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Economists Are the New Astrologers

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

An Anonymous Coward writes:

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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Original Submission

• Re:1976 (Score: 1) by khallow on Thursday August 31 2017, @08:54PM

  by khallow (3766) 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.

  Parent