Skip to comments.Economics is Hard. Donít Let Bloggers Tell You Otherwise
Posted on 07/03/2010 6:43:19 AM PDT by 1rudeboy
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 its not meant to be, and Ill explain why.
Before I continue, heres 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 doesnt 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 Dont Think So movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that its 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. Im 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 ones 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, thats certainly a possibility, but thats 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.
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.
Sort of like attorneys drafting documents only another attorney can decipher. Perpetuation of the species.
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.
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.
Reading comprehension: -1
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!
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.
Economics...lets see...money in minus money out = profit unless money out is larger than money in when it becomes a loss. Very difficult.
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.
Keynesian economics ALWAYS fails. ALWAYS.
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.
“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”.
I did ok in my upper-level Macro class. Upper-level Micro kicked my ass (and the professor was a prick).
“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.
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.
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.
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.
Eh? The one concept directly implies the other.
Also bears repeating.
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.
—took me a while to paste/format it for printing/reading; now for my coffee....
I find your pontificating about my pontificating about the author's pontificating something to pontificate about.
That’s because they never read Hazlitt’s classic.
Time for a a beer, another pressing problem solved.
Thanks for the link. Sounds like a good companion to Schiff’s book.
I just have the impression that neither of you bothered to read the essay.
History (and intellect) has ALWAYS shown Keynes as a failed economist and the politicians that follow his failed philosophy.
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.
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.
>>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$$Paper and Die, Athreya - if you do, you will. PLEASE DO!
Great overview of Keynes, his core belief of Socialism and what his goals were...
John Maynard Keynes and Economic Fascism
You’re gonna’ have to ice that knee, it jerked so badly.
Eat A$$Paper and Die, little rude twit.
Your example sounds like accounting, not economics.
Rub some dirt on it, Bill.
It might be mad-cow.
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.
I think that this essay is fairly level-headed. Some of the reactions it “inspires” truly are a wonder to behold.
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.
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.
The author simply is reminding you that some want to sell you gold. That's all, and it's certainly not "self-serving."
So far, Ive 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