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The one thing economists can say is that people usually act in their own best interests. Actually, it appears that things are too complex for even this to be t

by dhimes 18y ago

The one thing economists can say is that people usually act in their own best interests. Actually, it appears that things are too complex for even this to be true. They may try, but it's entirely conceivable that they don't understand what is in their best interest and what endangers their future. I think I prefer to think of what I am pondering as Economic engineering rather than social engineering. It seems like a very faith-based discipline, rather than one that formulates hypotheses based on evidence: There is a large and growing faction of economists that believe that the actions of the Federal Reserve (and to some extent Hoover and FDR) made the panic of 1929 into a full-blown depression But there is also emerging talk that Jimmy Carter prevented a global disaster like the one we are facing now. Neither claim is falsifiable, so not worth much mental energy to consider. Faith-based. I think that is why I was so impressed with Greenspan's testimony before Congress where he basically said he felt like the underlying principles on which he based his understanding of the economy were incorrect (he specifically mentioned the one you did about acting in our best interest). Here was a guy in the field who was actually looking at evidence, and trying to learn. I don't know if he's correct or not, I'm no economist. I'm griping about the methods, not the principles themselves. Anyway, thanks for reading my rant.

DanielBMarkham 18y ago
First, nice rant. Second -- agreed. People act in what they perceive to be their best interests. We initially made the mistake of assuming this was what was actually in their best interests, but that seems more doubtful. (Unless acting strictly based on perception of best interests is the optimal condition. Then we're back to square one.) Third -- agreed. It's to some degree faith-based. Climatology is faith-based as well, and for the same reasons. There are simply too many variables and the system is simply too huge and dynamic to be Newtonian. You get a bunch of smart guys, you make a bunch of models, and you take measurements, all the time having some "group consensus" that has as much to do with science as glow-in-the-dark watches have to do with nuclear propulsion. I've slung some code for Greenspan and the FRB BOG (Board of Governors). The people there are all highly professional and tend to focus much more on facts than theories. But even then, in my opinion, there's no science going on. It's a lot of educated guesswork. I wouldn't give up on the thought experiments such as what the Fed did during the Great Depression or what Carter might or might not have done. Thought experiments are powerful tools, and can lead to advances in science. To the degree that faith encourages creative explanations of what we don't know, it's a good thing. To the degree that it shuts out alternative answers, it's an obstacle. That's true in a lot of areas, not just economics.

by dhimes 18y ago

DanielBMarkham 18y ago

First, nice rant. Second -- agreed. People act in what they perceive to be their best interests. We initially made the mistake of assuming this was what was actually in their best interests, but that seems more doubtful. (Unless acting strictly based on perception of best interests is the optimal condition. Then we're back to square one.) Third -- agreed. It's to some degree faith-based. Climatology is faith-based as well, and for the same reasons. There are simply too many variables and the system is simply too huge and dynamic to be Newtonian. You get a bunch of smart guys, you make a bunch of models, and you take measurements, all the time having some "group consensus" that has as much to do with science as glow-in-the-dark watches have to do with nuclear propulsion. I've slung some code for Greenspan and the FRB BOG (Board of Governors). The people there are all highly professional and tend to focus much more on facts than theories. But even then, in my opinion, there's no science going on. It's a lot of educated guesswork. I wouldn't give up on the thought experiments such as what the Fed did during the Great Depression or what Carter might or might not have done. Thought experiments are powerful tools, and can lead to advances in science. To the degree that faith encourages creative explanations of what we don't know, it's a good thing. To the degree that it shuts out alternative answers, it's an obstacle. That's true in a lot of areas, not just economics.