6 ms·

What went wrong with economics

32 points by danh 17y ago

teilo 17y ago
But does that mean that Keynsianism is going to die? Not a chance. Keynsians control the entire monetary system. It does not matter how often their theories are debunked by history itself. They are the ones in power, and so they will continue to do what they do best: Rob from the poor and give to the rich through the hidden tax of inflation born of deficit spending and the centralized control of interest rates.
- padmanabhan01 17y ago
  and by printing currency out of thin air.
monological 17y ago
greed
voisine 17y ago
Nothing went wrong with economics. The austrian school of economics predicted the great depression, the economic failure of communism, the '01 nasdaq crash, and the recent housing bubble. If you keep looking to the keynsians after the stagflation of the 70's completely refuted the core tenant of their entire economic view, well, you've got no one to blame but yourself.
- philwelch 17y ago
  Economics isn't not a battle between Keynes and the Austrians, though. There are numerous neoclassical schools with varying degrees of prominence. Greenspan, for instance, was a monetarist, not a Keynesian. Other fields include behavioral economics. Meanwhile, while the early Austrian School provided a lot of important insights, most of them have been accepted by the neoclassicals. Most of "Austrian economics" today is merely an apologia for anarcho-capitalism, popular among libertarians who have studied the early Austrians, lack grounding in economics otherwise, and are more interested in rationalizing libertarian economic policies than honestly learning economics.
  - gasull 17y ago
    while the early Austrian School provided a lot of important insights, most of them have been accepted by the neoclassicals. Neoclassicals are using some of the rhetoric of the Austrian School, but they are doing the opposite in almost every single issue: central banking, fractional-reserve banking, intellectual property, etc.
    - philwelch 17y ago
      Those are three of very many issues: you failed to mention trade barriers, taxes, spending, government debt, regulations, price controls, rent controls, minimum wage, subsidies, and welfare. All issues which Chicago School economists agree with Austrians, and which a surprising number of other neoclassicals agree too.
      - tc 17y ago
        There is really no need to pick a fight between the Austrians and the Chicago School. Austrians are sympathetic to the Chicago School, particularly as they have adopted many Austrian insights. In fact, many of today's Austrians come from a monetarist background (Friedman as a gateway drug?), but later came to see how it is misguided and incongruous to oppose price controls on rent but support them on capital (interest rates). The real conflict today is between free market supporters (Austrians and most monetarists) and the supporters of big government (Keynesians and the mercantilist-style neoclassicals). Unfortunately the latter have been commanding government policy for some time.
        philwelch 17y ago
        "There is really no need to pick a fight between the Austrians and the Chicago School." Ha! Rothbard would roll in his grave to hear that. Also, how are interest rates a price control? I always thought time value of money was a relatively uncontroversial idea.
        tc 17y ago
- trominos 17y ago
  This comment is completely useless without some kind of citation or reference. (It's also annoyingly smug.)
  - tc 17y ago
    Sometimes you just assume that people have kept their eyes open -- or at least have Google at their disposal.
gaika 17y ago
Same happened before with chemestry / alchemy and astronomy / astrology - there were alchemists that were trying to please their king with promises of gold out of nothing or horoscopes, and there were scientists, that used it as a source of funding for their real research. Chemistry and Astronomy won, unfortunately our economic alchemy refuses to die.
- redcap 17y ago
  But of course, with the current financial system it looks as though large financial companies have managed to create wealth out of nothing or horoscopes.
asdlfj2sd33 17y ago
I'm not sure anything is broken, we just had plain old regulatory capture. Greenspan himself admitted he thought that people would protect their own self interest. But those people get bonuses if their risks pay off and have no real downside if they lose. They are gambling with other people's money, not their own money. And it's not as if self interest and lack of government bailouts prevent the Dutch tulip bubble, or any other speculative bubble.
- tc 17y ago
  ... but it did prevent the speculative losses from being socialized while keeping gains private. Only people who bought tulips lost money. It's also widely thought today that the tulip mania was brought on in part by a parliamentary decree that weakened contractual protections on tulip contracts -- making it easy to speculate on inflated tulip prices without a correspondingly strong fear of loss. There is also a strong case to be made that, similar to the current situation, the tulip mania was prompted or sustained by a sudden increase in the monetary base. Apparently the balance sheet of the Bank of Amsterdam was surging during this period.
  - redcap 17y ago
    Out of interest, do you have a link or source for your last comment regarding the Bank of Amsterdam?
    - tc 17y ago
      No, it was from memory. But fortunately Wikipedia cites its sources: http://en.wikipedia.org/wiki/Tulip_Mania http://en.wikipedia.org/wiki/Tulip_Mania
timwiseman 17y ago
This article is remarkably well balanced and correctly points out that both those who previously blindly followed economicists and those who blindly ignore them now are wrong. The truth of course is in between. Economics is both a comparitively young science (at least in terms of when it was formalized) and one that deals with (or is influenced by) a very unpedictable factor, human actions. It gets many things right, and some things wrong. With time, it will be refined though by its nature it is likely to never reach the rigour and predictive power of some of the hard sciences such as physics. This current upset is rightly forcing a reevaluation of many beliefs, but when the dust finally settles in the future, economics will emerge stronger and more accurate than before.
mhartl 17y ago
Let's check the index: What went wrong with economics. See Keynes, John Maynard
lyudmil 17y ago
I am a little baffled by the article's thesis. There is very little evidence to support a "failure" of economics in the case of this current crisis. Several economists (mainly Dean Baker) were able to see the housing bubble and to accurately predict that its burst would lead to a recession. I suspect the real failure being discussed in the article is the belief many at the Fed (especially Greenspan) had in self-regulating markets. Good arguments have been made that the lack of regulation was a major factor in creating the bubble-prone economy the US has had for 15 years (or more). So yes, in that respect, the "economic models" have failed. In reality, most of this was completely predictable and avoidable. I would again point people to Dean Baker as a great resource in understanding the crisis: http://www.youtube.com/watch?v=CrSrL0lBorE http://www.youtube.com/watch?v=CrSrL0lBorE
known 17y ago
http://en.wikipedia.org/wiki/Information_asymmetry http://en.wikipedia.org/wiki/Information_asymmetry has played its role in economic depression.
chinfuilan 17y ago
I got hold of the article rather accidentally and was attracted by it. Somehow, it was then put aside due to some preoccupation but it keeps returning and flashing to me like owl’s-carrying-letters sent in to Harry Potter, demanding my involvement to perhaps save the world. Yes, the world is in big trouble and economists can’t help due to perhaps lack of genes and consequentially severe loss of sights. “What went wrong with economics” is: Economics lacks at least one fundamental foundation. Installing this fundamental will elevate Economics to another platform. What is this fundamental? It is something that sciences cling on tightly, but economics does not. So, economics has departed from this fundamental, perhaps unconsciously. What is it then? It is the Fundamental Axiom or Law of Causality, simply means: Cause gives rise to Effect, In = Out, Debit = Credit, a Source for every Outcome, etc which are common senses or self-evident truths. Tell us in what way the Economics runs away from this fundamental? If you ask: You win, I win, everyone wins, who then is the loser or provider of wealth? Most of economists will tell you that there is no loser. The Economics textbooks also say so. But it cannot be no loser, as it violates the fundamental Law of Causality. So, we must insist for the presence of loser, as dictated by the Fundamental Law of Causality. On this insistence, one great researcher by the name of HNM had successfully uncovered the identity of the loser and the mask of wealth after an effort of several decades. Needless to say, he has restored the Fundamental Law of Causality back to the economics and make it a strong and real science. Using his new theory, all events in the past or present could be explained with ease, and that it could predict and even provide future policies and directions for our world. If you are really interested to find out more, please write to me via my email: chinfuilan@yahoo.com

32 points by danh 17y ago

teilo 17y ago

But does that mean that Keynsianism is going to die? Not a chance. Keynsians control the entire monetary system. It does not matter how often their theories are debunked by history itself. They are the ones in power, and so they will continue to do what they do best: Rob from the poor and give to the rich through the hidden tax of inflation born of deficit spending and the centralized control of interest rates.

padmanabhan01 17y ago
and by printing currency out of thin air.

monological 17y ago

greed

voisine 17y ago

Nothing went wrong with economics. The austrian school of economics predicted the great depression, the economic failure of communism, the '01 nasdaq crash, and the recent housing bubble. If you keep looking to the keynsians after the stagflation of the 70's completely refuted the core tenant of their entire economic view, well, you've got no one to blame but yourself.

philwelch 17y ago
Economics isn't not a battle between Keynes and the Austrians, though. There are numerous neoclassical schools with varying degrees of prominence. Greenspan, for instance, was a monetarist, not a Keynesian. Other fields include behavioral economics. Meanwhile, while the early Austrian School provided a lot of important insights, most of them have been accepted by the neoclassicals. Most of "Austrian economics" today is merely an apologia for anarcho-capitalism, popular among libertarians who have studied the early Austrians, lack grounding in economics otherwise, and are more interested in rationalizing libertarian economic policies than honestly learning economics.
- gasull 17y ago
  while the early Austrian School provided a lot of important insights, most of them have been accepted by the neoclassicals. Neoclassicals are using some of the rhetoric of the Austrian School, but they are doing the opposite in almost every single issue: central banking, fractional-reserve banking, intellectual property, etc.
  - philwelch 17y ago
    Those are three of very many issues: you failed to mention trade barriers, taxes, spending, government debt, regulations, price controls, rent controls, minimum wage, subsidies, and welfare. All issues which Chicago School economists agree with Austrians, and which a surprising number of other neoclassicals agree too.
    - tc 17y ago
      There is really no need to pick a fight between the Austrians and the Chicago School. Austrians are sympathetic to the Chicago School, particularly as they have adopted many Austrian insights. In fact, many of today's Austrians come from a monetarist background (Friedman as a gateway drug?), but later came to see how it is misguided and incongruous to oppose price controls on rent but support them on capital (interest rates). The real conflict today is between free market supporters (Austrians and most monetarists) and the supporters of big government (Keynesians and the mercantilist-style neoclassicals). Unfortunately the latter have been commanding government policy for some time.
      - philwelch 17y ago
        "There is really no need to pick a fight between the Austrians and the Chicago School." Ha! Rothbard would roll in his grave to hear that. Also, how are interest rates a price control? I always thought time value of money was a relatively uncontroversial idea.
        tc 17y ago
trominos 17y ago
This comment is completely useless without some kind of citation or reference. (It's also annoyingly smug.)
- tc 17y ago
  Sometimes you just assume that people have kept their eyes open -- or at least have Google at their disposal.

gaika 17y ago

Same happened before with chemestry / alchemy and astronomy / astrology - there were alchemists that were trying to please their king with promises of gold out of nothing or horoscopes, and there were scientists, that used it as a source of funding for their real research. Chemistry and Astronomy won, unfortunately our economic alchemy refuses to die.

redcap 17y ago
But of course, with the current financial system it looks as though large financial companies have managed to create wealth out of nothing or horoscopes.

asdlfj2sd33 17y ago

I'm not sure anything is broken, we just had plain old regulatory capture. Greenspan himself admitted he thought that people would protect their own self interest. But those people get bonuses if their risks pay off and have no real downside if they lose. They are gambling with other people's money, not their own money. And it's not as if self interest and lack of government bailouts prevent the Dutch tulip bubble, or any other speculative bubble.

tc 17y ago
... but it did prevent the speculative losses from being socialized while keeping gains private. Only people who bought tulips lost money. It's also widely thought today that the tulip mania was brought on in part by a parliamentary decree that weakened contractual protections on tulip contracts -- making it easy to speculate on inflated tulip prices without a correspondingly strong fear of loss. There is also a strong case to be made that, similar to the current situation, the tulip mania was prompted or sustained by a sudden increase in the monetary base. Apparently the balance sheet of the Bank of Amsterdam was surging during this period.
- redcap 17y ago
  Out of interest, do you have a link or source for your last comment regarding the Bank of Amsterdam?
  - tc 17y ago
    No, it was from memory. But fortunately Wikipedia cites its sources: http://en.wikipedia.org/wiki/Tulip_Mania http://en.wikipedia.org/wiki/Tulip_Mania

timwiseman 17y ago

This article is remarkably well balanced and correctly points out that both those who previously blindly followed economicists and those who blindly ignore them now are wrong. The truth of course is in between. Economics is both a comparitively young science (at least in terms of when it was formalized) and one that deals with (or is influenced by) a very unpedictable factor, human actions. It gets many things right, and some things wrong. With time, it will be refined though by its nature it is likely to never reach the rigour and predictive power of some of the hard sciences such as physics. This current upset is rightly forcing a reevaluation of many beliefs, but when the dust finally settles in the future, economics will emerge stronger and more accurate than before.

mhartl 17y ago

Let's check the index: What went wrong with economics. See Keynes, John Maynard

lyudmil 17y ago

I am a little baffled by the article's thesis. There is very little evidence to support a "failure" of economics in the case of this current crisis. Several economists (mainly Dean Baker) were able to see the housing bubble and to accurately predict that its burst would lead to a recession. I suspect the real failure being discussed in the article is the belief many at the Fed (especially Greenspan) had in self-regulating markets. Good arguments have been made that the lack of regulation was a major factor in creating the bubble-prone economy the US has had for 15 years (or more). So yes, in that respect, the "economic models" have failed. In reality, most of this was completely predictable and avoidable. I would again point people to Dean Baker as a great resource in understanding the crisis: http://www.youtube.com/watch?v=CrSrL0lBorE http://www.youtube.com/watch?v=CrSrL0lBorE

known 17y ago

http://en.wikipedia.org/wiki/Information_asymmetry http://en.wikipedia.org/wiki/Information_asymmetry has played its role in economic depression.

chinfuilan 17y ago

I got hold of the article rather accidentally and was attracted by it. Somehow, it was then put aside due to some preoccupation but it keeps returning and flashing to me like owl’s-carrying-letters sent in to Harry Potter, demanding my involvement to perhaps save the world. Yes, the world is in big trouble and economists can’t help due to perhaps lack of genes and consequentially severe loss of sights. “What went wrong with economics” is: Economics lacks at least one fundamental foundation. Installing this fundamental will elevate Economics to another platform. What is this fundamental? It is something that sciences cling on tightly, but economics does not. So, economics has departed from this fundamental, perhaps unconsciously. What is it then? It is the Fundamental Axiom or Law of Causality, simply means: Cause gives rise to Effect, In = Out, Debit = Credit, a Source for every Outcome, etc which are common senses or self-evident truths. Tell us in what way the Economics runs away from this fundamental? If you ask: You win, I win, everyone wins, who then is the loser or provider of wealth? Most of economists will tell you that there is no loser. The Economics textbooks also say so. But it cannot be no loser, as it violates the fundamental Law of Causality. So, we must insist for the presence of loser, as dictated by the Fundamental Law of Causality. On this insistence, one great researcher by the name of HNM had successfully uncovered the identity of the loser and the mask of wealth after an effort of several decades. Needless to say, he has restored the Fundamental Law of Causality back to the economics and make it a strong and real science. Using his new theory, all events in the past or present could be explained with ease, and that it could predict and even provide future policies and directions for our world. If you are really interested to find out more, please write to me via my email: chinfuilan@yahoo.com