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How economics became a religion (theguardian.com)
129 points by ingve 124 days ago | hide | past | web | 151 comments | favorite

A personal anecdote about Economics...

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

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

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

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

Your comment reinforces my cynical opinion of economics.

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.

> 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.

I don't know about your industry but the abiding memory i have from before the financial crisis of 2009 was of economists fanning the property bubble with the mantra ' the fundamental are sound' and how the worst scanario would be a "soft landing"

The main problem with economics is that it's hopelessly corrupted by political and financial interests, in a way that hard sciences only intermittently have to deal with, except with stuff like global warming.

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.

To support your point, the economist I can most clearly remember and who seemed to be on tv every other day, was chief economist with a bank that later needed rescuing.

> I don't know about your industry but the abiding memory i have from before the financial crisis of 2009 was of economists fanning the property bubble with the mantra ' the fundamental are sound' and how the worst scanario would be a "soft landing"

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...

I once sat in on a friend's final year economics course.

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.

You seem to at least have some personal experiences/familiarity behind your criticism, unlike almost everyone in this thread. So here's a chance to substantiate your claim. Here is a paper that was recently published in the Journal of Economic Theory https://dl.dropboxusercontent.com/u/17516137/RapidWeaverSite...

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.

Solovay showed that assuming the negation of the axiom of choice, there exists a model of real analysis where all sets are measurable. So really you only need measure theory if the paper depends on the axiom of choice in some fundamental way. But would you really trust an economics paper that depended on the axiom of choice?

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".

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

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

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

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


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.

Thanks for the tip in broadening my negative experience. It makes sense that big banks do employ some brilliant people to do some VERY complex things which would blow my mind :)

Another anecdote (engineer here): We were told in my econ class how difficult the math was and I always struggle with core math classes like calculus and differential equations, so I was worried. I spoke to the professor and he asked my major. When I replied with "engineering", he asked my GPA, to which I replied 3.6. He then laughed and said I'd be fine. In the next few classes I found out that your beginner Macro & Microeconomics courses basically need you to be able to add/subtract/multiply/divide and find the area of a triangle. So basically any 5th grader could do the problems although terms like marginal cost might sound scary. I know in more advanced courses things like probability & statistics come into play and that there are many professors who know what they're doing. Despite that, I feel like many graduates probably don't know the background, just the tooling to use for a particular class of problems. As much as I hate to admit it, the derivations typically done in Math/Physics/Engineering serve a real purpose (besides annoying students) in that they show you how things really work and came into being. Without knowing the why, you're basically plugging numbers into a black box and hoping you don't do something that causes it to break down. Despite all this, there are some real gems in Economics that are very useful. I'm re-learning econ at the moment and it is helpful to know how markets work.

>We were told in my econ class how difficult the math was and I always struggle with core math classes like calculus and differential equations, so I was worried. I spoke to the professor and he asked my major. When I replied with "engineering", he asked my GPA, to which I replied 3.6. He then laughed and said I'd be fine

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.

Oddly, economics is one of the fields where you're probably better prepared for graduate work in economics if you major in something other than economics. Math, physics, or engineering may be better prep.

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.

Yes in the U.S. If econometrics in Europe actually goes over partial differential equations, then it is an order of magnitude more complex than schools in the U.S. If they do cover that in the U.S. it would only be done at a glance as they don't take a real calculus or differential equations or other mid-advanced math classes. They do have business calculus, but that is a joke.

It's also present in other fields. Maybe in most fields. We're kinda looking at the gem of knowledge from our own perspective thinking we found the best one.

Sadly, no. Or, not anywhere near that level of BS.

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:


It seemed to cut off before he got to the "faking" part.

Did you watch / understand the video? The entire thing was about non-science departments faking the trappings of science.

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.

I think he must have been too subtle.....a longer version of that video autoplayed a bit later and made it a bit more clear. People from those departments are often so deluded that if you didn't know who this man was, you may very well have thought he was advocating that they are equal.

> 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.

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?

In my school, business, compsci and psychology had a GPA requirement.

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.

Wash out from business and psych TO econ is strange. My impression of the rigor of those disciplines:

Econ > Psych > Business

Econ/psych debatable, but business definitely isnt

You're considering the supply side, but not the demand side. If the business major required a certain GPA to stay in, the competition among students could kick someone out, especially if grades were calculated on a bell curve. Someone who can't hack it would consistently score lower than their peers in that scenario and not meet the GPA cutoff.

Not only are the theoretical foundations of some areas of economics dubious but the profession is (particularly at the high levels) very money-driven and, in some cases, very morally dubious. Some professors and academics are paid hefty sums to write papers that support and influence important policies.[0]

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

[0] https://www.propublica.org/article/these-professors-make-mor...


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

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

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

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

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

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

He uses a sample size of one from the 70's to claim theories "really work." Further, his examples of economic theories that work come almost all come from mathematicians/physicists that moved into the field.

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

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

Thanks for the great article.

Economics is worse than religion: it's astrology.

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

A lot of economics is just concepts built on pure math (interest rates, etc). There's nothing astrological about this

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)

See Milton Friedman's "The Methodology of Positive Economics" (https://en.wikipedia.org/wiki/Essays_in_Positive_Economics):

"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 economics is just concepts built on pure math

A lot of numerology is also pure math, addition for example.

If you can't see the difference between an interest rate and "finding your lucky number" this discussion can't be furthered

Interest rate is "pure math", and used within a framework, parts of it rather arbitrary. "finding your lucky number" is framework and adding up numbers in a name or stuff like that is "pure addition", so that framework uses pure math. That's my point, you're just not getting it.

> ... it's astrology.

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.

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

Approaching with math and large amounts of data are actually really great because you can start to account for variability and the flaws of traditional theoretical economics. Hard part now is determining who is twisting analysis for ideological/power reasons vs. staying true to the data/reality.

The problem is if you look at say home ownership as a balance between the costs of rent vs. loans that works at a very high level. But, second order effects such as decreased earnings from immobility vs pride in home ownership etc get really complicated if you want high fidelity models.

To use an analogy, classical physics is great for building walls, but it does not help you build 5nm transistors.

The bigger problem seems to be that most don't seem to realize they're a branch of psychology. How often have you heard economic talking heads talk about logical fallacies and biases, for example. It's not that what they're doing has no value, it's that they're mostly besides the point.

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

I hope that 'right', in this context, means that it leads to observationally verifiable predictions of significant real-world events, and not, say, 'makes the math tractable', or 'produces results that conform to the existing tenets of economic theory'.

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.

> 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.

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

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

I know nothing of modern economics, but couldn't you just model the rationality of individual as a random variable like everything else?

There was a serious attempt to push an equivalent of rational choice in political science a while ago. Public choice theory holds that bureaucrats and politicians are rational actors maximising their own power. It's no longer very prominent because it turns out to be a poor fit for actual motivations - which seem to be a complex mix of office politics, power seeking, public service motivation, and following the wishes of their superiors. The model was simply too reductive to be useful.

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.

"Economics has many successes"

Out of interest (no pun intended), what are they?

It's arguable, but the massive decline in global poverty over the last 30 years is arguably the largest. Details are complicated, but things like comparative advantage > free trade seem to have been working.

Not true. Too cynical. That the economy is amenable to quantification is unquestionably true. That it has so far completely resisted our advances is false.

Edit: Having said that I see where you're coming from.

If economics is the study of macro-psychology, then it would have the same problems as regular psychology: the inability to do truly controlled experiments, only with an even smaller set of entities to build your N out of.

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.

What's macro-psychology? Do you mean group-psychology?

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.

Group psychology vs egregore psychology. The difference is whether you are paying attention to individual desires in aggregate, or whether you are attributing desires to the collective entity that no single individual has.

I think Futurama got it right with their "voodoo economists"

Which was originally a quip Bush Sr used to describe Reaganomics.

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

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

> It was always prove this or solve that

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.

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

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

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

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

> It's possible that we focus on theory because it spreads economic orthodoxy faster than empirical work

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

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

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

Why would they talk about data?

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.

Data is the result of observations. What is science without observation?

There are observations. Just go to http://data.worldbank.org if you want some. My point was that people in deparments aren't the ones making them.

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

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

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

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


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.

It has no predictive aspects.

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

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

> While economics has issues, this is an unfair assessment.

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.

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

The last phrase is the key. The economists in the Austrian school explain: Money is simply a proxy for goods and services. It solves the "coincidence of wants" problem. When the Fed and other similar agencies print money unbacked by goods and services, they immediately devalue the currency because now each unit (dollar) represents a smaller amount of goods and services. But when this "infusion" hits the big banks, the effect has not been felt by the full market so the rich and powerful benefit before the devaluation has been felt by the market. And the general public pays for the fraud.

I've long thought economics is the art of controlling an unstable feedback mechanism into spiraling out of control slow enough that generational amnesia prevents greater society from noticing.

Sounds like you would find Steve Keen's work interesting then.


Not a bad take.

> whenever money is created, by private interests, [it] is given to governments and society as debt

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

[1] https://www.treasurydirect.gov/govt/reports/pd/feddebt/fedde...

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

Agree... most of the concern over money printing are overblown. The M2 money supply growth is in-line with historical trends. The hyperinflation many in 2008-2010 predicted failed to happen. Look at it this way: someone who shorted the treasury bond market in 2000 anticipating debt-related inflation would have lost substantial money despite the national debt rising considerably since then. That's not an invitation for wasteful spending, but it means that concerns over the debt are almost always overblown.

Public debt, yes. Private debt on the other hand...

The argument boils down to this:

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

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

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

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

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

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

> why not change the rules so that the newly created money is given no-strings-attached to the government?

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

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

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

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

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

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

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

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

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

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

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

Side note: these statistics were collected by economists.

[1] https://fred.stlouisfed.org/series/M2 13514.5 / 12844.8

[2] https://fred.stlouisfed.org/series/PAYEMS 146404 thousand / 141742 thousand

[3] https://fred.stlouisfed.org/series/CES0500000003 26.25 / 25.62

[4] https://fred.stlouisfed.org/series/LES1252881600Q 350 / 346

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

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.

But that $3 trillion is all spent. Is it not?

It want to capital infusions for major banks and QE-related asset swaps. It's not like money was printed and given to people.

> It want to capital infusions for major banks and QE-related asset swaps

The $3 trillion figure is from the 2016 budget. I don't believe any capital was infused into banks à la TARP [1] 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.

[1] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

> But that $3 trillion is all spent. Is it not?

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 [1] 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.

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

South Park did an episode about this https://m.youtube.com/watch?v=7OevEml84BI

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


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

[1] http://www.nytimes.com/2013/05/10/nyregion/new-bill-seeks-to...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Few Western economists think they know all the answers...

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.

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

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

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

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

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

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

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

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


> The Guardian is a notorious proponent of central economic planning

Do you have a citation for that, please?

Well I am not a proponent for that and I agree with them. Furthermore Basic income is NOT a central economic idea it's an idea that goes across political ideologies and rightfully so.

Basic income is a form of central economic planning. A central authority deems that X% of every individual's income will be forcibly redistributed through a program that disperses it equally amongst the population.

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 [1].

[1] https://en.wikipedia.org/wiki/Economic_planning

central planning is about supply and demand. basic income is just another way to deal with social welfare. Its not anymore central than conditional income. And even further than that calling it central planning doesent change its value one being the removal of the giant bureaucracy around it.

As a regular Guardian reader I don't recognise any of that stuff.

For more in a similar vein, see

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

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

If anything has become a religion it is politics.

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

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

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

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

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

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

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

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

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

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

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

Oh of course completely agree. The problem though is that it then comes down to the individual rather than the field as a whole.

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

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

[0] http://siteresources.worldbank.org/DEC/Resources/JDSAntmanMc...

[1] http://sedici.unlp.edu.ar/bitstream/handle/10915/3512/Docume...

> 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.

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.

Understanding the future by understanding the past is the classic mistake of economics. It is this unfounded premise that has led them far far away from anything useful.

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.

Excuse me, but this is a lot of nonsense. All empirical sciences infer the future from past observations.

and most of them fail including ecomics exactly because human systems arent adheering to the same simple rules as ex natural sciences.

Gonna leave this here:


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

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

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

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

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

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

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

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

For the interested I recommend as an introduction:

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

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

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

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

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

Hmm, it's a minefield for me to speculate about your reasons :)

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

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

Hell, I would've probably voted the same.

Btw I also feel that I softened my stance due to

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

- kids and other things to care for and worry about

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Beautifully written, sir

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

Just 3% is cash in the economy; Everything else is debt, debt and damn statistics; http://www.positivemoney.org/our-proposals/debt-based-money-...

> for every pound in your bank account someone else must have a pound of debt

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

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

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

> Doesn’t seem really like a liability in the normal sense

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

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

[1] https://blogs.cfainstitute.org/investor/2016/01/27/is-this-t...

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

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

That article was really excellent, thanks for that.

Fractional reserve banking doesn't really exist anymore. There are reserve requirements in many countries, but they exist in order to prevent the banks from holding too many liquid assets, rather than putting a ceiling on the amount of loans it can make.

But in Canada and the UK, the reserve requirement is zero.

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

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

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

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

Depending on where you live, stuff like prosperity gospel is both mainstream and dominant, especially if you aren't associated with a less extroverted church that doesn't use modern marketing.

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.

Yea, sounds like a baseless jab.

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

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

2008 crash was no different. Five years earlier, on 4 January 2003, the Nobel laureate Robert Lucas had delivered a triumphal presidential address to the American Economics Association. Reminding his colleagues that macroeconomics had been born in the depression precisely to try to prevent another such disaster ever recurring, he declared that he and his colleagues had reached their own end of history: “Macroeconomics in this original sense has succeeded,” he instructed the conclave. “Its central problem of depression prevention has been solved.”

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

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

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.

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

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

This thread has become laughing stock for economists


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