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.
A friend of mine who is a noted economist with a Ph.D. in statistics, commented to me with something along the lines of:
> The only reliable correlation in economic papers is the probability that an author will be published.
I take her comment to mean that big names from big universities get papers published, but publication is not based on the merits of the paper.
More to the point, she said that the statistics used for almost all mainstream economics is flat-out wrong.
As someone who has worked extensively with both PhD statisticians and economists, but practices neither beyond what I've learned via osmosis, I couldn't care less what the statisticians think anymore. They were definitely smart, but completely useless. We had several projects where the economists came up with solutions that measurably and objectively worked to the order of 9 figure changes in the bottom line and reversals of decades-long trends...and they did it using data sets that the statisticians wouldn't even touch due to some religious moral panic from observational data. Statisticians always found some way to object to everything under grounds of being proper in some way or another, and rarely came to the table with anything more useful than "First we need to find some way to create a perfect alternate universe".
Econometrics has very rightly diverged from statistics. Economists do not have the luxury of the theoretical environments that statisticians require but never have to create. And as a social science, they don't have the luxury of measuring outputs of perfectly understood processes, but rather the ever changing output of cultures and personalities guided by 3.5 billion years of evolution. Maybe their ideas offend statisticians, but it's pretty hard to find something that exists in the real world that doesn't offend them, so I'm not concerned.
When people wave around the conclusions of scientific papers as proof that some political action is required which is going to impact the lives of millions of people, you need to seriously take the papers with a grain of salt.
I don't really know any way to get around it. Any time you're studying the impact of human collective activity the stakes are far too high to trust that anyone is taking a disinterested view of reality.
If you'd like to read about it, the best contemporaneous piece I've read on it is "All the Devils Are Here" - https://www.amazon.com/All-Devils-Are-Here-Financial/dp/1591...
They talked about the "gravitational model" of economics, that the amount of trade between two economies is proportional to the product of the size of the economies each raised to some power, divided by some power of the distance between them. They showed a best fit of the 5 parameters to under a dozen data points and it looked rather awful. (I am not sure how well defined those variables are). Without any theoretical justification it seemed like a model stolen at random from physics that didn't fit well.
I've also read a published economic paper written in terms of measure theory, where it was clear the author did not understand measure theory at all. The ideas were misapplied to a simple problem in a way that made it sound very difficult. Admittedly this is partly the fault of mathematicans who teach measure theory as statistics; while you can use that model it makes things very complicated and you almost surely don't need to deal with infinities in most real problems, let alone non-measurable sets.
This arm of economics trying to ride the coattails of prestige worn by maths and physics is void of meaning.
This was a co-authored publication of an economist and a political scientist (at the University of Rochester). It's one of their several co-authored pieces; and it was published in a good field journal, but not a top general-interest journal. It has so far received a couple of cites from papers on the same topic. My point is, this paper is fairly "standard" for contemporary economic theory.
It also happens to use a decent amount of measure theory.
Now, I will personally venmo you $200 if you are able to find a single mistake or "abuse" of measure theoretic concepts in that paper in the following sense: a measure-theoretic theorem, definition, or proof technique was unnecessary for mathematical purposes, and you can demonstrate why that's true by writing an alternative proof, with the same generality but without such a concept.
I'm not baiting you, I'm genuinely curious to see if you or anyone else in this thread can do it, because I had taken plenty of measure theory in my PhD days, and this paper's usage of it seems perfectly on point to me. I'm also using it as an example because the authors' language is very clear and meticulous, and you shouldn't have trouble accessing that paper without knowing economic jargon.
I can also link you a few other random economics papers if you want. Alternatively, you could admit your disparagement of economists' intellectual ability, and intellectual honesty, was perhaps misplaced.
For me, a good analogy is with engineers and real numbers. Engineers use real analysis all the time. But the results of an engineering paper should not depend on the definition of a real number, nor should the engineer care.
Edit: Hamming made the point better than I can:
"Does anyone believe that the difference between the Lebesgue and Riemann integrals can have physical significance, and that whether say, an airplane would or would not fly could depend on this difference? If such were claimed, I should not care to fly in that plane".
Here's the editorial board of the Journal of Finance:
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.
Was this in the US? Undergrad econ is very watered down compared to Europe. A common lament here is that people who get their undergrad in econ in the US are woefully unprepared for the math they'll need in grad school.
Econometrics uses as much calculus as engineering does (PDE's, etc). In other countries, they do this at the undergrad level.
Of course, one solution is to just major in Econ and make sure you take those classes. The US undergrad path is very different, it's not as specialized as it is overseas. There's flexibility - well, use that flexibility to take math through diff eq, linear algebra, some proof based stuff, and perhaps some numerical analysis or computing.
Also - some universities essentially offer two tracks. My alma mater, UCSD, does this. When I was there, you could major in Econ or "QEDS" - quantitative economics and decision science. I think they've changed the name and modified the curriculum since then but it's a similar track - it requires that you sit with the engineering, math, and hard science majors for the first couple years of calc, linear algebra, and DE's, and offers upper division work that draws on this background. The basic Econ major required very minimal calculus from a shorter and less rigorous sequence.
This split is present in a lot of US universities, as far as I understand. You really can't know just by looking at the name of the degree, because a "BA" in economics at some universities actually does reflect a mathematically rigorous program.
There are fields where the practitioners actively try to dis-prove themselves. Where they are aware of the limits of human psychology, and design experiments / analsyses to work around their own limitations. These fields are called "science".
There are other disciplines which don't do that, but who do fake it. See Noam Chomsky for a great explanation:
For another explanation, see "Cargo cult science"
His whole point (and mine) is that a field of study can follow the superficial trappings of science while at the same time not understanding the core principles of science. If that isn't "faking it", then you should explain why. Use examples.
So you judge a field from one conversation that a friend told you happened? From one professor? Who might have even been joking.
And you think that is a reasonable proposition?
All of the fratboys who washed out of the Business department either landed in sociology, MIS, or economics. They seemed to do well there, and get decent jobs as long as they had 15 credits of accounting.
I was told that they didn't really wash people out until the graduate level.
Econ > Psych > Business
Econ/psych debatable, but business definitely isnt
Please watch the Inside Job for an example of how money goes around the high strata of the economics profession.
Noah Smith has good rebuttal for standard blanket critiques and he uses this article as an example.
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.
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.
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.
Statistical models also are interesting but there are limitations, both at micro and macro levels
But I think people take its prediction power too seriously and ignore linked events that seem independent at first (like low graded loans failing affecting payment of other loans)
"Truly important and significant hypotheses will be found to have "assumptions" that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense) (p. 14)."
A lot of numerology is also pure math, addition for example.
And it has alchemists, too. Like the alchemists of old were searching for a formula to make gold (assuming they legitimately tried and were not just scamming their employers), their modern-day peers try to find a formula for producing unicorns.
To use an analogy, classical physics is great for building walls, but it does not help you build 5nm transistors.
I would be less skeptical if there were not apparently at least two schools of economists, producing diametrically opposed analyses and recommendations for any situation.
What you perceive is large part politics, not academic economics.
I'm not an economist, but it would surprise me if a whole society's motivations were not at least as complex as those of a government department.
Out of interest (no pun intended), what are they?
Edit: Having said that I see where you're coming from.
I think the closest we can get is to compare the predictions from their theories to reality X years later. It anyone has done that, I'd be very curious to see it.
Economics is the study of a particular value system within society, that value system being the monetary/capital one. Human psychology comes into play (both at the individual and group level) because human evaluation and action is involved.
Edit, I need to emphasize the use of the word little
Sounds like almost all of my ee, cs, and math classes. If your are implying that having students, whom are learning the basics of the "trade", learn how and why the models work the way they work is bad then biological sciences must be operating on a different paradigm that relies on just accepting what you're told.
> opposite of science and very much like theology
What?? Math and logic proofs are part of theology now? You can't mean that so can you please explain more.
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.
Or for the same reasons we start physics in a frictionless, idealized environment.
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]
Data collection in economics is often very much outside the scope of economics departments. Not only because it's beyond the budgets of individual departments to maintain the necessary personnel, but because it's hard to get people to disclose that sort of information. That task falls mostly on the lap of government and international organizations, who have the sort of legitimacy to pull that off. Besides that, there's experimental data, surveys sent out to private organizations and private (closed) databases. But the majority of the data used in econ deparments was produced elsewhere.
If what you wanted to hear someone talk about "measuring the flow of money", you'd probably be better off in some Federal Reserve bank.
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.
Economics is what Feynman calls a "pseudoscience" ( aka social sciences ).
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.
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.
It's the truth.
> Entire nations base economic policy based on much economic theory.
Sure. Just like in the past entire nations based their economy/society on religion.
> That is as predictive as you can get, betting with real stakes.
No. That's called "gambling". It isn't predictive. It isn't science.
> Choosing good or poor economic policy results in predictions either way.
You are mistaking what I mean by "predictive". I meaning in the sense of science where assertions are made and if it fails, the theories/laws are gotten rid of. It is empirically and predictive based where you can test it.
Imagine a religious society. A priest says, if everyone prays to god, then we will have a great harvest. Everyone prays but we get terrible harvest. What's the priest's response? People didn't pray hard enough.
Economics is the same. If an economic model fails, they blame politics/the people/weather/whatever. A socialist/communist economists will cling to their beliefs and say no "true" form of socialist economics system has been created yet. There isn't a "test" to definitively show on or the other. That's what I mean.
The U.S. government, in 2016, issued $1.4 trillion of debt  and took in almost $3 trillion in taxes . I'm not sure I see your point.
1) The economy is a system with some amount of money in it.
2) The money is measured (see; M2 ).
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?
Argentina, Brazil and various countries tried this. TL; DR Politicians like to print money to hand out favors . 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 , and in May than in April , 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.)
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.
(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 .)
Side note: these statistics were collected by economists.
 https://fred.stlouisfed.org/series/M2 13514.5 / 12844.8
 https://fred.stlouisfed.org/series/PAYEMS 146404 thousand / 141742 thousand
 https://fred.stlouisfed.org/series/CES0500000003 26.25 / 25.62
 https://fred.stlouisfed.org/series/LES1252881600Q 350 / 346
Yes and it has been pretty consistent in this since the beginning of our country. Nothing really new here.
Additionally GDP has been increasing exponentially along with it.
Population has also been doing the same.
I often see the phrase "exponential increase" as a scare tactic. In tons if situations it's expected and would be odd if it werent.
The $3 trillion figure is from the 2016 budget. I don't believe any capital was infused into banks à la TARP  last year. Also, QE refers to the Federal Reserve, instead of just buying Treasury bonds from banks, buying a broader portfolio of assets. This is done off the Fed's balance sheet and does not come out of tax proceeds.
And the $1.9 trillion isn't? At the micro level, economies are just transactions. People (e.g. natural persons, companies and governments) buy goods and services with money or credit. Credit creates debt.
"Money" would still exist if we zeroed out debt, e.g. gold-based economies of yore, but that destroys the double-entry ledger system  that serves as a a distributed error-correcting mechanism. It also decouples the currency from economic growth, which produces all kinds of nasty side effects.
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.)
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.
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.
But they do think they know the methodology that will get them the right answers eventually. It boils down to
1/ Write down a model, which is unknown up to a vector of parameters
2/ Use economic theory (e.g. assumptions about rationality) to restrict the parameter space
3/ Use data to estimate the model
4/ Draw conclusions from the estimates
In principle, that's OK. But the analysis can go very wrong at any one of those steps.
There are also many, many ways to understand complex phenomena that don't go via steps 1-4. Attempting to use that methodology in fields such as biology, psychology, or anthropology would often yield lousy results (though not always). It's not at all clear that it's the definitive method through which to understand the economy.
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.
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.
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.
Do you have a citation for that, please?
Like all central economic planning schemes, it overrides the individual's right to privacy and property in order to force the individual to conform to some simplistic plan.
Central economic planning contrasts with the market mechanism, where individuals decide for themselves what to do with their person and property .
* 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.
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.
That's why progressives (who are generally atheists or agnostics) seem to treat non-religious things like the environment as a religion.
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.
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.
On the contrary, econometrics is mostly about telling spurious relations from cause-and-effect, while making predictions is of relatively little interest. This is in contrast with other fields such as AI where making accurate predictions seems to be the main aim and understanding is secondary.
You could claim the same thing about Astrology. Doesn't change that it's fundamentally not a very useful disciplin to explain anything about the future what so ever and thus as a tool for deciding about the future more or less useless.
Yeah, it seems dodgy. But he moved to focus on his Patreon page as his older blog got spam flooded.
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.
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)
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.
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
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.
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.
This is called double-entry bookkeeping . 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.
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  per the Chicago Plan  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 . (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.)
But in Canada and the UK, the reserve requirement is zero.
$1.54 trillion is CASH.
$19.96 trillion is DEBT.
I don't think the author understands Christianity at all.
This modern religious thing that you see is weird to me. I spent most of my childhood going to an urban Franciscan catholic parish. Those guys took charity seriously and would have sold off the pews except that they didn't actually own the church building they were in.
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-...
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.
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.