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Bad Economics
- JackPoach 5y agoThe points are valid. But it's entirely possible to replace 'Bad Economics' with even 'Worse Economics'
- yanderekko 5y agoYep. Sadly, these sorts of critiques are often just a thinly-veiled attempt to reject any sort of scientific approach to economics, and instead just replace it foundationally with something that's more amenable to the author's ideological priors. If you come up with a new working paradigm to predict macroeconomic variables, and you manage to use it to great practical success, the discipline is not going to freeze you out of publishing or whatever. You can precipitate a scientific revolution. Of course, the vast majority of critics aren't even pretending they can do this. Instead they'll attack the status quo without having anything better to offer, as if showing the flaws of a theory provide rhetorical justification for believing whatever you want. It's like a secular version of the "god in the gaps" argument.
- Nasrudith 5y agoYeah - it is telling that economics criticism rarely includes any alternative model and if it does tends to be meaningless feel-good inane fluff like "Gross Happiness Product". The same sort of woo as "alternative medicine" calling working medicine allopathic as a slur. What do they call economics which actually work more or less? Neoliberalism. The reoccurring criticisms of GDP are fundamentally clueless as complaining that gasoline poisons you when you drink it, therefore energy density per volume or mass is invalid. GDP is still power but the things they complain about are applications. The whole point of trade is that you can convert funds from like gold or tourism to tractors and medicine. Frankly they tend to be childish tantrums calling economists evil for not reflecting their sacred imperatives of how they believe the world should be.
- fluentmundo 5y ago"rarely includes any alternative model"? Did you read the piece? Here is the alternative model proposed by Skidelsky: "These deep methodological issues do not render economic knowledge utterly useless, Skidelsky suggests. But they do mean economics as we know it may have to be thrown out. [...] We should instead take a more provisional, open, and flexible attitude toward economic phenomena and treat economics as (just) another social science, rather than one supposedly purified of uncertainty by its logical prowess. Concretely, this means we should abandon dreams of an immaculate science of economic life—and stop deferring to those who claim to speak in its name. More abstractly, in place of a discipline that neglects the 'mesoeconomic' level—the institutions, firms, unions, banking systems, social movements, digital platforms, states, and other social entities that shape our behavior—Skidelsky proposes an approach 'which is more modest in its epistemology and richer in its ontology.'"
- SantalBlush 5y agoThat's not an alternative model. And by that, I don't mean it doesn't have enough math, what I mean is that it doesn't offer any different methodology for improving our knowledge of the economy. All of the things listed here can be included in the current framework of economic theory. There's no alternative being put forth here.
- Mikeb85 5y agoOn one hand, overly theoretical economics might not have the predictive power people want, but models tied too closely to past real world events are kind of like over-fitted models to the stock market: they work until something changes and they don't. Economics is hard, there's a million factors. Why doesn't increasing the minimum wage increase unemployment? Because increasing minimum wage has supply and demand-side effects but also because it doesn't happen in a vacuum, we don't know what happens if you increase minimum wage but keep everything else exactly the same because we've only ever increased minimum wage in the real world, where growth has steadily happened over the years, where there's a ton of other factors. Also because companies won't not hire, they'll just raise prices to compensate if the demand is still there for their products. Every supply/demand curve just puts pressure on prices, which way the price moves and how far depends on many supply/demand curves.
- pid-1 5y agoI'd bet in 50 or 100 years economics will be regarded as the astrology of our times.
- tomrod 5y agoDoubtful. Economics is the source of many methodologies in game theory, mechanism design, behavioral game theory, much of political science and voting theory, and has quite imperialistic methods such that quantitative accounting and financial engineering use econometric modeling. Not to mention RCT, causal inference, GIS, and machine learning applications have a lot of conceptual overlap. A safer bet would be that people in 50 or 100 years times will be expecting people in 100 years time to regard it as astrology. Edit: good catch(es), mobile commenting and I missed a key phrase (source of many methodologies).
- disgruntledphd2 5y ago> Not to mention RCT, causal inference, GIS, and machine learning applications RCT's were developed by psychologists (for educational purposes) and promoted by medical statisticians. Causal inference was essentially invented by a computer scientist. You can definitely thank geographers for GIS, and ML is basically a rebranding of statistics by Comp Sci researchers. Game theory I'll definitely concede to economics, but political science is it's own discipline, and shouldn't be regarded as part of economics.
- tomrod 5y agoEconomist here. The premise misses the "why". Up until the early 80s, macro was seen like an airplane control system where you could inject things here or there and make things work. Then Bob Lucas came out with his critique for rational expectations, and since most economics (sans early Keynesian and MMT) have grounded decision and policy making in microeconomic foundations. Why? Because people make rational decisions across the distribution. This led to Huggett and Aiyigari models, as well as tweaks on computational/agent-based models to account for microeconomic foundations. It was a necessary evolution. The critique in this article connects disparate things and misses much of the bigger picture.
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- CPLX 5y agoI also have a degree in economics and I was raised by two professors of economics and in my young life was surrounded by Nobel laureates in economics and have been involved in policy related things my whole life so I feel like I have some loose context to make this next statement. The entire modern economics profession is irredeemably corrupt and has led to unfathomable amounts of human misery due to blind allegiance to beautiful models against all obvious evidence that they had no actual relationship to how the world works. This was especially true in Microeconomics and doubly true when it comes to talking about Lucas and Sargent and the nonsense that is Rational Expectations, as well as of course EMH and other related delusions. Our public policy would probably better served if most of the profession was put on a cruise ship and launched out to sea. Just saying.
- yanderekko 5y ago>Our public policy would probably better served if most of the profession was put on a cruise ship and launched out to sea. Ah, the Khmer Rouge strategy. I wonder how that worked out.. It's not a coincidence that the "Nirvana fallacy" concept was coined by an economist.
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- bannedbybros 5y ago
- tomrod 5y ago@Bumby, you had a thoughtful question. I'm not sure where you're comment went, so replying at top level: >> Why? Because people make rational decisions across the distribution. > Do you mean that the average consensus converges on a rational decision? From an economists perspective, where does that assumption tend to break down and what are the best mechanisms for mitigating it? To clarify, on average people make microeconomics decisions that move a macroeconomic distributions in a measurable (and sometimes predictable) fashion. Connecting microeconomics foundations to macro models also allows for structural estimation of unobservable parameters, but that's really a tangent. Your question is getting more at behavioral economics/mechanism design (e.g bounded rationality), on which topic I am not deeply studied. The aphorism "the market is rational on average" seems related, perhaps?
- OGWhales 5y agoTheir comment is "dead" but you can make it visible by enabling "showdead" under your account settings.
- fuzzfactor 5y ago>"the market is rational on average" Goes along with the equally well-proven: "The market can remain irrational longer than you can stay solvent." Don't worry this has no effect except for those times when people or governments are trying to become or remain solvent to begin with. Macroeconomics is not just big amounts of money, it's also big amounts of time.
- a1445c8b 5y agoI was distracted by this passage: > What this argument misses is that the stakes of bad economics are often far higher than bad physics: being wrong about gravitational waves may cost you tenure, but being wrong about the minimum wage might condemn tens of millions to poverty. Which leads me to believe that the author has a seriously myopic view of Physics and how much it permeates everyday life.
- ryathal 5y agoWhile physics can explain a lot of everyday life, you don't need to actually know it, understand it, or even be correct about it to use the effects. Humans built structures long before we formalized the definition of gravity, but they still stood up. We don't YOLO astronauts in the first draft of a spaceship design and hope for the best, but that's pretty much how economics works.
- a1445c8b 5y ago> While physics can explain a lot of everyday life, you don't need to actually know it, understand it, or even be correct about it to use the effects. The author is not referring to ordinary people though. Let me paraphrase the quoted text: > What this argument misses is that the stakes of bad economics are often far higher than bad physics: [physicists] being wrong about gravitational waves may cost [them their] tenure, but [economists] being wrong about the minimum wage might condemn tens of millions to poverty.