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Unlike what politicians would want you to believe, Economics is a science and the consequences of actions in economics are pretty close to those in physics. Hu

Unlike what politicians would want you to believe, Economics is a science and the consequences of actions in economics are pretty close to those in physics. Huh. Austrian economics argues the exact opposite, which is generally correct for most things at a higher level than chemistry, especially something as stochastic as economic modeling. One thing I've noticed is that the "Black Swan" events-- like 2008 which people said "Tehre's no way you could see this coming" despite the popular sentiment in 2006 being "there's no way there's a housing bubble!" showing that people did, in fact, see it coming-- really are pretty predictable at least in terms of risk. Austrian economists are wary of making predictions in general, which goes hand in hand with their overall distaste for econometrics. Not to say that the more naive ones don't yell about incoming collapse all the time. Even Keyenes disagrees with the monetary policy we've been following for these decades, even though the politicians claim its his idea. IT isn't, it's not what he said at all. We've come a long way since Keynes. Like we've debunked the marginal propensity to consume since then, for instance, despite the fact that most laymen and politicians keep making the same fallacy.

TheOtherHobbes 11y ago
A lot of economists will be very surprised to hear that MPC has been "debunked." Last time I looked it's still considered a mainstream idea - mainstream enough to appear in introductory econ texts, anyway. Steve Keen makes the - IMO interesting - point that there are different kinds of consumption, and lumping consumption under a single Benthamite label is a gross oversimplification. But MPC is a simple measure of economic freedom. It's not what you spend your extra earnings on that matters, because - unless you're burning banknotes - it all goes towards increasing GDP anyway. Where things get fuzzy is a lack of appreciation for the fact that spending measures current economic activity, but savings, credit, and investment all measure faith in future economic activity. Because faith is based on an irrational thing called "sentiment", you have a huge chunk of the economy based on hope, fear, and desire - which is maybe not the most practical and useful way to make the economy work for everyone.
- reagency 11y ago
  GDP is a weak measure of prosperity/utility. War had very high GDP, but has very low utility. It doesn't burn banknotes, but it burns everything banknotes buy, so the result is similar. The only thing economically good about war is that it gives political cover for deficit spending, which encourages productive activity (which GDP measures poorly)

TheOtherHobbes 11y ago

A lot of economists will be very surprised to hear that MPC has been "debunked." Last time I looked it's still considered a mainstream idea - mainstream enough to appear in introductory econ texts, anyway. Steve Keen makes the - IMO interesting - point that there are different kinds of consumption, and lumping consumption under a single Benthamite label is a gross oversimplification. But MPC is a simple measure of economic freedom. It's not what you spend your extra earnings on that matters, because - unless you're burning banknotes - it all goes towards increasing GDP anyway. Where things get fuzzy is a lack of appreciation for the fact that spending measures current economic activity, but savings, credit, and investment all measure faith in future economic activity. Because faith is based on an irrational thing called "sentiment", you have a huge chunk of the economy based on hope, fear, and desire - which is maybe not the most practical and useful way to make the economy work for everyone.

reagency 11y ago
GDP is a weak measure of prosperity/utility. War had very high GDP, but has very low utility. It doesn't burn banknotes, but it burns everything banknotes buy, so the result is similar. The only thing economically good about war is that it gives political cover for deficit spending, which encourages productive activity (which GDP measures poorly)