3 ms·

This is many words to say something fairly simple: microeconomics is a science (/math), macroeconomics is mostly voodoo that macroeconomists pretend is science

This is many words to say something fairly simple: microeconomics is a science (/math), macroeconomics is mostly voodoo that macroeconomists pretend is science and for which they give each other bogus awards. Maybe one day we will have the ability to properly model the incredible complexity of a macroeconomic environment, but doing so requires encapsulating thousands (if not millions) of variables and we are not there yet. You cannot simplify anything at the macroeconomic-level to an equation or theorem with a handful of variables or concepts, which macroeconomists want to do. Said another way: macroeconomics is a social science, and like psychology or similar, most of the output of this discipline has piss-poor predictive quality and has an abysmal track record when it comes to reproducibility.

AmericanChopper 3y ago
He’s simply rediscovered Hayak’s central grievance with Keynes, but somehow made the leap to placing the blame for this with corporations, rather than the actual governors of macroeconomics, central banks…
- hayst4ck 3y ago
  If anyone wants a fun quick summary of Hayek this throwback to the 2008 crisis is an easily consumed primer on Keynes vs Hayek: Keynes vs Hayek rap battle 1: https://www.youtube.com/watch?v=d0nERTFo-Sk https://www.youtube.com/watch?v=d0nERTFo-Sk Keynes vs Hayek rap battle 2: https://www.youtube.com/watch?v=GTQnarzmTOc https://www.youtube.com/watch?v=GTQnarzmTOc
SantalBlush 3y ago
>You cannot simplify anything at the macroeconomic-level to an equation or theorem with a handful of variables or concepts, which macroeconomists want to do. They do this in a 101 class. They absolutely do not use "a handful of variables or concepts" when they're setting policy.
- danielmarkbruce 3y ago
  Who is "they" and what policy are you referring to? Folks at central banks setting monetary policy? Advisors/elected officials who decide fiscal policy? Regulators at various agencies deciding regulatory policy? Something else?
  - SantalBlush 3y ago
    I thought it would be clear that I was talking about macroeconomists in general, just like GP.
    - danielmarkbruce 3y ago
      Practically zero economists set policy, the exception being that central banks tend to have a decent number of them. Mostly they publish papers and talk.
      - tomrod 3y ago
        Economist here. The field has people that are involved in many policy settings, usually in an advisory capacity but often at the helm.
        danielmarkbruce 3y ago
        Yup, that's covered in "writing papers and talking". The context of the conversation is the use of simple models or large complex models and predictive capabilities. I know a couple folks who are policy advisors - and they don't whip out a giant model with 1000's of variables and then have someone actually setting policy look at said model and make a decision. On top of that, it's rarely a single person "setting policy". So, the idea that economists use large models to set policy is basically nonsense.
        SantalBlush 3y ago
        I understand that one can argue semantically whether advisors are "setting policy", but that's not a productive thread to follow, because it isn't relevant to my point. We are all aware that macroeconomists aren't voting "aye" and "nay" in the capitol, and it's a dishonest representation of my comment to ever pretend that I was suggesting that. Anyone who is interested in a good-faith discussion around here is perfectly capable of understanding my point and responding with a substantive comment, just like those who want to argue for argument's sake are able to intentionally misunderstand. Have a good day.
karmakurtisaani 3y ago
This is overly cynical, and I would say microeconomics is even more bogus than macro. In micro you come up with gross oversimplifications of the world and obtain a mathematical model that's supposed to be scientific because it's mathematical. In macro, the problem is that when central banks follow some economic theory, you don't see what would have happened if they didn't. As an example, people love to criticize the bailouts of banks and ZIRP, without understanding why it was done. The reason was that economists identified that the long and destructive recession in the 1930s was largely made worse by lack of available money: banks in those days could not evaluate who to give loans to, so they were overly cautious. As a result, businesses went bankrupt and no new ones were founded. This is what they wanted to avoid in our recent crises, and of course their actions come with other consequences. Those consequences are impossible to predict, as you say, but that's not the point. The point is to do or predict at least something, and try not to repeat past mistakes. This holds true for any study of complex systems where you cannot just make repeated experiments to obtain exact knowledge (some parts of medicine, psychology, nutrition etc.)

AmericanChopper 3y ago

He’s simply rediscovered Hayak’s central grievance with Keynes, but somehow made the leap to placing the blame for this with corporations, rather than the actual governors of macroeconomics, central banks…

hayst4ck 3y ago
If anyone wants a fun quick summary of Hayek this throwback to the 2008 crisis is an easily consumed primer on Keynes vs Hayek: Keynes vs Hayek rap battle 1: https://www.youtube.com/watch?v=d0nERTFo-Sk https://www.youtube.com/watch?v=d0nERTFo-Sk Keynes vs Hayek rap battle 2: https://www.youtube.com/watch?v=GTQnarzmTOc https://www.youtube.com/watch?v=GTQnarzmTOc

SantalBlush 3y ago

>You cannot simplify anything at the macroeconomic-level to an equation or theorem with a handful of variables or concepts, which macroeconomists want to do. They do this in a 101 class. They absolutely do not use "a handful of variables or concepts" when they're setting policy.

danielmarkbruce 3y ago
Who is "they" and what policy are you referring to? Folks at central banks setting monetary policy? Advisors/elected officials who decide fiscal policy? Regulators at various agencies deciding regulatory policy? Something else?
- SantalBlush 3y ago
  I thought it would be clear that I was talking about macroeconomists in general, just like GP.
  - danielmarkbruce 3y ago
    Practically zero economists set policy, the exception being that central banks tend to have a decent number of them. Mostly they publish papers and talk.
    - tomrod 3y ago
      Economist here. The field has people that are involved in many policy settings, usually in an advisory capacity but often at the helm.
      - danielmarkbruce 3y ago
        Yup, that's covered in "writing papers and talking". The context of the conversation is the use of simple models or large complex models and predictive capabilities. I know a couple folks who are policy advisors - and they don't whip out a giant model with 1000's of variables and then have someone actually setting policy look at said model and make a decision. On top of that, it's rarely a single person "setting policy". So, the idea that economists use large models to set policy is basically nonsense.
        SantalBlush 3y ago
        I understand that one can argue semantically whether advisors are "setting policy", but that's not a productive thread to follow, because it isn't relevant to my point. We are all aware that macroeconomists aren't voting "aye" and "nay" in the capitol, and it's a dishonest representation of my comment to ever pretend that I was suggesting that. Anyone who is interested in a good-faith discussion around here is perfectly capable of understanding my point and responding with a substantive comment, just like those who want to argue for argument's sake are able to intentionally misunderstand. Have a good day.

karmakurtisaani 3y ago

This is overly cynical, and I would say microeconomics is even more bogus than macro. In micro you come up with gross oversimplifications of the world and obtain a mathematical model that's supposed to be scientific because it's mathematical. In macro, the problem is that when central banks follow some economic theory, you don't see what would have happened if they didn't. As an example, people love to criticize the bailouts of banks and ZIRP, without understanding why it was done. The reason was that economists identified that the long and destructive recession in the 1930s was largely made worse by lack of available money: banks in those days could not evaluate who to give loans to, so they were overly cautious. As a result, businesses went bankrupt and no new ones were founded. This is what they wanted to avoid in our recent crises, and of course their actions come with other consequences. Those consequences are impossible to predict, as you say, but that's not the point. The point is to do or predict at least something, and try not to repeat past mistakes. This holds true for any study of complex systems where you cannot just make repeated experiments to obtain exact knowledge (some parts of medicine, psychology, nutrition etc.)