
Two big questions for economists today - jseliger
http://blogs.law.harvard.edu/philg/2015/01/05/two-big-questions-for-economists-today/
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crdoconnor
>Ackerman’s point of view that economists were infallible and their
suggestions should be adopted uncritically by voters was called into question
by the fact that the group neglected to book the most popular speakers, such
as Thomas Piketty, into sufficiently large rooms and, though they were
videotaping the talks, did not have any provision to show the videos in real-
time on screens in lobbies or other rooms. If the nation’s top economists
can’t estimate demand for talks by economists can we trust them to tell us
what to do about global warming?

I think this touches on the core elephant in the room with modern (especially
American) economics. There is often a lot more money and career advancement to
be made as an economist if you are productively wrong - making policy
proscriptions that serve an agenda, than if you are right.

Of course it does none of them any good to admit that. State this aloud and
expect to be ostracized at a conference like this.

It would be helpful to look at economists themselves as rational agents who
produce an output (political opinions with the veneer of objectivity) and who
respond to incentives.

Bearing in mind that the employment/income options for most economists are:

* Academic departments, funded via student debt.

* Think tanks - nearly all funded by large corporations and high net worth individuals.

* Finance - large banks, hedge funds, etc.

Large corporations usually have different agendas but will seek to form
cohesive blocs to increase their power, often under the umbrella of a lobby
group. Sometimes they will fight, though. Examples:

* Exxon cares about discrediting climate change.

* Power companies want solar panels dead yesterday.

* Comcast wants net neutrality dead.

* Google and Netflix want net neutrality alive.

* Google's founders want something done about climate change (as do many notable high net worth individuals from a non-fossil fuel background).

* Private colleges want the federal government to keep increasing loans to students.

* Corporations that employ a lot of people and are under threat from unionization would like to see workers' bargaining power curtailed (debt is good at that).

* Everybody in high finance likes debt (obviously). Especially if it is administered by them, but even if it is not, because even if it isn't, one day it could be privatized and produce profits.

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dllthomas
So, can we change the incentives?

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danieltillett
The golden rule is hard to change - he with the gold makes the rules.

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Retra
>A possibility that the Big Thinkers don’t seem to consider is “Maybe colleges
aren’t teaching anything of value to employers?”

It's not about employers, but about society. Colleges are supposed to be
teaching things that are of value _to society_, not necessarily to employers.
Employers should be trying to improve society by rewarding people who produce
value to society, not to employers. That is how an employer justifies her
power to a society that allows her to have a disproportionate amount of it.

It is very possible that employers' values are not an accurate representation
of societal values. Maybe your currency doesn't accurately encapsulate what
your society values? Maybe your businesses are not in touch with who their
customers/employees are and what motivates them?

Example: I pay rent. I've never received an invoice telling me what that rent
pays for or how much I'm actually paying for it. My rent payments are not
approval of my landlord, they are necessary for my survival. Yet it gives my
landlord economic power regardless of why I'm spending the money. Social
values are not measured by economic power.

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SilasX
>It's not about employers, but about society. Colleges are supposed to be
teaching things that are of value _to society_, not necessarily to employers

Then why are students asked to bear the $100k cost _individually_? Kinda hard
to justify that level of self sacrifice from anyone.

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crdoconnor
The justification is that because college students benefit personally from
their education, non-college students should not be expected to pay for it.

The reason is that ramping up aggregate private debt has a number of
advantages to the following two groups:

* Large employers would like to see the bargaining power of their employees curtailed. You'll be much more fearful of quitting your job or demanding a raise if you fear spiraling compound interest.

* High finance (investment banks, hedge funds, etc.) because they can often figure out a way of being paid to administer debts and use it as fodder for high profit gambling activities (derivatives, etc.).

An ancillary reason is that ramping up private debt is a way to give a quick
economic and employment boost because it usually increases aggregate spending.
The public can be boiled like a frog.

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potash
> There may be a market opportunity for an economist to write a big Piketty-
> style book on climate change.

Yale economist Bill Nordhaus' Climate Casino is that book. And his research
with integrated assessment models concluded:

> The consequences of [climate change] will be costly for human societies and
> grave for many unmanaged earth systems; the balance of risks indicates that
> immediate action should be taken to slow and eventually halt emissions of
> CO2 and other greenhouse gases.

And, by the way, this analysis doesn't even take into account tipping points!

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danieltillett
Until we as a society face the fact that doing something about climate change
required compensating the owners of fossil fuels for not letting them extract
them then we are going to get nowhere.

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rgbrenner
Why would we need to compensate them (Saudi Arabia, Venezuela and other
owners) when it's our demand that gives them the ability to sell their
product. Since the value of their oil reserves is tens (if not a hundred+)
trillion dollars.. it would be cheaper to simply give everyone in the US and
Europe a free electric car.

Edit: 100 trillion is so much money.. that we could literally replace every
car in the entire world (1 billion cars) with a free tesla and still have
money left over.

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danieltillett
Yes the money involved is massive, but the way politics works is those with
something to lose have far more power than those that will gain from any
change. This is why tax reform is so difficult. The owners of all the fossil
fuels are effectively able to veto all change unless we pay them off. If this
is the case lets get on with buying them off.

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vinceguidry
> Despite the evidence that people who weren’t academically inclined prior to
> college get little benefit from college and simultaneously suffer four years
> of lost income,

The real reason we put kids through four years of college is because nobody
wants to trust 18 year olds with pretty much anything, much less a salary and
responsibilities. So the choice isn't between college and starting a career,
it's between college and whatever bullshit jobs they'll be able to scrape up.

If you got rid of or otherwise stopped convincing kids they should go to
college, you wouldn't have a bunch of gainfully-employed teenagers. You'd be
gleefully recreating the enormous social problem of lots of bored young people
sitting around without a whole lot to do.

We all know where that leads. Anything's better than that, even something that
doesn't really help end outcomes much.

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rahimnathwani
> If K-12 and college are making ever-better American workers then capitalists
> are using their class power to steal from the working class ... If on the
> other hand ... the problem is simply that engineers keep designing better
> machines (capital) while our education system turns out workers no better
> than those of 30 years ago...

This is a key point. People talk about increases in labour productivity (how
much output per given unit of labour) but this economic definition doesn't
match the day-to-day meaning of the word.

If I devise a new process/system which means that I need only 1 employee
rather than 1000, for the same amount of output, that remaining employee
hasn't suddenly become 1000 times more productive. (Although it would be
measured as such by economists.)

Why should we assume that the capitalist (or the market) would reward workers
for such technological progress?

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IndianAstronaut
>If I devise a new process/system which means that I need only 1 employee
rather than 1000, for the same amount of output, that remaining employee
hasn't suddenly become 1000 times more productive. (Although it would be
measured as such by economists.) Why should we assume that the capitalist (or
the market) would reward workers for such technological progress?

This is where we go back to the era of Marx and why him and others were
advocates of the people owning the means of production. The two eras are
similar, lots of automation, lots of inequality, huge companies growing from
nothing.

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evo_9
It's stunning to me that a Living Wage isn't the main thing they are talking
about let alone not even on the list.

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Legogris
I find the assumption that the goal or purpose of higher education should be
paying off economically in terms of future employment a foreign one. I am well
aware that I could build a much more fruitful career by making a different
choice than pursuing the path that I have chosen. I have other priorities in
life and I assume that so do most of the people who would, say, major in
poetry at a "lower quality college". Despite what some economists seem to
think, money doesn't really reflect how a lot of us like to think of "value".
Spending a big amount of my time on spiritual development, cooking,
sozializing and taking classes outside of my field is obviously not the most
rational choices for my career. Why focus on getting more money if I already
have enough to get by?

