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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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