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 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]
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.
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.
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.
Eh? The one concept directly implies the other.
Also bears repeating.
Rxcellent book.
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
—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.
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.
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$$Paper and Die, Athreya - if you do, you will. PLEASE DO!
Great overview of Keynes, his core belief of Socialism and what his goals were...
John Maynard Keynes and Economic Fascism
http://www.youtube.com/watch?v=WnUUMs9WIC0
You’re gonna’ have to ice that knee, it jerked so badly.
Eat A$$Paper and Die, little rude twit.
Your example sounds like accounting, not economics.
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