
How economics became a religion - ingve
https://www.theguardian.com/news/2017/jul/11/how-economics-became-a-religion
======
javiramos
Not only are the theoretical foundations of some areas of economics dubious
but the profession is (particularly at the high levels) very money-driven and,
in some cases, very morally dubious. Some professors and academics are paid
hefty sums to write papers that support and influence important policies.[0]

Please watch the Inside Job for an example of how money goes around the high
strata of the economics profession.

[0] [https://www.propublica.org/article/these-professors-make-
mor...](https://www.propublica.org/article/these-professors-make-more-than-
thousand-bucks-hour-peddling-mega-mergers)

------
nabla9
[https://www.bloomberg.com/view/articles/2017-07-14/so-
many-c...](https://www.bloomberg.com/view/articles/2017-07-14/so-many-critics-
of-economics-miss-what-it-gets-right)

Noah Smith has good rebuttal for standard blanket critiques and he uses this
article as an example.

~~~
culturalzero
Idk... He admits upfront that the standard critiques have merit, but that
recent shifts to hard data are a positive upheaval(thank you, you hackers
you).

~~~
Analemma_
Too bad the Austrian Schoolers didn’t get that memo and continue carrying on
as though lack of empiricism is some kind of virtue.

~~~
saosebastiao
The "Austrian school" isn't what you think it is. The Austrian school refers
to a theoretical school of thought of a very narrow subsection of
macroeconomics (which itself is a very narrow subsection of economics) called
business cycle theory. That subsection doesn't even represent 1% of what
professional economists worry about, yet it somehow has 100% of the attention
of armchair economists and political parties.

The funny thing about the statement isn't that it is true (the Austrian school
doesn't rely on empiricism) but rather that you singled out a single school of
business cycle theory for that criticism. Because BCT _can 't rely on
empiricism_. It is an area of economics where controlled experiments are
impossible and standard impact measurement methods used in econometrics are
not applicable due to dynamic cycles. That's the reason why " _see, look at
this trend line...your idea didn 't work_" is always defended by " _well it
would have been worse if we didn 't do it!_".

The implication is that by design, none of the "schools" of BCT use empiricism
and all of them rely primarily on theory. Any appearance of empiricism coming
from one of those schools is highly suspect on its face and far more likely to
come from a politically backed think tank than from a peer review process. And
that includes the incredibly terrible claims of empiricism from Keynesian and
Monetarist schools in addition to your target of scorn.

------
tomrod
I'm an economist by training (PhD) and by trade. The claims in the article are
astute. Economics is a "social science" that often tries to answer the "why"
people do things by postulating on the "what" they do (Weak/Strong Axioms of
Revealed Preference). There is certainly a generation of economists who
focused on theory, formalization, microeconomics foundations to
macroeconomics, and general equilibrium theory that required heavy mathematics
to succeed--resulting in survival bias towards formalization on systems
involving choices. The questions of formulations of preferences (preferences
drive the underlying utility theory) or moving outside the consumer context
are taboo. Since taboo, they support a religious overtone.

Of course, people relying on economists have often quipped they wished they
could find a one handed economist ("on the other hand...")

Thanks for the great article.

------
vbuwivbiu
Economics is worse than religion: it's astrology.

It has the trappings of mathematics (ODEs and whatnot) as astrology uses
numbers, like astrology and auguring (in their day) economics is a fantasy
serving to flatter the powerful.

~~~
Retric
Economics has many successes, but the problem is it's trying to approach
psychology with math. They know that people are not actually rational, but
there is some value in treating them as such.

~~~
nabla9
Rational choice theory is usually the right model. There are others.

~~~
culturalzero
The biggest problem I run into with this is that I believe the bounds of
rationality for different individuals had far more variability than is
accounted for. I suppose it's still useful to look at for a perspective on
some things though

~~~
nabla9
Economic models usually look at average behaviour for large groups. There are
cases where the model breaks, but jumping into "oh, it was all bs then" is
just populism.

------
jostmey
From what little exposure I had as a student in Biological sciences to the
economics department at the University of Chicago, I saw the economics
department as an excuse to do lots of sophisticated mathematics and proofs. I
never heard people in the economics department talk about collecting data or
measuring the flow of money. It was always prove this or solve that. It was
the opposite of science and very much like theology -- theory divorced from
testable observation

Edit, I need to emphasize the use of the word little

~~~
dbecker
Economic research can be roughly divided into three subfields: Macroeconomics,
Micro theory, and Empirical Micro.

The first 2/3 of an undergrad curriculum at most universities is all macro and
micro theory. So, most of what an undergrad sees is _prove this or solve
that._

But far more econ faculty focus on empirical work for their personal research.

It's possible that we focus on theory because it spreads economic orthodoxy
faster than empirical work. But economists spend much less time doing theory
when they are outside undergraduate classrooms.

~~~
JumpCrisscross
> _It 's possible that we focus on theory because it spreads economic
> orthodoxy faster than empirical work_

Or for the same reasons we start physics in a frictionless, idealized
environment.

~~~
arethuza
Pretty sure when I started physics in high school we started with measuring
trolleys accelerating (or not) done an inclined run timed with ticker tape and
covered the maths alongside the experiments.

Edit: I seem to remember friction being addressed pretty quickly as it was
required to explain why your trolley would stop accelerating.... [NB It's been
30+ years]

------
igravious
They use the word `ideology' in the article, it would be more correct to use
it in the title as well. _Both_ sectarian religious thinkers _and_ partisan
economists let their ideology lead their reasoning. So are oblivious to this,
others are aware of it.

------
narrator
Mainstream economics is a bit of a cult due to the identifiability problem.
This is the problem that empirical evidence is ignored in most econometric
papers and there is usually no way to identify economic events discretely that
correspond to the ones mentioned in papers. Paul Romer, a professor at the
Stern school of business, has published a great paper calling this out (pdf:
[https://paulromer.net/wp-content/uploads/2016/09/WP-
Trouble....](https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble.pdf)
) .

Central planning has and always will be an epic failure. The economic
calculation problem always leads to its downfall.

The Chinese banking and finance model, which is akin to largely privatized
central planning, is the only real alternative and it is ignored, though it
seems to have solved the business cycle, given that western observers have
been predicting a Japanese style prolonged financial crash for 30 years and
instead there's been continuous growth.

------
Torai
Economists don't want to address the elephant in the room: whenever money is
created, by private interests, is given to governments and society as debt.
So, the way economy is structured now, it's by design a transfer of wealth =>
resources => power from the public to the powerful.

~~~
JumpCrisscross
> _whenever money is created, by private interests, [it] is given to
> governments and society as debt_

The U.S. government, in 2016, issued $1.4 trillion of debt [1] and took in
almost $3 trillion in taxes [2]. I'm not sure I see your point.

[1]
[https://www.treasurydirect.gov/govt/reports/pd/feddebt/fedde...](https://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_ann2016.pdf)

[2] [http://federal-budget.insidegov.com/l/119/2016](http://federal-
budget.insidegov.com/l/119/2016)

~~~
roenxi
The argument boils down to this:

1) The economy is a system with some amount of money in it.

2) The money is measured (see; M2 [1]).

3) The amount of money appears to be increasing extremely quickly
(exponentially, in fact).

4) The new money is not being expressed in wages. The government doesn't
appear to be pushing it into the economy directly because they are taking on
debt instead of printing money.

If you accept this frame, then the follow up is that someone is being given a
lot of money, and the question is why not change the rules so that the newly
created money is given no-strings-attached to the government?

[1]
[https://www.federalreserve.gov/RELEASES/h6/Current/default.h...](https://www.federalreserve.gov/RELEASES/h6/Current/default.htm)

~~~
JumpCrisscross
> _why not change the rules so that the newly created money is given no-
> strings-attached to the government?_

Argentina, Brazil and various countries tried this. TL; DR Politicians like to
print money to hand out favors [1]. An independent central bank, governed by
and reportable to elected officials at an arm's length, turns out to be a
better solution.

Note that flat wages with job growth doesn't comport with your fourth
observation. More wages were paid in June than in May [2], and in May than in
April [3], _et cetera_. There were just more people earning them.

(I'm not suggesting stalled wage growth, especially relative to upward-
marching productivity, isn't an area of concern. It's just that history shows
it's better to address these issues through fiscal, versus monetary, policy.)

[1]
[https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf](https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf)

[2] [http://www.reuters.com/article/us-usa-economy-
idUSKBN18T0BT](http://www.reuters.com/article/us-usa-economy-idUSKBN18T0BT)

[3] [http://www.reuters.com/article/us-usa-economy-
idUSKBN1810BZ](http://www.reuters.com/article/us-usa-economy-idUSKBN1810BZ)

~~~
roenxi
I'll offer a point of clarification - and I do agree that the situation is a
lot more complex than 4 dot points.

That said; point 4 can stand if (wages growth + unemployment drop) < (increase
in the M2).

I haven't checked it in America, but in Australia the M2 is growing at about
8% p.a. I'm confident assuming total wages aren't growing that fast, because
it would be very visible on the ground (people getting jobs left right and
centre). The new money being created is mostly going elsewhere vs wages.

~~~
JumpCrisscross
From 27 June 2016 to 12 June 2017, U.S. M2 grew about 5.2% [1]. From June 2016
to June 2017, total U.S. non-farm payrolls grew by about 3.3% [2]. Finally,
from June 2016 to June 2017, total U.S. average hourly earnings for private
employees rose by 2.5% [3].

(In case you're curious, median usual real wages and salaries for full-time
employees in the United States, 16 and over, rose about 1.2% from Q1 2016 to
Q1 2017 [4].)

Side note: these statistics were collected by economists.

[1]
[https://fred.stlouisfed.org/series/M2](https://fred.stlouisfed.org/series/M2)
_13514.5 / 12844.8_

[2]
[https://fred.stlouisfed.org/series/PAYEMS](https://fred.stlouisfed.org/series/PAYEMS)
_146404 thousand / 141742 thousand_

[3]
[https://fred.stlouisfed.org/series/CES0500000003](https://fred.stlouisfed.org/series/CES0500000003)
_26.25 / 25.62_

[4]
[https://fred.stlouisfed.org/series/LES1252881600Q](https://fred.stlouisfed.org/series/LES1252881600Q)
_350 / 346_

------
spfan
South Park did an episode about this
[https://m.youtube.com/watch?v=7OevEml84BI](https://m.youtube.com/watch?v=7OevEml84BI)

------
Vektorweg
Suggested recently by Richard Wolff and many others before him: a possible
solution out of this economy is worker coops aka democracy at work.

[https://youtu.be/ynbgMKclWWc](https://youtu.be/ynbgMKclWWc)

~~~
JumpCrisscross
I tend to believe a diversity of systems is the healthiest state. Coöperative
housing, for example, has a mixed history in New York. By removing price as a
selection factor, they whitewashed "other* selection criteria, _e.g._ race
[1].

[1] [http://www.nytimes.com/2013/05/10/nyregion/new-bill-seeks-
to...](http://www.nytimes.com/2013/05/10/nyregion/new-bill-seeks-to-curb-
discrimination-by-co-op-boards.html)

~~~
Vektorweg
Democracy itself is certainly not the best decision making process, but it
tends to avoid some radical pitfalls of oligarchic and tyrannic processes.

~~~
JumpCrisscross
Elections behave differently depending on scale [1]. This may be a function of
the law of large numbers [2], or that the difficulty of coördinating scales
exponentially with the number of people one must coördinate [3].

A small group of people with absolute authority to decide who does and doesn't
get to live in a building can be more tyrannical than a large group of people
forced to compete on just price. (And vice versa.)

[1]
[https://en.wikipedia.org/wiki/Selectorate_theory](https://en.wikipedia.org/wiki/Selectorate_theory)

[2]
[https://en.wikipedia.org/wiki/Law_of_large_numbers](https://en.wikipedia.org/wiki/Law_of_large_numbers)

[3]
[https://en.wikipedia.org/wiki/Theory_of_the_firm](https://en.wikipedia.org/wiki/Theory_of_the_firm)

------
nautilus12
Southpark already explored this concept pretty well I think. Season 13 episode
3. Im gonna go watch that instead of read this :P

------
baron816
Macroeconomics isn't so much a religion as it is a pantheon of religions.
Religion and spirituality are really separate things. Jainism, Buddhism,
Daoism, and Confucianism are religions, but they worship no deities. Religions
just try to explain how the world works and how to make the existence of its
members better. Communism, Keynesianism, and Nazism do the same thing.

Few Western economists think they know all the answers. Saying economists are
wrong to try to estimate what the economy will do if some policy is enacted is
like saying that biologists shouldn't try to estimate what will happen to a
human body if a certain drug is administered. Of course, no one will know for
sure how someone will react to the drug as there are a million different
factors that influence such things. But, it's best to do your best to try to
figure out if something is going to be poisonous based on all the things you
know about the human body and chemistry before you give it to the patient,
right? Economics is hard because you can't do repeated trials. Most economists
acknowledge this, and they understand the pitfalls of their craft. There are
plenty of instances of individual economists making outrageous predictions
about the future that proved comically false. But these are the exception, not
the rule.

The problem we have now is that politicians think they do have all the
answers. The Republican party has decided all that is needed for economic
growth is lower taxes (not low taxes, mind you--lowER taxes). The Democrats,
likewise, think all you need to do is throw money at a problem, or regulate
it, and it will be fixed. They KNOW the solution and they won't consider any
other solution because they already have the answer. I wish just one
politician would say "I don't know" and would ask economists what is likely to
work under the circumstances.

~~~
xaa
Biologist here. Biologists don't try to predict whether a drug will have side
effects before giving it to humans. They simply give it to mice. If we do have
some strong reason to suspect it might be harmful to humans, we might do a
primate trial, but usually not as those are expensive.

People do make statements like "Drug X has target Y, so its side effects
should be limited to A, B, and C", but no one takes those claims seriously.
It's too hard to predict what a drug will do, and in fact drugs are frequently
used in practice without any knowledge of mechanism of action.

The point is that biology is fundamentally empirical here, because in complex
systems it seems that rationalism/theory is not that useful.

> Economics is hard because you can't do repeated trials.

Yes. The problem is that they pretend they can predict results of
interventions when they demonstrably cannot. Economists are simply used to
justify policy decisions made on some other basis.

------
jondubois
In the same way that a religion uses church to reinforce its doctrine at
regular intervals, the school of economics leverages the media to reinforce
its own doctrine at regular intervals. But unlike economic ideas, many
religious ideas are so much at odds with observable reality that they need
constant (weekly) reinforcement in order for people to keep believing them.

Like with religion though, the ideas spread by economic theory also have a
certain uplifting (hopeful) quality which give people an incentive to believe
in them.

The doctrine of economics promises that if you adhere to its rules, you will
be rewarded with financial independence; this is not so different from the
doctrine of religion which promises that if you adhere to its rules, you will
be rewarded with eternal life - While the promised land of economic theory may
not quite measure up; it makes up for this deficiency by being easier to
reconcile with observable reality; especially for those who happen to be among
the chosen few who actually get to see the promised land.

------
mcguire
For more in a similar vein, see

* _Debunking Economics_ by Steve Keen. It's rhetoric aside, it provides strong arguments that the basics of economics are simply...wrong.

* _Misbehaving_ by Richard Thaler. A history of and introduction to behavioral economics, it has many amusing stories about interactions with economists behaving badly.

------
FlashGit
If anything has become a religion it is politics.

------
Aron
This article goes well with the recent submission of an old Asimov article on
the cult of ignorance. Science is a religion. Economics is a religion. Experts
don't know anything. You can believe whatever you want!

edit: Just noticed that the page has it's own internal link to another
guardian article 'the cult of the expert - and how it collapsed' so they know
what they are doing.

------
lordnacho
There's a good section in Harari's recent book Sapiens where he lumps
ideologies with religion. Basically the common thing is a shared strong belief
in some idea, the only difference being whether it involves supernatural
creatures.

My own take on economics is I'm glad I studied it while also studying
engineering. Taken with a proper science, you learn an awful lot about how how
to think critically. If you only do science, you don't think too much about
whether the conclusions are warranted. You gasp, but it's true. And it's
because you can pursue the evidence in a very detailed way in sciences, and
that has been done for you by the time you come to study it. So when you're
learning, most of the time isn't spent on considering whether you believe in
quantum tunnelling. Your time is mostly spent understanding the intricacies of
the explanation, and calculating predictions based on the theory.

With economics, all my engineering friends would make a face when you talked
about it. Law of one price? Really? Oh yeah, it's an idealised world. And in
contrast to the frictionless, airless world in intro physics, we don't have
much of a clue of how loosening the assumptions affects the model. For
instance there are agent based models where you get multiple prices. Other
unlikely things are where some consumer is meant to be optimizing some utility
function. Most graduates will find this hard to do with a computer, so I'm not
sure I believe the hand-wavy "they use a heuristic" explanation. Also, my
parents ran a restaurant and despite having an economics degree I never saw my
dad draw a nice supply and demand X to set prices.

That being said I still think there's a lot of value in economics, especially
on the micro end. It's worthwhile having a simple market model in your head,
where "market model" actually means a catalog of how markets can deviate from
Econ 101. Mainly it' a collection of failures of information. Lemon problem,
star-systems in employment, network externalities. Also game theoretic ideas
are useful to have heard of, even though the actual models are incredibly
complex.

With macro, I wondered whether anything was learned. A lot of it seems like
mathfuscation. Econometric models can get very complicated. More complicated
normally means it needs a lot of data to validate. But how is economic data
gathered? Well it depends on what the economic theory of the time finds
important. And it's not cheap or easy to gather, so you don't get terribly
much data. A GDP print comes out maybe four times a year. And the economic
regime has shifted over the years with various governments, so how do we draw
any conclusions?

A lot of the political "lessons" in economics are badly reasoned. Especially
when you chat with political types, you get a single example in support of
some idea. (Print money? Weimar Republic!) It decays into storytelling, which
is not science.

Post uni, I've had an interesting journey. At one stage I saw a lot of value
in libertarian ideas. I was always wary of certain people I knew who just
swallowed it whole. They're very loud, and somewhat articulate, but the more
confident someone was, the less likely it was they knew the evidence. For
instance you'll sometimes run into someone who denies that monopolies have
ever existed. They can explain away everything with their model: the invisible
hand was trying, but mankind got in the way. Usually a red mankind.

And that brings me back to religion. A lot of people who don't know what
they're talking about will confidently tell you their version of economics is
the right one. Even when you have counterexamples, which you will because
you're a graduate, they will wave it off generically (X is actually
misunderstood / X is not that important). Some of these people are actually
intelligent fools, and they'll create elaborate and technically sophisticated
explanations for their world view. It's often impossible to get them to see
any light, because your objections will not cause them to overturn their world
view.

How do you know it is fruitless? With ideology as with religion, nothing is
ever explained simply. Find the right professor and he'll explain in a way you
will understand why a plane flies. Find a religious person or ideologue, and
the explanation is elusive. It's part of god's plan, or it's the hand again _.
If you get the feeling the emperor has no clothes, you 're right.

_ I actually like Adam Smith, his explanations were simple and not trying to
take things to extremes. For instance he talked about how what the market
wanted might not be good for the people in it, because if you specialise in
some aspect of pinmaking you might find it boring. It's a bit unfortunate how
he's been characterised over the years.

~~~
soVeryTired
Beautifully written, sir

------
jeffdavis
People are prone to religion. If they don't have an organized faith, they will
look for it elsewhere.

That's why progressives (who are generally atheists or agnostics) seem to
treat non-religious things like the environment as a religion.

------
ThomPete
Economics is fundamentally based on the fallacy of statistics to say anything
meaningful about society. However as someone once noticed, statistically
humans have one testicle. It's statistically true but pragmatically useless.

Economics is in reality a study of history sometimes a social science rather
than a study of the future. And all economic models are based on historical
knowledge.

Economy in itself is pretty harmless but when it's combined with politicians
who use it to steer public discourse it's catastrophic.

And so we have economist with no model for factoring in technologys' effect on
society advising and informing politicians about public policy.

It is my guess that Economics in the future in many ways will be seen the same
way many of us sees astrology. As something which is really good at finding
correlation but very bad at exposing any causation.

~~~
tomrod
> statistically humans have one testicle. It's statistically true but
> pragmatically useless.

A funny quip that highlights more misapplication of statistics than a deep
truth of the quantitative realm. Yes, the mean is a statistic. But bi-modality
is also something good statisticians (and economists!) pay attention to.

~~~
soVeryTired
The widely-used representative agent paradigm more or less does assume that
everyone has one testicle.

~~~
tomrod
Meh, thus the push for expressing heterogeneity over the past few decades in
the literature. Sample papers: [0] [1]

[0]
[http://siteresources.worldbank.org/DEC/Resources/JDSAntmanMc...](http://siteresources.worldbank.org/DEC/Resources/JDSAntmanMcKenzieRevised.pdf)

[1]
[http://sedici.unlp.edu.ar/bitstream/handle/10915/3512/Docume...](http://sedici.unlp.edu.ar/bitstream/handle/10915/3512/Documento_completo.pdf?sequence=1)

------
digi_owl
Gonna leave this here:

[https://www.patreon.com/ProfSteveKeen](https://www.patreon.com/ProfSteveKeen)

Yeah, it seems dodgy. But he moved to focus on his Patreon page as his older
blog got spam flooded.

------
lottin
If economic theory was so bad as it is often implied any idiot could come up
with a better theory and replace the one that we have now. The fact that this
doesn't happen would suggest that it isn't that bad.

~~~
lliamander
All you've established is that economics is better than some random idiot.
Hardly sufficient reason to accept the opinions of economists as hard science.

The fact of the matter is, as many economists themselves will admit, economic
theories suffer from both poor predictive power and poor falsifiability.

This is by no means a knock against economists. They can still provide
valuable insight. But they don't have automatic authority over a reasonably
informed layman.

------
jimheckmen
So it looks that pretty much everybody here actually graduated in theology
instead of science (as claimed). If not, are you sure to know enough of
theology to call upon it ?

------
agumonkey
Anything too large and too diffuse is religion IMO. Technology, growth based
capitalism etc .. It's what people holds as an entity to respect by "all"
means.

------
dmichulke
I studied economics through the backdoor, starting with game theory, then
(around 2008, because "no one saw it coming") generalizing to economics,
political economics and politics.

If you go that way, you will inevitably end up subscribing Austrian economics
(and also libertarian justice/politics) which is basically a non-existent area
in mainstream economics but is the only consistent theory and kind of
automagically leads to many of Taleb's criticisms (e.g., second order
effects).

For the interested I recommend as an introduction:

\- Atlas shrugged (A. Rand, for those who have time) \- Economics in one
lesson (H. Hazlitt, for those who don't have time)

~~~
int_19h
> you will inevitably end up subscribing Austrian economics (and also
> libertarian justice/politics)

How do you account for all the people who did subscribe to it at some point in
the past, but no longer do?

Case in point: I used to be an ancap. I've read "Atlas Shrugged" many times,
and I worshiped Rothbard.

That was many years ago. In this past election, I supported Sanders.

~~~
dmichulke
Hmm, it's a minefield for _me_ to speculate about _your_ reasons :)

Maybe you can elaborate a little more what changed your mind?

One good reason for your vote would be however that DT and HC were close to 0
on most scales you could think of (economic understanding, morality,
diplomacy, consistency) so you were in a hard position to begin with.

Hell, I would've probably voted the same.

Btw I also feel that I softened my stance due to

\- a much better financial position (e.g., if you earn 20k p.a. then 30% tax
is a lot; but the same tax rate affects you much less if you earn 80k)

\- kids and other things to care for and worry about

~~~
int_19h
For the most part, based on my observations, I have realized that libertarian
economics is not going to create an _ethical_ society - the one that I would
want to live in myself, for example.

I still apply the same basic principles in my politics - i.e. that personal
freedom and lack of regulation is a good thing in and of itself, but
regulations can be a necessary lesser evil to mitigate some greater evil.
Thus, society should have "just enough government", and no more than that. I
just draw the line on what is "enough" much further to the left than I used to
- enough so to firmly identify as left-wing by now on the basis of policies
that I end up supporting with this justification (e.g. socialized healthcare,
UBI, some anti-discrimination laws).

As far as tax rates, I'm not sure I get it... who pays a 30% tax off $20k
annual income? Unless you include all taxes, such as sales. But then the
logical response would be to replace sales taxes with income or property taxes
(i.e. make the tax system less regressive), not necessarily to campaign for
lower taxes overall.

------
melnonic
This thread has very low quality discussion. MOst of you have no clue of what
you're talking about.

------
known
Just 3% is cash in the economy; Everything else is debt, debt and damn
statistics; [http://www.positivemoney.org/our-proposals/debt-based-
money-...](http://www.positivemoney.org/our-proposals/debt-based-money-vs-
sovereign-money-infographic/)

~~~
JumpCrisscross
> _for every pound in your bank account someone else must have a pound of
> debt_

This is called double-entry bookkeeping [1]. Every pound in your bank account
is a debt _on the bank 's balance sheet_. If it weren't, you wouldn't have any
claim to exercise when you walked into the bank to demand your deposits.

[1] [https://en.wikipedia.org/wiki/Double-
entry_bookkeeping_syste...](https://en.wikipedia.org/wiki/Double-
entry_bookkeeping_system)

~~~
andy_ppp
That’s true except fractional reserve banking means the lending of those
“debts” out by the bank multiple times. Doesn’t seem really like a _liability_
in the normal sense.

~~~
JumpCrisscross
> _Doesn’t seem really like a liability in the normal sense_

Banks borrow from depositors and lend to borrowers. Deposits are a liability
in that if the bank can't pay them back, the bank's assets are seized the firm
put under conservatorship (or even liquidated, _e.g._ Lehman Brothers).

Note that eliminating fractional-reserve banking, _i.e._ switching to a full-
money system [1] per the Chicago Plan [2] is not a free lunch. It shifts a lot
of power from de-centralised actors to the state. That, in turn, makes
central-bank independence even more important [3]. (Note that implementing the
Chicago Plan would maintain double-entry bookkeeping, and so the persistent
Internet meme about us being in a debt-denominated economy.)

[1] [https://blogs.cfainstitute.org/investor/2016/01/27/is-
this-t...](https://blogs.cfainstitute.org/investor/2016/01/27/is-this-the-end-
of-fractional-reserve-banking/)

[2]
[http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf](http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf)

[3]
[https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf](https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf)

~~~
digi_owl
[http://www.bankofengland.co.uk/publications/Documents/quarte...](http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf)

~~~
andy_ppp
That article was really excellent, thanks for that.

------
known

      $1.54 trillion is CASH.
      $19.96 trillion is DEBT.

[http://www.federalreserve.gov/faqs/currency_12773.htm](http://www.federalreserve.gov/faqs/currency_12773.htm)

------
unit91
> Over time, successive economists slid into the role we had removed from the
> churchmen: giving us guidance on how to reach a promised land of material
> abundance and endless contentment.

I don't think the author understands Christianity at all.

~~~
mathgeek
Sounds like the televangelist form of Christianity, or the various offshoots
dealing with prosperity.

------
Suncho
To be fair, they're mostly talking about macroeconomics.

------
paulpauper
_Yet if history teaches anything, it’s that whenever economists feel certain
that they have found the holy grail of endless peace and prosperity, the end
of the present regime is nigh. On the eve of the 1929 Wall Street crash, the
American economist Irving Fisher advised people to go out and buy shares; in
the 1960s, Keynesian economists said there would never be another recession
because they had perfected the tools of demand management._

 _2008 crash was no different. Five years earlier, on 4 January 2003, the
Nobel laureate Robert Lucas had delivered a triumphal presidential address to
the American Economics Association. Reminding his colleagues that
macroeconomics had been born in the depression precisely to try to prevent
another such disaster ever recurring, he declared that he and his colleagues
had reached their own end of history: “Macroeconomics in this original sense
has succeeded,” he instructed the conclave. “Its central problem of depression
prevention has been solved.”_

Sigh...it seems like every month there is new article that degenerates
economics by comparing to a religion or astrology.

Economists don't need to be able to predict [http://greyenlightenment.com/why-
economists-dont-need-to-be-...](http://greyenlightenment.com/why-economists-
dont-need-to-be-able-to-predict/)

A doctor cannot predict with 100% certainty when or if someone will get sick.

A car mechanic cannot predict with 100% certainty when someone's car will
fail.

Economics models such as the Black Scholes equation do an adequate at
describing reality. Are they perfect/ no, but in most instances good enough.
When such models fail, they can be modified, but that does mean having to do
away with models altogether. In the past few decades, very sophistical
financial models have been developed that can account for nearly everything. I
agree that over-reliance on models can be problematic, but models are
descriptive, not just prescriptive. Just saying "We don't know" and ending it
there means scientific progress stalls.

The 2008 bank bailout, in retrospect , although maligned, was a success by
infusing liquidity to the weakest parts of the economy (financial
institutions, housing, etc.) so that the healthier parts (retail, tech,
payment processing) would bot be hurt too much by contagion. The post-2008
bull market and ecoomic expansion is the longest ever, and programs such as
TARP helped in that regard, but also the strength of the private sector,
exports, technology, and consumer spending.

 _No sooner do we persuade ourselves that the economic priesthood has finally
broken the old curse than it comes back to haunt us all: pride always goes
before a fall. Since the crash of 2008, most of us have watched our living
standards decline. Meanwhile, the priesthood seemed to withdraw to the
cloisters, bickering over who got it wrong. Not surprisingly, our faith in the
“experts” has dissipated._

The S&P 500 is 60% higher than it was in 2008. After factoring in dividends,
it's 80% higher. Profits & earnings have also grown considerably. Dwelling on
the mistakes and crisis of the past means one overlooks how things have
improved.

 _For decades, neoliberal evangelists replied to such objections by saying it
was incumbent on us all to adapt to the model, which was held to be immutable
– one recalls Bill Clinton’s depiction of neoliberal globalisation, for
instance, as a “force of nature”. And yet, in the wake of the 2008 financial
crisis and the consequent recession, there has been a turn against
globalisation across much of the west. More broadly, there has been a wide
repudiation of the “experts”, most notably in the 2016 US election and Brexit
referendum._

I agree that many experts who predicted a bear market and recession as a
consequences of Brexit and Trump were dead wrong, but that goes to show how
hard predicting is (but I'm sure personal political biases also played a
role). But economics is also descriptive: the US economy did not enter
recession, simply because Brexit and Trump failed to have any negative impact
on earnings.

~~~
Nursie
>> Economists don't need to be able to predict

Then perhaps they shouldn't? There are always economists sticking their oar in
on all sorts of predictive matters, often sounding really quite certain that
their predictions of doom or transcendent joy are inevitable. 6 months down
the line, when nothing of the sort occurs, they are nowhere to be seen.

------
adekok
A personal anecdote about Economics...

A friend was doing a Masters in Nuclear Physics at the same time as myself.
She decided she didn't like it, and went to do a Masters in Economics. 4
months later, she was back in Physics.

Over a beer, she told me that the comment which did it for her was a professor
who claimed "The math you're learning now is more complex than nuclear
physics." Uh.... right. She showed me her notes (math, no explanation), and I
correctly identified it as Bayesian probability calculations.

It's hard to have respect for a field when they're don't know what they're
doing, and still think they're better than everyone else.

I'm sure there's lots of things in economics which are real and useful, but
there's a _lot_ of woo in it, too.

~~~
paulpauper
If you go on Arxiv and Journal of Finance, the quant papers there are very
technical (very advanced statistical and PDE methods). Not saying it's harder
than physics, but it's not a walk in the park either.

~~~
msangi
It's also worth noting that a lot of quants have a pure maths/physics
background rather than economics

~~~
smhcf8
Yes, "quants" tend to have undergrad math/physics backgrounds, but "quants"
aren't the ones writing academic papers in the Journal of Finance. You, and
many others in this thread, seem to have a painful lack of awareness that
there are things called PhD programs, and that they select and train students
to specifically do research. Here's an analogy: a random comp-sci
undergrad/master's isn't going to be publishing in a conference any time soon.
Most of you have no chance of getting into a PhD comp-sci program, just as
most random econ students have no chance of getting into a PhD econ program.
Both of these select heavily from mathematics.

Here's the editorial board of the Journal of Finance:

[http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1540-62...](http://onlinelibrary.wiley.com/journal/10.1111/\(ISSN\)1540-6261/homepage/EditorialBoard.html)

You can feel free to check their affiliations for yourself, but almost every
single person has a PhD in Economics or a PhD in Finance/Financial-Economics
from a top department. PhD Finance programs are structured like PhD econ
programs (you take the usual micro/macro/metrics), and were historically
rooted in economics departments. And for what it's worth, almost all of them
will have a bachelor's in mathematics, or a master's in mathematics, or in the
case of international students, a master's in economics.

The topic of this thread is about academic economics, yet you and everyone
else are attacking it by citing the irrelevance of undergrad economics in the
U.S.. Which we're all painfully familiar with. But believe it or not, the best
aspiring comp-sci academics in the United States rarely take a full major of
comp-sci courses at the undergrad level either, because U.S liberal arts
majors are frankly geared towards students who have no interest in academia.
This does not imply a single thing about graduate-level comp-sci, economics or
finance research.

------
awkwarddaturtle
Economics has always been more of a religion than anything else. It has no
predictive aspects. It is purely reflective. And the entire system has a group
of "ideologies/leaders/etc" that adherents cling to and worship.

Economics is what Feynman calls a "pseudoscience" ( aka social sciences ).

[https://youtu.be/tWr39Q9vBgo](https://youtu.be/tWr39Q9vBgo)

One sect of economists will argue with another sect of economists and neither
side can ever win. Just like muslims and jews will argue with each other and
never get anywhere.

~~~
PakG1
_It has no predictive aspects._

While economics has issues, this is an unfair assessment. Entire nations base
economic policy based on much economic theory. That is as predictive as you
can get, betting with real stakes. Some nations succeed. Some don't. There is
fairly solid agreement as to why certain countries perennially have extremely
poor economic performance while others are not bad. There is fairly certain
agreement as to why Germany experienced hyperinflation. Choosing good or poor
economic policy results in predictions either way.

~~~
int_19h
How often do the nations that base their economic policy on economic theory
succeed, and how often do they fail? That's the crucial data that would tell
us whether it has predictive value or not, and if so, to what extent.

------
Jabanga
The Guardian is a notorious proponent of central economic planning, which is
the most hubristic economic ideology there is. It presumes a small group of
economists, using macroeconomic data, can plan the activities of millions of
people better than they can themselves using vast stores of localized private
knowledge that's diffused across society. Moreover, it advocates that the
government should give these economists the right to override an individual's
own decisions on what to do with their life and property, in order to force
them to comply with said plan.

Every other article from them promotes basic income, prohibitions on
'dangerous' free market interaction (e.g. Uber), conspiracy theories about the
wealthy promoting the free market ideology, or some other bullshit economic
fad based almost entirely on conjecture from anecdotal evidence that satisfies
its ideological biases.

~~~
pmyteh
The Guardian is a (social) liberal newspaper, not a socialist one. I've never
seen them argue for central planning in an editorial, and I've been reading
them on and off for nearly 30 years. Not is it particularly fond of
economists.

They do generally object to laissez-faire capitalism. But frankly, a dislike
of Uber is nothing at all to do with a penchant for 5-year plans.

~~~
Jabanga
All social democratic policies are forms of central economic planning. Central
economic planning is not limited to full-scale communism.

[https://en.wikipedia.org/wiki/Economic_planning](https://en.wikipedia.org/wiki/Economic_planning)

------
melnonic
This thread has become laughing stock for economists

[https://www.econjobrumors.com/topic/the-coders-over-at-
hacke...](https://www.econjobrumors.com/topic/the-coders-over-at-hackernews-
are-attacking-my-friends-on-ejmr?replies=17#post-3631832)

