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posted by janrinok on Sunday February 12 2017, @05:31PM   Printer-friendly
from the sir-can-do-better dept.

It is often opined here on Soylent that Economics isn't real science. You would expect economists to disagree with that sentiment, but it turns out that there is a growing international movement within the world of economics itself, started by a group of students, that seeks to drastically overhaul the entire field. Some choice quotes from the article, which is in fact a review of a book "which formalises and expands the case" that economics is in need of reform:

In the autumn of 2011, as the world's financial system lurched from crash to crisis, the authors of this book began, as undergraduates, to study economics. While their lectures took place at the University of Manchester the eurozone was in flames. The students' first term would last longer than the Greek government. Banks across the west were still on life support. And David Cameron was imposing on Britons year on year of swingeing spending cuts.

Yet the bushfires those teenagers saw raging each night on the news got barely a mention in the seminars they sat through, they say: the biggest economic catastrophe of our times "wasn't mentioned in our lectures and what we were learning didn't seem to have any relevance to understanding it", they write in The Econocracy. "We were memorising and regurgitating abstract economic models for multiple-choice exams."

Part of this book describes what happened next: how the economic crisis turned into a crisis of economics. It deserves a good account, since the activities of these Manchester students rank among the most startling protest movements of the decade.

After a year of being force-fed irrelevancies, say the students, they formed the Post-Crash Economics Society, with a sympathetic lecturer giving them evening classes on the events and perspectives they weren't being taught. They lobbied teachers for new modules, and when that didn't work, they mobilised hundreds of undergraduates to express their disappointment in the influential National Student Survey. The economics department ended up with the lowest score of any at the university: the professors had been told by their pupils that they could do better.


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  • (Score: 1, Interesting) by Anonymous Coward on Sunday February 12 2017, @09:02PM

    by Anonymous Coward on Sunday February 12 2017, @09:02PM (#466295)

    If you're talking about the paper that described a productivity cliff at 90% debt-to-GDP ratio, you should probably also acknowledge the correction of the math error, and the consequences:

    The link between debt and reduced productivity remained unassailed. Except, instead of being mostly OK until about 90%, it's a gradual reduction in growth based on debt levels.

    This is probably quite shocking, so I hope you're sitting down, but it turns out that siphoning off money from a country's coffers to pay interest is not good for the country at the time.

    Also, if you'd been paying attention, you'd have figured out that the argument for austerity wasn't that the government would stop spending and suddenly there'd be a unicorn in every peasant's pot, but that it was necessary to solve the debt problem so that countries could dig themselves back out of their self-created pits.

    Details matter.

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  • (Score: 0) by Anonymous Coward on Sunday February 12 2017, @10:19PM

    by Anonymous Coward on Sunday February 12 2017, @10:19PM (#466322)

    This is probably quite shocking, so I hope you're sitting down, but it turns out that siphoning off money from a country's coffers to pay interest is not good for the country at the time.

    Not true. Not even remotely true. Evidence of two-dimensional thinking.

    • (Score: 0) by Anonymous Coward on Sunday February 12 2017, @10:43PM

      by Anonymous Coward on Sunday February 12 2017, @10:43PM (#466333)

      You're right. I'm sorry.

      Paying interest totally benefits the country. Pay lots of interest!

      Can we pay more? Will ... will the evil banksters turn it down?

      • (Score: 0) by Anonymous Coward on Monday February 13 2017, @02:54AM

        by Anonymous Coward on Monday February 13 2017, @02:54AM (#466427)

        Paying interest totally benefits the country. Pay lots of interest!

        Depends on what the borrowed money was used for, and to whom the interest is being paid. If the money was mostly borrowed internally, and invested in something that tends to produce more money (like infrastructure), then it's not really a problem since it all stays in the country and is productive. The problems don't really occur unless the money isn't being used for things that will create more money and the interest is being paid outside the country. Governments being unable to understand the issues of variable income streams and thus always spending all their money all the time is a different problem, really.

  • (Score: 3, Insightful) by sjames on Monday February 13 2017, @04:45AM

    by sjames (2882) on Monday February 13 2017, @04:45AM (#466450) Journal

    It turns out though that if investing $1000 nets you 20% and the interest you pay is 5%, you should probably borrow more if you can.

    • (Score: 2) by FatPhil on Monday February 13 2017, @10:25AM

      by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Monday February 13 2017, @10:25AM (#466527) Homepage
      Except investing 1000 doesn't net you 20%, it nets something with a cauchy distribution which appears to be centred at 20%, but, being cauchy, not only doesn't have a standard distribution, but also doesn't even have a mean.
      --
      Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
  • (Score: 2) by fritsd on Monday February 13 2017, @12:51PM

    by fritsd (4586) on Monday February 13 2017, @12:51PM (#466555) Journal

    This is probably quite shocking, so I hope you're sitting down, but it turns out that siphoning off money from a country's coffers to pay interest is not good for the country at the time.

    I am not an economist, but I would imagine that postponing siphoning off money from a country's coffers to pay interest is not good for the country, either. Unless you believe that the country will do better in the (near) future or that its creditors will go bankrupt first.

    If that belief is based on current indicators, it can be valid.
    However if that belief is based on: "everybody knows that there is infinite economic growth because during the 20th century (which accidentally corresponds with the development of the petroleum economy and cheap energy) this was the case", I think the country is screwed.

    ALSO, there'd better not be any "black swan events" [wikipedia.org] in your country anytime soon, that push your country's debt through the roof.