Such a shame nature lends it's name to this absolute drivel. There are reasonable 'mainstream' explanations for the crash. I was fortunate to attend a lecture at my alma mater on that. It had to do with insurance and the difficulty of doing risk analysis and communicating this down the line. The only thing she is right about is that economics is not as exact as physics. But that should be taken as a sign to develop better numerical analysis methods rather than to embrace 'that's just your opinion man' level bs. She does not belong in science at all.
I agree. There's a case to be made that traditional macroeconomic models should incorporate more of the findings of experimental microeconomics that show how humans differ from idealized economic agents --- but this article is not such a case. Instead, it's just postmodern ideological drivel that suggests replacing numbers with advocacy, done under the guise of "ecological economics" and "feminist economics" and emphasizing "the collective over the individual".
This article in Nature is exactly the sort of dead weight that accumulates during economic expansions and that we discard during economic contractions. The article is a move in a tiresome academic status game. It is not useful for describing, predicting, or governing society.
You see this nonsense in every part of academia. The worth of theory is its predictive power, not its ideological purpose or its "values".
This author doesn't really explain how their proposed additions to the curriculum would have predicted the subprime mortgage crisis. If the author is going to criticize mainstream economics for being irrelevant, it seems reasonable that they show how using their methods, it could have been predicted.
Ok, if we demonstrate that the movement of the planets is not accurately predicted using a well loved system is it appropriate for us to be held to having to invent a new system before publishing?
It might be that there is another planet, or it might be that our understanding of the universe is incomplete. It seems to me that the information that there is something out there that isn't covered by our predictions is quite useful for directing science.
Well, at least comedians seemed to understand the crisis several months before Lehman crashed: "Subprime Banking Mess"
https://www.youtube.com/watch?v=mzJmTCYmo9g
"John Bird and John Fortune (the Long Johns) brilliantly, and accurately, describing the mindset of the investment banking community in this satirical interview."
If only there were a branch of economic thought which predicted regular, increasingly intense crises of capital, say, one which was articulated by a bearded 19th century German...
This is true. The author doesn't mention behavioural economics but I think that that is more the way forward. People are not the simple rational actors of conventional economic theory. They lie, speculate, panic and so on. Bitconnect is a one word disproof of rational agent theory.
I don't know about predicting the mortgage crisis but if you assume humans are human in all sorts of awful ways then you should stick to systems which are simple robust and hard to screw up and time tested rather then the opaque mystery content derivatives that fueled the mortgage bubble. This may have prevented it rather than predicted it.
The prediction thing is tricky as in the joke "The stock market has forecast nine of the last five recessions." There are always people predicting things will go wrong but how do you filter which to take notice of?
Synopsis: The notes below are our attempt to re-develop economic theory from scratch, namely starting with the axiom that individuals optimize what happens to them over time, not what happens to them on average in a collection of parallel worlds. The latter, surprisingly, is the starting point of the currently dominant form of economic theory.
I think the author falsely assumes that academic economists and the people who go on to work in big business, governments and central banks were not aware of the shortcomings of their discipline. I would assume instead that they were. But greed and power was their motivator nonetheless. So I wish good luck for her but I don't think awareness will change the hunger for power or greed in any way.
Probably so. At some point I won some maths-heavy economy textbooks in an undergraduate probability theory competition. It was last updated a few years before 2008 (I would guess no later than 2004), and it is mainstream enough to be a gift agreed upon by large-finance sponsors and financial-applied probability theory professors.
While explaining the market models, the book had quite a few footnotes that briefly mentioned incentive structures at different levels (individual traders, groups inside a company, mortgage-issuers that unload all of the risk…) Sometimes it stayed politically correct («it remains to be seen how this incentive structure will affect market stability»), sometimes not (especially when there were enough historical examples of exactly the same incentive structure leading to the same problems), but it made clear that principal-agent problems in the then-current (and now-current) economy are well-known and easy to describe in mainstream economics.
Economics isn’t science. In science you have the scientific method, control and experimental studies that can validate a hypothesis. that’s pretty impractical to do as an economist. Economists often describe their field as the study of human incentives, which is basically the study of human decision making, which is basically reading minds. It’s a worthy subject of study, but we put far too much faith in it that what’s warrented.
> In science you have the scientific method, control and experimental studies that can validate a hypothesis.
Astronomy, Cosmology, Epidemiology, Geology, Economics. You definitely can’t do experiments in cosmology and good luck with epidemiology or geology. Microeconomics is actually much, much more experimental than most of the rest of that list.
It may be instructive here to distinguish between Macro, which has had the problem of not being able to produce scientifically valid models, and Micro which has arguably made gains in predictive modeling of parts of the system. (Sort of like physics, where we have strongly predictive pieces, but no accepted TOE?)
What controls and experiments can you do in astronomy?
The scientific method is a thin veneer best left at in the high school curriculum where it belongs. Actual science is vastly more messy and interesting.
I'd argue that a principle failing of economics -- and one which can be found to apply to its sibling spin-outs of moral philosophy -- is what W. Brian Arthur has observed: formulation of economic theory, or selection among competing theories for inclusion into pedagogy, virtually always occurs in the context of policy formation. That is, these are inherently political.
And Smith's curt not, that "wealth, as Mr Hobbes says, is power" (incorrectly attributed elsewhere to Marx), plays into the selection of texts for teaching, the granting of tenure, the establishment of departments. Before the Koch brothers were financing, and calling shots oncurricula and faculty, in Florida and at George Mason University, an earlier oil baron, J.D. Rockefeller, was establishing the Chicago School. Each is curiously mute on that intersection of wealth and power Smith highlighted, particularly as concerns monopoly. A topic almost wholly missing from the Libertarian economics bible by Henry Hazlitt.
There's a very large body of work in fields like critical economic geography (as an extremely introductory and nonrepresentative example, [1][2]) that discuss the affective, pluralistic dimensions to global and local economies, of which I think orthodox economics barely touches on (slightly, somewhat, in neuroeconomics).
I think this is really important. With a better understanding of the limits of human rationality (which is chief among other things) we can begin to unravel the original axioms and assumptions of the neoliberal era, the ones that basically treat humans merely as selfish, individualistic, perfectly-rational economic agents. With a better understanding of this, we can begin to build a society for humans instead of capital.
> With a better understanding of the limits of human rationality (which is chief among other things) we can begin to unravel the original axioms and assumptions of the neoliberal era, the ones that basically treat humans merely as selfish, individualistic, perfectly-rational economic agents.
Your comment is the equivalent of saying astronomers need to consider models in which the planets rotate around the sun.
Just as one bit of evidence, we can ask if anyone has ever been awarded the Nobel Prize for studying the things you claim "economics barely touches on". If someone received a Nobel Prize, the field hasn't "barely touched on" it.
2017: Richard Thaler for behavioral economics. His entire career has been devoted to studying the limits of human rationality.
2013: Robert Shiller for his work showing financial markets are not efficient.
2002: Kahneman and Smith for using experiments to study the decision making process.
2001: George Akerlof, whose Nobel Lecture included "Behavioral Macroeconomics".
1978: Herbert Simon, the guy responsible for bounded rationality.
These are just a few names off the top of my head that won a Nobel Prize for work that you say economists aren't doing.
Golly, if I didn't know any better I'd think that maybe the field that deals with questions of power and resource allocation might not actually be apolitical, but may be primarily driven by the need to justify existing distributions of power and resources.
Economist here. I think you're mixing political science (power distribution + more) with economics (efficient resource allocation + more). Happy to talk more if you're interested.
"I drew an upward sloping curve and a downward sloping curve that meet in the middle, and therefore socialism cannot work."
The 2008 crash called for a massive reassessment of the political and cultural status of economics. It required honest economists to recognize their profession not as a neutral description of the world but as a tool for the powerful to exercise dominion over the rest of us. But "cognitive dissonance doesn't work like that", especially when doing so would mean giving up prestige, lucrative consulting opportunities, the ear of the government. For some reason, those other social sciences don't seem to get invited to nearly such lavish parties...
Of course, many people within and without the profession have been making this argument for decades, since way before 2008. But funny thing, the way power works is - those sort of people are never listened to. Why would that change now?
Edit: For a nice overview of these arguments I recommend the book "Economists and the Powerful" from 2012.
The real lesson of the 2008 crash is that long periods of prosperity inevitably produce an accumulation of poor investments, parasitic false beliefs, and outright fraud. At first, the economy is strong enough to shrug off the burden of this detritus, but it eventually accumulates and overwhelms growth. We end up one day having a Minsky moment and clean up the crud accumulated during the growth phase.
The best way to minimize the pain associated with this necessary process is to commit to reason, empiricism, and truth during the growth phase, minimizing the accumulation of uselessness that the eventual economic contraction must discharge.
We have known for hundreds of years that over expansion of debt causes crashes. Maybe I'm missing the point, were economists supposed to stop the expansion of debt?
I liked her comment about mainstream economics' bias toward maximizing "efficiency". It definitely felt like eliminating sources of "deadweight loss" was the primary goal of introductory microeconomics. Nevertheless, most societies today have substantial tax rates, suggesting that there are other priorities than efficiency in the real world.
Interestingly, though, mainstream macroeconomics would probably have predicted (and could have been used to prevent) the 2008 crisis if it had actually been used. Instead, well-positioned economists supported policies that ignored the rapid growth of a housing bubble and the fact that it was driving a substantial portion of total economic output. I would not, for example, call the analysis in Baker's 2002 paper [1] a heterodox analysis, indeed, it was pretty mainstream. It was, however, contrary to the pronouncements of the Federal Reserve.
Mainstream macro economics is 'captured', and they have been behaving like high priests justifying dubious policies. [1]
The 80s onwards have seen massive CEO pay increases, financialization, asset inflation, deregulation, the vulgar celebration of greed by economists and on the other side wage stagnation, increasing inequality, the 2008 crisis and endless bailouts.
Greenspan and others are happy to gloat about cornering labour in Congress [2]. This is an odious statement made without protest from members.
Macro economists can continue to be tone deaf and believe the narratives of emh, rational expectations, 'freetrade' and 'assumptions' that are disconnected from reality but there is now significant dissent and resistance to these narratives. [3]
Evonomics is a good place to start getting a perspective of the scale of problems, and people need to do this untill there is a complete meaculpa and clean up of corporate and vested interests, untill then every single thing macro economists say needs to be questioned and verified.
The idea that economics is formulated as it is to protect the status quo, or to justify the distribution of wealth and power is only partially correct. Economists have a lot to say that elites do not want to hear. The political class, in fact, routinely ignores economists' prescriptions, eg a carbon tax.
Instead, I would say that:
(1) on some issues there is a diversity of opinion among economists and so people pick and choose their ecomist to justify their position
(2) non academic employed economists' pronouncements tend to reflect the interests of their employers (for variety of reasons)
(3) as a class economists defend not the status quo but an ideology that justifies that status quo. for example pareto optimal policies dont really work out when distributions are already highly unequal.
The crash wasn't really about economics, it was more about people abusing financial instruments for short term gains. There would need to be some sort of meta-field that combines economics, finance, banking, politics, etc to properly analyze the cause/effect and predict this.
I think a big problem is that economics - as defined by culture from the enlightenment to about 1980, with markets created by locally rational transactions - isn't as important as the culture that defined it made it to be. For example, the market and the function of the market was seen as an absolute / starting point for an economy. In China it was not possible to simply establish a market, but instead what has happened is that the state created pseudo private enterprises outside of a market system / in the absence of a market system which then underpinned further economic activity. The market of ideas - which is the construction that we put on democracy has been further challenged. The Chinese government employs more than 50m people, and this wide participation in a structured and hierarchical mechanistic system provides another way of managing and legitimising capital allocation.
A functioning free market is the best system we've come with for capital allocation and benefits to consumers.
Even China tends to create competing corporations and to let them compete. In many industries they actually let private players create companies independently.
Related from 2003 by Jim Sanford: "Confessions of a Recovering Economist"
http://www.paecon.net/PAEReview/issue21/Stanford21.htm
"I am an economist. It is seventeen days since I last uttered the phrase "supply and demand." But the demon still lurks untamed, within me. Economics is an addiction. Every other addiction has a Twelve Step program, laced with tough love and blunt self-honesty. Why not a Twelve Step program for economists? God knows, we have done enough damage with our arrogant, drunken prescriptions. Here's how each and every economist can face up to their inner demons, and make their own small contribution to setting things right. ..."
From 2010: "They Did Their Homework (800 Years of It)" https://www.nytimes.com/2010/07/04/business/economy/04econ.h...
"But in the wake of the recent crisis, a few economists — like Professors Reinhart and Rogoff, and other like-minded colleagues like Barry Eichengreen and Alan Taylor — have been encouraging others in their field to look beyond hermetically sealed theoretical models and into the historical record. “There is so much inbredness in this profession,” says Ms. Reinhart. “They all read the same sources. They all use the same data sets. They all talk to the same people. There is endless extrapolation on extrapolation on extrapolation, and for years that is what has been rewarded.”"
Or from 2011: "Economics for the Rest of Us: Debunking the Science That Makes Life Dismal" by Moshe Adler
https://www.goodreads.com/book/show/7197448-economics-for-th...
"Why do contemporary economists consider food subsidies in starving countries, rent control in rich cities, and health insurance everywhere "inefficient"? Why do they feel that corporate executives deserve no less than their multimillion-dollar "compensation" packages and workers no more than their meager wages? Here is a lively and accessible debunking of the two elements that make economics the "science" of the rich: the definition of what is efficient and the theory of how wages are determined. The first is used to justify the cruelest policies, the second grand larceny.Filled with lively examples-from food riots in Indonesia to eminent domain in Connecticut and everyone from Adam Smith to Jeremy Bentham to Larry Summers-Economics for the Rest of Us shows how today's dominant economic theories evolved, how they explicitly favor the rich over the poor, and why they're not the only or best options. Written for anyone with an interest in understanding contemporary economic thinking-and why it is dead wrong-Economics for the Rest of Us offers a foundation for a fundamentally more just economic system."
Or harder hitting from a trial lawyer: http://conceptualguerilla.com/essays/essays-on-economics-and...
"Old habits die hard. In fact, we still have a “leisure class”. As capitalism has grown so has the wealth and privilege of our leisure class. The old mythologies – gods, the “great chain of being” etc. – are no longer available to justify the existence and perpetuation of our leisure class, something our elites are definitely interested in perpetuating. What was needed was a new “rational” world-view that justified the existence of privileged elites. That rationalization came in the form of a brand new science known as economics, which included a brand new mythology."
Or from 1999: "The Market as God" by Harvey Cox (Harvard professor of religion): https://www.theatlantic.com/magazine/archive/1999/03/the-mar...
"A few years ago a friend advised me that if I wanted to know what was going on in the real world, I should read the business pages. Although my lifelong interest has been in the study of religion, I am always willing to expand my horizons; so I took the advice, vaguely fearful that I would have to cope with a new and baffling vocabulary. Instead I was surprised to discover that most of the concepts I ran across were quite familiar. Expecting a terra incognita, I found myself instead in the land of déjà vu. The lexicon of The Wall Street Journal and the business sections of Time and Newsweek turned out to bear a striking resemblance to Genesis, the Epistle to the Romans, and Saint Augustine's City of God. Behind descriptions of market reforms, monetary policy, and the convolutions of the Dow, I gradually made out the pieces of a grand narrative about the inner meaning of human history, why things had gone wrong, and how to put them right. Theologians call these myths of origin, legends of the fall, and doctrines of sin and redemption. But here they were again, and in only thin disguise: chronicles about the creation of wealth, the seductive temptations of statism, captivity to faceless economic cycles, and, ultimately, salvation through the advent of free markets, with a small dose of ascetic belt tightening along the way, especially for the East Asian economies."
See also:
"The Impact of Inequality: How to Make Sick Societies Healthier" by Richard G. Wilkinson
And: "The Spirit Level: Why Greater Equality Makes Societies Stronger" by Richard Wilkinson and Kate Pickett
And: "The Price of Inequality" by Joseph E. Stiglitz
Another petition/manifesto by students from 2009: "The True Cost Economics Manifesto"
https://blog.p2pfoundation.net/the-true-cost-economics-manif...
"“We, the Undersigned, make this accusation: that you, the teachers of neoclassical economics and the students that you graduate, have perpetuated a gigantic fraud upon the world. You claim to work in a pure science of formula and law, but yours is a social science, with all the fragility and uncertainty that this entails. We accuse you of pretending to be what you are not. You hide in your offices, protected by your mathematical jargon, while in the real world, forests vanish, species perish and human lives are callously destroyed. We accuse you of gross negligence in the management of our planetary household. ..."
There is at least one other petition I saw from around then (though with softer words) mainly by economics professors and grad students -- can't find it at the moment.
Or to go way, way back, see Marshall Sahlins:
http://www.primitivism.com/original-affluent.htm
"Hunter-gatherers consume less energy per capita per year than any other group of human beings. Yet when you come to examine it the original affluent society was none other than the hunter's -- in which all the people's material wants were easily satisfied. To accept that hunters are affluent is therefore to recognise that the present human condition of man slaving to bridge the gap between his unlimited wants and his insufficient means is a tragedy of modern times. ... The world's most primitive people have few possessions. but they are not poor. Poverty is not a certain small amount of goods, nor is it just a relation between means and ends; above all it is a relation between people. Poverty is a social status. As such it is the invention of civilisation. It has grown with civilisation, at once as an invidious distinction between classes and more importantly as a tributary relation that can render agrarian peasants more susceptible to natural catastrophes than any winter camp of Alaskan Eskimo."
Even in the 1980s when I was in college it was clear to many that much of economics was, essentially, am apologetic branch of mathematics with little connection to the real world. My own take on that from around 2008:
https://pdfernhout.net/post-scarcity-princeton.html#Some_com...
Wow, what Socialist crap that article is, and in Nature of all things! Probably best to steer clear of those books on economy! Anyway, if you look into how trading is done today, and how big firms – especially banks – are allowed to operate, then it's no wonder it goes as it goes. First off no company should be too big to fail. That should be your first warning sign that it's become too oligarchic, if not completely monopolistic. But no, most governments chose to go in the opposite direction, and further corporatize and monopolize the behemots. Well, good luck with that! Now we're probably just moments before the biggest crash in history. People talk about 2008 being this century's 1929. Ha! That was peanuts!
[+] [-] timwaagh|7 years ago|reply
[+] [-] quotemstr|7 years ago|reply
This article in Nature is exactly the sort of dead weight that accumulates during economic expansions and that we discard during economic contractions. The article is a move in a tiresome academic status game. It is not useful for describing, predicting, or governing society.
You see this nonsense in every part of academia. The worth of theory is its predictive power, not its ideological purpose or its "values".
[+] [-] atmosx|7 years ago|reply
[+] [-] archgoon|7 years ago|reply
[+] [-] sgt101|7 years ago|reply
It might be that there is another planet, or it might be that our understanding of the universe is incomplete. It seems to me that the information that there is something out there that isn't covered by our predictions is quite useful for directing science.
[+] [-] pdfernhout|7 years ago|reply
[+] [-] bjhoops1|7 years ago|reply
[+] [-] tim333|7 years ago|reply
I don't know about predicting the mortgage crisis but if you assume humans are human in all sorts of awful ways then you should stick to systems which are simple robust and hard to screw up and time tested rather then the opaque mystery content derivatives that fueled the mortgage bubble. This may have prevented it rather than predicted it.
The prediction thing is tricky as in the joke "The stock market has forecast nine of the last five recessions." There are always people predicting things will go wrong but how do you filter which to take notice of?
[+] [-] tirumaraiselvan|7 years ago|reply
Synopsis: The notes below are our attempt to re-develop economic theory from scratch, namely starting with the axiom that individuals optimize what happens to them over time, not what happens to them on average in a collection of parallel worlds. The latter, surprisingly, is the starting point of the currently dominant form of economic theory.
[1]https://twitter.com/ole_b_peters/status/1041252157956280321
[+] [-] tirumaraiselvan|7 years ago|reply
[+] [-] zeckalpha|7 years ago|reply
[+] [-] fogetti|7 years ago|reply
[+] [-] 9mit3t2m9h9a|7 years ago|reply
While explaining the market models, the book had quite a few footnotes that briefly mentioned incentive structures at different levels (individual traders, groups inside a company, mortgage-issuers that unload all of the risk…) Sometimes it stayed politically correct («it remains to be seen how this incentive structure will affect market stability»), sometimes not (especially when there were enough historical examples of exactly the same incentive structure leading to the same problems), but it made clear that principal-agent problems in the then-current (and now-current) economy are well-known and easy to describe in mainstream economics.
[+] [-] speedplane|7 years ago|reply
[+] [-] barry-cotter|7 years ago|reply
Astronomy, Cosmology, Epidemiology, Geology, Economics. You definitely can’t do experiments in cosmology and good luck with epidemiology or geology. Microeconomics is actually much, much more experimental than most of the rest of that list.
[+] [-] polynomial|7 years ago|reply
It may be instructive here to distinguish between Macro, which has had the problem of not being able to produce scientifically valid models, and Micro which has arguably made gains in predictive modeling of parts of the system. (Sort of like physics, where we have strongly predictive pieces, but no accepted TOE?)
[+] [-] FabHK|7 years ago|reply
[+] [-] antt|7 years ago|reply
The scientific method is a thin veneer best left at in the high school curriculum where it belongs. Actual science is vastly more messy and interesting.
[+] [-] dredmorbius|7 years ago|reply
Economics, as practiced, is profoundly unscientific in numerous deep particulars.
(There are exceptions, though these are largely peripheral and or heterdoxical.)
It need not be, and I've described the fallacy of "no controlled experiments" as regards several other fields in a recent comment. (https://news.ycombinator.com/item?id=17998690)
I'd argue that a principle failing of economics -- and one which can be found to apply to its sibling spin-outs of moral philosophy -- is what W. Brian Arthur has observed: formulation of economic theory, or selection among competing theories for inclusion into pedagogy, virtually always occurs in the context of policy formation. That is, these are inherently political.
And Smith's curt not, that "wealth, as Mr Hobbes says, is power" (incorrectly attributed elsewhere to Marx), plays into the selection of texts for teaching, the granting of tenure, the establishment of departments. Before the Koch brothers were financing, and calling shots oncurricula and faculty, in Florida and at George Mason University, an earlier oil baron, J.D. Rockefeller, was establishing the Chicago School. Each is curiously mute on that intersection of wealth and power Smith highlighted, particularly as concerns monopoly. A topic almost wholly missing from the Libertarian economics bible by Henry Hazlitt.
One wonders why this might be.
[+] [-] elvinyung|7 years ago|reply
I think this is really important. With a better understanding of the limits of human rationality (which is chief among other things) we can begin to unravel the original axioms and assumptions of the neoliberal era, the ones that basically treat humans merely as selfish, individualistic, perfectly-rational economic agents. With a better understanding of this, we can begin to build a society for humans instead of capital.
[1] https://pdfs.semanticscholar.org/f10a/6bae34ac59c7be9b7741fe...
[2] https://onlinelibrary.wiley.com/doi/abs/10.1002/978111838449...
[+] [-] bachmeier|7 years ago|reply
Your comment is the equivalent of saying astronomers need to consider models in which the planets rotate around the sun.
Just as one bit of evidence, we can ask if anyone has ever been awarded the Nobel Prize for studying the things you claim "economics barely touches on". If someone received a Nobel Prize, the field hasn't "barely touched on" it.
2017: Richard Thaler for behavioral economics. His entire career has been devoted to studying the limits of human rationality.
2013: Robert Shiller for his work showing financial markets are not efficient.
2002: Kahneman and Smith for using experiments to study the decision making process.
2001: George Akerlof, whose Nobel Lecture included "Behavioral Macroeconomics".
1978: Herbert Simon, the guy responsible for bounded rationality.
These are just a few names off the top of my head that won a Nobel Prize for work that you say economists aren't doing.
[+] [-] bjhoops1|7 years ago|reply
[+] [-] tomrod|7 years ago|reply
[+] [-] bjhoops1|7 years ago|reply
[+] [-] dredmorbius|7 years ago|reply
https://www.bartleby.com/10/105.html
[+] [-] _wc0m|7 years ago|reply
The 2008 crash called for a massive reassessment of the political and cultural status of economics. It required honest economists to recognize their profession not as a neutral description of the world but as a tool for the powerful to exercise dominion over the rest of us. But "cognitive dissonance doesn't work like that", especially when doing so would mean giving up prestige, lucrative consulting opportunities, the ear of the government. For some reason, those other social sciences don't seem to get invited to nearly such lavish parties...
Of course, many people within and without the profession have been making this argument for decades, since way before 2008. But funny thing, the way power works is - those sort of people are never listened to. Why would that change now?
Edit: For a nice overview of these arguments I recommend the book "Economists and the Powerful" from 2012.
[+] [-] quotemstr|7 years ago|reply
The best way to minimize the pain associated with this necessary process is to commit to reason, empiricism, and truth during the growth phase, minimizing the accumulation of uselessness that the eventual economic contraction must discharge.
[+] [-] vertline3|7 years ago|reply
[+] [-] projektfu|7 years ago|reply
Interestingly, though, mainstream macroeconomics would probably have predicted (and could have been used to prevent) the 2008 crisis if it had actually been used. Instead, well-positioned economists supported policies that ignored the rapid growth of a housing bubble and the fact that it was driving a substantial portion of total economic output. I would not, for example, call the analysis in Baker's 2002 paper [1] a heterodox analysis, indeed, it was pretty mainstream. It was, however, contrary to the pronouncements of the Federal Reserve.
1. http://cepr.net/publications/reports/the-run-up-in-home-pric...
[+] [-] throw2016|7 years ago|reply
The 80s onwards have seen massive CEO pay increases, financialization, asset inflation, deregulation, the vulgar celebration of greed by economists and on the other side wage stagnation, increasing inequality, the 2008 crisis and endless bailouts.
Greenspan and others are happy to gloat about cornering labour in Congress [2]. This is an odious statement made without protest from members.
Macro economists can continue to be tone deaf and believe the narratives of emh, rational expectations, 'freetrade' and 'assumptions' that are disconnected from reality but there is now significant dissent and resistance to these narratives. [3]
Evonomics is a good place to start getting a perspective of the scale of problems, and people need to do this untill there is a complete meaculpa and clean up of corporate and vested interests, untill then every single thing macro economists say needs to be questioned and verified.
[1] https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble....
[2] https://www.federalreserve.gov/boarddocs/hh/1997/february/te...
[3] http://evonomics.com/economyths-five-stages-economic-grief/
[+] [-] your-nanny|7 years ago|reply
Instead, I would say that:
(1) on some issues there is a diversity of opinion among economists and so people pick and choose their ecomist to justify their position
(2) non academic employed economists' pronouncements tend to reflect the interests of their employers (for variety of reasons)
(3) as a class economists defend not the status quo but an ideology that justifies that status quo. for example pareto optimal policies dont really work out when distributions are already highly unequal.
[+] [-] montalbano|7 years ago|reply
[+] [-] dredmorbius|7 years ago|reply
[+] [-] Dowwie|7 years ago|reply
[+] [-] fouc|7 years ago|reply
[+] [-] sgt101|7 years ago|reply
[+] [-] ElBarto|7 years ago|reply
Even China tends to create competing corporations and to let them compete. In many industries they actually let private players create companies independently.
[+] [-] your-nanny|7 years ago|reply
[+] [-] travbrack|7 years ago|reply
[+] [-] js8|7 years ago|reply
[+] [-] pdfernhout|7 years ago|reply
From 2010: "They Did Their Homework (800 Years of It)" https://www.nytimes.com/2010/07/04/business/economy/04econ.h... "But in the wake of the recent crisis, a few economists — like Professors Reinhart and Rogoff, and other like-minded colleagues like Barry Eichengreen and Alan Taylor — have been encouraging others in their field to look beyond hermetically sealed theoretical models and into the historical record. “There is so much inbredness in this profession,” says Ms. Reinhart. “They all read the same sources. They all use the same data sets. They all talk to the same people. There is endless extrapolation on extrapolation on extrapolation, and for years that is what has been rewarded.”"
Or from 2011: "Economics for the Rest of Us: Debunking the Science That Makes Life Dismal" by Moshe Adler https://www.goodreads.com/book/show/7197448-economics-for-th... "Why do contemporary economists consider food subsidies in starving countries, rent control in rich cities, and health insurance everywhere "inefficient"? Why do they feel that corporate executives deserve no less than their multimillion-dollar "compensation" packages and workers no more than their meager wages? Here is a lively and accessible debunking of the two elements that make economics the "science" of the rich: the definition of what is efficient and the theory of how wages are determined. The first is used to justify the cruelest policies, the second grand larceny.Filled with lively examples-from food riots in Indonesia to eminent domain in Connecticut and everyone from Adam Smith to Jeremy Bentham to Larry Summers-Economics for the Rest of Us shows how today's dominant economic theories evolved, how they explicitly favor the rich over the poor, and why they're not the only or best options. Written for anyone with an interest in understanding contemporary economic thinking-and why it is dead wrong-Economics for the Rest of Us offers a foundation for a fundamentally more just economic system."
Or harder hitting from a trial lawyer: http://conceptualguerilla.com/essays/essays-on-economics-and... "Old habits die hard. In fact, we still have a “leisure class”. As capitalism has grown so has the wealth and privilege of our leisure class. The old mythologies – gods, the “great chain of being” etc. – are no longer available to justify the existence and perpetuation of our leisure class, something our elites are definitely interested in perpetuating. What was needed was a new “rational” world-view that justified the existence of privileged elites. That rationalization came in the form of a brand new science known as economics, which included a brand new mythology."
Or from 1999: "The Market as God" by Harvey Cox (Harvard professor of religion): https://www.theatlantic.com/magazine/archive/1999/03/the-mar... "A few years ago a friend advised me that if I wanted to know what was going on in the real world, I should read the business pages. Although my lifelong interest has been in the study of religion, I am always willing to expand my horizons; so I took the advice, vaguely fearful that I would have to cope with a new and baffling vocabulary. Instead I was surprised to discover that most of the concepts I ran across were quite familiar. Expecting a terra incognita, I found myself instead in the land of déjà vu. The lexicon of The Wall Street Journal and the business sections of Time and Newsweek turned out to bear a striking resemblance to Genesis, the Epistle to the Romans, and Saint Augustine's City of God. Behind descriptions of market reforms, monetary policy, and the convolutions of the Dow, I gradually made out the pieces of a grand narrative about the inner meaning of human history, why things had gone wrong, and how to put them right. Theologians call these myths of origin, legends of the fall, and doctrines of sin and redemption. But here they were again, and in only thin disguise: chronicles about the creation of wealth, the seductive temptations of statism, captivity to faceless economic cycles, and, ultimately, salvation through the advent of free markets, with a small dose of ascetic belt tightening along the way, especially for the East Asian economies."
See also: "The Impact of Inequality: How to Make Sick Societies Healthier" by Richard G. Wilkinson
And: "The Spirit Level: Why Greater Equality Makes Societies Stronger" by Richard Wilkinson and Kate Pickett
And: "The Price of Inequality" by Joseph E. Stiglitz
Another petition/manifesto by students from 2009: "The True Cost Economics Manifesto" https://blog.p2pfoundation.net/the-true-cost-economics-manif... "“We, the Undersigned, make this accusation: that you, the teachers of neoclassical economics and the students that you graduate, have perpetuated a gigantic fraud upon the world. You claim to work in a pure science of formula and law, but yours is a social science, with all the fragility and uncertainty that this entails. We accuse you of pretending to be what you are not. You hide in your offices, protected by your mathematical jargon, while in the real world, forests vanish, species perish and human lives are callously destroyed. We accuse you of gross negligence in the management of our planetary household. ..."
There is at least one other petition I saw from around then (though with softer words) mainly by economics professors and grad students -- can't find it at the moment.
Or to go way, way back, see Marshall Sahlins: http://www.primitivism.com/original-affluent.htm "Hunter-gatherers consume less energy per capita per year than any other group of human beings. Yet when you come to examine it the original affluent society was none other than the hunter's -- in which all the people's material wants were easily satisfied. To accept that hunters are affluent is therefore to recognise that the present human condition of man slaving to bridge the gap between his unlimited wants and his insufficient means is a tragedy of modern times. ... The world's most primitive people have few possessions. but they are not poor. Poverty is not a certain small amount of goods, nor is it just a relation between means and ends; above all it is a relation between people. Poverty is a social status. As such it is the invention of civilisation. It has grown with civilisation, at once as an invidious distinction between classes and more importantly as a tributary relation that can render agrarian peasants more susceptible to natural catastrophes than any winter camp of Alaskan Eskimo."
Even in the 1980s when I was in college it was clear to many that much of economics was, essentially, am apologetic branch of mathematics with little connection to the real world. My own take on that from around 2008: https://pdfernhout.net/post-scarcity-princeton.html#Some_com...
[+] [-] skookumchuck|7 years ago|reply
[+] [-] kebman|7 years ago|reply