
Why Were Economists as a Group as Useless Over 2010-2014 as Over 1929-1935? - nabla9
http://www.bradford-delong.com/2017/04/why-were-economists-as-a-group-as-useless-over-2010-2014-as-over-1929-1935.html
======
nabla9
It seems that people are too hurried to read the article and are commenting
the title and economics on general level.

Basic macroeconomics did fine. Austerity side Alesina/Ardagna/Reinhart/Rogoff
camp was utterly wrong. Spreadsheet errors in their studies that became basis
for political action etc. Even after the austerity approach has been shown to
be baseless in academia it continues to live in politics. Politicians have
little or no ability to evaluate what they hear or read.

Backgrounder:

How the Case for Austerity Has Crumbled
[http://www.nybooks.com/articles/2013/06/06/how-case-
austerit...](http://www.nybooks.com/articles/2013/06/06/how-case-austerity-
has-crumbled/)

~~~
empath75
The problem is that politicians don't give a solitary shit about economics
except when it gives them cover for doing what they wanted to do anyway. I
hope no one genuinely believe that politicians wanted to enact austerity
measures or shrink government because of economics. They do it because huge
corporations and billionaires want less taxes and lower regulation so they can
accumulate more wealth personally. Whether the economy as a whole or even a a
majority of the people benefits is irrelevant to them. See also climate
change.

~~~
ksk
As you probably might also agree, its a bit of both. Politicians don't go into
politics thinking they're just going to accept donations and do whatever. They
believe the stuff at some level and then get corrupted by the
marketing/lobbying. The greater problem is that politicians are lay people,
and even if they wanted to listen to economists they would first have to
navigate the topology of the topic at large, and then understand the minutia
of what each side represents. Now apply that for 10 different varied fields
including foreign policy/medicine/science/defense/social issues/etc and you
quickly realize that its just impossible for any one person to make accurate
decisions across such a wide swath of issues. Maybe the answer is more
decentralization, but then you cant do the moonshots where you need to pool in
the resources/talents/labor across a large populace. Its all a shitshow to
some extent. But then again, the world hasn't gone to shit just yet so at-
least somethings working .. :)

------
hkmurakami
_" Economics is a highly sophisticated field of thought that is superb at
explaining to policymakers precisely why the choices they made in the past
were wrong. About the future, not so much."_ \-- Ben Bernanke, 2013

(the quote is from an unexpectedly funny and thoughtful commencement speech)

[https://www.youtube.com/watch?v=Ww6guPQsKQo](https://www.youtube.com/watch?v=Ww6guPQsKQo)

[http://money.cnn.com/2013/06/02/news/economy/bernanke-
prince...](http://money.cnn.com/2013/06/02/news/economy/bernanke-princeton-
speech/)

~~~
socmag
Hey, there is a great cartoon about that here!

[https://rwer.wordpress.com/2013/11/09/the-scientific-
illusio...](https://rwer.wordpress.com/2013/11/09/the-scientific-illusion-of-
modern-macroeconomics/)

------
Retric
Great Depression: _industrial production in the United States declined 47
percent and real gross domestic product (GDP) fell 30 percent._

In comparison 2010-2014 was a minor blip, with less than 3% GDP drop, that
barely qualifies as a correction. I fear central banks have actually gotten to
good at minimizing these issues as we could easily do the same thing in
another 10 years, where the great depression created far more systemic change
in both organizations and peoples attitude to investing and credit.

PS: People want the post correction economy to match up with the pre-recession
economy. However, in the case of irrational behavior the rational economy
should have a lower GDP and that's not actually a problem.

~~~
hl5
A minor blip where millions lost their jobs, houses, and businesses...

The hard part about economic analysis is you can never know all the variables
in a dynamic system. It's a common error to summarize based on variables
convenient to the theme you choose to present only to later realize your
analysis should have included some fairly obvious factors.

~~~
AnimalMuppet
Yes millions lost their jobs, houses, and business. And yes it was a minor
blip. If you think otherwise, you don't grasp how bad the Great Depression
was. Think about 35% unemployment _for years_.

The majority of mainstream economists didn't see it coming. That's a totally
valid criticism. But they did a much better job of handling it than in 1929,
and the damage, while major, was still nothing like the Great Depression.

~~~
hl5
I see your 42 million unemployed people in 1929 and raise you 100 million
people not currently looking for work in 2017.

~~~
dragonwriter
A lot of those 100 million are elderly, children, or permanently disabled.
There's a reason we count unemployed in a different manner than just "not
currently looking for work."

------
thinkling
If economists did come to a broad consensus, many politicians would still
ignore that consensus if it didn't happen to fit their worldview or the
interests of their major donors.

See: climate science.

~~~
FullMtlAlcoholc
One could scarcely call the field of Economics a science though.

~~~
mathieutd
Why? They formulate theories and test them against data to understand how the
world works. Is that not the definition of science?

~~~
gone35
_[...] and test them against data_

No, in fact they don't. It's hard to believe, I know.

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TSiege
From what it looks in these comments, almost no one read this article nor know
who Bradford Delong is. He's a New Keynesian, arguing no one listened to
Keynesians...

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lollerbot817
Because economics has always been utterly useless in any practical sense. It
makes no testable predictions and is no more scientific than any theology.
Only because it clothes its dogmas in symbolic notation is it accorded even
the slightest bit of respect. The sooner we jettison it from our epistenic
frames, the more quickly we will return to something that at least partially
resembles sanity.

~~~
matt4077
> It makes no testable predictions

That's not true. There are, for example, GDP growth forecasts published by
almost all central banks and many other institutions. They are pretty wrong,
most of the time. But they are made, and falsifying them has been pretty easy
in the past.

There are many more theories in economics that are, in principle, testable and
falsifiable. The problem is that it's difficult to run controlled
"experiments" on interventions. You never have a control group in the strict
sense, and everything is connected to everything else.

~~~
crdoconnor
There's accidental wrongness and then there's politically motivated "useful"
wrongness:

[https://pbs.twimg.com/media/A8rBinMCcAEO59f.jpg](https://pbs.twimg.com/media/A8rBinMCcAEO59f.jpg)

------
api
There was another article on academic incentives today that referenced a
wonderful quote:

"When a measure is used as a target, it ceases to be a good measure."

My impression is that economics as a whole does not understand this. When you
target GDP for example, GDP ceases to be a good measure of anything. The
trouble with economics as a science is that its results are used to guide the
economy. This creates a feedback loop, making it essentially a self-
invalidating discipline.

~~~
matt4077
That's true if what you measure is only a proxy for some other reality that
you actually want to affect, but that is harder to measure. Cholesterol, for
example, has long been targeted because it had shown a high correlation to
cardiovascular health and life expectancy. The result was a long series of
medications that successfully lowered cholesterol, with occasional death as a
side effect.

GDP is pretty close to what you actually want to change. There are some other
measures, such as social mobility, Gini, or poverty–but rising GDP has almost
always been good for people.

~~~
api
I'm not convinced GDP is what we want per se. It's a secondary indicator of
what we want, but it's also possible to boost GDP by inflating asset, debt,
and investment bubbles, and otherwise moving money around un-productively or
even counter-productively. This is particularly true in the short term.

What we want is productivity, development, and innovation. Those are primary
things that like "good science" in the academic case are not easily distilled
into simple measures that can be set as targets.

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ThomPete
Economists are mostly to be considered historians and even as historians they
have very little actual data about the things that make an economy.

This is most visible in the fact that they treat technology as an externality
even though its probably the most important factor in understanding our
current economy. These economists with their models still assume production as
primarily an output of labour are advicing our politicians. Its going to be
seen as an era of great ignorance to the factors that really matter to an
economy today.

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SubiculumCode
It is hard to characterize as diverse a field as economics. However, there are
some influential sectors of the field of economics that 1) avoids rigorous
empirical research, and/or 2) identifies economic policies that benefit their
benefactors, and then produce economic theory that support those policies.
Which is backwards, or at least distorted.

~~~
FullMtlAlcoholc
There is also a troubling cult of personality that plagues the field, where
Nobel Prize winners and other luminaries' research is accepted as truth
without peer review. Example: Greenspan

------
nickik
Its interesting how DeLong who got so many things wrong is so convinced he is
totally correct. He talks about Skidelsky, who is a convicted old Keynesian
who somehow survived the 70s to hunt economics.

Many monetarist (and others) have correctly point to these the drop-off in
demand in 2008/2009 and said if it continued it would be bad.

The large error that happened, was actually the professions believe in the
liquidity trap. Those like Krugman and DeLong who wrongly believed that 'the
central bank was out of ammo' and the central bankers who ran around like
headless chickens when their New Keynesian models failed at the ZLB. It took
smart central bankers like those in Switzerland and others (and eventually the
US) to overcome that and simply go back to what is now called 'unconventional
monetary policy'. It is of course only called that because New Keynesian
labeled it that (its not in their models so it can't possibly be a normal
thing to do).

The Fed for example was so convinced that they needed to control the interest
rate (because of New Keynesian thinking), they sterilized (selling bonds to
prevent the balance sheet from growing) all their bad asset purchases and once
they were unable to sustain that and started growing the balance sheet
(labeled QE1 after the fact), they switched to paying interest on reserves
with the express purpose to not allow the new money to 'get out'. At the same
time they are doing this, NGDP is falling of a cliff. Its economic madness and
the reason is a false believe in New Keynesian models and specifically the
liquidity trap. It is insane to use a model that practically fails when the
crisis hits.

------
forkLding
A lot of economics aside from the first year undergrad basics are being
contested, I've discussed this issue with several economics professors and
their consensus is to use the basics but ignore the more senior stuff.

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fiatjaf
It's great there isn't a "consensus" between economists, otherwise if that
consensus was wrong we would never be able to leave it, like what happens in
other sciences.

~~~
mikeash
Yes, it really would be terrible if economics ended up like physics or
chemistry, where consensus results in vast numbers of useful and correct
predictions.

------
carsongross
Because they don't take debt, in particular private debt, seriously, including
Krugman and Delong.

Steve Keen explains how wrong this is.

~~~
naravara
Nobody thinks national debt doesn't matter. They think the long term costs of
endemic poverty or economic stagnation outweigh the long term costs of
carrying a deficit.

~~~
akinalci
We have this big problem. We'll just patch over it with this other problem and
call that a reasonable strategy.

~~~
tcbawo
I think what he's suggesting is that paying down debt through austerity can be
more costly than growth, since austerity hurts growth. The trick is, where
does growth come from?

~~~
gozur88
The mistake there is thinking printing money brings you growth. Where has this
worked?

~~~
josephlord
Firstly there are two ways that money is printed.

1) Government/central bank spend more than they take in taxes.

2) Private banks make loans to private sector (biz or individuals).

Money is destroyed by government running a surplus or by loans being repaid.

Note also that for the government to run a surplus the private sector must run
a deficit (decrease savings or increase borrowing) in most circumstances.

The question is where money should be created and how it should be managed and
controlled.

~~~
makosdv
Why does money need to be managed and controlled?

Real money inherently has a limited supply, so there is no need for it to be
managed or controlled; the market does that on its own. However, the fiat
currencies that are used by central banks around the world are not real money.
The arrogance of central banks thinking they can manage and control the
economic interactions of millions of people in a country is what leads to
these great depressions and recessions.

~~~
matt4077
Economic crises today are nowhere near the disasters they were in the past.
It's pretty obvious that the system's stability has increased–in the past,
depression could mean starvation.

> The arrogance of central banks thinking they can manage and control the
> economic interactions of millions of people in a country...

The arrogance of physicians thinking they can manage and control the
biological interactions of billions of cells...

Just because something has a lot of moving parts doesn't make it intractable.
"Complex" is just latin for "put together", and we can always try to take it
apart, learn about individual parts, and work our way up.

In any case, not doing anything is also a decision. It's a completely
arbitrary idea–as if monetary policy were some sort of intrusion into the
"natural law" of the economy.

~~~
makosdv
I don't think that the rarity of starvation in modern times is due to central
banks, but instead due to advances in farming that allows a very small
percentage of people to produce enough food for everyone.

Physicians don't think they can manage and control the billions of cells in
our bodies; we still don't understand how all of our cells even work.
Physicians apply tested practices to individual people and hope that it
addresses whatever medical problem is being observed. They understand that
treatments are not one-size-fits-all and that mistakes can kill people. They
also understand that our bodies self regulate and they are only trying to
address a specific imbalance in their specific patient, not something that
applies to an entire population.

Central banks think they can turn a couple of knobs (currency supply and
interest rates) and control an entire economy made up of millions of people.
Using the physician example, that's like thinking that the only two treatments
needed for any medical condition are adjustments to our blood level and body
temperature.

Monetary policy is a newer invention in the history of human civilization and
even then, it wasn't always applied so universally. Monetary policy can only
exist with central banks.

------
AndrewOMartin
Because due to random luck they happened to be vaguely accurate over
1936-2009?

~~~
Gibbon1
Economics went down a rathole in the 1960's. Happens to a lot of fields.

------
crimsonalucard
Two things in our universe that are impossible: Modeling chaos and knowing the
future.

Economists model chaos and use that model to predict the future.

~~~
matt4077
The weather forecast is pretty close–it's where chaos theory originated after
all, and it's got "forecast" in its name.

And forecasts in that realm have improved tremendously over the last years.

