4 ms·

You're suggesting that there is some coordinated and intentional scheme by the ruling class to use economists as a way to serve them, my whole point is that the

by Kranar 4y ago

You're suggesting that there is some coordinated and intentional scheme by the ruling class to use economists as a way to serve them, my whole point is that there need not be any such conspiracy or intentional malice for this to occur by any party. It could simply be an emergent phenomenon where economists whose opinions align with the ruling class get more exposure and more prestigious appointments than those whose opinions disagree with them, or even worse disparage them. I am reminded of a TV news reporter/presenter who took offense to the idea presented to them that they are spreading political propaganda in service of the elites and flippantly asked something along the lines "Do you think I am self-censoring myself in service to the elite class, like I'm just a pawn taking a paycheck to say whatever the elite want me to say?" and the response to that question was "You most likely believe everything you say and are honest about your position, but if believed something different you wouldn't be sitting where you are."

Aunche 4y ago
>You're suggesting that there is some coordinated and intentional scheme by the ruling class to use economists as a way to serve them I wasn't suggesting that. OP did. Nothing I said suggests that economics is an incorruptible field. The problem is that a disproportionate demand for economists comes from people with an agenda. We all know that lobbying exists. When politicians get most of their knowledge about economics from these lobbyists rather than from less biased sources, of course it will seem like the field is more broken than it actually is.
boppo1 4y ago
Well I'm not the other guy, and I don't think there's any sort of "seekrit society with the elites". But having done undergrad study of finance, it seems like there's a sort of "ideological capture" in the field of economics. I have never had anyone explain to me why interest rate intervention doesn't fundamentally undermine the quality of work we're doing (giving businesses loans they shouldn't be able to afford means we're wasting effort). All the economists just agree it's totally okay based on less than 100 years of data, which, IMO isn't long enough to really observe the policy effects. Suppose you open a spreadsheet right now, discount 100 years of cash flows, and measure each cash flow as a % contribution to the sum (aka npv). You will find that at medium to higher rates years 0-20 make up the greatest percentage of the npv by far. But as you lower them, that relationship flips and cash flows for years 20 to 100 become the lion's share of the valuation. Pretty sure this is how we wound up with WeWork and all the similar fiascos, meanwhile huge swaths of the capable working-age population has dropped out of society for lack of well-compensated opportunity. Hell, there's a lot of issues right now that seem pretty easily explained with a simple DCF interpretation. All I ever seem to get is "lowering interest rates gets the economy rolling again by allowing businesses to continue hiring, and even if those jobs are just digging & filling in holes, those people have to buy food and housing and stuff so it gets the economy rolling again!" But that doesn't explain what happens if you "get it rolling again" too many times and the ratio of hole-diggers to food-makers starts to approach 1/2 (or wherever a "tipping point" may be). Hey great! Low unemployment! Except what's actually getting done is worthless. Is there such a thing as the 'natural interest rate' in economics? A way to determine what the yield curve would be if we hadn't been intervening for the last half a century?
- Aunche 4y ago
  I don't understand what your DCF example is supposed to illustrate. A higher interest rate also enables wealthier people to stay wealthy without doing anything. Meanwhile, Wework and similarly useless companies circulate wealthy investor's money into regular people's pockets by renting out office spaces at a loss. For the most part, I don't think low interest rates are a bad thing (though I don't think that they should have ended quantitative tightening prematurely in 2019). I share your sentiment that too much money is circulating around, but I don't blame the Fed. They have no way to stop Wework from receiving cheap cash without hurting useful small businesses. IMO, if Congress weren't so bad at balancing a budget, the government wouldn't have to issue so much debt, and in turn the Fed wouldn't have to buy so much of it back to achieve a similar effect with QE.

by Kranar 4y ago

Aunche 4y ago

>You're suggesting that there is some coordinated and intentional scheme by the ruling class to use economists as a way to serve them I wasn't suggesting that. OP did. Nothing I said suggests that economics is an incorruptible field. The problem is that a disproportionate demand for economists comes from people with an agenda. We all know that lobbying exists. When politicians get most of their knowledge about economics from these lobbyists rather than from less biased sources, of course it will seem like the field is more broken than it actually is.

boppo1 4y ago

Well I'm not the other guy, and I don't think there's any sort of "seekrit society with the elites". But having done undergrad study of finance, it seems like there's a sort of "ideological capture" in the field of economics. I have never had anyone explain to me why interest rate intervention doesn't fundamentally undermine the quality of work we're doing (giving businesses loans they shouldn't be able to afford means we're wasting effort). All the economists just agree it's totally okay based on less than 100 years of data, which, IMO isn't long enough to really observe the policy effects. Suppose you open a spreadsheet right now, discount 100 years of cash flows, and measure each cash flow as a % contribution to the sum (aka npv). You will find that at medium to higher rates years 0-20 make up the greatest percentage of the npv by far. But as you lower them, that relationship flips and cash flows for years 20 to 100 become the lion's share of the valuation. Pretty sure this is how we wound up with WeWork and all the similar fiascos, meanwhile huge swaths of the capable working-age population has dropped out of society for lack of well-compensated opportunity. Hell, there's a lot of issues right now that seem pretty easily explained with a simple DCF interpretation. All I ever seem to get is "lowering interest rates gets the economy rolling again by allowing businesses to continue hiring, and even if those jobs are just digging & filling in holes, those people have to buy food and housing and stuff so it gets the economy rolling again!" But that doesn't explain what happens if you "get it rolling again" too many times and the ratio of hole-diggers to food-makers starts to approach 1/2 (or wherever a "tipping point" may be). Hey great! Low unemployment! Except what's actually getting done is worthless. Is there such a thing as the 'natural interest rate' in economics? A way to determine what the yield curve would be if we hadn't been intervening for the last half a century?

Aunche 4y ago
I don't understand what your DCF example is supposed to illustrate. A higher interest rate also enables wealthier people to stay wealthy without doing anything. Meanwhile, Wework and similarly useless companies circulate wealthy investor's money into regular people's pockets by renting out office spaces at a loss. For the most part, I don't think low interest rates are a bad thing (though I don't think that they should have ended quantitative tightening prematurely in 2019). I share your sentiment that too much money is circulating around, but I don't blame the Fed. They have no way to stop Wework from receiving cheap cash without hurting useful small businesses. IMO, if Congress weren't so bad at balancing a budget, the government wouldn't have to issue so much debt, and in turn the Fed wouldn't have to buy so much of it back to achieve a similar effect with QE.