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Can anyone lend insight into whether any of the following really hold any merit? 1) Economists have a structural imperative not to publish their most meaningfu

by ep103 10y ago

Can anyone lend insight into whether any of the following really hold any merit? 1) Economists have a structural imperative not to publish their most meaningful studies. In short, if you find an accurate model for something, there's a good chance you can make more privately than via publishing. 2) The lack of a professional body for economists leaves open to corruption. Like the Dean of Columbia's Economics school writing a report praising Iceland's market reforms prior to 2008, at the behest of Iceland's Chamber of Commerce. 3) Economics jobs tend to fall into 2 broad categories. Either you're working for wallstreet analyzing markets, which are, in fact, very free ideal markets that lend themselves to the mathematical model... or you're working for a think tank, which almost certainly has an ideological bias.

conistonwater 10y ago
Re (2): Glenn Hubbard (the dean you mention) has a relatively long history (depending on who you ask, of course) of having dubious ideas on economics. For example: http://krugman.blogs.nytimes.com/2012/08/10/culture-of-fraud/ http://krugman.blogs.nytimes.com/2012/08/10/culture-of-fraud..., Krugman's blog has lots of examples. So in that context, writing a report "at the behest of Iceland's Chamber of Commerce" is pretty small potatoes. It's far more likely that they commissioned a report knowing Hubbard's own views in advance, which makes it dodgy as hell, but not quite corruption. And in any case, many of those arguments about market reforms and deregulation really ought to be assessed on merits (which are objectively poor), with who's paying for them being more of a side note. It's also arguable that a professional body would not solve these kinds of problems. It'd be hard to build an argument against a profession by focussing on just one hack. Re (1): taking an economics model and pushing it to production involves a genuinely considerable amount of work. "Make more privately" would mean something along the lines of getting hired by a hedge fund as consultant. There are also other incentives involved: first, academia generally urges people to publish. Second, having a model be published is part of the way it is accepted by practitioners too: if you just come up with a random model, it would have to be insanely good to convince anyone to put their money behind it, otherwise they'll require you to get other people to assess it, and you'll have to publish it in a peer-reviewed journal. The exception would be really specialized models, where you think you found an arbitrage opportunity or something (even then it's not completely clear, see, e.g., the literature on selling deep out-of-money puts).
- ianai 10y ago
  1) is laughable. Economics is hardly developed enough for someone to a.) come up with a theory "no body else" has and b.) have that theory be specific enough that one individual in a short amount of time could profit greatly from it and c.) studies a topic that's so chaotic the best theories of it are "long term" - i.e. 10s-100s of years, not days. The exceptions to my point here are so widely known as to not be profitable or not really be 'doing economics' 2) By the nature of the work of an economist there will always be people who want to say they're an economist so people will 'follow them'. Everyone has an opinion about the economy. The best system in place is the academic route - university education, accreditation, and peer review. Those aren't perfect. I'm saying they're the best we're likely to get. 3) I'd say economists either work in academia, government, or private enterprise. In academia they're refining theories, teaching, and publishing. In government and private they're running numbers. In private enterprise, I'd say they're expected to tell who ever what that person wants to hear in the way they want to hear it.
- neffy 10y ago
  1) Historically Keynes is certainly known for profiting on foreign exchange bets, Irving Fisher on the other hand is notorious for predicting multiple times that the recovery of the 1929 crash was about to begin - and his funds followed his predictions into oblivion. 2) It was Fredrik Mishkin - and he was paid well over $100,000 for it. https://www.utanrikisraduneyti.is/media/Raedurogerindi/Financial_Stability_in_Iceland.pdf https://www.utanrikisraduneyti.is/media/Raedurogerindi/Finan... This is the report, and it's worth reading because it encapsulates just about everything that is wrong with macro-economics, from theory to corruption. Understand that all anybody had to do at the time to understand how badly off the rails the Icelandic Banks were was to look at their balance sheets in their annual reports.
  - ep103 10y ago
    So in most science, if someone comes out with a study saying that (say, for example) climate change isn't real, they'll be buried under the remaining 99% that came to consensus in the other direction. Sure, Industry will bankroll lobbyists to fight any potential change in government, and fund crackpot theories, but ultimately, the evidence that will accrue will be damning. Why wasn't that the case for Iceland? Why doesn't that happen more for economics as a whole? Is it a function of time? In economics, people are more focused on sub 10 year plot lines? Perhaps our understanding of macroeconomics is so poor that we're surprised by "big changes" every few years, and evidence doesn't get a chance to accrue? Whereas evidence for climate change can accrue year after year?
rz2k 10y ago
re:1) Possibly so for some subjects in microeconomics. And, I'm sure there are things that would be called "dark patterns" here that are determined by economists helping corporations determine their pricing. With respect to macroeconomics, the insights suggest choices in public policy that advance a given goal. They could be dishonest about their conclusions and try to benefit a specific group than the one they claim will benefit, but even then they still require the public policy to be implemented, which is different than being able to trade on things in secret. re:3) Two categories outside of academia are economists working at Federal Reserve banks and the small economics groups at other banks and a few of the largest corporations. Much of the work at the Federal Reserve banks goes to waste, because of the political stakes around the Fed and attempts to co-opt its influence. Almost everyone is muzzled from saying anything publicly, because it will be intentionally misunderstood, and become part of a political excuse to limit the Fed system's independence. It is a loss for general economic understanding, but probably has prevented some economic interference by crackpots in Congress. At the banks there are a few roles. Sometimes in a period of uncertainty their job is to supply a high level picture and a few operating theories to work with when deciding how to react through the trading day. Sometimes the job is to provide a plausible narrative for justifying why they are trading in a market that is not sustainable over the long term, but is still making the bank money that year. The weakness behind 2008 were not an unknown secret even if no one knew exactly how and when the crisis would occur. And yet, the people at the bank using your research wouldn't find your analysis useful if your advice was to just stay out of the market. Furthermore, there are plenty of people on Wall Street who are brilliant and great at their finance jobs, but have no understanding of the material in a typical intermediate macroeconomics course, because it simply is not relevant to their daily performance.

by ep103 10y ago

conistonwater 10y ago

Re (2): Glenn Hubbard (the dean you mention) has a relatively long history (depending on who you ask, of course) of having dubious ideas on economics. For example: http://krugman.blogs.nytimes.com/2012/08/10/culture-of-fraud/ http://krugman.blogs.nytimes.com/2012/08/10/culture-of-fraud..., Krugman's blog has lots of examples. So in that context, writing a report "at the behest of Iceland's Chamber of Commerce" is pretty small potatoes. It's far more likely that they commissioned a report knowing Hubbard's own views in advance, which makes it dodgy as hell, but not quite corruption. And in any case, many of those arguments about market reforms and deregulation really ought to be assessed on merits (which are objectively poor), with who's paying for them being more of a side note. It's also arguable that a professional body would not solve these kinds of problems. It'd be hard to build an argument against a profession by focussing on just one hack. Re (1): taking an economics model and pushing it to production involves a genuinely considerable amount of work. "Make more privately" would mean something along the lines of getting hired by a hedge fund as consultant. There are also other incentives involved: first, academia generally urges people to publish. Second, having a model be published is part of the way it is accepted by practitioners too: if you just come up with a random model, it would have to be insanely good to convince anyone to put their money behind it, otherwise they'll require you to get other people to assess it, and you'll have to publish it in a peer-reviewed journal. The exception would be really specialized models, where you think you found an arbitrage opportunity or something (even then it's not completely clear, see, e.g., the literature on selling deep out-of-money puts).

ianai 10y ago
1) is laughable. Economics is hardly developed enough for someone to a.) come up with a theory "no body else" has and b.) have that theory be specific enough that one individual in a short amount of time could profit greatly from it and c.) studies a topic that's so chaotic the best theories of it are "long term" - i.e. 10s-100s of years, not days. The exceptions to my point here are so widely known as to not be profitable or not really be 'doing economics' 2) By the nature of the work of an economist there will always be people who want to say they're an economist so people will 'follow them'. Everyone has an opinion about the economy. The best system in place is the academic route - university education, accreditation, and peer review. Those aren't perfect. I'm saying they're the best we're likely to get. 3) I'd say economists either work in academia, government, or private enterprise. In academia they're refining theories, teaching, and publishing. In government and private they're running numbers. In private enterprise, I'd say they're expected to tell who ever what that person wants to hear in the way they want to hear it.
neffy 10y ago
1) Historically Keynes is certainly known for profiting on foreign exchange bets, Irving Fisher on the other hand is notorious for predicting multiple times that the recovery of the 1929 crash was about to begin - and his funds followed his predictions into oblivion. 2) It was Fredrik Mishkin - and he was paid well over $100,000 for it. https://www.utanrikisraduneyti.is/media/Raedurogerindi/Financial_Stability_in_Iceland.pdf https://www.utanrikisraduneyti.is/media/Raedurogerindi/Finan... This is the report, and it's worth reading because it encapsulates just about everything that is wrong with macro-economics, from theory to corruption. Understand that all anybody had to do at the time to understand how badly off the rails the Icelandic Banks were was to look at their balance sheets in their annual reports.
- ep103 10y ago
  So in most science, if someone comes out with a study saying that (say, for example) climate change isn't real, they'll be buried under the remaining 99% that came to consensus in the other direction. Sure, Industry will bankroll lobbyists to fight any potential change in government, and fund crackpot theories, but ultimately, the evidence that will accrue will be damning. Why wasn't that the case for Iceland? Why doesn't that happen more for economics as a whole? Is it a function of time? In economics, people are more focused on sub 10 year plot lines? Perhaps our understanding of macroeconomics is so poor that we're surprised by "big changes" every few years, and evidence doesn't get a chance to accrue? Whereas evidence for climate change can accrue year after year?

rz2k 10y ago

re:1) Possibly so for some subjects in microeconomics. And, I'm sure there are things that would be called "dark patterns" here that are determined by economists helping corporations determine their pricing. With respect to macroeconomics, the insights suggest choices in public policy that advance a given goal. They could be dishonest about their conclusions and try to benefit a specific group than the one they claim will benefit, but even then they still require the public policy to be implemented, which is different than being able to trade on things in secret. re:3) Two categories outside of academia are economists working at Federal Reserve banks and the small economics groups at other banks and a few of the largest corporations. Much of the work at the Federal Reserve banks goes to waste, because of the political stakes around the Fed and attempts to co-opt its influence. Almost everyone is muzzled from saying anything publicly, because it will be intentionally misunderstood, and become part of a political excuse to limit the Fed system's independence. It is a loss for general economic understanding, but probably has prevented some economic interference by crackpots in Congress. At the banks there are a few roles. Sometimes in a period of uncertainty their job is to supply a high level picture and a few operating theories to work with when deciding how to react through the trading day. Sometimes the job is to provide a plausible narrative for justifying why they are trading in a market that is not sustainable over the long term, but is still making the bank money that year. The weakness behind 2008 were not an unknown secret even if no one knew exactly how and when the crisis would occur. And yet, the people at the bank using your research wouldn't find your analysis useful if your advice was to just stay out of the market. Furthermore, there are plenty of people on Wall Street who are brilliant and great at their finance jobs, but have no understanding of the material in a typical intermediate macroeconomics course, because it simply is not relevant to their daily performance.