
Against Economics - kwindla
https://www.nybooks.com/articles/2019/12/05/against-economics/
======
aazaa
> Printing money does not cause inflation.

Ah, but it does. It creates _asset inflation_. This may be the worst kind of
all possible inflation because it makes people believe they are wealthier than
they are. When the inflation can no longer be sustained, large numbers will
soon find out they are far poorer than they once thought. That's the stuff of
revolutions and Dark Times.

Asset inflation takes root through policies that distribute money, not to the
poor (Great Society), but to the rich (Deregulation and Quantitative Easing).
The rich have no use for the money being given out and so drive up asset
prices with it.

From this perspective, it's easier to see how a multi-thousand word essay on
new economics fails to mention negative interest rates once.

~~~
snidane
This is the big flaw in how inflation is measured. Assets (eg. for pension
savings) and especially housing costs are for some reason not included in the
Consumer Pricing Index despite them being a huge expense from person's monthly
paycheck.

One can argue the reasons why. Is of the same problem with KPIs in general
thay we only measure things which are easy to measure and omit the difficult
but often much more important things to measure?

Or is it a conspiracy plot in which the governments realized that the only way
to repay those ever increasing government debts is by inflating them away. Ie.
borrowing at 1% akin to CPI reported inflation instead of at 8% which is what
the actual inflation might be.

~~~
ianai
Putting on my academic Econ hat for a moment: There’s probably a stronger
argument for including housing costs like rent into CPI than asset value like
home values. Assets like homes are supposed to be illiquid and relatively
constant over time. Ie little change in the underlying fundamentals of the
item or changes that can be accounted for in an uncomplicated way. When such
stable in underlying value but relatively illiquid assets like homes trade
their realized prices are supposed to reflect little more than inflation. So
maybe their price changes make more sense on the exogenous side of the
equation than the endogenous?

Is this argument still valid? It seems like it would be since it still seems
moving in and out of a mortgage is a longer (by months) process than moving in
or out of a lease.

~~~
ianai
Replying to myself to avoid an edit as this is a new topic.

I’m wondering increasingly lately if oil hasn’t replaced gold and fiat as the
underlying backer value of currency. We had a problem in Econ to contrast and
compare fiat currency to gold backed currency. Fiat is supposed to not be tied
to a scarce resource and thus central banks have the ability to influence
market growth through currency growth. Gold or resource backed currency can
only grow at the rate new stock is removed from the ground. Of course, oil
complicates there concept as oil is irreversibly consumed when it’s burned.
The value of it still greatly affects market growth potentials though.

~~~
derefr
The difference with oil is that not everybody exports it. With the gold
standard, every sovereign nation worth the name attempted to create a gold-
backed sovereign currency, and so was essentially “exporting gold” in some
sense (the sense in which you can take their currency outside the country and
spend it.)

But not all countries are oil exporters, or oil “holders”; and even those who
are, are not exporters to the same order-of-magnitude. This creates very clear
market effects where e.g. the value of the Canadian dollar at any time is
essentially the value of the US dollar divided by the quantity of US oil
exports.

This would be like different gold-backed sovereign nations declaring a
different, floating “ratio” of their fiat currency’s value to their level of
gold deposits, such that changes in the price of gold would throw exchange
rates around (and some nations having no gold at all, and thus having an
exchange rate that measures only how much of some _other_ country’s gold their
fiat currency could buy you!)

------
rayiner
The article takes things a bit too far with the political angle. Just because
economists may or may not be particularly accurate at predicting recessions
doesn’t mean that “economics” doesn’t deserve its place in the neo-liberal
order.

NPR did a podcast a few years ago on six policies it’s ideologically diverse
panel of economists all agreed on:
[https://www.npr.org/sections/money/2012/07/19/157047211/six-...](https://www.npr.org/sections/money/2012/07/19/157047211/six-
policies-economists-love-and-politicians-hate)

They are:

1&2) get rid of tax deductions for mortgage interest and healthcare

3) eliminate corporate taxes

4) replace payroll and income taxes with consumption taxes

5) impose carbon taxes

6) Legalize marijuana

Perhaps unsurprisingly, Europe, Canada, and Australia have all been moving in
the above direction (at least slowly) over the past 30 years, marking a period
of return to growth after decades of economic doldrums where they were
uncompetitive with the USA.

There is even less disagreement when it gets into microeconomics. Everyone
agrees that markets produce efficient prices so long as you account for
externalities. So for example, an EPI study polled economists about the $15
minimum wage (who identified as Democrats 3:1 as compared with Republicans):
[https://www.johnlocke.org/update/what-do-economists-think-
ab...](https://www.johnlocke.org/update/what-do-economists-think-
about-a-15-hr-minimum-wage). 75% thought it would negatively affect
employment, and 84% agreed it would hurt youth employment.

Similarly, few economists support rent controls:
[https://www.economist.com/leaders/2019/09/19/rent-control-
wi...](https://www.economist.com/leaders/2019/09/19/rent-control-will-make-
housing-shortages-worse)

Indeed, the consensus on government price controls is so deep that, with the
exception of isolated things like rent control and the minimum wage, where
people don't perceive it as price regulation, even liberals don't really call
for price regulation. That is remarkable, because price regulation was a
feature of life until the 1970s. Airline tickets, freight trucking, phone
bills--all were priced not based on markets, but based on bureaucrats picking
numbers.

~~~
gruez
>4) replace payroll and income taxes with consumption taxes

how can this be implemented in a fashion that's non-regressive? income taxes
in most countries are progressive, and consumption taxes are regressive.

~~~
nwj
Progressiveness is a function of both taxes and benefits. A consumption tax
scheme can be made more progressive by paying benefits in a more progressive
manner.

For example, Exampleville institutes a consumption tax of 15%. Such a tax is
regressive because consumption is usually a smaller proportion of a wealthy
person's income than a poor person's income. To counteract this, Exampleville
pays a monthly cash grant to all citizens and adjusts the payment level so
that the cash grant is larger for the poor and smaller (or non-existent) for
the wealthy.

See [https://tax.purpleplans.org](https://tax.purpleplans.org) for an example
of a real proposal that mimics this scheme.

~~~
mdorazio
But this assumes that the revenue from the consumption tax will 1) be the same
as for the income tax, and 2) hit wealthy people enough that the lower benefit
payout will balance it.

I don't really see how these can be true given that, as you state, wealthy
people spend a smaller portion ( _a lot_ smaller) of their income than do poor
people.

To toss out some numbers, let's say the wealthy person makes $1M per year at a
35% effective income tax rate and the poor person makes $50K per year at an
effective 10% income tax rate. Let's further suppose the wealthy person spends
half their after-tax income, and the poor person spends all of it. Total tax
revenue in this case would be $355K under the income scheme, but if we switch
to a consumption tax, the tax revenue drops to $55,500. There's no amount of
benefit allocation you can do to make up the difference. On top of that, the
tax burden for the wealthy person (after offsetting for the benefit
allocation) is still massively lower than under the income scheme, even if
they get $0 in benefits. You'd have to raise the consumption tax ridiculously
high (33% !) to get close, which will effectively discourage expenditures and
encourage savings, pretty much destroying the US consumption-based economy.

I just can't see a realistic scenario where this setup isn't regressive or
generally a bad idea. If you want to keep a progressive system but also
eliminate income tax, we need to consider a wealth tax.

~~~
smnrchrds
> You'd have to raise the consumption tax ridiculously high (33% !)

I don't think 33% is ridiculously high. VAT is 25% in Norway, Sweden, and
Denmark, 27% in Hungary; and their economies are doing well.

~~~
burntoutfire
Interestingly, the Nordics also have super-high income taxes. I wonder what
the VAT there would have to be to abolish income taxes. 50%? 60%?

~~~
patricius
Just checked the Danish national budget. Danish VAT brought in (or was
estimated to bring in) 212 billion DKK in 2018. In comparison, tax levied on
personal income brought in 562 billion.

------
KODeKarnage
Oh great, another non-economist getting famous for criticizing economics from
a position of comprehensive ignorance. Modern economics has more than enough
critics WITHIN the economics field. People who wouldn't say something as
stupid as "Economists still teach their students that the _primary role of
government_ ... is to guarantee price stability!". Seriously, this has NEVER
been remotely close to true. When you say something like that, you effectively
lose the section of the audience that knows the something about economics, and
are instead rousing the ignorant rabble. The field of Economics has problems
(such as an over-reliance on mathematical models), but instead of any of THAT
being discussed we have the argument centering around some fantasy-world view
of economics and economists!

~~~
etripe
You're taking the least charitable interpretation of that sentence, reading it
as "all" or "most" economist teaching government's primary role is price
stability. That is apparently false (I'll take your word for it).

In a more charitable reading, he's reacting to one or a few instances where it
is taught but shouldn't. That could be accurate, if contextually misleading
and possibly myopic.

Discounting his argument based on factual errors is fine, but given that you
only bring one counterpoint to the table, "another non-economist getting
famous for criticizing economics from a position of comprehensive ignorance"
sounds like an argument from authority.

~~~
QuesnayJr
I don't see how anything in the text permits that charitable reading. Even the
inventor of monetarism itself, Milton Friedman, thought that the government
could prevent recessions -- he just thought that the best way to do that was
to target the money supply, so you get price stability and no recessions all
at once. The whole point of his and Schwartz _The Monetary History of the
United States_ is that drops in the money supply are linked to recessions.

------
ep103
Does anyone have a good, non-biased resource explaining why keynesians cannot
explain stagflation, and what Milton Friedman did during this era to solve
that problem and thereby launch us into the modern neo-liberal moment?

Whenever I search for this, I have a tendency to find articles that already
assume the reader has read on the topic numerous times (like this one), or
they they only address the topic in the most watered-down and overtly partisan
manner.

From reading between the lines on the first few pages of google results, it
seems like Keynesian thought in the 1970s hadn't evolved far enough to
recognize that inflation could have multiple driving factors and could impact
different parts of the economy disproportionately. My limited understanding
too is that this was resolved theoretically and with obvious and clear
explanation in the years afterward (now referred to as neo-keynesian), but by
then Milton Friedman had been lionized as the new economic "truth" and the
universe moved on in his direction.

~~~
skybrian
Inflation was fixed when the Federal Reserve (led by Volker) increased
interest rates to over 17%, causing the early 80's recession. [1] We've had
other problems since then, but not inflation, so it increased confidence that
the the Fed knows what it's doing.

But I don't know what Friedman had to do with this or how it affected theory.

[1]
[https://en.wikipedia.org/wiki/Early_1980s_recession_in_the_U...](https://en.wikipedia.org/wiki/Early_1980s_recession_in_the_United_States)

~~~
perl4ever
This is an unsatisfying view of things, for me, because it seems like low
inflation and interest rates are a global phenomenon.

As a pessimist, it seems to me that assuming there are resilient homeostatic
mechanisms preventing inflation, then they must be obscure, given that
politicians have not been able to screw them up for quite some time. And that
means that when they do break for whatever reason, markets may not be aware
for an indefinite amount of time. Like, for instance, lately people have been
worrying about the US President trying to bully the Fed. It's hard to tell if
he's had any effect, if he was right in his opinion, and whether he has found
or will find any new lever to influence them.

I don't really think it makes sense to regard the Fed as an entity that still
entails the Volcker era, and I'm doubtful that markets really have faith in it
that way. I'm inclined to think more along the lines that often markets just
go along assuming nothing has changed until there is a shock or crisis that
shows they have. Like Wile E. Coyote running off a cliff.

~~~
QuesnayJr
According to current thinking, the homeostatic mechanism is inflation
expectations. People currently have "anchored" inflation expectations in that
expect any inflation to remain stable in the long run. If inflation
expectations become unanchored (like in the 70s), then it requires larger and
larger inflation to stimulate the economy.

------
snidane
After years of unsatisfactory personal research of various schools od
economics I had to come to conclusion they are all flawed because they
completely omit the important parts which govern our economy.

For example having all economical models based around people exchanging goods
and not focusing on why money actually disappears from economy in form of
monopolies and money parked in real estate. It always has to be poured back
into economy in form of money stimuli like QE, yet people are blind to the
fact that it yet again gets eaten up by ever bigger monopolies and more
expensive real estate. A simple network model of money circulating in economy
would show that these sinks are where the money keeps disappearing.

Yet no economic school has its primary focus set on these money eating sinks.
The closest school is actually the once mighty, now close to extinct Georgist
school, in which they at least explain the business cycle of booms and busts
as housing cycle, where housing bust is not some random consequence of a
business going bonkers, but housing (actually land speculation) being the
major cause of these cycles.

If you think about it 100% of population (except for hobos) are involved in
real estate market and paying close to 50% of paycheck on housing in some
form. Yet all economics focus on stock and bond markets and exchange of random
little items even though these are dwarfed by the housing markets.

I don't think it is a conspiracy, but laziness. People like to research things
which are easy to research, but not things which are difficult but important.

~~~
QuesnayJr
There's an entire field of real estate economics. There are professors and
conferences and everything.

You won't find your theory about money sinks, because it's a theory unique to
you. It may be the greatest breakthrough in the history of economics, but it's
not a theory that currently anyone else believes in. I personally am
skeptical.

------
nlfwhulsdhouv
> To this day, economics continues to be taught not as a story of
> arguments—not, like any other social science, as a welter of often warring
> theoretical perspectives—but rather as something more like physics, the
> gradual realization of universal, unimpeachable mathematical truths.

This has always been my main frustration with economics. As a field, it
certainly has value and usefulness, just like sociology, anthropology, or any
of the 'softer' sciences. However, it eschews the tradition of teaching a
variety of views and perspectives for the rigid orthodoxy of classical physics
or chemistry, without the clean experimental results to back it up.

Microeconomics and econometrics take a much more concrete and practical view
and well-describe localized economic phenomenon, but macroeconomics is a
bastardized combination of sociology and capitalist political theory mashed
into an unfalsifiable 'science' and taught as such.

~~~
lordnacho
As someone who studied economics, I've always found the history of the subject
itself to be more illuminating than much of the content of it. Both due to the
content having this not-rigorous quality to it and because a lot of
macroeconomics seems to be politics in disguise.

You're right about micro though.

~~~
mr_toad
> a lot of macroeconomics seems to be politics in disguise.

It used to be called political economy. But macroeconomics went off on a math-
trip in the 20th century that rivals string theory in its practical
applications.

~~~
QuesnayJr
The opposite is true. Before the mathematics, everyone in macroeconomics was
hopelessly confused. The mathematics makes the claims people are making much
clearer. People still argue about what Marx meant in _Capital_. Nobody argues
what Kydland and Prescott meant in "Aggregate Fluctations and Time to Build"
(an early mathy path on macroeconomics), because it's all right there in the
math.

------
jeffdavis
"...government borrowing didn’t divert funds from the private sector; it
created entirely new money..."

The general answer to this is that public spending crowds out private spending
as both are bidding for the same goods and services.

Not sure if that's a good explanation, but the article doesn't seem to address
that conventional wisdom.

------
riffraff
> We now live in a different economic universe than we did before the crash

I think "this time is different" thinking is dangerous. Yes, maybe the world
is different now, but it's only been 10 years since the big crash, not so
long.

Expecting the world to keep being the same as it is now is just as dangerous
as thinking it will always be as it was for the last 50 years.

------
ianai
“”” The one thing it never seemed to occur to anyone to do was to get a job at
a bank, and find out what actually happens when someone asks to borrow money.
In 2014 a German economist named Richard Werner did exactly that, and
discovered that, in fact, loan officers do not check their existing funds,
reserves, or anything else. They simply create money out of thin air, or, as
he preferred to put it, “fairy dust.””””

Let me stop you there. Economists aren’t trying to create the exact theory
that market participants implement. That would almost certainly be short
sighted to the point of uselessness. (How often in your life have you woken up
with Plan A and wound up doing B - where B is very different from A?) Instead,
they’re looking for a theory that agrees in the outcome and may be applied
usefully to describe what’s going on in resource allocation. This probably
flies in the face of a technology focused era in which surveillance of the
masses at the nearly perfectly micro/individual level is a prime factor in
market valuation. Some of the largest corporations today have access to data
no economist ever dared dream to consider.

That actually makes me think modern surveillance companies (google, Apple,
amazon, etc) could really make market models from the individual to market
level in aggregate.

Versus the topics at discussion here - which are macroeconomic. Macro is often
hurt by a lack of data since there are only so many years of data of the
goings ons of nations in a global context - with probably not enough variation
to make conclusions.

------
tjpaudio
I would write this author off, this is a rant and nothing more. "We now live
in a different economic universe than we did before the crash. Falling
unemployment no longer drives up wages..." Wages are certainly going up in
places with low unemployment, its just not distributed as evenly as it was in
prior history.

~~~
lukifer
For context, David Graeber is an anarchist anthropologist who has written
extensively about economics. His two best-known works on the subject:

\- [https://www.amazon.com/Debt-
First-5-000-Years/dp/1612191290/](https://www.amazon.com/Debt-
First-5-000-Years/dp/1612191290/)

\- [https://www.amazon.com/Bullshit-Jobs-Theory-David-
Graeber/dp...](https://www.amazon.com/Bullshit-Jobs-Theory-David-
Graeber/dp/150114331X)

His views are surely influenced by his a-priori politics, but I've found his
ideas thought-provoking to say the least.

~~~
QuesnayJr
Graeber is also the person who wrote this sentence:

"Apple Computers is a famous example: it was founded by (mostly Republican)
computer engineers who broke from IBM in Silicon Valley in the 1980s, forming
little democratic circles of twenty to forty people with their laptops in each
other's garages..."

------
darawk
> Central banks like the Bank of England create money as well, but monetarists
> are entirely wrong to insist that their proper function is to control the
> money supply. In fact, central banks do not in any sense control the money
> supply; their main function is to set the interest rate—to determine how
> much private banks can charge for the money they create. Almost all public
> debate on these subjects is therefore based on false premises.

This seems to be a weird oversight on the part of the author. Even if we
accept the heterodox view of money creation as espoused by this article (which
I do, for what it's worth), the central bank still plays a very important role
even in the private creation of money. Setting the "risk-free" interest rate
for the economy determines how much money banks are going to be willing to
lend, which thereby determines how much money they will create. Just because
the central bank is not printing the money themselves does not mean that their
policy levers are not having profound effects on the money supply.

~~~
QuesnayJr
Graeber has an oddly dated notion of issues in macroeconomics. Targeting the
money supply is a 70s era idea that the Bank of England tried briefly and
abandoned in favor of targeting the interest rate.

------
diego
This article lost me at "printing money does not cause inflation." How would
that be possible? The only answer would be that money is increasing in value
for some reason, and the government must print more to keep prices stable
(otherwise they would fall). Even then, it would be a technicality.

~~~
donatj
Yup, came here to make the same complaint. The article just throws that out
there as fact with no justification or citation.

Just need to look at what's going on in Venezuela, right now.

Increased supply of anything lowers it's value.

~~~
lordnacho
> Increased supply of anything lowers it's value.

Network goods? Are telephones more valuable when more people have them? Road
networks?

Just pointing out that many things in economics are not so obvious.

You're right that you need to cite things that go against the orthodoxy. At
least to have sane debates. But of course he could have cited the current
money printing era, where if you believe the official figures there's not a
lot of inflation anywhere in the west. I'm not so confident in the figures,
but that's at least some evidence that printing a load of money doesn't cause
inflation.

~~~
beerandt
I know there's an economic element to networks, but in the context of what
we're talking about, more people having a telephone is a measure of the
products quality, not supply. Capacity of the network would equal supply.
Right?

Unless I'm grossly missing something.

~~~
IggleSniggle
The value of a single phone is zero, 2 phones grants each owner the ability to
contact one person (2 units of value total), 3 grants 3 owners 2 each (6), 4
-> 3 (12), 5->4 (20). In other words, increasing the size of the network
multiplies the value of the entire network by that amount (factorial).

In a phone network, there are a few different tipping points where the
_ubiquity_ adds additional value. At a certain point, having a phone is
worthwhile _because everyone you could possibly want to talk to also has one._
(this is also why I still have an account on Facebook).

The same can be said of a currency network. It becomes more valuable the more
people you can exchange it with. People using US dollars outside the US gain
value from knowing they have a trusted "stable third party" currency, and at
the same time US dollars become more value to citizens of the US because they
can now use that currency for purchases in that other country.

Having 20 phones with one owner is practically worthless, even though the
network capacity is theoretically high. Distributing those phones among twenty
people is what generates the real value. But you can't really distribute 20
phones equally among 200 people.

You need sufficient _saturation_ of currency for its distribution to be of any
real value, because you need enough quantity to be able to use it to do its
job as a holder of arbitrary value exchange.

~~~
beerandt
I appreciate the response. I get that... (I think)

I just don't get why that necessarily has anything to do with supply itself.
It has to do with the distribution, and as a result, the quality or utility of
the network.

As you said, one person having 20 phones is off dubious value, but 20
additional people with phones might increase the network's quality.

The supply (20) is independent of the resulting quality/saturation/useful node
count.

On the other hand, increased nodes _could_ be seen as a negative. Like the US-
Russia hotline. Or Facebook after it opened up to users without college email
accounts.

Sometimes supply might affect the quality of a network, and therefore the
value of having a node (phone) on that network. But to say supply increases
with demand is misleading, to me. Increased quality increases demand, at a
rate greater than the rate demand is decreased due to increased supply.

If supply _happens_ to increase quality, then yes supply might dominate the
equation such that demand increases as supply increases. But that doesn't mean
the fundamental relationship between supply and demand has changed, it's just
been minimized for particular cases.

Or maybe I'm just getting confused by transitive semantics.

~~~
IggleSniggle
I would agree with most of what you said here. To echo your semantics and in
the greater context of this thread, I was merely pointing out that increasing
the supply (and in the case of money, distribution/saturation) _could_
increase the "quality" at a rate faster than the forces that that push the
"quality" down in terms of "quality" per unit of currency. In the specific
case of money, there is an additional group psychology at play: if you believe
your money won't be worth as much tomorrow as it is today, then you should
spend it today if you can. Since the value derived from currency is in its
exchange (it's not producing any value sitting under a mattress), it increases
the "quality" of the currency for it to be circulating.

~~~
beerandt
Yea, if we're talking about money supply I suspect the phone comparison might
be apt in a slightly different way.

I haven't seen anyone touch on it in this thread, but I've read opinions where
people have blamed companies for hoarding all of the newly available cash,
especially for stock buybacks.

If there's any truth to that, it would make sense, since companies can usually
get better rates and first dibs at market level loans/ bonds/ etc than small
business or individuals.

In the phone analogy, (if we assume there's _some_ value having multiple
phones) this would be like a new dialing prefix being released, and companies
buying up the numbers hundreds at a time at bulk rate discount, leaving little
or no additional numbers for individuals.

So supply was increased, but the businesses hoarding new numbers prevents any
quality improvement if the network.

------
6510
note to self:

Required for education: Unskilled labor "must" pay less to motivate people to
get diplomas.

Required for productivity: Wages "must" be low enough so that people have to
keep working.

Since motivation to get a diploma depends on the size of the income advantage
"ideally" people without diplomas should barely be able to sustain themselves
- forever.

All other economic talk seems filler material. All excessive wealth "should"
go towards sustaining the filler material or otherwise be destroyed. For this
purpose we also see endless investment in businesses that exist only for the
purpose of extracting wealth from everyone else. Some of course deliver useful
products in return but if they could increase ROI by not making anything most
if not all would do it. If they operate at a loss it is even more "beneficial"
to the system. For this purpose we also have 32 Trillion "hidden" in tax
havens.

The whole thing seems to have "evolved" so that we all are as productive as
possible only to sacrifice the produce on the altar of productivity again. The
bad thing about this is that all this "productivity" destroys everything
around us. It all costs finite resources. We would be better off just making
what we need efficiently.

------
harimau777
Can anyone recommend a book or other resource that gives an overview of the
various schools of economics including the "heterodox" ones?

When I'm learning about a subject I find it much easier if I have a framework
for categorizing and organizing the different approaches or topics that the
subject consists of.

~~~
Synaesthesia
Well the best heterodox economist IMO is Michael Hudson. Recommend his blog,
talks and books to anyone.

------
lootsauce
A few observations I generally do not see discussed.

Velocity of money has a large impact on the inflationary impact of circulating
money.

Bank loans endogenously produce new money in the economy. This can
dramatically impact the inflation seen relative to Fed printing.

Official macro stats, especially inflation are tweaked to death and are not a
stable metric.

------
xvilka
Highly correlates with what is written in the Incerto[1] series by Nassim
Nicholas Taleb.

[1]
[https://www.goodreads.com/series/164555-incerto](https://www.goodreads.com/series/164555-incerto)

------
hogFeast
I have an outsider's perspective, I studied economics but mostly ended up
doing economic history (I am a practical person, and preferred stats to
models)...

...the point of economics is not to produce models that are 100% accurate.
Yes, there is an absolute ton of witchcraft in economics and especially in
macro (CGE, DGE to name two areas beloved by civil servants/central banks) but
it is very far from useless (and, contrary to what the author thinks, there is
a hell of a lot of testing of theories). The issue, funnily enough given the
author's perspective, is often that we use economics to just support whatever
we already believe.

On his actual content: unsurprisingly, he gets his history totally wrong.

First, an important point, the UK never actually adopted monetarism. We were
forced to adopt DCE targets by the IMF in 1968 but everyone thought it was
bullshit. Even after Thatcher crushed inflation, monetarism was only popular
amongst the small group of City economics/journalists who came to the idea in
the 1970s (and were thought of as crackpots by non-risk takers). The UK was
thoroughly Keynesian, that is why we persisted with utterly insane policies
through govts under both parties (until Thatcher).

Second, saying monetarism causes disaster confuses the cause and effect.
Monetarism, whatever its theoretical faults, was correct in 1979 but was only
necessary because Labour/Heath had fucked the economy beyond belief (the UK
went to a three-day week because the economy literally just stopped working).

Third, the 1960/70s were not a period of economic success. Inflation hit 25%,
two devaluations, one trip to the IMF, one banking crisis, and endless begging
other people to lend money (and the govt got a reputation for going back on
agreements). Incomes policy was, objectively, one of the most disastrous
policies ever conceived. It ended up, literally, with unions running the
economy in 1974. Yes, growth was high but real growth was lower and supported
by population growth. I am not aware of any history which concludes any
economic policy pursued in this period worked. Everything failed.

Fourth, what everyone forgets about the 1950/60s was that there was almost no
trade. That is why workers were richer. Most currencies weren't convertible
until the late 50s. The UK could milk Commonwealth nations dry with no
competition. But the evidence here is clear: trade makes us richer. Anyone who
says this isn't the case, even Trump recognises this, is an ignoramus.

Fifth, Greenspan understood there was a bubble. He gave a speech in 1998
saying there was a bubble. The issue - which is perfectly logical if you look
at what happened in 1958 when the Fed did burst a bubble - is that people will
say you caused the downturn if you intervene (he blames monetarism for causing
the downturn but also blames the Fed for not bursting the bubble...what a
genius this guy must be, spotting bubbles like he is at a car wash). This is
an attempt to inject some psychology into economics, it is amazing the author
doesn't see this.

It is no surprise Graeber has thrown his lot in with Corbyn. The number of
crackpot acolytes around Corbyn grows every day (thankfully, he remains
unpopular with voters). I would vote for Labour normally...but their current
policies are just...ignorant. These ideas have been tried, they didn't work,
that is why Corbyn has support amongst young people who don't read books. The
logic is: build a wall, make Goldman Sachs pay for it.

~~~
petermcneeley
You dont sound like an outsider at all. "Trade makes us richer. Anyone who
says this is the the case is an ignoramus".

Contrast that with this recent article

[https://foreignpolicy.com/2019/10/22/economists-
globalizatio...](https://foreignpolicy.com/2019/10/22/economists-
globalization-trade-paul-krugman-china/)

I think what you really need to define is what "us" means

------
anm89
This article is utterly nonsensical (claiming the money supply is essentially
unrelated to inflation) but the specifics of their argument say a lot about
the field and why things I think are about to get worse.

Their argument goes

A) current economic regimes are built on shifting sand and border on useless
for predicting macro crises (this is true more or less)

B) there are other schools of thought out there which are sometimes more
predictive than the main stream

C) therefore get rid of economics

D) and replace it with a different version of economics, specifically one
which agress with my politics.

The problem is that they are right, mainstream economics is junk, and so it
becomes really hard to discredit other wacky ideas like mmt, or endless
unmoderated fiscal stimulus because hey, couldn't be much worse than our
system which seems to blow up and screw everyone over.

~~~
apendleton
> claiming the money supply is essentially unrelated to inflation

I don't think this is the actual claim. The key quote is this (emphasis mine):

> Doubling the amount of gold in a country will have no effect on the price of
> cheese _if you give all the gold to rich people and they just bury it in
> their yards, or use it to make gold-plated submarines_

It's not that they're unrelated, it's that increasing the monetary supply is a
necessary but not sufficient criterion for inflation to occur. I don't think
the author would likely deny that printing boatloads of money resulted in
inflation in Zimbabwe or Venezuela, just that if you increase the monetary
supply specifically by giving it to rich people who hoard and it never gets
spent on consumer goods, it won't affect the price of consumer goods. That's
not how it went down in Venezuela, but is (the author asserts) what kept QE
from working.

~~~
BenoitEssiambre
>and it never gets spent on consumer goods

It doesn't need to be spent on consumer goods to cause inflation. It can also
be spend on economic investment ie. new capital (new factories, new equipment,
infrastructure inventory, supplies, training, R&D, real estate, mining
operation etc. etc.). The money will quickly flow to employees and then to
everything else.

Only if the rich keep all the new money in cash form would it not cause
inflation but this would usually be a very risky and unstable situation for
the money hoarders as some of the money on the sidelines can start moving at
any time which would cause inflation to spike and the rest of the stockpile to
lose value quickly.

~~~
apendleton
> The money will quickly flow to employees and then to everything else.

Sure, I never said it was the rich people that had to do the spending, so we
don't disagree there, but if "inflation" as commonly measured (CPI, say) is to
occur, the prices of consumer goods have to change, and someone at some point
has to buy some, whether it's the rich people or their employees, and if it's
the latter it requires that the former sink their money into something that
employs people. The author suggests that this happens less reliably than it
used to (that they hoard cash, or I dunno, gold? whatever -- something
societally unproductive)

------
jariel
This is not an argument against economics, but against specific ideas in
economics holding true:

"Falling unemployment no longer drives up wages. Printing money does not cause
inflation."

This is not fair.

A) Wages are the _last_ thing to rise and tend only to do so when unemployment
is low. We're just now reaching that level.

B) Inflation doesn't well account for surpluses: we're getting a lot of bang
for our buck in digital services, something that's super hard for the BLS to
measure. 'Consumer Surpluses' are like 'profits' to the consumer that are not
really measured at all - the only place we do this is when the BLS measures
the 'quality' of a basket of goods to figure out inflation: i.e. if the Tomato
is getting nicer, redder, juicier, then part of the increased cost of said
tomato goes to value, the rest to inflation. This is hard enough to do
already, but nary impossible with new services coming online.

Case and point: Fortnite. It's free. I've played quite a number of hours of
that last year _and never spent a dime_. Apex is a big game, not free. This is
a new trend. The surpluses there are vast. Games have a measurable effect on
time spent on other things as well.

In a nutshell: consumers lives are improving in ways not always appreciated.

C) "Printing money does not cause inflation" \- generally, it absolutely does!
It just depends where you measure said inflation: stocks, housing - massive
inflation. We just don't put that into our version of inflation. But there's
inflation for sure!

Consider point 1 and 2 together: if stocks are doing well, and CEO's are
getting their rewards for strong returns, why are they incented to innovate,
pay more etc? Screw that - in a game of 'stocks going up because free money'
\- the strategy is to 'do nothing' \- just keep operating as per, and avoid
risk. 'Push the button, collect reward'. Risk changes the nature of the
operating environment, and who wants that if there's steady 'returns'?

D) The Fed is not 'printing money' really, it's not quite fair to say that in
the sense usually implied: a government (or anyone else) 'printing money' to
pay for stuff has an entirely different implication.

I'll state the article misses the most important things:

1) Printing money almost assuredly does cause inflation, even now.

2) _All things equal_ wages will rise as unemployment lowers. It's just that
'all things are not equal'. Take a look at real surpluses. Take a look at
debt-leveraging in homes. Take a look at bifurction of employment from 'tech
workers' to 'powerless gig economy' people. Take a look at levels of migrants,
their relative skill and their relative market power for wages (they have
little power, and there are enough that it absolutely moves the needle).

'Economics' can be used to measure and address all of those things, you just
have to start looking at the data, and if not, start measuring things we
didn't before.

My bet is the answers are not actually that far off, and probably not very
surprising if we could see 'all the data' otherwise ignored or unmeasured.

