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When Christopher Nolan was promoting his previous film Interstellar, he made the casual observation that "Take a field like economics for example. [Unlike physics] you have real material things and it can't predict anything. It's always wrong." There is a lot more truth in that statement than most academic economists would like to admit.
[...] several famous Keynesian and neo-classical economists, including Paul Romer, [...] criticized the "Mathiness in the Theory of Economic Growth" and [...] Paul Krugman. In this instance, though, Krugman is mostly correct observing that "As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth."
[...] But more fundamentally, as Austrian economist Frank Shostak notes, "In the natural sciences, a laboratory experiment can isolate various elements and their movements. There is no equivalent in the discipline of economics. The employment of econometrics and econometric model-building is an attempt to produce a laboratory where controlled experiments can be conducted."
The result is that economic forecasts are usually just wrong."
"[Levinovitz] approvingly quotes one economist saying "The interest of the profession is in pursuing its analysis in a language that's inaccessible to laypeople and even some economists. What we've done is monopolise this kind of expertise.[...] that gives us power.""
[...] because economics models are mostly useless and cannot predict the future with any sort of certainty, then centrally directing an economy would be effectively like flying blind. The failure of economic models to pan out is simply more proof of the pretense of knowledge. And it's not more knowledge that we need, it's more humility. The humility to know that "wise" bureaucrats are not the best at directing a market "
Economists Are the New Astrologers
(Score: 1) by khallow on Wednesday August 30 2017, @11:35AM (7 children)
Which is actually a solid argument against the Keynesian approach. Let us note that we have since had a couple of other glaring examples of the failure of this approach with the Japanese "lost decade" (more like two lost decades now) and the Obama administration's actions.
A key problem of Keynesian economics and one which ties into the astrology theme here is that it's great rationalization for more public spending during emergencies. Then the theory gets conveniently ignored when times get better and yet the spending doesn't decline. My take is this is why Keynesian economics became so popular in the first place.
(Score: 4, Informative) by Thexalon on Wednesday August 30 2017, @01:25PM (2 children)
Yep, they failed so hard that:
- The unemployment rate, which had shot up to 10% before Obama's policies could take effect, had come back down to 4.8% by the time he left office.
- Working-age labor force participation rate, which had dropped down to 81.8%, was ticking upwards to 82.5% by the time he left office.
- GDP increased from $14.4 trillion to $18.6 trillion (in 2009 dollars) over the course of his term.
I think the Obama administration and Federal Reserve Chair Janet Yellen can be forgiven for thinking they were generally on the right track, because that does not look to me like a failure.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by khallow on Thursday August 31 2017, @12:15AM (1 child)
Would have happened quicker without his interference. Keep in mind you're bragging about doing this in eight years.
Amazing recovery there in eight years.
In 2009 dollars, GDP increased [thebalance.com] from $14.4 trillion to $16.716, which is a pathetic growth rate, 1.8% per year for the US over eight years, especially from the bottom of a recession (the strongest growth tends to closely follow recessions). In comparison, from 1967 to 2016 the US economy increased by 2.7% over the 50 year period, including Obama's two terms (in other words, excluding Obama's two terms, economic growth was 2.9% per year, including several recessions, more than half again as high).
(Score: 1) by khallow on Thursday August 31 2017, @02:31AM
While I think the conclusion was that the economy was worse than we knew, it strikes me that perhaps the solutions were also worse than we knew.
(Score: 2) by Pav on Thursday August 31 2017, @09:35AM (3 children)
OK... I can see I wasn't clear enough here... I said:
'and supposedly disproved Keynes by showing how stagflation confounded the "Keynsian" models'
Note the quotes around "Keynsian". This wasn't a reflection of Keynses work... this is why it's called the Phillips Curve. I thought Phillips was misguided, but it seems Phillips himself didn't even think the curve was a law of economics. So it was economists who misused Phillips work and who called themselves Keynsians who served as straw men for the Austrians. Basically it was politics.
The Austrian argument says that you should let a recession play out and the economy will right itself, but what Keynes DID say was that this can't be allowed to happen because there's always a chance an economy will become permanently stuck in a new low wage low investment state. Decades of experience of the IMF enforcing Austrian economics in the third world (many of which had been permanently crippled) has given this view considerable weight, and this bastion of Austrian economics is developing decidedly Keynsian views.
(Score: 1) by khallow on Friday September 01 2017, @01:19AM (2 children)
Not seeing the problem myself. The Third World started crippled, that's why it's behind in the first place. The world has become a vastly better place in the past 50 years, though I'm not inclined to blame the IMF for that.
And not seeing why you're attributing Austrian economics to the IMF when you won't attribute Keynesian economics to the Keynesians. At least the latter is paying lip service to the respective theory.
(Score: 2) by Pav on Friday September 01 2017, @02:18AM (1 child)
*sigh* You should look into the core of what Keynes actually said. You'll be getting your Austrian medicine from Trumps idealogues. Perhaps you might even bounce back after the coming recession. Keynes would probably say "don't count on it".
(Score: 1) by khallow on Friday September 01 2017, @06:19AM
I'm not seeing the need to do so when you're not saying anything different. For example:
This is a state we've never seen, I might add, not even during the Great Depression. There have been plenty of nasty recessions that have plumbed the depths, but this just didn't happen. We have however seen a number of economies that have self-destructed for various reasons into a lower productivity state due to governance flaws, societal corruption, and/or destruction of infrastructure (for example, Haiti or the Ottoman Empire of the 19th century). Keynesian policies really don't help here. They can help preserve infrastructure (assisting imploding financial infrastructure), but they can make societal corruption and governance flaws worse. And frankly, the primary role of Keynesian policies, as it has for most of a century, continues to be the rationalization of increased public spending.
This is the core of what Keynesian economics is about - the idea that one needs to intervene when the economy is doing poorly. It suffers greatly from confusing correlation with causation. The intervention happens, the economy improves, thus, it must have been the intervention which caused the improvement in the economy. This ignores that economies improve naturally on their own as happened prior to the implementation of Keynesian schemes in the last century.
If so, that would be a great improvement over what we'll probably get from Trump ideologues on the economic front. Currently, they'll exceed expectations, if they don't screw over businesses like the Obama administration did and manage to generate some net economic growth on par with the longer term history of the US.
I've been pretty good at anticipating coming recessions (and we know they are coming). So yes, not only can I bounce back, but I probably can count on doing so for several recessions to come.