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Economics is Hard. Donít Let Bloggers Tell You Otherwise
scribd.com ^ | June 17, 2010 | Kartik Athreya

Posted on 07/03/2010 6:43:19 AM PDT by 1rudeboy

Abstract

In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contibute any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public.

The following is a letter to open-minded consumers of the economics blogosphere. In the wake of the recent financial crisis, bloggers seem unable to resist commentating routinely about economic events. It may always have been thus, but in recent times, the manifold dimensions of the financial crisis and associated recession have given fillip to something bigger than a cottage industry. Examples include Matt Yglesias, John Stossel, Robert Samuelson, and Robert Reich. In what follows I will argue that it is exceedingly unlikely that these authors have anything interesting to say about economic policy. This sounds mean-spirited, but it’s not meant to be, and I’ll explain why.

Before I continue, here’s who I am: The relevant fact is that I work as a rank-and-file PhD economist operating within a central banking system. I have contributed no earth-shaking ideas to Economics and work fundamentally as a worker bee chipping away with known tools at portions of larger problems. It is precisely from this low-level vantage point that I am totally puzzled by the willingness of many who fearlessly and breathlessly opine about economics, especially macroeconomic policy. Deficits, short-term interest rate targets, sovereign debt are all chewed over with a level of self-assuredness that only someone who doesn’t know more could. The list of those exhibiting this zest also includes, in addition to those mentioned above, some who might know better. They are the patron saints of the “Macroeconomic Policy is Easy: Only Idiots Don’t Think So” movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that it’s all really very simple (and may even be found in Keynes’ writings). Lastly, before you dismiss me as a right- or left-winger, I am not. I’m simply less comfortable with ex cathedra pronouncements and speculations than the people I have named. [footnote omitted]
The main problem is that economics, and certainly macroeconomics is not, by any reasonable measure, simple. Macroeconomics is most narrowly concerned with the tracing of individual actions into aggregate outcomes, and most fatally attractive to bloggers: vice versa. What makes macroeconomics very complicated is that economic actors... act. Firms think about how to make profits, households think about how to budget their resources. And both sets of actors forecast. They must. One has to take a view on one’s future income, health, and familial obligations to think about what to set aside for retirement, how much life insurance to buy, and so on. Of course, all parties may be terrible at forecasting, that’s certainly a possibility, but that’s not the issue. Even if one wanted to think of all economic actors as foolish and purposeless organisms making utterly random choices, one must accept that their decisions will still affect, and be affected by what others do. The finitude of resources ensures this “accounting” reality.

[excerpted]


TOPICS: Business/Economy; Editorial; Philosophy
KEYWORDS: bloggers; blogs; businessinsider; economics; eeconomists; johnstossel; keynes; keynesian; mattyglesias; robertreich; robertsamuelson; zerohedge
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This essay had Andrew Leonard over at Salon howling, and FReepers piling-on without reading it (I know, because the link went dead for a few days).
1 posted on 07/03/2010 6:43:21 AM PDT by 1rudeboy
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To: Toddsterpatriot; Mase; expat_panama

ping


2 posted on 07/03/2010 6:43:59 AM PDT by 1rudeboy
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To: 1rudeboy

Btt


3 posted on 07/03/2010 6:49:40 AM PDT by mnehring
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To: 1rudeboy
If you laid all of the economists in the world end to end they still would not reach a conclusion.

That said economics is made deliberately hard by people in the trade. They make it almost a black art simply to confuse and bewilder the general public with bull$hit. I aced econ once I figured out that the lingo was just there to make it sound like it was above the average Joe. Biggest problem today is that the world economy has changed and the econ peddlers have not. Therefore they are constantly hit with “unexpected” economic data. Bottom line is that this depression will not end until the uncertain aspects of government intrusion and taxation are settled.

4 posted on 07/03/2010 6:51:38 AM PDT by mad_as_he$$ (Sometimes you have to go to dark places to get to the light....)
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To: mad_as_he$$

Sort of like attorneys drafting documents only another attorney can decipher. Perpetuation of the species.


5 posted on 07/03/2010 6:56:42 AM PDT by csmusaret (50,000 sailors in rowboats using mops could do a better job of cleaning the Gulf than Obama is.)
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To: mad_as_he$$
If you laid all of the economists in the world end to end, you'd have a bunch of really bored hookers.

So, Dr. Urethra thinks that a Ph.D. is a **necessary** qualification for anyone to comment on economics, eh? How then does he explain away all the Ph.D.s who have, presumably by dint of their hallowed expertise, managed to advocate the policies that have wrecked a once-dynamic economy?

Keep your degrees, boyo; give me someone who can add and reason logically, ANYtime.

6 posted on 07/03/2010 6:58:57 AM PDT by SAJ
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To: mad_as_he$$
The whole "unexpected" thing is the result of journalists, in my opinion, but this author deals with it also:

In part, it is because few of the economists engaged in serious science spend any of their time connecting to the outer world . . . , leaving that to a group almost defined by its willingness to make exaggerated claims about economics and overrepresent its ability to determine clear answers.

7 posted on 07/03/2010 6:58:57 AM PDT by 1rudeboy
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To: SAJ

Reading comprehension: -1


8 posted on 07/03/2010 6:59:40 AM PDT by 1rudeboy
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To: mad_as_he$$

Translation of the author’s condescension: Don’t worry your pretty little head about stuff you don’t understand, leave that hard stuff to us, we are the experts!


9 posted on 07/03/2010 7:02:00 AM PDT by DaveyB (Fear is the foundation of most governments -- John Adams)
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To: 1rudeboy

I got a good chuckle out of this. Few people irritate me more than Paul Krugman. Just when I thought he couldn't become any more intolerable, he wins a Nobel Prize.

10 posted on 07/03/2010 7:02:09 AM PDT by Mase (Save me from the people who would save me from myself!)
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To: 1rudeboy

Economics...lets see...money in minus money out = profit unless money out is larger than money in when it becomes a loss. Very difficult.


11 posted on 07/03/2010 7:04:16 AM PDT by Don Corleone ("Oil the gun..eat the cannolis. Take it to the Mattress.")
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To: 1rudeboy
In general I think you are correct. However, several of the econs publish their predictions about where the economy is going and for the most part they are flat out wrong - especially the ones who work for the government or the Federal Reserve. Several of the big banks publish forecasts also and they are about 75% wrong.
12 posted on 07/03/2010 7:04:32 AM PDT by mad_as_he$$ (Sometimes you have to go to dark places to get to the light....)
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To: DaveyB

One of the reasons I posted this, and cross referenced the Salon thread, is because I find your pontificating amusing. The fact that you are pontificating that the author is pontificating simply is icing on the cake.


13 posted on 07/03/2010 7:05:56 AM PDT by 1rudeboy
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To: 1rudeboy
Economics is hard in this respect: the economy is too complex for anyone to fully understand it, and thus it is impossible to control it. So, government should just stop trying; cut taxes and get out of the way.
14 posted on 07/03/2010 7:06:19 AM PDT by B Knotts (Just another Tenther)
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To: 1rudeboy
A 100% Absolute fact:

Keynesian economics ALWAYS fails. ALWAYS.

15 posted on 07/03/2010 7:06:35 AM PDT by newfreep (Palin/DeMint 2012 - Bolton: Secy of State)
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To: 1rudeboy
Damn right macroeconomics is hard.

In fact, it was one of the hardest classes I ever took in college (who am I kidding...they were all hard). Adding to the difficulty were two additional factors: the class started at 7AM, and there were five students total in the class.

There was nowhere to hide, and the 85 YO professor could be brutal when you gave a wrong answer. The man forgot more economics than all those pinhead PHDs could ever learn.

16 posted on 07/03/2010 7:06:35 AM PDT by Night Hides Not (If Dick Cheney = Darth Vader, then Joe Biden = Dark Helmet)
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To: 1rudeboy
It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder. - Frederic Bastiat 1801-1850
17 posted on 07/03/2010 7:07:18 AM PDT by PGalt
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To: mad_as_he$$

“economics is made deliberately hard by people in the trade. They make it almost a black art simply to confuse and bewilder the general public”

Not all that different from the mumbo jumbo dished out in other fields of study such as the law and information technology.

Where were the learned economic prognosticators just before the Great Recession? Truth is, they didn’t see it coming. They do however, have the unique talent of making hindsight sound prescient.

I minored in econ but am learning far more useful and lucid information from Peter Schiff’s book “How and Economy Grows and Why it Crashes”.


18 posted on 07/03/2010 7:08:08 AM PDT by Starboard
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To: Night Hides Not

I did ok in my upper-level Macro class. Upper-level Micro kicked my ass (and the professor was a prick).


19 posted on 07/03/2010 7:10:17 AM PDT by 1rudeboy
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To: B Knotts

“So, government should just stop trying; cut taxes and get out of the way.”

A handfull of technocrats in the government operate on the mistaken belief that they can make better decisions than that which is reflected in the collective wisdom of the judgements of hundreds of millions of people.


20 posted on 07/03/2010 7:13:07 AM PDT by Starboard
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To: Night Hides Not

Most of the profs speak English as a second language, poorly. One guy would write formulas on the board with his right hand while following with an eraser in his left.


21 posted on 07/03/2010 7:18:07 AM PDT by shove_it (old Old Guardsman)
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To: B Knotts
Economics is hard in this respect: the economy is too complex for anyone to fully understand it, and thus it is impossible to control it. So, government should just stop trying; cut taxes and get out of the way.

Bears repeating.

You are absolutely correct. In the 19th and early 20th it was possible for honorable and intelligent people to deceive themselves into believing they could "manage" the economy and make the world a better place.

The economy has since become orders of magnitude more complex and faster moving. Only a fool, an aspiring tyrant or someone intentionally deceiving himself could believe the same today.

It's like controlling the weather (or the climate). It's not just that we'd likely screw it up, it's that we don't have a clue how to go about doing it. If we would admit to ourselves that we don't have a clue, we just might possibly find one. Since we won't, we won't.

22 posted on 07/03/2010 7:22:48 AM PDT by Sherman Logan
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To: newfreep
Keynesian economics ALWAYS fails. ALWAYS. Define "Keynesian economics."

Define "fails."

My point is that calling a particular policy "Keynesian" does not mean it is necessarily destined for failure.

And it is often possible to argue that even with a "failed" policy things might have been even worse without it.

23 posted on 07/03/2010 7:25:53 AM PDT by Sherman Logan
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To: 1rudeboy

Eh? The one concept directly implies the other.


24 posted on 07/03/2010 7:26:13 AM PDT by SAJ
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To: Starboard
A handfull of technocrats in the government operate on the mistaken belief that they can make better decisions than that which is reflected in the collective wisdom of the judgements of hundreds of millions of people.

Also bears repeating.

25 posted on 07/03/2010 7:26:38 AM PDT by Sherman Logan
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To: Starboard

Rxcellent book.


26 posted on 07/03/2010 7:26:56 AM PDT by mad_as_he$$ (Sometimes you have to go to dark places to get to the light....)
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To: 1rudeboy

One thing about economists... most are not business people and they do not understand business. Most would not be an economist if they knew how to make money in the business world. A few are truly sharp scientists but very few. Most “economists” quoted my the state run media are acaDemons... they know the least of all.

LLS


27 posted on 07/03/2010 7:29:10 AM PDT by LibLieSlayer ( WOLVERINES!)
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To: 1rudeboy

—took me a while to paste/format it for printing/reading; now for my coffee....


28 posted on 07/03/2010 7:29:15 AM PDT by expat_panama
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To: 1rudeboy
The fact that you are pontificating that the author is pontificating simply is icing on the cake.

I find your pontificating about my pontificating about the author's pontificating something to pontificate about.

29 posted on 07/03/2010 7:34:11 AM PDT by DaveyB (Fear is the foundation of most governments -- John Adams)
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To: 1rudeboy

That’s because they never read Hazlitt’s classic.

Go here for help:
http://www.amazon.com/Economics-One-Lesson-Henry-Hazlitt/dp/B001G8NW6Y/ref=sr_1_2?ie=UTF8&s=books&qid=1278167272&sr=8-2

Time for a a beer, another pressing problem solved.


30 posted on 07/03/2010 7:34:14 AM PDT by chickenlips
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To: chickenlips

Thanks for the link. Sounds like a good companion to Schiff’s book.


31 posted on 07/03/2010 7:42:09 AM PDT by Starboard
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To: SAJ; DaveyB

I just have the impression that neither of you bothered to read the essay.


32 posted on 07/03/2010 7:45:00 AM PDT by 1rudeboy
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To: Sherman Logan
Sorry, but if you need "Keynesian" defined exposes your lack of intelligence and common sense...or at best your passive defense of Keynesian.

History (and intellect) has ALWAYS shown Keynes as a failed economist and the politicians that follow his failed philosophy.

33 posted on 07/03/2010 7:49:01 AM PDT by newfreep (Palin/DeMint 2012 - Bolton: Secy of State)
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To: 1rudeboy
The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading. Note also that intelligence is not the issue. Many of those I am telling you not to listen to will more than successfully be able to match wits, in any generalized sense, with me. This is irrelevant. The question is: can they provide you, the reader, with an internally consistent analysis of a dynamic system subject to random shocks populated by thoughtful actors whose collective actions must be rendered feasible? For many questions, I and my colleagues can, and for those that the profession cannot, the blogging crowd probably can’t either.

Good grief! All he had to say was, "Economics follows Chaos Theory and therefore can't be explained" instead of four pages of Thesaurus use.

34 posted on 07/03/2010 7:50:15 AM PDT by raybbr (Someone who invades another country is NOT an immigrant - illegal or otherwise.)
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To: raybbr

He (or she?) has to spend a good deal of time heading-off the attacks you see above—”ivory tower intellectual,” “elitist,” and so forth.


35 posted on 07/03/2010 7:55:27 AM PDT by 1rudeboy
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To: mad_as_he$$

>>made deliberately hard by people in the trade

Pay no attention to the little men behind the curtain.

Ivory Tower A$$Hats like Athreya like to prop up the facade that the Proletariat needs a Vanguard Elite to “understand” (or not?) that fraud and blowing a derivative bubble by securitizing A$$Paper is bad.

Well, most of us simple folks (with common sense) don’t need a “Kartik Athreya” to understand the double entendre meaning of ESAD - one being a directive commonly uttered toward pompous twits like Athreya - the other meaning simply that if you do, you will.

Eat A$$Paper and Die, Athreya - if you do, you will. PLEASE DO!


36 posted on 07/03/2010 8:00:11 AM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: newfreep

Great overview of Keynes, his core belief of Socialism and what his goals were...

John Maynard Keynes and Economic Fascism

http://www.youtube.com/watch?v=WnUUMs9WIC0


37 posted on 07/03/2010 8:00:35 AM PDT by newfreep (Palin/DeMint 2012 - Bolton: Secy of State)
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To: LomanBill

You’re gonna’ have to ice that knee, it jerked so badly.


38 posted on 07/03/2010 8:01:24 AM PDT by 1rudeboy
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To: 1rudeboy

Eat A$$Paper and Die, little rude twit.


39 posted on 07/03/2010 8:03:57 AM PDT by LomanBill (Animals! The DemocRats blew up the windmill with an Acorn!)
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To: Don Corleone

Your example sounds like accounting, not economics.


40 posted on 07/03/2010 8:07:07 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: LomanBill

Rub some dirt on it, Bill.


41 posted on 07/03/2010 8:07:25 AM PDT by 1rudeboy
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To: 1rudeboy
99% of the people with PhDs in economics never write anything meant for the general public. Those that do write for the public almost always have axes to grind and those axes are what drive their writing rather than the raw economic data. That is true for cranks like Krugman and brilliant authors like Sowell [no bias in my choices :) ]. Imagine if Dr. Sowell analyzed the data and found that government control of the economy actually was better in the long term... I think he would still rank personal freedom over a few percentage points of GDP. Similarly, Krugman will never admit that individual freedom is better than government economic control no matter how many times the Fed and the Treasury screw up.
42 posted on 07/03/2010 8:13:34 AM PDT by KarlInOhio (Gun control was originally to protect Klansmen from their victims. The basic reason hasn't changed.)
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To: 1rudeboy; 10Ring
He thinks British Petroleum is owned by Prince Charles.

It might be mad-cow.

43 posted on 07/03/2010 8:13:34 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Sherman Logan

If you want to try and argue that the bastardized Keynesian practices of the past 10 years prevented things from getting worse then they are then you are mistaken.

When governments attempt to prevent markets from correcting themselves through policy intervention they are just kicking the can down the road. They did it in 2001 and again and again til the point where we find ourselves now.


44 posted on 07/03/2010 8:17:16 AM PDT by misterrob (Thug Life....now showing at a White House near you....)
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To: Toddsterpatriot

I think that this essay is fairly level-headed. Some of the reactions it “inspires” truly are a wonder to behold.


45 posted on 07/03/2010 8:18:32 AM PDT by 1rudeboy
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To: 1rudeboy

It is a largely self-serving piece of crap. The Fed has violated a few laws in the past few years and while the author had no real say in this the critics are not wrong in their beefs. Furthermore, telling people that if they didn’t acquire a PhD in econ from a university then their grasp of the subject is limited is utter bunk. Is Roubini dead wrong? Schiff? What about all of the folks at the Von Mises Institute or CATO or Heritage?

The bloggers do a very valuable service by pointing out the failures of policy makers who lived in academia for too long and surrounded themselves with other liberal socialists.


46 posted on 07/03/2010 8:29:35 AM PDT by misterrob (Thug Life....now showing at a White House near you....)
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To: LomanBill

lol.Perfect.


47 posted on 07/03/2010 8:29:56 AM PDT by mad_as_he$$ (Sometimes you have to go to dark places to get to the light....)
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To: 1rudeboy
He (or she?) has to spend a good deal of time heading-off the attacks you see above—”ivory tower intellectual,” “elitist,” and so forth.

He invited it with his language and professions of acuity in economics and declaring his education.

Those who don't know Indians very well will take that as elitism when in fact he states his bona fides as simple fact. He speaks from a position of self-described authority while at the same time denouncing said authority. It's just his way.

I would have preferred he tried to explain Chaos Theory. THAT would have had me reaching for the Thesaurus.

48 posted on 07/03/2010 8:31:34 AM PDT by raybbr (Someone who invades another country is NOT an immigrant - illegal or otherwise.)
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To: misterrob
The bloggers do a very valuable service by pointing out the failures of policy makers who lived in academia for too long and surrounded themselves with other liberal socialists.

The author simply is reminding you that some want to sell you gold. That's all, and it's certainly not "self-serving."

49 posted on 07/03/2010 8:32:15 AM PDT by 1rudeboy
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To: raybbr
So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy. Taken literally, I am almost certainly wrong. Some of them have great ideas, for sure. But this is irrelevant

50 posted on 07/03/2010 8:35:11 AM PDT by 1rudeboy
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