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To: JasonC
Thank you for your thoughtful reply. You obviously have a great wealth of knowledge in regards to the economy. I read in another post that today's economists are where astrophysicists were in the time of Copernicus. Obviously I am not expert in this area as my professional expertise is elsewhere but I try to pay attention to what is going on. You are stating explicitly in a number of posts that (if I understand you correctly) that basically the U.S. economy is just so big it is largely resistant to just about any outside influence that the government might want to try to implement. Thank you especially for clearing up my concern that CDSs are essentially offsetting bets with little impact outside of those who actually hold them. I must confess I have been listening to the doom and gloomers. Peter Schiff seemed to be right on the money about much of recent events. Hopefully the doom and gloomers are wrong. Meanwhile I will still cling to my guns, bitterly. <Μολὼν λάβε/p>
44 posted on 01/31/2009 12:11:19 PM PST by wastoute (translation of tag "Come and get them (bastards)")
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To: wastoute
today's economists are where astrophysicists were in the time of Copernicus

In a couple of ways. The basic fact is that economics is a behavioral study - meaning that it is a study of the way people (individually or in groups) behave under certain conditions - the condition economics cares about is scarcity (which to you and me means a limited number of things - money, oil, water even air). After my time in the field, behavioral economics and other specialized fields emerged that shattered the silliness of previous schools. These guys recognized that most of the tools we've historically used (aggreagates, equilibrium, etc) are often misleading, and that only individual actors matter, that there is not equilibrium but constant dynamic change, that all value is subjective, and most importantly that an economy is a dynamic adaptive complex system. In other words they recognized that modern economic models are pitiful representations of economic reality - they are sometimes useful but in very complex situations (like today) can be misleading. They are trying to create more complex models now that computing power permits, but it's a gargantuan task.

The other thing is that like I said above, economics is an adaptive complex system - emphasis on adaptive. Because it's conscious. It's living, breathing, always observing its own environment (like government and regulators) and trying to leverage that for its own gain. The Lucas Critique is a theory that states that once the general public realizes that a certain measure (say M1 or CPI) is used as a policy tool, that measure starts to lose is effectiveness for that policy. Indeed, we've known since the mid-90s that M1, M2 and CPI were starting to lose their value. Re-read GReenspan's "irrational exuberance" speech from 1996 and you will see a wonderful summation of what my 5 years at the Bureau of Labor Statistics revealed about the consumer Price Index.

The economy is not a passive subject, it is like a wild animal, constantly in an active struggle to evade its would-be tamers. So yes, we are in the early stages of undertanding the economy, and no we will never be able to catch up as much as we can with the physical sciences.

49 posted on 02/01/2009 5:35:54 PM PST by sanchmo
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