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How economists rode maths to become our era’s astrologers (aeon.co)
203 points by kawera on July 22, 2017 | hide | past | web | favorite | 168 comments



Or as FA Hayek described it.. the "Pretense of Knowledge" -

> Hayek’s greatest contribution to economics was to show that society is far more complex than we realize, with little pieces of knowledge dispersed among millions of individuals. “The curious task of economics,” he famously wrote in “The Fatal Conceit,” which he published in 1988, “is to demonstrate to men how little they really know about what they imagine they can design.”

> Recent government interventions suggest that politicians and bureaucrats today think they can design just about anything. This ignorance has backfired, as it always does, bringing with it what economists call “unintended consequences.”

Ref: https://www.washingtonpost.com/news/volokh-conspiracy/wp/201...


Or as feynmann described... pseudoscience.

https://youtu.be/tWr39Q9vBgo


I can't even bear to compare my own four decades of head scratching about economics with Feynmann's insights,

but I can offer you a realisation that I have attained through the kind of haphazard real world that experience the sort of life that I remember reading about in Surely You're Joking Mr Feynmann?

Only to understand why the insight was late in arriving, you see I read Surely.. Joking about when I was ten, and growing up in the bosom of a well to do upper middle class family, with my father retired and mother devoted homemaker and a professor my half brother by our father's first marriage and uncle was a DoD director and scientist who also had no children and was devoted to my early years...

And so I grew up in a world in which I was sure that I could attribute to everyone I met, the possession of a underlying and rational logic, even when I was unsure of how they themselves understood what motivated their decisions.

I'm surveying a decade of watching my life and world in the most complete definition possible, being systematically destroyed. Possibly result of accidentally discovering a corruption of immense and blatant scale.

I learned from this experience, of prison and acquittal ("we should never have been in this court.." began the judge after a five year onslaught of abuse, clearly wrecked my mental health, and irreparably my physical health, I see from my now recovering vantage)...

.... there's nothing that motivates people in any reliable way I see purely random behaviour to be the norm...

And economists are won't to portray the world with the idea of rationality of interests.

Erm.... NOPE!

Try another model....

Oops that's the primary assumption... Okay, back to my aimless broken life, unable to communicate with anyone in normal life because I find no motivation for anything, no systems no values... All outsourced to the Nanny State and red masthead newspapers..

Edit: not in any reply to anyone I've not checked out yet for a update, but I was purposely ignoring the STFUARTFA of econometrics and the various things I have done with along my career, particularly auction and micro markets theory and logic, which I just noted to my loyal but only in title one remaining limited partner is among the memories that I have been thoroughly unable to recall of in any part of my work, which spanned more than half of my years on this planet. I certainly know that economics is far beyond the kind that The Economist newspaper is given to making accessible to proverbial common man hypothetical problems and quandary. I never thought that economics was ever limited and possibly that same belief in the limitless application of Economic Theory (intoned with great reference by all who utter the wisdom denounced from whom they are unable to question, not because they lack the ability, but because they are presented with unintelligible morass of signal free human volume)... May be that that limitless applicability which is the candle that will burn both ends forever in some kinds professionally employed as economists, is precisely what should have been the very warning sign, alerting us to a problem. I mean, has any other profession, reached across the desk, and leaning over the work of a unrelated practitioner, suggested that their input was capable of unbounded insights and discovery? Yet, like the populous hope for Panacea or else a Soma, we all have our moments of susceptibility...)


"To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in."

Piketty T. "Capital in the 21st century", p. 36.


Economics as a discipline is ultimately a form of humanistic understanding. The ideal of scientific rigor is certainly laudable, but it is nonetheless an ideal for the discipline in general. One of the two forms of understanding, humanistic and scientific, is not better than the other. But they require different questions and, as a result, often lead to different answers through different methods, one of which is interpretation, or, understanding the use and uses of something within a constellation of rules and history. Economics, in general, works, but we must be sure of the particular ways it works.

The discipline raises the questions of philosophy of mathematics and logic (and thus we should say language). How do mathematical models relate to the world? Is it the Tractatus, or Philosophical Investigations?

I wonder if economics students are ever assigned readings of Ludwig Wittgenstein. The latter part of Ray Monk's biography on him touches on many hilarious debates between him and his students, including Alan Turing, around these questions.


When you're attempting social engineering, one form is better than the other.

If your predictions consistently fail, you're not doing good science.

If you want to claim you're not doing science at all but standup comedy or literature, that's fine.

But that's not how economics is presented to the public. It's always "We must do [unpopular thing] to get [defined outcome] because [economics is truth]."

If there's no empirical basis for any of that, the entire narrative is plain political fraud.


>If your predictions consistently fail, you're not doing good science.

I agree with where you're going, but I think the better phrasing would be "If your predictions consistently fail, your scientific theory isn't very good"

Good science usually involves a lot of failure before it provides good theory.

This doesn't excuse incredible overselling of economic models by economists though.


> The ideal of scientific rigor is certainly laudable

There is no scientific rigor so there is nothing to laud. Economics is on the same level as astrology in that "math" is used to gain the appearance and legitimacy of "science".

> The discipline raises the questions of philosophy of mathematics and logic (and thus we should say language). How do mathematical models relate to the world? Is it the Tractatus, or Philosophical Investigations?

The problem has nothing to do with mathematical models. It has to do with testability and reproducibility.


> Economics is on the same level as astrology in that "math" is used to gain the appearance and legitimacy of "science".

I wasn't aware that astrology uses even the pretense of math, however I'm admittedly not well-versed in astrology.


There was a time when astronomy was only a component of astrology, and astrophysics/cosmology is what happened when science-minded astrologers figured out the whole thing couldn't work because their attempts to make ever more accurate "predictions" (soothsaying) based on ever more accurate predictions (of the positions of celestial bodies) told them the universe was arranged just a little bit differently than they'd supposed. What is now purely pseudoscience was once a proto-science; the woo was still woo, but there was actual science there as well.


for a completely diferent view on economics I recomend the book "Basic Economics"[1] written by Thomas Sowell [2] 704 pages without a single mathematical formula or graph.

[1] https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... [2] https://en.m.wikipedia.org/wiki/Thomas_Sowell


Not sure if that quotation inspires much confidence. Economics has math behind it. Subjects like Sociology have none of the rigor of math and are thus a large waste of time.


This is exactly the fallacy he is addressing. Math = rigor, so clearly the discipline which uses the most math is the most rigorous, right? But actually math is only useful when it is based on a useful model of reality. If the underlying assumptions are unfounded or faulty, then math does not help you at all.


The takeaway is that the math used in econ obscures the truth while lending a fake gravitas to pure opinion.

At least sociology is honest that they're going pure opinion.


Do you imply that philosophy and sociology as disciplines are not rigorous? This shows a very weak knowledge of those disciplines, and of maths-focused economics if you still believe that maths = rigor.


Not philosophy, but sociology yes.


The math is a red herring. It's the buried assumptions that underpin the math which is where the real bullshit usually lies.


Exactly. The answer is not less mathematics, but more empirical work.


This article confuses how top-level economists (who are de facto politicians) that attribute sometimes questionable decision making to models (most of the times due to political pressure) with a honest and very complex (at the edge of academic research) profession. It points out the it got so "mathy" that it kind of decoupled from non-technocrats but that can easily be said about literally any field today. What amazes me most is that the author complains about how that happens in the US, the most transparent and actually research-based application of economics in the world. I would invite you to go to some other less developed countries to see how "wonky" economics couples with intelectual dishonesty tries (and many time succeeds) to fool the many in favor of the few. And again, using wonky arguments to fool people is a practice that happens in any field, dismissing an entire profession who actually brought many advances to modern societies is ridiculous. The advance in statistics and econometrics is what made machine learning possible... I have to say, it has been a while since I've read such nonsense trying to pass as a good analysis/critique.



Cherry picking a controversy doesn't do much to generalize an entire field (if you want I can find some Freud controversies and say that psychology is hocus pocus). By the way, I'm not american. Funny enough, that one you picked is exactly the opposite from here. The authors were harshly criticized for NOT applying "mathy" rigor. The conclusion from "This time is different" is exactly what common sense would tell you, don't get too much debt or else you might grow less in the future and they got crushed because they did not entered in the extreme math/econometrics analysis. What the article criticizes is exactly what "This time is different" did, it applied less data rigor to point out almost a common sense and yet it backfired, so what is it? Should economists apply more or less "math"? I guess either way, this misses completely the point about economics and dismissing the entire field because of it is ridiculous.


I am not American either. I pointed this out because you seemed to imply that USA was the best example of how to properly use a mathematical approach.

Also, I think it is appropriate: what we had here was someone "demonstrating" why a specific policy works: "it works because our math model proves it works". So instead of going for an empirical proof everybody was expected to be ok wih this because, look, we have math. Also, if it is not working for you it's because you are not doing it right.

In a proper scientific discipline you design experiments to verify if your formulas are correct: if you send a rocket to Venus and it crashes back on Earth you can't just say "you didn't it right, I have an Excel sheet that says it should have reached the target"...


> the US, the most transparent and actually research-based application of economics in the world

An assertion based on what (apart from American exceptionalism)?


Sorry didn't mean it like that. I meant one of the most. Again, I'm not american.


> the US, the most transparent and actually research-based application of economics in the world

Exactly. And if even with all the "research" all the predictions are wrong all the times and all the political measures based on economics studies give yield bad results all the times that makes the argument correct, right?


I think you are confusing what economics is then. Economics is not only about predicting, actually there are various fields in economics focused in different kind of predictions techniques - including such ones that (coupled with the field of statistics/mathematics) resulted in big data analysis and machine learning. In one of many definitions that you can find in Wikipedia definition of its "Economics" page:

"Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man.[21]" Lionel Robbins (1932) developed implications of what has been termed "[p]erhaps the most commonly accepted current definition of the subject":[22]

Economics is about understanding how your everyday actions impacts the whole, it is a study that allowed whole societies to organize and plan at the beginning and now it dares, through data, to predict events. And believe me, if companies and people couldn't have a minimal idea of the inflation rate by the end of next year, investments wouldn't occur as much (because the interest rate would be higher) and everyone would be worse off. Obviously, trying to predict the future is almost nonsensical, and yet those methods apply to every field nowadays. Marketing without data is nothing, does a marketing analysis always result in a successful prediction? No, and yet if you don't actually engage in trying you don't have a clue of what works and is ultimately worse off. Again, there are predictions for every possible outcome. There are researchers that say is no environment crisis and use data to back that up. The policy that ends up being made is about the study, but about the elected by the people that chooses that prediction it think it suits the society that he represents better, doesn't mean that aren't very serious people doing work that benefits us all doing those predictions.


"economics is the study of the use of scarce resources which have alternative uses." Thomas Sowell

https://en.m.wikipedia.org/wiki/Thomas_Sowell


typos in last phrase: The policy that ends up being made is NOT* about the study, but about the one who was elected by the people thinks suits the society that he represents better, doesn't mean that aren't very serious people doing work that benefits us all doing those predictions...


Economics may not be about predicting, but if economic theories can't predict well (in the statistical sense, meaning the generated data should fit your predicted probability distribution), then the economic theory doesn't reflect reality. And thus has questionable use in policy decisions.


I studied economics and philosophy in college. Did a bit of economics research for a senior thesis.

I was encouraged to study economics as a more "practical counterbalance" to philosophy. The funny thing is, I've found philosophy, in how it helped me improve the rigor of my thought, to be much more useful and practical than anything I learned in economics.

Economics needs to rely more on computation and data than on abstract mathematical models if it ever hopes to have real predictive power.


Yeah, it's weird. Early economists clearly didn't have the data or computing capability available to do analysis on the real world. So instead the took some inspiration from it and then built these simplified models, that were at least possible to study and make conclusions about. However, because real-world economic outcomes are so important, politically and socially, people ended up taking their conclusions and trying to apply them back to the real world.

It's as if, after early AI researchers who took some inspiration from biology to create neural networks, the medical establishment then took their results and decided to use them as a guide to performing brain surgery.


"It's as if, after early AI researchers who took some inspiration from biology to create neural networks, the medical establishment then took their results and decided to use them as a guide to performing brain surgery. "

I like that analogy.


If you read Hayek, Mises ("Human Action", very hard to follow) or later Rothbart ("Man, Economy, State"; easier to read), they all derived the same conclusions entirely based on philosophy rather than the "neoclassical economists" who use mathematical models. And all this was researched and known before math creeped so deeply into economics.


Very true, however you make it sound like economists actually do caveat their hilariously simple economic models with "this is a wild guess of how the real world works". Whenever I've read it it has been presented as "this is how a market works" or whatever.


There is a whole branch of econometrics that has endless methods of doing macroeconomic quantitative analysis using data. It just doesn't work on the macro level, the data is too aggregated, the system is too entangled with dependencies between collected data and incomparable between countries, results have only historic and not predictive value and even then they are usually more voodoo than anything else.

So I disagree: Macro economics needs less computation, data and abstract mathematical models.

The Hayek quote that CaseySoftware wrote into another toplevel comment sums it up perfectly: Only pretense of knowledge coming from this.


It can't rely on data. The data is collected in a context of a policy arrangement and is therefore tainted by that policy.

Economists think they can look beyond that and divine the deep truths. But they can't. They are looking for the philosophers stone.

If you collect data about a man in a straitjacket you can only predict the movements of a man in a straitjacket. You can say nothing about what would happen if you took the straitjacket off.

The purpose of economics is to embed the beliefs of those funding economists. Particularly the idea that there is no alternative - because data.


Policy is also data. I don't know why you don't acknowledge that. In fact most data sets are tethered to their context. So I don't actually get your point, other than that trying to analyze data sets contextlessly won't work.


His point is that policy data, unlike most sources of data in the sciences/computer-science world, is contaminated by behavioral adjustments. This is a point that was first brought up by the famous (and frequently misunderstood) Lucas critique. https://en.wikipedia.org/wiki/Lucas_critique

And the central tenet of the critique has been reaffirmed by decades of meticulous "natural experimental" studies and small-scaled field experiments which show that real-world economic causal effects do not often correspond to observational data on policy changes.

Believe it or not, both of you, there are plenty of competent economists working on that exact methodological problem and resolving other statistical issues that are rarely encountered in non-behavioral sciences. James Heckman's works on this topic have been so widely influential, and lauded, that his papers are now frequently taught as canonical texts in graduate-level statistics courses. And this is a guy that started out only wanting to estimate returns to early-childhood education and basically carved out the best way to do it over 10 years.

Here's a long review paper by Heckman on the literature on microeconomic policy evaluation: http://www.nber.org/papers/w11259.pdf

The language is clear, the use of statistical theory and technical concepts is brief but rigorous (the proofs are on p.54 onward), and literally all 80 pages are devoted to reviewing other recent papers on the best statistical methods to analyze policy data towards making accurate causal inferences.

Realize the sheer size of that body of work? Maybe, just maybe, there are good academics in every discipline who aren't hopeless idiots that fit into your grandiose stereotypes. And maybe a random one-liner "omg they should look at policy data" isn't exactly a well-informed criticism in the context of the sheer amount of contemporary empirical work that you've never heard of in a discipline that you aren't familiar with.


> Economics needs to rely more on computation and data than on abstract mathematical models if it ever hopes to have real predictive power.

In industry it does. Every major bank and hedge fund employs economists, and generally they have a pretty good grasp of what's going on. Of course those models are kept secret, much like trading algorithms.

That's why stuff like Econometrics is taught, and why (at least in the program I took) a decent amount of stats courses are required.

There's many branches of Economics which look at different things; you have macro which is mostly theoretical and constructs broad models which attempt to model behaviour in a somewhat abstract way, micro which attempts to model individual behaviour, game theory which is practical but not necessarily for predictive power on a broad level, and Econometrics which is very practical, but doesn't necessarily provide much insight beyond medium-term predictions.


> In industry it does. Every major bank and hedge fund employs economists, and generally they have a pretty good grasp of what's going on. Of course those models are kept secret, much like trading algorithms.

How useful are those models, however? Without knowing much of the field, I do see the managed funds not outperforming index funds over the long term. Would the current run to the large unmanaged funds not demonstrate how limited their trade secret models are?

In the case of automatic trading models, occasionally running wildly off the rails, there is probably still value, in that it does something we otherwise could not. A hedge fund manager that fails to outperform the index over the long term is not providing any value, except perhaps in providing a social function.


And even then I think that it's important to realize that you can only get that far in terms of predictability. First off, it's a complex system; your sampled data set is incomplete by definition. Secondly, your theory is part of the system that it's measuring, at least if it ever becomes popular enough to influence policy.

I think economics has some valuable insights into human nature -- not necessarily applicable to every human but applicable to enough of us to be of use -- but they should stop cargo culting mathematics. Or more accurately, everyone else should call their bluff.



Yes, economics has not been very successful at making predictions with pinpoint accuracy, and yes, people might place too much faith in economic theory.

But the stark reality is that the existence of economics as an academic discipline is inevitable. Policymakers worldwide make decisions that impact billions of people and involve trillions of dollars, and it simply either isn't palatable to the public ear to proclaim they're going by intuition alone, or involve proposals so complex that our intuition just can't evaluate them - they need an academic foundation to stand on.

And that's where economists come in - they might quibble over more esoteric topics, or waver in giving specific recommendations, but there are areas where they can say what definitely won't work in the long run - for e.g. when foreign aid might work instead of foreign trade, currency manipulation, regulation of monopolies, use of state subsidies, impacts of tariffs etc. The academic consensus in areas like these are a lot stronger than the media make it seem.


You seem to be saying that the existence of economics as an academic discipline implies that economics theory must be based on (pseudo-)mathematical models.

I don't know in the US but in France we have two families of economists in academia: orthodox and heterodox.

The orthodox family is the one of the economists who thinks that their field is a hard science with laws comparable to that of physics. It is the mainstream family. It may be further simplification of the reality but I think almost all of them of them could be considered rightists politically. Sadly, they are currently taking over the entire field by making it very hard to get an academic position in economics if you are not on their team.

Heterodox economists are the ones who believe their field is more like a social science. They have a variety of point of views depending on their approach (sociological, anthropological, historical, philosophical, etc.). They are often categorized as more leftists relatively to orthodox (again, I may be oversimplifying here). Many of them are "refugees" in other academic field such as sociology (e.g., Frédéric Lordon or Bernard Friot).

Anyway, my point is that economics could very well be an academic discipline without being a religion.

EDIT: the Austrian School of Economics that fiatjaf mentions in another comment is an example of what is called heterodox economics.


The libertarian counter argument to this is that public servants/bureaucrats shouldn't be in the business of investing trillions of dollars. The market gets to decide which investments get made and the investor takes the fall for bad decision instead of sucking on taxpayer's teats for a bailout.


Seeing "Free market solves all" believers (which libertarians are a subset) on hacker news still to me is amazing. It seems like it requires such double think.

The free-market concentrates wealth/power to those that have wealth/power. It always has, and always will. There is no "fair competition". If anywhere hacker news is blatant about sharing this truth.

Every business plan lools for its "moat". It's way to ensure it doesn't have to compete. Half the startup exit strategies aren't to make a long term business, but to get bought out by a huge company and let them own the product. Ie concentrate more power in one of the aleeady most powerful companies.

Amazon, Google, Facebook... on a daily basis we sit and watch these companies expand at will taking over markets and now industries and forcing out and effectively preventing any legit competition.

Fundamentally how can people believe that the "free-market" is actually a balancing fair effect while watching this data day in and day out.

The positive impact free-market is an idealism that doesn't exist. It's the exact same thing with communism, but a different group who is mixing up their ideologically perfect idea with reality.

Yes communism probably would be great if the world worked that way, but it doesn't. And yes libertarianism would be great if the world worked that way, but it doesn't. Communist refuse to believe their ideology is flawed regardless of how much evidence there is to the contrary, libertarians do the exact same but with a different religion.


You just made a list of assertions based on the popularity of a certain viewpoint on HN, which does have a left leaning bias.

It all depends on what you want to optimize for. If you optimize for equality, go with communism, and everyone will be equally poor. If you want wealth, go with a free market, and billions of people will be elevated out of poverty.

Freer markets lead to more economic growth and therefore more with for everyone, not just the rich. Free markets aren't about fair, they're about progress.

Yes, every business wants a moat. The main source of this moat? Government interventions with regulations, bailouts, prohibitions, etc


"Yes, every business wants a moat. The main source of this moat? Government interventions with regulations, bailouts, prohibitions, etc "

Libertarians never can describe what a free market really is. Is anti-theft law a government regulation? Seems to me that pure anarchy is the only real free market.


>Libertarians never can describe what a free market really is.

With a small amount of effort using google, you can find plenty of web pages describing basic libertarian philosophy - it really isn’t some kind of mystery.

>...Is anti-theft law a government regulation? Seems to me that pure anarchy is the only real free market.

(Since you asked, I would guess that most libertarians would say that the basic goal of a free market is to allow for voluntary exchanges between two parties which leave both better off. In order for this to happen, there has to be rule of law, property rights, enforcement of contracts, etc. And if you are wondering, libertarians likely also think that drugs and electrical devices, etc should be safe - they may just have different ideas on how to achieve that safety. Just because someone is opposed to prohibition on various drugs or opposed to laws against prostitution etc etc doesn’t mean they are proposing an anarchistic war of all against all.)


And when you're googling, please be sure to read this:

http://world.std.com/~mhuben/faq.html

It's one of the best quick critiques of libertarianism I've seen.

None of these ideas are new, they've been hashed out for years, and libertarianism has never really caught on because most people have an intuitive sense that mere property rights and enforcement of contracts are vastly insufficient to make a society anyone wants to live in--a sense that is reinforced whenever they think more deeply about what the arrangement of that world would mean for their lives.

(For example, take away tools for society-building such as public goods, e.g. roads, buses, libraries, health care, and replace it all with private equivalents, because now your main tool for running society is transactions. You're asking people to imagine a world in which they have to pay for everything, constantly, item by item. Like Joe Chip and his nickel-a-use door in that Phil Dick novel. People get what that would mean for their lives and they don't want that. Libertarianism gets more use as a joke in satire than in real world policy.)


Yes I can look up libertarian philosophy. No problem. What I can't look up is how this would work in the real world. Want safe drugs and devices? Who determines that? Somebody has done harm to another person. Who determines that?

Look at tobacco. Without government research we would probably still be at the same stage as climate research where the tobacco companies would claim the science is still unsettled. How can you get a court settlement against billion dollar company who can pay an unlimited number of lawyers and scientists?

I just think a lot of libertarians are intellectually lazy, blame everything on government and offer no practical solutions. There is a lot to improve in this world but dreaming of the ever elusive free market and evil government will do nothing.


> What I can't look up is how this would work in the real world. Want safe drugs and devices? Who determines that? Somebody has done harm to another person. Who determines that?

What I typically get as a response is that that person or company will go out of business, as people will stop buying said unsafe products. In my opinion this belief comes from wrongly applying parochial common sense to such a large and complex system that is the modern economy.

Victorian England learned this lesson the hard way through its string of adulteration scandals (e.g plaster in bread). You could perhaps make a parallel with the adulteration scandals in China.


>...Want safe drugs and devices? Who determines that?

I am sure many consumers see the UL certification on electrical devices and think that the product design must have been certified a large government agency. Some public goods must be provided by government, but those who think everything requires a government agency seem to forget the regulatory capture, rent seeking, political cronyism etc that can plaque government programs.

>...Somebody has done harm to another person. Who determines that?

Did anyone ever say that courts should be removed?

>...I just think a lot of libertarians are intellectually lazy, blame everything on government and offer no practical solutions.

Oh please. One might say it is intellectually lazy to create straw men arguments and then declare victory. If you need an example of trying to offer practical solutions, go to reason.org and you can probably find hundreds of pages of commentary, practical solutions, reviews, etc. The top story on teh site looks like it is on the details of the current state of the air traffic reform legislation being proposed in congress. You can read the digital version of their magazine for free and in fact every issue they have ever published for close to 40 years. Feel free to disagree with what they (or anybody else) writes - but don't make up a story that they (and others) just "blame government and offer no practical solutions".

>...There is a lot to improve in this world but dreaming of the ever elusive free market and evil government will do nothing.

Many libertarians I know would consider themselves to essentially be classic liberals. I suspect they all would find your characterization above to be inaccurate and offensive. For example, here is a quote from a professor at NYU:

"...I consider myself both a libertarian and a classical liberal. … So there are important differences among liberals and libertarians but I view these are differences along a spectrum. Some are principled (“Never, ever, initiate the use of force”) and some are empirical (“Many public goods can be provided privately”) and some are hard to classify (“The NSA should not collect masses of meta data”). Some people will want to take these differences and harden them into different political philosophies with different names and so forth. But I suggest that libertarians and classical liberals have too much in common for any divorce."

https://thinkmarkets.wordpress.com/2014/02/05/libertarianism...


The problem with that line of economic thinking is that it all hangs on the efficient market hypothesis, which has proved to be nowhere near as robust as most libertarians claim.

You are also assuming that taxes actually pay for things, which isn't really how modern monetary systems work (Governments who have their own central banks actually spend money into existence and taxes destroy money). So Governments do have an important issue to play being the monopoly issuer of money.


>The problem with that line of economic thinking is that it all hangs on the efficient market hypothesis, which has proved to be nowhere near as robust as most libertarians claim.

It does not hinge on the efficient market hypothesis: at its most basic it's just built on the idea that in the general case people are more careful with their own money than they are with other peoples', which is an observation I don't think many people would disagree with. It can be also built on the assertion that people are more able to invest in things how they want if they can spend that money directly than if they have to do it through the incredibly indirect method of voting for a political party and then somehow transferring money to the government to invest, which doesn't seem particularly controversial.

>You are also assuming that taxes actually pay for things, which isn't really how modern monetary systems work (Governments who have their own central banks actually spend money into existence and taxes destroy money). So Governments do have an important issue to play being the monopoly issuer of money.

From an economic perspective there's not a huge difference between taxes and creating money in this sense: both involve a transfer of wealth from citizens to government. Wealth (or more abstractly, utility) is the fundamental unit of economics, not money.


Considering the investment and banking industries are built on the claim that finance is more more careful with other people's money than its own, I'm not sure what you're basing that on.

Of course you're correct in that it demonstrably isn't. But does that make your point about the politics of finance right, or wrong?


In most Western countries, the amount controlled by public servants/bureaucrats is decided by governments and parliaments elected about every four years. If libertarians believe that amount is too high, they need to do a better job convincing voters to elect parties that decrease public spending.


"it simply either isn't palatable to the public ear to proclaim they're going by intuition alone, or involve proposals so complex that our intuition just can't evaluate them - they need an academic foundation to stand on."

Complex proposals that the public can't evaluate are more typically a way of pulling the wool over the public's eyes.

If the public were against "economic intuition" on principle then Trump would likely have lost Michigan on the basis of his opposition to the TPP, which most economists supported.


For 40+ years, the economics profession at large has advocated policies which have massively favored the wealthy over everyone else (globalisation/neoliberalism). The same economists were showered with huge pay packets, consulting fees and prizes (just look at how many Nobel prizes the Chicago school hoovered up). The profession as simply another means by which the wealthy exercise control over the rest of us.

So it's all a bit late for this hand-wringing now. They used you, you got paid, enjoy your privileges and try not to think what you've done.


The last 40+ years of globalization have raised more people out of poverty than at any other time in history, and spread progress and prosperity around the world. Check your envy and hatred, friend.


The problem is the impossibility of posing counterfactuals about historical questions. If we could compare the last 40+ years with Chicago School economists spreading their theories vs. some other school of economic theory or none at all, then your statement would be sensical. As it stands, you're just throwing out a superficially relevant correlation with no possible way of disproving it.


Fortunately during the past 40 years different countries engaged in different degrees of liberalization, so it is in fact possible to compare them to some degree. Some of these countries even had very similar cultures and economic starting points.

For example, Hong Kong and Singapore were extremely economically liberal. They still are, to some extent (some of the lowest tax rates in the world; Singapore even has no capital gains tax, and its top tax rate is 20%). According to Google, Singapore has a per capita GDP of $52,960.71 (the US is $57,466.79), a rich country by international standards. Hong Kong has a GDP per capita of $43,681.14.

Taiwan and Korea were/are less economically liberal than Hong Kong and Singapore, but still have relatively low tax rates by international standards. Korea has a GDP per capita of $27,538.81, and Taiwan of $31,900.00.

China was slow to open up economically, waiting until the 1970s, and even since then its policies are less liberal than the aforementioned countries (see e.g. https://en.wikipedia.org/wiki/Ease_of_doing_business_index). China now has a GDP per capita of $8,123.18.

North Korea is even less liberal than China, almost completely rejecting international trade. It has a GDP per capita of $583.00.

While this is not a large sample size, it's better than nothing, and does seem to indicate a correlation between economic liberalisation and economic growth.


Or that being agreeable with already established economies, ie the west, allows you to get in on the pyramid scheme early?

The longer term impact for global development is explored by Dani Rodrik

"""This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers"""

https://www.sss.ias.edu/files/papers/econpaper107.pdf

Does it bother you at all that you took a simple set of numbers, largely devoid of context, and then waved your hands with some math and made a huge conclusion? No relevance to the subject of the original post we are discussing here?

I think its a direct example of Premature Mathiness but I suspect you'll disagree :)


If you don't like numbers, why not come to Asia sometime and see what people here have achieved, see the standard of living they enjoy, and compare it to pictures of the same places 60 years ago? Or go to the poorest regions in China, which are still richer than most of Asia was 60 years ago, and see the difference. Calling it a "pyramid scheme" is frankly absurd, given the tangible increases in quality of life that have been achieved.

>"""This means countries are running out of industrialization opportunities sooner and at much lower levels of income compared to the experience of early industrializers"""

>https://www.sss.ias.edu/files/papers/econpaper107.pdf

>Does it bother you at all that you took a simple set of numbers, largely devoid of context, and then waved your hands with some math and made a huge conclusion? No relevance to the subject of the original post we are discussing here?

How was what I posted not relevant? The person I was replaying to asserted that there was no basis to make comparisons between the effects of different degrees of liberalism, I presented an example refuting that. If anything the link you posted seemed less relevant: how does a reduction in industralisation opportunities relate to the ability to make comparisons between different economic systems?


Simply put, the gains Asia made in becoming the microchip and refrigerator manufacturing SOLE SOURCE for the world will not be replicated in Africa and South America.

"Relevance" wasn't the metric. The metric was you very directly seeing numbers at hand and then using the math tool you had and coming to a broad, simplistic and wrong answer about whether "liberalization" is the way forward in 2017.

Many many mainstream economists are increasingly disagreeing with your simplistic and ideological model.


>Simply put, the gains Asia made in becoming the microchip and refrigerator manufacturing SOLE SOURCE for the world will not be replicated in Africa and South America.

>"Relevance" wasn't the metric. The metric was you very directly seeing numbers at hand and then using the math tool you had and coming to a broad, simplistic and wrong answer about whether "liberalization" is the way forward in 2017.

Then if liberalisation is not the way forward, how will countries in Africa and South America be better served by denying opportunities to them and the people in them?


It's very unclear what the way forward is, and that is the problem.


"For example, Hong Kong and Singapore were extremely economically liberal."

I'd seriously question this. There's a ton of stuff which they have both done which would be met with horror by "economically liberal" types if it were tried in the west.

For example, in Singapore 90% of the housing market is directly controlled by the government and if you look at the medical market, they have some really stringent price controls.

Then there's the currency manipulation: both states, while small, have enormous holdings of treasuries which they buy in order to make their exports more competitive.

I think those "ease of doing business measures" are fluff at best and at worst, basically just outright propaganda on behalf of foreign investors.

"North Korea is even less liberal than China, almost completely rejecting international trade. It has a GDP per capita of $583.00."

Nobody really has a clue what North Korea's numbers are and my level of trust in the CIA's estimates hovers around zero.

Having been there and to Bangladesh I'd have to argue that the latter, while more open to the outside world, is much poorer. Whatever propaganda you are fed, it's fairly obvious from the eye that, for instance, the quality of housing in Bangladesh countryside/2nd tier towns is worse than those in North Korea's 2nd tier towns and countryside.


>I'd seriously question this. There's a ton of stuff which they have both done which would be met with horror by "economically liberal" types if it were tried in the west.

I'd wager the vast majority of economic liberals would welcome government controls on the housing market and medical market if it meant a top tax rate of 20% (with the average person paying much less), no capital gains tax, and extremely liberal immigration policies. The lesser of two evils, so to speak.

>I think those "ease of doing business measures" are fluff at best and at worst, basically just outright propaganda on behalf of foreign investors.

If you want a more concrete example: in Australia it takes approximately one day and zero dollars to open a business. In China it often takes over 30 days and thousands of dollars in deposit, depending on the kind of business.

>Whatever propaganda you are fed, it's fairly obvious from the eye that, for instance, the quality of housing in Bangladesh countryside/2nd tier towns is worse than those in North Korea's 2nd tier towns and countryside.

I encourage you to watch accounts given by people who managed to escape from North Korea: they give me the impression that starvation is a bigger problem there than even in Bangladesh.


It's like you completely forgot that East and West Berlin exist. The Soviets dumped billions into East Berlin and it was still a shithole


Actually, we can. Peek behind the Iron Curtain and its late survivors (Venezuela, North Korea). Massive failures. Societal collapse.


This isn't at all related to the OP's comment.

Globalism has allowed multinational corporations to expand their economic and political influence - since they have the economies of scale to expand globally. It's true that more people have been lifted out of poverty, but the fact remains that globalism favors wealthy owners of multinationals over everyone else.

Look at how much influence western oil/tech companies have in countries around the world. Lobbies are stronger in our political realm, it really isn't fair to say that these policies benefited the poor more than the wealthy.

That's not to say that globalism is bad. But we need to be careful because as the wealthy's influence and power grows, it becomes harder to solve the problems that will come with the age of automation.


Is it possible that the game isn't zero sum? To lift a phrase from your second paragraph, is it possible that globalism favors wealthy owners of multinationals AND everyone else?

You're right to point out the risks of vast wealth disparities and the corrupting influence of money in politics, but I think that problem needs to be combatted separately, and not by making everyone less well off.


My whole comment assumes the game isn't zero sum. I recognize that globalism helps the poor. My conclusion is that it helps wealthy individuals who own these corporations more than the masses.

To break this down further, the masses gain economic value and employment. The wealthy gain political/economic influence to solidify their wealth and position.

I'm not talking about low-balling millionaires. I mean the billionaires and royalty of the world. The people who own industries, not just companies.


I appreciate your nuanced comment, but I think it's important to also recognize that it's better for everyone's fortunes to increase even unequally than for everyone to be equally impoverished. There is no economic law that says equality begets wealth creation, so the conversation needs to be about balancing equality with wealth creation. The left seems to think the conversation should only be about equality, and the right seems to think it's only about wealth creation. And if I had to be overly simplistic, I would err on the right, given the respective track records of capitalism and socialism (I know a lot of people throw a fit at any positive mention of 'capitalism', but please note I'm not saying that unregulated markets are optimal--only that they significantly outperform planned economies).


I did my bachelors in economics, and one of our textbooks taught that all other things being equal (ceteris paribus), more equality means less wealth creation. Why? Wealth will naturally concentrate in the hands of those more capable of creating it: if Jo is making 2% per annum return and Jane is making 4% per annum return, and they both start with the same amount, then Jane's share of the total wealth pool will continuously increase relative to Jo. The key thing to note is that as Jane's making better use of resources, producing twice as much from them as Jo, if we take resources from Jane to give to Jo then they'll be used less effectively, slowing overall growth.

To illustrate, imagine they both start with $1000 each. The total wealth pool is hence $2000, and they both have 50% each, perfect equality. Now, let's look 50 years in the future, assuming the previously mentioned interest rates per annum compounding annually. According to http://www.moneychimp.com/calculator/compound_interest_calcu..., Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is $9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less equal, but they're also both wealthier, and the overall wealth pool has increased.

Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane will have $69,633.20 and Jo will have $19,128.28, with the total wealth pool being $88,761.48. If we equalise wealth, however, such that both have $4,899.13, then in 50 years they'll each have $34,816.57, for a total wealth pool of $69,633.14. This is 78.45% of the total wealth pool that there would be if no wealth transfer took place.

In this sense there is hence a direct tradeoff between growth and financial equality.


Thanks for the informative comment. I'm getting some downvotes, so I want to clarify that I agree with you, and if my comment suggested otherwise, it's a miscommunication.


I didn't downvote you and didn't mean to imply your comment suggested otherwise, I was just elaborating.


In spite of neoliberalism, not because of it.

The country which has done most to raise its citizens out of poverty (China) did the exact opposite of articles 5, 6, 7, 8 and 9 of the Washington Consensus.

The Latin American countries which applied it as directed in the 1980s, by contrast, subsequently did very poorly on raising people out of poverty.


>The country which has done most to raise its citizens out of poverty (China) did the exact opposite of articles 5, 6, 7, 8 and 9 of the Washington Consensus.

It's interesting to compare China, GDP per capita of around $8000, with neighbours like Taiwan, Singapore, Hong Kong and Korea, all of which are now developed countries (GDPs per capita of $20000-$50000), and all of which opened up more and sooner than the Chinese mainland.


Of course. China took inspiration from them. They all followed an almost identical, although subtler model. Singapore and Hong Kong made less use of tariffs and disguised their subsidies better, and made greater use of currency manipulation, though.

Western economists, by and large, advocate doing the exact opposite of what they all did.

90s Russia is a good example of where those recommendations were taken to heart. It didn't go well:

http://fair.org/extra/harvards-best-and-brightest-aided-russ...


>The last 40+ years of globalization have raised more people out of poverty than at any other time in history

This claim is a prime example of the cargo cult pseudoscience that's in question here. No causal relationship is established between corporate globalization and it's just assumed as an axiom that "we must be responsible for it!". It totally ignores the factors of technological progress, decolonization and self-rule, as well as the efforts of countless NGO's. It's not just wrong: it's horribly misleading.


Burning through the vast energy and natural resources at our disposal is what has allowed us to "lift" so many people out of poverty. "Proposerity" and "progress" are not a miracle of economic thinking, or technology. We owe all of this to fossil fuels, nothing more, nothing less.

In fact, you'd need to slap an extremely inefficient economic system on top of this mind-blowing amount of resources to not enrich the global population at least a little bit. Or you'd have to purposefully design it to work that way.


>Burning through the vast energy and natural resources at our disposal is what has allowed us to "lift" so many people out of poverty. "Proposerity" and "progress" are not a miracle of economic thinking, or technology. We owe all of this to fossil fuels, nothing more, nothing less.

The Soviet Union had equal access to natural resources as America and Western Europe, yet at the time of its collapse it was much poorer, and many former Soviet Union countries still are. Clearly in the short term at least natural resources aren't all that matters.


Maybe, but I hope there are better arguments for the current system than "it works better than the Soviet Union". All you have done here is establish that an extremely dysfunctional economy can either waste or fail to use its resources, which would mean that America and Western Europe are not completely dysfunctional. This is a pretty low bar.

And as you said, we're talking short term here. Very short term. On slightly longer terms, it really doesn't look so good. Indeed, it takes an absurd level of denial / techno-optimism / magical thinking (whichever you prefer) to look at paleoclimatology and current climate indicators and think it can go on for much longer without global catastrophy.

At the end, if the best we can say of globalization is "For around 40+ years it was great fun for a lot of people. Well, for the most privileged countries anyway. And then it collapsed, and took a great chunk of the biosphere and the human population with it"... I don't see much to celebrate.


>Maybe, but I hope there are better arguments for the current system than "it works better than the Soviet Union". All you have done here is establish that an extremely dysfunctional economy can either waste or fail to use its resources, which would mean that America and Western Europe are not completely dysfunctional. This is a pretty low bar.

It's a reasonable argument to make when people are advocating moving closer to Soviet Union policies (e.g. restricting trade, stronger government intervention in industry).

>And as you said, we're talking short term here. Very short term. On slightly longer terms, it really doesn't look so good. Indeed, it takes an absurd level of denial / techno-optimism / magical thinking (whichever you prefer) to look at paleoclimatology and current climate indicators and think it can go on for much longer without global catastrophy.

>At the end, if the best we can say of globalization is "For around 40+ years it was great fun for a lot of people. Well, for the most privileged countries anyway. And then it collapsed, and took a great chunk of the biosphere and the human population with it"... I don't see much to celebrate.

Ultimately all life on Earth will die when the sun burns out or otherwise significantly changes its output. The only hope humanity has to outlive this is taking to the stars, and that won't happen without consuming a lot of resources.

If you want to look at it in terms of natural resources, personally I think irrational fear of nuclear power is the biggest problem facing the world. Modern reactors pose almost no risk to the biosphere compared to coal, oil and the like, nor do they contribute to global warming. More people die every year from coal-burning related illness than have ever been killed by nuclear power accidents.


> Ultimately all life on Earth will die when the sun burns out or otherwise significantly changes its output. The only hope humanity has to outlive this is taking to the stars, and that won't happen without consuming a lot of resources.

There's 500M to 1 billion years left for complex multi-cellular life on earth, due to increased solar output. That's around 100000x to 200000x longer than human recorded history. So clearly, not an imminent problem any rational human needs to worry about.

Trashing the planet in a few decades for such a far away "problem" is absurd. All it does is significantly shorten the time we have here. We could decide that 500M to 1B years is enough, stay here and enjoy all the time left.

If we really want to escape our fate on earth, well we could simply take our time to slowly develop ways go to space. Assuming that it is possible for humans to reach anything beyond the solar system, which may not be the case. There are practical physical and thermodynamic considerations that may prevent us from ever colonizing much in space, even if we were to try hard. In which case, preserving earth would not just be the best thing to do, it would be the only thing we can do.

> If you want to look at it in terms of natural resources, personally I think irrational fear of nuclear power is the biggest problem facing the world. Modern reactors pose almost no risk to the biosphere compared to coal, oil and the like, nor do they contribute to global warming. More people die every year from coal-burning related illness than have ever been killed by nuclear power accidents.

No disagreement here. Though it only addresses some of the issues we face, nuclear fission is probably the only semi-viable alternative to fossil fuels.


>Trashing the planet in a few decades for such a far away "problem" is absurd. All it does is significantly shorten the time we have here. We could decide that 500M to 1B years is enough, stay here and enjoy all the time left.

>If we really want to escape our fate on earth, well we could simply take our time to slowly develop ways go to space. Assuming that it is possible for humans to reach anything beyond the solar system, which may not be the case. There are practical physical and thermodynamic considerations that may prevent us from ever colonizing much in space, even if we were to try hard. In which case, preserving earth would not just be the best thing to do, it would be the only thing we can do.

Ultimately it's a moral judgement. The people living now are different in one key way from people who may exist in the future: they exist. At the core of economics is fulfilling peoples' revealed preferences. If peoples' revealed preferences show they prefer greater consumption now at the expense of people who may live in the feature, that's what will be optimised. What weight should the potential wishes of people potentially born in the future have compared to those of people actually existing now? That's ultimately a philosophical questions, outside the range of economics, maths or science. The one thing that economics shows is that the collective preferences of people existing now tend to put a lot more weight on the importance of people existing now than on people who might exist in the future.


Many / most people exisiting now also fail to grasp how bad the future will get on our current course. They fail to realize that modern life is anything but a short-term artefact of fossil fuel gluttonery (every person in the first world has uses the equivalent of 100 fossil fuel slaves. It's easy to mock human slavery when you can burn such a dense source of energy instead) and mild stable climate, both of which are likely to go very wrong this century.

The decision to put more weight on the present is mostly made in ignorance and wishful techno-optimism. Many people still think that we're somehow building a cheap-energy no-death space-faring future, or they're not thinking about it at all (though that does not stop them from making children). Going to space to escape the hard reality of life on earth and then never dying is basically the techno-optimist's replacement for the now outdated concept of heaven.

People on HN tend to go for techno-optimism. This is readily apparent when the AI, singularity delusion is treated as a grave and imminent civilizational problem but fossil fuel, energy shortage and climate change are dismissed with "PV will solve all of this. Evil greedy subsidy-loving coal and oil companies are the problem". Our fossil fuel powered civilization would quickly beg for these "evil" companies to resume their activity if they somehow decided to stop providing oil for a week.

Finally, this preference is also made at the expense of most of the wildlife and biodiversity that exists now (or not long ago for a significant chunk of it), which would very much like to continue exisiting too.


They started out poorer though, and the reverse argument can be made comparing Cuba and various Caribbean countries (Haiti and Jamaica in particular come to mind).


Your line of thinking implies that sans globalization the benefits of modern technology would not have achieved the same, if not better, without offering a scintilla of evidence for that self-affirming assertion.

Let's be clear here: the dissenting position that you dismiss (in an ad hom manner) as motivated by "envy and hatred" is critical of the unbelievably distored distribution of wealth and political power that has resulted.

We are concerned about the future generations, "friend".


Consider looking then to a country that completely rejects globalism, like North Korea. How has _modern technology_ helped citizens there live long, healthy and satisfying lives?

>unbelievably distored distribution of wealth and political power

Distorted by who's standard? There's no way to scientifically assert that a certain distribution of wealth and power is correct; it's just a distribution. To assert that a particular distribution is "wrong" (or synonyms in this case like "distorted") is a value judgement. It's a natural impulse for people to feel bad when other people have more than them, and this feeling is called envy, so it's not unreasonable to attribute a person's dislike of a distribution in which others have more than them as motivated by envy. Especially from the perspective of someone who believes increasing the size of the pie is more important than equalising the distribution, which many economists believe.


North Korea can not possibly be considered a meaningful 'control' in an empirical context given that it represents a bona fide edge case.

> Distored by who's standard?

By the standard of those of us who have a contrary "belief" than your economists.

As for envy, I hold that envy is operational amongst near peers. Peasants don't "envy" the king.


> The last 40+ years of globalization have raised more people out of poverty than at any other time in history

The last 40 years of globalization have done more to reinforce durable economic inequality—often along ethnic lines—in both the more and less developed partners in trade, globally, than any other comparable time period in history; since human misery is largely driven by relative rather than absolute deprivation, this is a fairly significant problem even before considering the ethnic component, and the ethnic aspect has been fuel for significant, mostly intrastate, ethnic violence.


Both of you are correct. The issue I see is that we could have done more.


Yes, but that has really nothing to do with economics.

Globalization is above and beyond all else a result of the Internet, and digital communications, dropping latency to practically 0. No economist predicted, understood or indeed currently understands what that would bring, and what it is doing to our world.

At this point in time, the inability of the economics academy to understand, debate or indeed correct, the multiple feedback loops that are operating to concentrate money into the financial sector, is probably the biggest single threat to capitalism that has ever existed.

At the end of the day, it doesn't matter if power is concentrated through the monetary unit, or through the gun - or indeed the latter as a result of the former - the end is wide scale impoverishment.


> Globalization is above and beyond all else a result of the Internet

I didn't downvote you, but the reason people are is probably that this is obviously wrong. Globalization began well before the Internet was commercialized.


Container shipping did a lot more for economic growth in the last 50 years than the Internet did.


All part and parcel of the same thing. Literally. Container shipping comes as a result of technological development that comes as a result of increasing point to point communication speed and information transfer. It's an underlying and fundamental change across the globe.

cf. printing presses did the same thing and ushered in 100 years+ of economic and social disruption.


To me it's not wealth misdirection it's more the purpose of optimizing economy and currency which is flawed IMO. Energy, ideas, knowledge should be free; somehow they are, human systems distorded themself into making them appear not so.


Also the Economics "Nobel Prize" isn't even really a Nobel Prize.


Of all the topics in which HN has provided me immensely deep insight, its userbase has failed equally immensely in economics. Comments from people who took just one Economics 101 class in college baselessly trashing the field making it to the top of the comment list disappoints me.

You know someone has no credibility on the matter when they mention homo economicus, as if it was the keystone.


> Comments from people who took just one Economics 101 class in college baselessly trashing the field making it to the top of the comment list disappoints me.

Yeah, as someone who actually has a degree in both computer science and economics, it's really embarrassing to see the level of discourse that pervades threads on economics.

It's like seeing an economics student who's taken half an introductory CS class argue that CS is "a fundamentally broken pseudoscience", because they just found an implementation of an O(log(n)) algorithm that was slower than an implementation of an O(n^2) algorithm.


For you and GP: it's not enough to claim that a criticism is ill-founded. You need to show how it's ill-founded.

Your defense in particular sounds a lot like an argument from authority.


I have a Ms in Economics and work as an economist. Most of the criticism and debate I see here is quite interesting, and the reflexions of the author of the article are similar to mines after working several years in the field.

You fall in the category of people who think that debate about science should be limited to those who know science theory. The problem I saw in the field is that people talking have to much to loose, hence forbidding a reworking of the fundamental assumption and a trashing of the useless models that we keep producing.

If you want to do real science, go ask the ones who are practicing economics daily about their heuristics. Nightclub owners figured out their economics interest long before two-sided market theory was out there, after all.


Kahneman in "Thinking, fast and slow" covers expert overconfidence. Some funny quotes:

"The Duke scholars collected 11,600 such forecasts and examined their accuracy. The conclusion was straightforward: financial officers of large corporations had no clue about the short-term future of the stock market; the correlation between their estimates and the true value was slightly less than zero!"

"The wide confidence interval is a confession of ignorance, which is not socially acceptable for someone who is paid to be knowledgeable in financial matters. Even if they knew how little they know, the executives would be penalized for admitting it."


Economists started using mathematics purely out of Physics Envy. I am obviously not talking about financial products which require some statistics and complex probabilistic models due to the way they're structured.

All the great economists of the liberal tradition up to and including Von Mises wrote monumental works without the need for equations. It was Keynes who first used mathematics both as a quest for respectability (Physics Envy) and as a way to convince credulous politicians like FDR that this stuff is complex and best left at "experts". The disastrous results are still with us today. And no, Keynesian politics did not end the Great Depression, they actually prolonged the misery and it took WWII and the destruction of all global competition to end it.

Not to mention that what passes as "mathematics" among the economists is laughable among mathematicians. Latin was employed towards similar ends by the Roman Catholic Church (although a plausible defense could be mounted that a standard language better preseved the Doctrine against heresy). Ditto for the complex models sometimes employed by astrologists.

A con game, 'nuff said.


These complaints against economics are getting ridiculous. It's the same BS that's getting levied against climate science, coming from a place of ignorance. Science is hard.

It feels like, "Physics can't unify QM and gravity, it must be wrong!" Well yeah, there might be parts that will be discovered to be broken, and it can't describe everything yet, but there are parts that are totally valid and incredibly important. Econ is like that, just younger and less mature. Not having all the answers doesn't make it astrology.

Imagine that some poorly understood aspect of physics was incredibly important. Maybe we get devastating earthquakes across the country every 6 years. Physicists can't predict these very well, so physics is astrology? Even without perfect understanding, the government has to make decisions about earthquake relief and planning. I would hope they turn to the scientists to see which areas have the highest risk, even though the predictions will likely still be way off. Earthquake-ology is young and hard, but it's better than letting actualy astrologers drive.

More surprising than anything in this article is the suggestion that the math and stats are a bad influence. I flip a coin, telling you it has a 60% chance of coming up heads. It comes up tails, 'proving me wrong.' Are you going to accuse me of peddling pseudoscience?


Isn't the difference simply that physics has theories backed by reproducible experiments, whereas economics has theories but one can't do such reproducible experiments without an inspectable multiverse to settle all the counterfactuals.


Not really. Climate science is actually a decent analogy. We look at the historical record (observational, can't do experiments, very macro) and combine it with theory we can back up from foundations and experiments (done on a micro level) and get an overall picture of how things work. Just as we don't need to recreate the entire planet's history in a lab, we don't need to recreate the global economy.

I chose the 'large earthquake' example deliberately. We can't do experiments on the level of large-scale earthquakes, it's very hard and pretty inaccurate, but we can still do quite a bit of real science. And it turns out that physics is more than just earthquakes, just as econ is more than macro.

This isn't to say that macroeconomics is spot on or even good, but just to say the challenges around experimentation aren't fundamental barriers to scientific understanding.


> Are you going to accuse me of peddling pseudoscience?

For that example, no. The actual issue is analogous to making calculations with very high precision when your input data is of much lower precision; if you use those latter decimals to draw conclusions, you may as well be casting tea leaves or whatever.

I think where people have an issue with Econ is where it takes some vague tendency in human behavior that kind of makes sense to think of as a rule that maybe holds, and then use it as a basis for making rigorous deductions on the supposition that the rule holds absolutely. (At least this is the complaint I'm familiar with, that much of its grounding is based in outmoded pop psychology.)


Take one of the most widely-known principles in macro: the Philips curve. In its most basic form, it says that as unemployment decreases, employment increases.

The trouble is, it doesn't work very well. So economists augment it with other unobservable variables like 'inflation expectations'. But if you go looking for evidence that these newer models are any better, 99% of what you'll find is theory.

The rules of the game reward you for making elegant models, not for making good empirical predictions.



Excellent article, thanks.

HN discussion: https://news.ycombinator.com/item?id=14781426


Quotes from Nassim Taleb regarding economists:

An economist is a mixture of 1) a businessman without common sense, 2) a physicist without brain, and 3) a speculator without balls.

Those with brains no balls become mathematicians, those with balls no brains join the mafia, those w no balls no brains become economists.

To have a great day: 1) Smile at a stranger, 2) Surprise someone by saying something unexpectedly nice, 3) Give some genuine attention to an elderly, 4) Invite someone who doesn't have many friends for coffee, 5) Humiliate an economist, publicly, or create deep anxiety inside a Harvard professor.

A trader listened to the firm's "chief" economist's predictions about gold, then lost a bundle. The trader was asked to leave the firm. He then angrily asked him boss who was firing him: "Why do you fire me alone not the economist? He is too responsible for the loss." The Boss: "You idiot, we are not firing you for losing money; we are firing you for listening to the economist."

Discussing growth without concern for fragility: like studying construction without thinking of collapses. Think like engineer not economist.

Success in all endeavors is requires absence of specific qualities. 1) To succeed in crime requires absence of empathy, 2) To succeed in banking you need absence of shame at hiding risks, 3) To succeed in school requires absence of common sense, 4) To succeed in economics requires absence of understanding of probability, risk, or 2nd order effects and about anything, 5) To succeed in journalism requires inability to think about matters that have an infinitesimal small chance of being relevant next January, ...6) But to succeed in life requires a total inability to do anything that makes you uncomfortable when you look at yourself in the mirror.

[On his greatest disappointment]: That I am unable to destroy the economics establishment, the press.

Friends, I wonder if someone has computed how much would be saved if we shut down economics and political science departments in universities. Those who need to research these subjects can do so on their private time.

Being nice to the wicked (or economist) is equivalent to being nasty with the virtuous.


It still amazes me that people unironically cite these Taleb quotes without addressing how plainly neurotic these comments are. Does this increase or decrease your prior belief in his actual ability to carefully read, and then entirely dismiss, an economics academic literature that involves nearly ten thousand active young academics with backgrounds from all over the world, an undergraduate education that ranges from mathematics to physics to philosophy, and markedly diverse political beliefs, and who mostly work on topics that have nothing to do with financial math?

Or does it perhaps tell you that this top b-school PhD graduate, who

1. works on similar financial-math topics as the people he viciously smear in the media

2. publishes in the same journals that econ/finance academics publish in

3. had key results inspired or derived from previous economists including Daniel Ellsberg (who, by the way, is a national hero)

4, and was repeatedly hired by top econ/finance departments, but was never able to keep the same appointment for more than a few years

perhaps has deep-seated personal, psychopathic issues that prevent him from simply getting along with other academics in his own discipline, and that the academic world wasn't stacked against him and his insights?

and perhaps his actual academic analysis don't give you the sweeping indictment of his fellow academics that he'd have you believe in his bitter tirades?

and maybe you shouldn't take him that seriously when he periodically goes into his online rants and show a vicious tendency to smear and destroy any individual that's responsible for a perceived slight on him?


I do not think the whole of economics is a waste. But your post made me lol.

May be its not a 'science' subject as physics or engineering. In my part of the world it is still listed an arts subject.


Macro has a pretty bad reputation, but economists often point to successes of the field as a counterpoint. Noah Smith points to four areas: Matching theory, discrete choice theory, gravity trade models, and auction theory [0].

Does anyone know about these topics? Are they really as successful as their proponents claim?

[0]http://noahpinionblog.blogspot.co.uk/2017/06/is-economics-sc...


At a push gravity trade might be considered related to macroeconomics but they're all really microeconomics, i.e. the branch of Economics that has made and continues to make progress.


Aeon is by far the dumbest site that is regularly submitted here. So many articles making huge claims with nothing to back them up. It's awful.

Come at me.


Software profession seems to be the last corner where to expect some sound knowledge about economics. Looks like a McDonalds cashier would have a better understanding of business cycles.


Why do software engineers think they are intelligent enough to criticize other professions? The vast majority of the people on this forum are dumb code monkeys with a bachelors degree and an extremely basic understanding of math.


You are correct. They think this way because they spend less than 5% of their time talking to other people, whereas the normal population spends bare minimum 30% of their time interacting with humans directly.


I agree.


I always thought Economics as a discipline is iffy. On the first day of my Economics 101 class I was introduced to "economic man" or to make it more academic "Homo economicus." According to my professor this is a, "hypothetical person who behaves in exact accordance with their rational self-interest." Not only was he hypothetical but this is how we all behave whether we knew it or not. According to him I had this strange power to make 100% rational decisions. And I didn't even know it. I have never gotten passed that economic principle. And that economist uses it as its fundamental truth. WOW, talk about building on sandy soil. And upon that rationalize it as truth with math. The truth is that like any social science, ideas and behaviors change depending on how the person feels at that moment. There are no fundamental laws that can be found other than those that are needed to stay alive and even they vary depending on the individual's mental state at the time.

Economists would do their profession a favor if they treated it as the social science that it is rather that the hard science they profess. A perfect example of advancement in the field is the Nobel Prize given to Daniel Kahneman in 2002 for his and Amos Tversky work on cognitive basis. Their field is psychology, yet they got their prize in economics. No where do you see math as the tool they used to get to their discoveries. Yes, they might have used statistics to refine their ideas but not to find the fundamentals. Yes, you might say that they call their field behavioral economics but the reality is that human behavior is what economists study and as such they should treated it as the soft science it is.


> On the first day of my Economics 101 class I was introduced to "economic man" or to make it more academic "Homo economicus."

Of all criticisms you could make, this is pretty iffy. Did you complain in your physics class when they said "calculate speed of an object and assume no air resistance"? Or when they tell you to "consider it as a point mass"?

Here they are making the assumptions they work with apparent. You can't define exactly how people are, so we need to make some assumptions. That lets us clarify where and when these things might work or not work, and possibly look for explanations when our results are completely wrong. Imagine if they were to teach the same material, without the disclaimer "this only works if you make the assumption of homo economicus".

Any science works with models, and we need to define those models to be able to determine if they are useful or not.

"The best material model of a cat is another, or preferably the same, cat." --Norbert Wiener


We should stop referring to 'Nobel prize' winning economists, and instead say 'Sveriges Riksbank Prize,' just to take them down a notch.


I guess we could, if the nobel foundation didn't keep giving out the economics prizes at the same award ceremony and put the economics prizes on the same website as all the other prizes.


Economists these days are basically trying to find a way to avoid hard work and thrift. Unfortunately the only way we get better computers is by very smart people working very hard to develop better machines. The only way we get houses is by people building them. And the only way to obtain a net worth is to save more than one spends. However, economists seem to think that with enough money printing, borrowing, and other shenanigans they can somehow get more houses built in the places they are most needed. Of course, it is a joke and wrecks out everybody's wealth in the process.

As Hazlitt taught:

'The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.'

Anyone interested in clearing through the crud should read Henry Hazlitt's Economics in One Lesson.


There are other fields where prediction is hard, geology (earthquake prediction), medicine, etc I think using a single data point (e.g. Interest rates) doesn't represent the aggregate, which is if you ran the same experiment 100 times, would Economists do better than chance?


This is an implicit appeal the article is making that is really unfounded at some level.

They seem to be arguing that, because economists missed the Great Recession, economics is a failure.

The problem is the assumption is that a severe, large event is inherently very predictable because it is severe.

The opposite often happens, though. As you say, predicting volcanic eruptions, earthquakes, suicide, violent acts are all notoriously difficult to predict, and you could make the argument that severe economic events are the same (I'm not saying this is true, only that it's an equal counterargument).


I think it's more that the economics establishment had convinced themselves that the Great Recession was impossible than that they didn't see it coming.


I don't buy argument. It confuses economics used to advance political or commercial goals with academic economics.

Economics is far ahead other social sciences because it uses mathematical modelling. Models make it easier to see the limits and the scope of the arguments. Ability of outsiders to clearly see oversimplification s is strength.

Rational actor model is the best first order approximation of behaviour. Moving to others, there are others, should be justified carefully.

Other social sciences have it worse.

Btw. Economics is only partially social science. Actors don't have to be humans.


> It confuses economics used to advance political or commercial goals with academic economics.

Does it? Or is this totally confused in the practical world too?


It's not.

For example, the austerity debate has been academically settled. Politicians took one academic paper (outlier) with error and used it to screw things up. IMF did mea culpa after data disagreed.


How has it been settled?


You obviously have no clue of what you talk about


What are the terms of the settlement?


Fantastic analogy. Most of economics, especially macroeconomics, is quackery and neoliberal political agendas masqueraded by complex equations and mathematical models divorced from reality. The fact that only a handful of economists saw the recent economic depression is extremely telling. The data is often so aggregated that a lot of the broad conclusions are practically useless. The obsession over maximizing faulty metrics like GDP and the U-3 unemployment rate is ludicrous.


Yes, economics is too mathy in constructing models. At the same time, maths and computation do have predictive power.

So you have to discern between academics trying to model the economy, and economists in industry just trying to make short-medium range predictions (and who are generally more accurate).


My favorite line: Occasional governmental efforts to scientifically micromanage farm life in different climes using li ended in famine and mass migration.


This is crap. For one I find the authors background highly dubious to be writing on economics, philosophy and religion? Yes both are very concrete sciences. /sarcasm

Next he says no economists predicted the Great Recession but then references Krugman. Krugman did predict it, he even republished his book predicting it, with a new foreword pretty much saying "I told you so." As well, economic theory did help us in the fallout from the crash. I can't say how my jaw dropped when he alleged it didn't.

The issue of economic accuracy isn't the math, it's that people treat it like a belief system instead of a science. Economics should not have politics involved, the science itself has no room for it. Tangentially, I blame religion for this tainting of the science's perception but that's a whole long other conversation. This same problem has affected the "hard sciences" throughout time and still does to date (i.e. Racism and bigotry in biology are still present).

Mathematics in economics is highly underrated by those who don't understand it or think for some reason it's malicious. Why? Because they don't understand how feeling and math can go hand and hand. People believe quantifying things is some sort of evil, but is it? Why? If you take enough economics you realize by and large the units people get so hung up on are nearly irrelevant compared to the relationship between them. Those relationships are economic models. Can models can be simplistic-- sure, but the assumptions are there for you on paper listed clear as day (normally).

The "rational man" isn't something people take seriously as a reflection of the world in Econ (at least sane educated people don't)-- it's merely a starting point which gives us traction to move forward and see how the real world measures against it. It's not permanent, it's not looked at as real, but it's merely somewhere to get some leverage to move forward.

Economics actually helped me understand a great deal of high level mathematics because I was able to "feel" it by looking at economic models. Something I couldn't do from pure math. The ability to talk about the world around us in mathematics is an advantage not a hinderance. Being able to then describe my world using math has a been a very great advanatage for me in life and one I would not underrate.

Finally, the author gives no hard examples of its failure but merely quotes some random people to support his claim. There is no real analysis here. The Li he refers to is a shit comparison. He shows no math or statistics and expects his point to be taken seriously. Why? Are the two even comparable? I mean c'mon. It's just the ramblings of someone who doesn't like not being taken seriously academically or is paid less.

Economics is hard and it's probably always gonna be that way, taking away the math isn't going to make it easier it's gonna make it even more bullshitty. Ignoring the math will leave gaping holes in your ability to understand and think critically about it.

People assume economists haven't figured out how to do things properly. They're wrong. What really has happened is politics and money have shit all over the science and made it difficult for outsiders to find those answers. One of the reasons I'm pro socialism is because that's what the science shows works. The sciences shows how having a gold standard is idiocy and only bothers the ignorant. Libertarians, republicans, and gold bugs hate me for saying that but it's true.

I'm tired of ranting and economics on HN is literally worse than Twitter because people think they're educated on the subject so I'll stop right now.


Glad to see this comment here. There seems to be a lot of other people on HN who really like to make fun of economics.


See also how the Austrian School of Economics does not fall in that category at all and has created sound, useful and correct economics without math, but only pure logic.


The Austrian school is largely ignored I think because it isn't useful or correct.

I will agree that it is extremely logical and extremely internally consistent - but it doesn't describe the real world (in a macro sense) at all. Much of the problem is that it tries to reason about the behaviour of individuals or individual companies and extrapolate it into a macroeconomic theory - classic fallacy of composition.


Wait, but this is exactly what modern macroeconomics does by making a huge leap from microeconomic fundamentals and aggregating this into the Solow, Romer growth models and many derived upon models. It got so crazy that Paul Romer critices this approach himself in a well regarded paper last year: https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble....

The austrian economists in turn don't pretend to know that macroeconomics work this or that way, they can make assumptions of effects that can happen due to policies, but don't attempt to quantify them.

I think the austrian school is largely ignored for two reasons:

- from it derives a very libertarian view of the world, which many people reject because of political views. after the WW2 libertarian views were not popular, so Hayek and Mises where largely forgotten. - because its philosophical approach is exhaustively researched and you cannot add more fundamentals, leaving economists with the problem of not having much to work on.


Yes, microfounded macroeconomics in general (which is most of the mainstream, as well as Austrian economics) has been a huge step backwards.

I think some of the most promising macroeconomic modelling I've seen has been Steve Keen's complex dynamic systems work, which is all derived from actual definitions and identities, rather than trying to scale up individual behaviour. It's all stock-flow consistent too, which means it ensures everything actually follows the laws of accounting (strangely this isn't necessarily the case in mainstream models).


If I recall correctly, the Austrian School of Economics has a tradition of rejecting the scientific method and instead using something they call praxeology, which is most definitely not a scientific methodology.


I think you are getting at a wrong conclusion.

Praxeology as defined by wikipedia, "is the deductive study of human action". Deduction is deeply rooted philosophy, mathematics and logic. A very valid way of scientific reasoning.

It is a different way of doing science, than the "scientific method", which uses observation and quantitative methods.

The Austrian school derives consequences from human action, allowing to describe what can happen in an economy, qualitatively. But their method doesn't allow to make quantitative statements, which makes it "useless" to politicians wanting to change the economy.


I found this quote from von Mises when trying to work out what on Earth praxeology is:

"They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts."

Sounds more like ideology than a science to me....


So you think mathematics is an ideology?


No - science and engineering use mathematics to model the real world and generally do a mighty fine job of it.

Arguing that your subject, which most definitely is attempting to model part of the real world is actually a part of the a mathematical world and therefore not subject to the same rules as sciences seems a bit dubious to me.


But mathematics is itself a science!

It uses a priori truths and deduction from it to arrive at new results.

Additionally several branches of philosophy and logic use a priori facts to derive results from it.

Praxeology is one of different ways of scientific reasoning. Just because you cannot get quantitative results from it, doesn't mean its unscientific. It cannot get you very far in predicting concrete human action, because in its view, humans act based on a subjective value "function" that has a discrete scale (you can only say: A is better than B, not by how much). and since every human is unique with their own values, which are simply not objectively comparable, there is just no way to make predictions or qualitative assumptions from this approach to science.


Since you mentioned that "praxeology" yesterday I've spent a fair amount of time trying to work out what on earth it actually is.... I'm still dumbfounded.

Edit: A lot of the stuff around praxeology sounded rather like Marxism in that its proponents argue that it can't be refuted. Turns out that Hayek actually reached a similar conclusion and favoured a Popperian view that "any system which claimed that it was irrefutable was by definition not scientific".


The Austrian School of Economics fails because it's fairly explicitly not based on empirical evidence, and is explicitly proclaimed to be not falsifiable.


I'm torqued at the economists, but from what I saw in the OP I should be torqued at that, also.

The article seemed to say that econometrics or some such was not within their criticism and that, instead, they were criticizing the -- pure, theoretical, mathematical Nobel-prize seeking, etc.? -- economists or some such. Uh, it was not too clear just which brand, type, style, category, etc. of economists they were criticizing.

Okay, I'll defend some of the economists!

The field of economics is a train wreck, a theoretical, empirical, practical, intellectual, scientific, academic train wreck. E.g., they still have no F = ma (Newton's second law), and their predictions are as bad as those for the weather.

Why? Sure, likely like the weather, the economy is darned complicated.

Next, it's tough to get good data about the economy, e.g., the usual US Department of Labor, etc. statistics are crude approximations to reality.

E.g., for the crash of 2008, it was mostly a fairly closely held secret just how bad so many of the mortgages were, and those bad mortgages were the key to the crash. So, for the 2008 crash, which was over 8 years ago and that we are still pulling out of, that is, has been 2/3rds as long as the Great Depression, we were missing clear views of just the basic data. Outrageous. E.g., at

http://www.pbs.org/wgbh/pages/frontline/oral-history/financi...

see the Frontline interview of Well Fargo CEO Richark Kovacevich with in part:

"... when they came to me, I would say: 'This is toxic waste. We're building a bubble. We're not going to like the outcome. I'm very concerned.'" Not many people had enough data to see the problem. Outrageous.

Next, emotions, fear, mob behavior, the news looking for headlines all can affect what people do and the economy.

So, to do economics as a science is tough.

Well people in high end academics are supposed to do research. In the case of economics, they are supposed to try to make a good science out of it. So, they try.

In particular, the most respected work in science mathematizes the field.

Recently on the news was a remark about something else, but we can use it here: "Ask a Navy Seal how to eat an elephant, and he will say 'One bite at a time'".

Well, in trying to make economics a science, in particular, to mathematize the field, about all the high end research academic economists can do is try one bite at a time. So, they do. So, the work has not yet eaten all the elephant, moved all of the mountain, cleaned up all the mess, finished building the castle, etc. So, it's a work in progress. In particular, for the castle, they are still working on the foundation, and so far there is nothing like a roof. So, when it rains, there's no roof and anyone in the castle gets wet. Or, the kitchen just isn't ready to serve good food yet; the land is not cleared, and we are not ready to grow a crop yet.

Some of the mathematics I studied for my Ph.D. and some of the math research I did and published is close to some of the math some of the economists have tried to use. So, that math gives me a view of math in economics.

For that math, some of it really is okay for some questions about economic things. E.g., optimization, mathematical programming, e.g., linear programming, linear integer programming, actually can and sometimes do save money in some economic, business situations. The academic economists usually call such situations micro economics. So, some decades ago, as such math was developed for operations research or whatever, the math got used by academic research economists. IIRC linear programming was the core math of several Nobel prizes in economics.

My view is that linear programming, and optimization more generally, has next to nothing to do anytime soon with predicting, say, the growth in GDP over five years, but one could call that use of math in the research one bite of the elephant, one brick for the castle, one tree stump on the way to clearing the land ready for row crops, etc.

E.g., there was a famous paper in mathematical economics by Arrow, Hurwicz, and Uzawa. Arrow won his Nobel prize long ago, and Hurwicz won a few years ago. The paper makes use of optimization, in particular, the Kuhn-Tucker conditions (KTC) of non-linear optimization. So, in grad school, when I was studying the KTC (not much like KFC), I saw a tricky problem, didn't see a solution in the library, did some research, and got a solution. Later when I went to publish I saw that my work also answered a question stated but not answered in the Arrow, et al. paper. Okay.

So, alright, in some sense I knew the KTC as well as or better than Arrow, etc. My opinion of the KTC is that they have next to nothing to do with predicting, say, the growth in GDP over five years, but maybe that use of the KTC is a little progress. Maybe that work got some Nobel prizes not because it was especially good work, say, did for economics what Newton did for physics, but because it was the best work in economics the Nobel committee could find that year!

So, net, economics is not yet a science; some researchers are trying to make it a science, in particular, to mathematize the field.

There is a description of how this research goes: The researcher looks at some math and the economy, makes some simplifying assumptions about the economy, so, has a model of the economy, sees where they can apply that math to that model, makes the application, reads off the consequences for that model economy, publishes the stuff, and hopes for a Nobel prize, at least for tenure, and hopes that their students will do more along such lines. Yes, it's like in freshman physics were we have a frictionless ball bearing and no air resistance and, then, calculate how fast the ball would roll except, e.g., the KTC, much worse.

Gee, if the research is really bad, then there should be a big opportunity to jump into the field, get a relatively good salary, maybe get a Nobel, get famous, get high consulting fees, maybe get some adoring coeds, etc.

For me? I've got a startup. I've already done the original applied math research and written the software and am eager to go live. If the startup works, I'll be nicely wealthy. So, I'll stay with my startup!

Besides, when I tried to study economics, I thought that the subject was so badly done I should just close the book and f'get about it.

But once it was suggested that I take a course in economics. So, I did. I showed for the class, took notes, and said nothing. That was the first day with lots of freehand supply and demand curves. After the class, with just the prof and I, I asked him, nicely I thought, just what he was assuming about his curves, continuous, differentiable, continuously differentiable, infinitely differentiable, continuous and differentiable almost everywhere with respect to Lebesgue measure, convex, pseudo-convex, quasi-convex, etc. (or some such). Soon I got a call and was told "You are out of the economics class.". Gee, I was just asking!

Gee, those questions were not so bad! For that thing I did for the KTC and the Arrow, et al. paper, part of the work was to show that for the real numbers R, a positive integer n, a set C a subset of R^n and closed in R^n with the usual topology, there exists an infinitely differentiable function f: R^n --> R so that f(x) = 0 for all x in C and f(x) > 0 otherwise. E.g., the Mandelbrot set is closed. So, there's an infinitely differentiable f 0 on the Mandelbrot set and strictly positive otherwise. Instead of the Mandelbrot set, use a sample path of Brownian motion, a Cantor set of positive measure, etc. -- amazing. So, gee, for the Arrow, et al., paper I considered infinitely differentiable!


I think this in fact comes from this engineering of language in order to pass some agenda.

You create something that is really not science and call it social "sciences" and then you put inside those stuff like economics and all the shebang.

Of course that some people think those are actually scientific and then, when all the predictions fail not only stop believing the social "sciences" like economics, but in fact start looking at all sciences, even the real ones, as some fake agenda from someone.

In the end it's a double wrong, first because you are telling people that social "sciences" like economics actually predict anything and second because we are destroying the public view of real science.

I think what we need is some outreach program that explains people what the real sciences are in order to regain credibility for science and to get people suspicious of any predictions coming from social "sciences".

Not to say that some social "sciences" are not worthy of research, but we must understand that they are only ad hoc fields of knowledge and that they don't predict anything. For instance like history, a respected area that doesn't need to get some fake validation from calling itself a science.


The same bad arguments against economist repeated again and again. The people who write this are either stupid or simply write what people want to read.


The issue is that dumb unemployed programmers love to hit the 'up' button on articles shitting on things they don't understand.


A lot of people don't get that economics isn't about making predictions nor that the fact that a statistical model may lack predictive power has nothing to do with whether the model is correct. All a statistical model tells you is that the dependent variable will take this or that value given some values of the independent variables. So predicting the dependent variable requires you to know the values of the independent variables in the future, which means most of the time the model is completely useless for forecasting purposes. That doesn't mean that the model is useless in a general sense, or unscientific.


So what can you use a model for if it doesn't make predictions? Presumably a non-predictive model can't explain things either?

Also, if a model doesn't make predictions how can you compare it to reality to see if it is actually a useful model or not?


You can say: if X and Y happen, then with a great degree of certainty Z will follow. That's explaining things, despite not being able to predict if Z will occur or not. There are many ways to test the validity of a model, for example, you can "forecast" past values (using known values of the explanatory variables) and check the accuracy of the predictions.


There is a little problem here, though. In other scientific disciplines the "laws" are not time dependent. I.e. Chemical reactions in 1894 work just the same as in 2017 or 3251. On the other hand discovering that your country is sitting on a big oil field in 678 b.C. will not help your state budget at all, while in 1940 it could be enough for your neighbours to finance a war of invasion.

So being able to "explain" past economical phenomena is not very useful if you then cannot use the (now validated) model to guide present and future decisions.


It's true, although it's still useful in many instances if we take a more general approach. So, let's say that instead of focusing on the effects of discovering oil on the national budget, we could focus on studying the economics of natural resources in a more general sense. Here historical evidence could be perfectly useful.


"if X and Y happen, then with a great degree of certainty Z will follow"

How is that different to normal scientific predictions?


It's not different. What I'm saying is your ability to predict Z is contingent on your ability predict X and Y. If X and Y happen to follow regular patterns, then you can predict Z, if not you're out of luck. The point is that claiming that something is not science on the grounds that it can't predict Z makes no sense.


All these articles from opinionated outsiders aiming at "stimulating debate" sound extremely arrogant to academic economists. Do you really think you are telling anything new?


The people silencing you by fading you into the background do.




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