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posted by mrpg on Wednesday August 30 2017, @03:42AM   Printer-friendly
from the A-Star-To-Guide-Us dept.

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


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  • (Score: 2) by mcgrew on Wednesday August 30 2017, @02:37PM (7 children)

    by mcgrew (701) <publish@mcgrewbooks.com> on Wednesday August 30 2017, @02:37PM (#561513) Homepage Journal

    I discovered that economics was rank bullshit when I took an economics class taught by three PhDs. I had spent August of 1973 to August 1974 in Thailand, where the median income was $1000/year. These bozos were saying that since someone in the third world could live on a thousand a year, we could too.

    It was incredibly stupid. In a place where you can feed four in a nice restaurant for under a dollar and ride a bus anywhere in the country for a nickle, you could live fairly comfortably. Not so when that bus ride is seventy five bucks and that dinner is fifty.

    Then there was "trickle-down economics", proven over and over to simply not work, that many economists still hold to.

    --
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  • (Score: 2) by mcgrew on Wednesday August 30 2017, @02:40PM

    by mcgrew (701) <publish@mcgrewbooks.com> on Wednesday August 30 2017, @02:40PM (#561516) Homepage Journal

    I walked out and dropped the class before the first class was over. A third of the students followed me out.

    --
    mcgrewbooks.com mcgrew.info nooze.org
  • (Score: 3, Insightful) by Thexalon on Wednesday August 30 2017, @02:54PM (5 children)

    by Thexalon (636) on Wednesday August 30 2017, @02:54PM (#561523)

    Then there was "trickle-down economics", proven over and over to simply not work, that many economists still hold to.

    Having been face-to-face with its creator, Arthur Laffer, the thing that was very noticeable was that he couldn't offer a consistent answer a very simple question about his idea that forms the core of trickle-down: What is the tax rate which would maximize government revenue? In other words, where's the top of his Laffer Curve?

    The reason he can't answer the question is that the answer is always "Lower than whatever the current tax rate is". And that's not because the maximum point is 0%, it's because trickle-down isn't an economic theory at all, it's simply creating a seemingly-academic excuse for doing what many politicians want to do for reasons that have nothing to do with economics, namely give their donors a nice big tax break.

    --
    The only thing that stops a bad guy with a compiler is a good guy with a compiler.
    • (Score: 0) by Anonymous Coward on Wednesday August 30 2017, @05:30PM

      by Anonymous Coward on Wednesday August 30 2017, @05:30PM (#561592)

      ^ nailed it

      It would be really nice to know if Mises is just another corporate plant or actually that deluded. Useful idiot or agent provocateur?

    • (Score: 1) by khallow on Thursday August 31 2017, @01:17AM (3 children)

      by khallow (3766) Subscriber Badge on Thursday August 31 2017, @01:17AM (#561901) Journal

      Having been face-to-face with its creator, Arthur Laffer, the thing that was very noticeable was that he couldn't offer a consistent answer a very simple question about his idea that forms the core of trickle-down: What is the tax rate which would maximize government revenue? In other words, where's the top of his Laffer Curve?

      It's hard to blame Laffer here. Your question is broken. First, the Laffer curve is a very weak observation. It merely notes there is a maximum between the two extremes. You can come up with curves that will generate their maximum tax rate arbitrarily near 0% or 100%. So in particular, there is no predetermined maximum rate.

      The two huge factors here are what will the taxpayer and tax collector do with this money, if they had it? For example, if the taxpayer is just going to buy lots of cocaine and snort it (getting into progressively more life threatening problems as available money increases), then paying higher taxes isn't so bad an alternative. If they're doing good things with that money, then the optimum(s) of the Laffer curve slide down. Similarly, if government is turning that tax money into pointless, bloody wars, then the Laffer curve optimum(s) is much lower than if it is developing and distributing a cure for aging with that money.

      My view is that governments of the world right now are shitshows. So low tax rates look very appealing to me.

      • (Score: 2) by Thexalon on Thursday August 31 2017, @02:34AM (2 children)

        by Thexalon (636) on Thursday August 31 2017, @02:34AM (#561928)

        Laffer's argument was this: If taxes are too high, then the most skilled and presumably most financially successful people have insufficient incentive to produce more. That means that cutting taxes will lead to them producing more, which leads to increased economic growth. This increase in economic growth, in turn, counterintuitively means that lower tax rates can cause higher government revenue. (I should point out at this point that while it has never actually worked out that way, it's at least a coherent measurable economic argument.)

        Your position, on the other hand, actually proves my point: It's entirely a political view, namely that you believe that private individuals are better at spending money than the government is, therefor taxes should be lower, never mind the economics. That means you support Arthur Laffer's way of thinking because it provides a good excuse to do what you already want to do for reasons that have nothing to do with economics, namely cut taxes.

        I should also mention that the rich guys on Wall Street that are raking in a lot of the extra cash as they're taxed at a lower rate than the rest of us tend to spend their extra money on ... wait for it ... snorting cocaine. Well, that and hookers. So if your premise is that government can do better than cocaine addicts, you might want to rethink your position with regards to whether government is better or worse than they are.

        --
        The only thing that stops a bad guy with a compiler is a good guy with a compiler.
        • (Score: 2) by maxwell demon on Thursday August 31 2017, @06:28AM

          by maxwell demon (1608) on Thursday August 31 2017, @06:28AM (#561991) Journal

          Your position, on the other hand, actually proves my point: It's entirely a political view, namely that you believe that private individuals are better at spending money than the government is, therefor taxes should be lower, never mind the economics.

          I cannot find that claim anywhere in the post you replied to. Quite the opposite, indeed: It contains explicit examples both of bad private spending and of good government spending (although I don't agree that this specific example is indeed a good cause to spend government money; fighting cancer would have been a much better example).

          Also note that if there's an optimum that doesn't sit at 0% (and it is quite obvious that 0% cannot maximise your tax revenue), it also means that it is possible that the current taxes are below that optimum, and that you therefore should increase taxes to increase revenue.

          Moreover note that khallow's argument means that the government can influence where that optimum sits. It can raise that optimum by improving the spending. So if a government happens to tax at the optimum tax rate, and then decides to improve on its spending, then according to khallow's argument this means the optimum tax rate rises, and therefore the government should increase the tax rate accordingly in order to get back into the optimum.

          --
          The Tao of math: The numbers you can count are not the real numbers.
        • (Score: 1) by khallow on Thursday August 31 2017, @08:54PM

          by khallow (3766) Subscriber Badge on Thursday August 31 2017, @08:54PM (#562299) Journal

          Laffer's argument was this: If taxes are too high, then the most skilled and presumably most financially successful people have insufficient incentive to produce more. That means that cutting taxes will lead to them producing more, which leads to increased economic growth. This increase in economic growth, in turn, counterintuitively means that lower tax rates can cause higher government revenue. (I should point out at this point that while it has never actually worked out that way, it's at least a coherent measurable economic argument.)

          No, Laffer's argument was more limited than that. He noted that near zero tax revenue would occur at 0% and 100% tax rates. The former is obvious because no taxes are being collected. And the latter because most people, not just the financially successful people, would have any incentive to produce anything that would be fully taken away by taxation.

          Your position, on the other hand, actually proves my point: It's entirely a political view, namely that you believe that private individuals are better at spending money than the government is, therefor taxes should be lower, never mind the economics. That means you support Arthur Laffer's way of thinking because it provides a good excuse to do what you already want to do for reasons that have nothing to do with economics, namely cut taxes.

          What do you mean "never mind the economics"? Sure, if we completely ignore the economics in my point of view, then it really doesn't matter what we attribute it to. But there's no reason to do that, unless you're attempting an ad hominem.

          And frankly, it should be obvious to you that a cost/benefit analysis of higher taxation would need to include the relative values of the choices rather than just assume one is better. I have done that and as a result, I think government service is vastly overrated.

          I should also mention that the rich guys on Wall Street that are raking in a lot of the extra cash as they're taxed at a lower rate than the rest of us tend to spend their extra money on ... wait for it ... snorting cocaine. Well, that and hookers. So if your premise is that government can do better than cocaine addicts, you might want to rethink your position with regards to whether government is better or worse than they are.

          Funny how that example came to my mind, isn't it? Maybe you should read my post again. I'll note that at least with hookers, the rich Wall Streeters are employing people and distributing a significant amount of wealth around voluntarily.