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> Micro can be pretty useful to individuals, but Macro is literally no better than astrology Macro brought a whole new dimension to the economic thought. Examp

> Micro can be pretty useful to individuals, but Macro is literally no better than astrology Macro brought a whole new dimension to the economic thought. Example: Due to leaving out the macro dimension when deciding the fate for Greece in the eurocrisis, they forced them to lower the income of all people by 20% or something. Because the neoliberal labour market theory (micro) assumes the labour market functions like a normal market. They assumed the lower wages would be subsidized by higher employment (lower price of goods = higher demand). The opposite was the case. Unemployment increased drastically. And it's very simple to understand why. The income is cut by 20% -> the demand is automatically cut by 20% -> companies don't have incentive to employ new people -> instead they let people go despite the low wages so they can maximize their profits. This chain of events does not exist in micro. Another fundamental aspect is savings and debt. People don't realize, that every new savings in an economy have a debt counterpart in the same amount. So to say for example: "the government has to decrease it's debt" means nothing without explaining who should make less savings / more debt in return. This accounting logic can be used in cases like Germany with their export surplus: If everyone in Germany is saving (private households, companies and government), then who is the debt counterpart? The foreign countries. Then one should ask whether such a sitution is sustainable, were one country always saves while all it's trade partners always have to make debt. Obviously not. Micro economists would find ways to put a "everything perfect" stamp on Germany though. Because they are stuck on a micro level.

t_mann 4y ago
Fyi, modern macroeconomics is essentially a flavour of microeconomics. They call it microfoundations for macro. They share all the important formalisms like general equilibrium. Macro is just where the inadequacies of that formalism are most evident because it gets the most attention outside academia.
- worik 4y ago
  That is a style of teaching, and a wee bit ideological. Not a description of "modern macroeconomics"
roenxi 4y ago
> People don't realize, that every new savings in an economy have a debt counterpart in the same amount... This is the model macroeconomists use, but they've repurposed the word "savings" to something that isn't a particularly good idea. Someone who has $1,000 & invests it into - say - buying a solar panel doesn't have any savings but has made their future more comfortable through investment but has no savings. If they instead put the money into savings the evidence I've seen is it will go to some profligate spender who will likely make the future worse for everyone (like a money-losing Uber or a wormongering government). This is why macroeconomics can reasonably be compared to astrology - the words have so little connection to what people understand that they are useless. People make the mistake of thinking savings are desirable, not understanding that formal language has separated the idea of savings (accounting identities) and investment (making life better).
- Phil_Latio 4y ago
  But the fact that people don't know about these simple truths, is not that the "macroeconomic theory" is not understandable to the average person, it's that they are never teached about it. All they are teached or hear about is the micro garbage from mainstream economists, because we live in a world of neoliberalism.
  - roenxi 4y ago
    Why would they need to know technical accounting identities? What do you expect them to do differently if they understood?
    - Phil_Latio 4y ago
      Seriously? If these fundamental truths would be known, then politicians couldn't easily make stupid decisions against these thruths. Economies and peoples lives get in trouble by ignoring them.
      - roenxi 4y ago
        Yes seriously. They aren't fundamental truths, they're variables in a model used by economists. What do you think people would do differently? Which policies do you expect to change? The politicians already have access to the best economic advice they care to listen to. The most likely scenario where they make the same choices for the same reasons.
jrm4 4y ago
Honestly, you're doing a good job proving my point. In your first example, you're just offsetting some ostensibly bad macro with different macro. And I see no compelling reason to strongly favor theory 2 over theory 1, given the same problem that's endemic to pretty much all macro, you can't treat this like a "scientific experiment." Change the variables a bit and you could probably come up with a different outcome. To be clear, I 100% stand on my astrology point -- but I also say that to punch up astrology a little bit. For both macroeconomics and astrology, neither has very good predictive power of the sort that you should rely on, but both have the potential to kind of jog our brains a little bit to open up paths to interesting ideas. They're equal.
- abigail95 4y ago
  I think the aggregate demand curve slopes downwards. I think this because of macroeconomic theory. Because of this model, I can make predictions on how government spending/borrowing affects consumption and investment. There is good empirical evidence for this. Do you not agree? Why is this astrology?
  - jrm4 4y ago
    A disproportionate number of prominent women in my life are Scorpios. There was good empirical evidence, then, that my daughter would be one too -- and lo and behold, that's what she was born as. If you look enough you can find roughly equal solid empirical evidence in astrology, especially if you honestly include hits and misses. Out in the world, the accuracy, and consequently the utility, of human beings advising one another on actions based on macroeconomic theory has been pretty similar to astrology.
    - notahacker 4y ago
      "Roughly equal solid empirical evidence in astrology" feels like a very strong citation needed. Where's astrology's "you can reduce inflation by raising the interest rate" or "actually the Phillips Curve empirical relationship won't remain stable when used as a policymaking tool, here's why..."? This whole argument is roughly "lol, these computer people call themselves scientists and yet my computer has bugs in it".

t_mann 4y ago

Fyi, modern macroeconomics is essentially a flavour of microeconomics. They call it microfoundations for macro. They share all the important formalisms like general equilibrium. Macro is just where the inadequacies of that formalism are most evident because it gets the most attention outside academia.

worik 4y ago
That is a style of teaching, and a wee bit ideological. Not a description of "modern macroeconomics"

roenxi 4y ago

> People don't realize, that every new savings in an economy have a debt counterpart in the same amount... This is the model macroeconomists use, but they've repurposed the word "savings" to something that isn't a particularly good idea. Someone who has $1,000 & invests it into - say - buying a solar panel doesn't have any savings but has made their future more comfortable through investment but has no savings. If they instead put the money into savings the evidence I've seen is it will go to some profligate spender who will likely make the future worse for everyone (like a money-losing Uber or a wormongering government). This is why macroeconomics can reasonably be compared to astrology - the words have so little connection to what people understand that they are useless. People make the mistake of thinking savings are desirable, not understanding that formal language has separated the idea of savings (accounting identities) and investment (making life better).

Phil_Latio 4y ago
But the fact that people don't know about these simple truths, is not that the "macroeconomic theory" is not understandable to the average person, it's that they are never teached about it. All they are teached or hear about is the micro garbage from mainstream economists, because we live in a world of neoliberalism.
- roenxi 4y ago
  Why would they need to know technical accounting identities? What do you expect them to do differently if they understood?
  - Phil_Latio 4y ago
    Seriously? If these fundamental truths would be known, then politicians couldn't easily make stupid decisions against these thruths. Economies and peoples lives get in trouble by ignoring them.
    - roenxi 4y ago
      Yes seriously. They aren't fundamental truths, they're variables in a model used by economists. What do you think people would do differently? Which policies do you expect to change? The politicians already have access to the best economic advice they care to listen to. The most likely scenario where they make the same choices for the same reasons.

jrm4 4y ago

Honestly, you're doing a good job proving my point. In your first example, you're just offsetting some ostensibly bad macro with different macro. And I see no compelling reason to strongly favor theory 2 over theory 1, given the same problem that's endemic to pretty much all macro, you can't treat this like a "scientific experiment." Change the variables a bit and you could probably come up with a different outcome. To be clear, I 100% stand on my astrology point -- but I also say that to punch up astrology a little bit. For both macroeconomics and astrology, neither has very good predictive power of the sort that you should rely on, but both have the potential to kind of jog our brains a little bit to open up paths to interesting ideas. They're equal.

abigail95 4y ago
I think the aggregate demand curve slopes downwards. I think this because of macroeconomic theory. Because of this model, I can make predictions on how government spending/borrowing affects consumption and investment. There is good empirical evidence for this. Do you not agree? Why is this astrology?
- jrm4 4y ago
  A disproportionate number of prominent women in my life are Scorpios. There was good empirical evidence, then, that my daughter would be one too -- and lo and behold, that's what she was born as. If you look enough you can find roughly equal solid empirical evidence in astrology, especially if you honestly include hits and misses. Out in the world, the accuracy, and consequently the utility, of human beings advising one another on actions based on macroeconomic theory has been pretty similar to astrology.
  - notahacker 4y ago
    "Roughly equal solid empirical evidence in astrology" feels like a very strong citation needed. Where's astrology's "you can reduce inflation by raising the interest rate" or "actually the Phillips Curve empirical relationship won't remain stable when used as a policymaking tool, here's why..."? This whole argument is roughly "lol, these computer people call themselves scientists and yet my computer has bugs in it".