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Blame Economists for the Mess We’re In (nytimes.com)
89 points by pseudolus 57 days ago | hide | past | web | favorite | 134 comments

Applebaum tries to finger "elfin libertarian" Milton Friedman as "the most important figure". But the specific policies he attributes to Friedman don't seem so bad:

* end the draft, replace with well-paid all-volunteer military

* let international exchange rates vary

* evaluate regulations based on the cost-to-save-a-life

Does Applebaum want to bring back the draft? Put exchange rates back under direct political control (as is attempted in places like Venezuela & Argentina)? Have a purely "feel-it-in-our-guts" approach to regulation, without regard to whether the same $X million dollars in imposed costs could save 1 life in one case, or 100 lives somewhere else?

There are reasons the draft can be a good idea.

When the military is only voluntary you get a military with specific ideas about foreign policy and how you see the enemy, whoever they are.

If you introduce the draft you have a more heterogenous military.

Absolutely. A draft would also force Americans of all backgrounds to interact with each other in an environment that builds cohesion. It would also give even the most powerful of Americans skin in the game when it comes to starting wars.

> A draft would also force Americans of all backgrounds to interact with each other in an environment that builds cohesion.

Every American presidential election has a side show about the candidates military record and a meaningful number appear to have dodged their service - current president included.

This only works if there isn't an out for folk with bone spurs.

How widespread were those sort of shenanigans back when the draft was on, do you know?

Wasn’t the last president who has served bush senior? This would mean it‘s rather common in some circles.

Barack Obama wasn’t old enough to serve in Vietnam, so he wouldn’t have needed to dodge serving. In about 20 years, provided the draft doesn’t get reinstated, we’re likely to have more presidents who never served.

Seriously what is with people thinking the draft will somehow be a great unifer or that it is an appropriate propagator of values? Veterans were lynched for wearing their uniform. The Kennedys lost family in wars and yet JFK started the Vietnam war.

I think we should just accept that the hypocritical institution is dead after Vietnam and stop trying to use it for power fantasies over society or advocacy - its only function is to snatch defeat from the jaws of victory as it makes reasonable ideas grossly unreasonable.

Or we could, you know, just go to school and work and interact with one another the way we already do. Rather than trying to force people to give up years of their short lives via a draft.

Which school? Do you think the inner city kid goes to school with the Palo Alto kid? The Appalachian kid? The son of illegal alliens? We live in bubbles and we wonder why we can't make sense of each others realities.

A draft cannot be made practical and fair unless you are going to have an Army of 1945 proportions. Otherwise, you might need one in ten draft-age men, and the business of choosing which becomes even more open to manipulation.

You do not think a truly random selection process could be implemented with integrity?

I propose a civilian service academy and civilian service, which would achieve most of a draft's goals without the military. American infrastructure could use it, among other benefits.

I talk about it in episode 138 in my podcast: http://joshuaspodek.com/guests/rants-raves-monologues-volume....

General McChrystal wrote about it in Time Magazine: Every American Should Serve For One Year https://time.com/4824366/year-national-service-americorps-pe...

This is what we have in Finland; basically either: 1. Military service ranging from half a year to a year. 2. Civil service for a year. 3. Half a year prison sentence. 4. Exemption for medical reasons.


That is oxymoronic - the purpose of the draft is to have military warm bodies without having to pay or get volunteers.

Infastructure work's limitations are based on funding and skilled labor - not a mass of gruntwork.

What specific kind of military do you get? The US military I was a part of was the most diverse group of men and women I have ever worked with in just any metric you can find.

I believe parent commentator was making a claim to lack of philosophical diversity, and that a voluntary military is more prone to prefer war over diplomacy.

I see the margin the parent commentator is trying to make, but feel it misses people who join the military to obtain gainful employment, get education, or numerous other reasons.

The issue you identify is a good reason why our system of government, which places an elected, term-limited civilian as the commander of the military, is extremely clever. We end up with an effective military, but have a counterbalance to a military acting as a hammer constantly looking for nails.

The people involved are certainly imperfect (and some are more imperfect than others), but we're always just a few years away from a course correction if the electorate sees fit.

a voluntary military is more prone to prefer war over diplomacy.

The military gets no say - wars are declared, or not, by elected politicians. What you say is only true in countries where the military runs the government.

I never saw it as „the military“ being more prone. But rather the general public. As in a voluntary military, they (their families) are likely not involved with the military personally. While having the draft ensures most everyone will be - on a family level - impacted by a war or peace decision.

Military officers advise politicians. It seems silly to believe they have zero sway over political opinions.

> but feel it misses people who join the military to obtain gainful employment, get education, or numerous other reasons.

You're right. But I wonder what kind of "politics" they would adopt when needed if they didn't feel the rest of the army has one way of thinking.

Diverse on many metrics I'm sure, except probably economic class.

Western militaries for hundreds of years have been working class soldiers and upper or at least upper-middle class officers. The middle-middle class is very underrepresented. This is true even today.

Is there a survey or study of the demographics? I'm genuinely curious about how it currently looks because I have a hard time believing the upper crust bothers with this sort of thing any more. Service just doesn't seem to carry the social weight it once did, and there are plenty of stories of rich kids dodging deployments and the like.

Based on the data here, the grandparent is wrong. Maybe they were historically correct, but today the three middle quintiles of economic class is over-represented https://www.cfr.org/article/demographics-us-military (Look for the graph titled "Neighborhood affluence for 2016 recruits")

A draft raises the cost of war, making war less likely.

That depends on how easy it is to get out if it.

If the influential always go to the coast guard or whatever, war is less meaningful for those in power.

“That depends on how easy it is to get out if it.”

Exactly. That’s why I despise ppl whose connections got them out of the draft. For everyone of those punks, another one of McNamara's morons had to be drafted.

Mohamad Ali, on the other hand, he had the courage to go to jail.

Burn your draft card, escape to Canada, or simply refuse. But those who use university exemptions or bone spurs can go to hell.

Escaping to Canada increases the amount of McNamara's morons needed the same as a university exemption or bone spurs does.

The only difference between your methods is consequences for the person undertaking it, not those that have to replace them. You appear to want people avoiding being drafted to suffer. Pretty odd if you otherwise sympathise with them.

Even though Ali had the courage to go to jail, by your reasoning in the previous paragraph, someone else “had to” be drafted in his place.

Perhaps you won’t go so far as to call conscription kidnapping, but you seem to sympathize at least a bit with people having scruples over being shipped off involuntarily to wage aggressive war. Now, you may admit that some are principled objectors, and others may simply believe that dirty work is beneath them. The more important question is whether the draft is just. If so, then any refusal by the able is wrong, and if not, we may not condemn resistance in any peaceful form.

The reality of deferments for the politically connected and most especially those for the children and grandchildren of politicians who vote for war makes utter propaganda the notion that disinterested philosopher-kings or a technocratic elite are merely acting to promote the greatest good for the greatest number.

Does this argument back-test successfully?

Has the US suffered fewer war-fatalities in the era(s) where it had a draft (including the Civil War, WW1, WW2, & Vietnam), or in the era where it has an all-volunteer force (since 1973)?

That’s almost impossible to compare due to advances in both weapons and protective equipment.

And yet, we have to try to make such comparisons to make such sweeping judgements as "a draft makes war less likely".

The quality of weapons and armor (and training and medical care!) also isn't independent of the draft/volunteer dimension. A all-volunteer-force may find it necessary to invest more in each, because fewer people will volunteer to be part of a military force that tries to win with raw & disposable strength-of-numbers.

So maybe the all-volunteer-force "raises the cost of war" even more, considering financial costs & second-order effects, and thus best deters war? It's possible, which is why such claims need to be evaluated against history, not just asserted.

Probably not but a lot has changed.

I'm not convinced.

Assuming you even recruit the officer class from draftees, you're going to recruit the ones that think like you, or at least that you respect, which in practice means they know someone you respect, were taught somewhere you respect, in short they're probably from the same circles as you.

Plus if you don't want to join the military, are you really going to give a toss about contributing?

Yes that's all true at the bottom. The top is still career military and they very much set the culture, tone, and policy.

Yes, but they don't hold the rifle, in case it matters.

Friedman also defended a negative income tax which essentially was a form of UBI.

Within that context, negative income tax was sought to replace welfare, social security, Medicaid, etc. Is that the case with UBI?

Many UBI supporters still view one of its main benefits the simplification & unified replacement of all such programs.

Now, those programs are complicated, involve a lot of overhead, often underutilized, and create unintentional disincentives to work when the "marginal tax rate" (in taxes or lost benefits) sometimes goes over 100%. Offering a simple & big-enough UBI instead can fix all that.

(A UBI can also replace minimum-wage laws and most if not all unemployment insurance. And perhaps, many workplace regulations, because a citizenry where everyone can say "this job sucks, I'm outta here" can be a better check on abuses than the current system of compliance-surveillance, regulatory-fines, and court-cases.)

UBI can also be inflated away to nothing. It's a neoliberal scam.

So can all the other forms of welfare.

No, not all. For example not a positive right to healthcare.

UBI is transparently an attempt to redistribute tax income to private companies such that no opportunity for profit stays with or is limited by government. UBI would mean no more Medicare stipulations, no more existing conditions protections. Just your ten grand a year or whatever and a bunch of private companies who have what you need, at whatever price they set.

Good point; after posting I wished I'd said "...cash welfare", because of course in-kind transfers of goods and services would be immune to any amount of inflation.

Indexing the UBI amount to some basket-of-subsistence-consumption could likely address this concern.

(The handling of existing-conditions is a regulatory issue orthogonal from UBI. I'd prefer a UBI replace all "income-supporting" programs – including things like food stamps and housing vouchers – and also obviate many rules premised on the idea that the threat-of-privation captures people in bad jobs/relationships. But "structure-of-market" or "acceptable offerings" or "required minimum standards" regulations are a separate matter.)

> Have a purely "feel-it-in-our-guts" approach to regulation

That is exactly what they want. The modern world of cost-benefit analysis and economic modeling has been unkind to the whimsical. They want emotions, narrative, and oratory--not reason and data--to guide policy.

Frankly, there's very little difference between the two when the ones making the yardstick are also the ones being measured.

Statistics and measurement are insidious like that. Sometimes you're just not measuring the right things, or the way you are measuring just tells you exactly what you think it should.

What does GDP mean to a worker making only enough to afford to pay medical bills or the rent?

What does * per capita do to assuage the suffering of the mother of 3 working 3 dead end jobs and living out of her car?

What good is the S&P500 closing up 6 points when most can barely afford to put more than what there company matches into the market?

What does anything the Dow does mean to anyone who's retirement on Social Security barely covers what they need to merely remain alive?

Economic modeling seems like it has done one and only one thing well.

Create work for economists to do.

Vietnam ended the draft.

Friedman’s worst idea that remains in vigorous implementation was automatic income tax withholding. He poured jet fuel into an engine of runaway state growth but is somehow remembered as a libertarian.

He was an economist during an era where progressivism explosively grew the administrative state and really didn't have any checks. They were enabled by war.

What you're talking about was one of his biggest regrets.

> "It never occurred to me at the time that I was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom. Yet, that is precisely what I was doing. [My wife] Rose has repeatedly chided me over the years about the role that I played in making possible the current overgrown government we both criticize so strongly."

[1] : https://www.theguardian.com/commentisfree/2006/nov/16/post65...

And look at the meager thanks Friedman gets from those like Applebaum craving ever-greater tax revenues!

Unfortunately evaluating regulations based on the cost to save a life would be considered heresy in certain circles. Not spending the entire GDP to save one more life is ideologically incompatible with a lot of people's beliefs.

I think there's some misunderstanding due to a disconnect between what economics values and what Joe Public values. For instance, there's a relatively un-controversial mainstream economic theory called https://en.wikipedia.org/wiki/Factor_price_equalization, which predicts that "When two countries enter a free trade agreement, wages for identical jobs in both countries tend to approach each other" (e.g. low-skilled workers in the rich country are now competing with low-skilled workers in the poor country). Economists are fine with this, because the model predicts an overall increase in global standard of living. I suspect however if you asked the voters "would you support a policy that will reduce the standard of living for less-skilled Americans but lift hundreds of millions of people in Asia out of poverty", support would be far from unanimous.

We in the USA live in the most gilded time in history, partially thanks to free markets and all the reasons the author bemoans. All income levels experience a level of prosperity without equal. Our poor are obese, unemployment is low, and the access to career altering knowledge and skills has never been better. A dip in the economy is overdue yet here we are, still experiencing a historic period of growth and economic strength.

But a presidential election is coming and the side not in power must convince everyone they are miserable. And since the economy historically ebbs and flows, “experts” will line up to write articles about the upcoming sunset so they can preen about when it inevitably does.

All the while our government is 22 trillion in debt and nobody cares. The left claims it’s because we don’t tax enough and then proposes programs that would explode the debt. And the right claims we spend too much yet, on their watch, deficits have never been larger despite record receipts.

Poor being obese is not a sign of prosperity. There are many countries that are not prosperous at all with obesity problems. Obesity can be due to genetics, lack of access to healthy food or time for recreation, etc.

High unemployment doesn't mean much if real wages are dropping for most people and necessities like housing or Healthcare are becoming less affordable even for those employed.

I agree that there are people out there incentives to make things seem worse than they are, but I so think things are pretty bad.

Once upon a time being poor absolutely meant being hungry. No more.

That is an utterly remarkable change and is unprecedented in all of human history. And so many wizards of smart assured the people of their time that population growth was going to lead to famine. They were dead-ass wrong.

I think we can all agree This is due to technological advancement, not economics, which is what we are discussing

Reasons why said technological advancement occurs in some times and places but not others is most definitely a question of economics.

Yes, you are absolutely right. Thank God we don't have famines, but that's a really low bar to strive for as humanity. People only being able to afford food and a lifestyle that lead to obesity and a whole host of other health problems is still pretty bad, imo.

Nonsense. It's a really big deal. It's probably the greatest accomplishment in all of human history.

But to concede a point, there's no finish line in the race to improve human health and experience.

Perhaps second or third to the vast reductions in maternal/infant death and from communicable diseases. Likewise, still work to be done.

I do agree it's a huge deal. I think my bigger source of disagreement was pointing to things like obesity as a sign of prosperity.

I guess everything is relative. Obesity is relatively better than famine. But overall, the article is arguing that many things are getting worse recently, which I think is true. Despite improvements in science, technology, productivity, and economic growth, groups of people are facing lower affordability of basic needs. Whether or not economists are to blame is another matter.

So what’s your point?

Forget it, Donny, you're out of your element!

Not sure who Donny is, but regardless my question still remains. So how about this, what was your intention with sharing with us?

Reading you, makes evident that you not are in lower class.

Needing loans, and keep on debt for a very long time, to study on a university, isn't "easy access to career altering knowledge".

Add an injust healthcare system, that can bankrupt anyone in the lower class.

Evident huh? Your HN must have features mine doesn't.

"Add an injust healthcare system, that can bankrupt anyone in the lower class."

Nice word salad - full of garnish and color that ultimately provides little nutrition.

Blame no one. I sincerely doubt if humans truly understand economics. I mean we have the data for last 100 years. Maybe more. And everything we know today has been inferred from this data. But honestly, how do we know how economy is supposed to behave over a 20 year period in a world of high frequency trading, automated trading, disruptive technologies, globalization, ability to work remotely, a Continental currency and the list goes on. We don't know what we don't know. We just have to accept that.

> I sincerely doubt if humans truly understand economics

This exaggerates our ignorance. Microeconomics is well understood, down to producing testable hypotheses. In macroeconomics, we can draw broad lessons. We know, with respect to elected governments, economies with independent central banks outperform those with political ones. We know there is a relationship between interest rates, money supply and inflation, even if we can’t precisely predict it.

Macroeconomics is largely qualitative. It tells us directions, but not precisely. (Microeconomics is properly a science, offering a full set of experimental tools and falsifiable predictions.)

We know, with respect to elected governments, economies with independent central banks outperform those with political ones.

We know there is a correlation, that's all. I happen to think that an independent central bank is a good idea but that is little more than a guess based on my low opinion of the political class.

We have accounting records for the Mesopotamian civilization to the extent that Michael Hudson decades ago got a doctorate in economics for his work analyzing the debt ledgers in cuneiform. His work was instrumental for getting Iceland out of the financial struggles they were in years ago and his career struggles are a testament to the lack of concern that most STEM and economics professionals have for the possible lessons of thousands of years ago.

Computerized trading has minimal impact on real asset prices, it just adds efficiency and liquidity. Bitcoin is mostly used as a speculative investment vehicle and for illegal transactions. Most technology (Google/FB), took an existing industry and computerized it (Advertising). Nothing is new, and the situation we are in now was discussed 20 years ago as a possibility, just not by the economists and politicians in power.

It does also add new vectors for error propagation.

If that was true, perhaps economists should put the "economics may be scientific, just not as reliable as you might expect" disclaimer in bolder letters.

Good economists do it. What makes you think economics is scientific? To be honest it seems to me we’re at the alchemy level of economics - basically we barely understand what we’re doing

Economics is scientific — and much more complicated than physical sciences because people are involved. If I drop a rock with a certain mass from a tower of a certain height, I can safely assume that my measurements of that one event are representative of all similar events in the future. Predicting based on observations of someone’s behavior today what he will do tomorrow is highly problematic because in a real sense the same individual tomorrow will be a different person.

This is the difference between the science and not-science. The former allows predicting future, the latter doesn't.

Exactly. Behavioural economics can do this, but macro fails at this at every point, or has so far. I think of it as essentially we’re at the bloodletting level of economics - we sort of think we understand how things work, but really, we don’t, and we might be causing more harm than benefit through our prescriptions.

Nothing makes me think economics is scientific.

But it's taught as if it's a science, handled inside academia as if it's a science, and has more influence on policy than hard science does.

If it's not a science, those three facts are rather curious.

You can view economics (the field) as a coordination device.

Basically, nobody knows anything[1]. But if everyone were to admit that, there would be no basis on which to conduct policy. → Chaos/arbitrariness/incoherence (over time and sectors)

So people make up and promote a narrative (bullshit story) and if enough people believe / are made to believe in it, then you have a basis for relatively stable and coherent policy regime.

This interpretation of economics (as a field) is consistent with the history of economic ideas. No economic ideas are ever discarded or disproven (the very antithesis of science if you will). As the Economist aptly put it: "Macroeconomic arguments tend not to produce winners and losers: only those with more in- fluence and those with less."[2]

That's why economics (the field) is really less about economics (the substance) but about politics and power.


[1] Hyperbolically speaking, of course, and aimed in particular at macro- and monetary economists. There are some nice results but they apply, as far as I could tell, mostly to smaller settings, not the aggregate economy.

[2] The Economist. Free exchange: Magic or logic? page 69, Mar 16 2019.

I do not see why experimentation is impossible if we are in a position where there literally is no alternative other than doing 'experiments' except refusing to address the results and change tactics except under extreme political pressure. Things like 'we believe if taxes are lowered on businesses, it will result in them hiring more workers', after it has been tried for 30 years and has resoundingly shown to be a collassal untruth, actively destroying the middle class and leading to tremendous instability even among those who do remain employed, at least if we could say it was an experiment and we were uncertain of the outcome, we could say 'well that didn't work let's try something different' instead of it being a political battle fueled by people just trying to trick others into thinking that reality is different from what it is.

In a situation that affects so many people, it may seem unwise to do experiments and try things where we can not say with certainty what effects they might have, though we admit they may be substantial. The ethics are very dim on that front. But the alternative has to be considered. We do not have 'generally accepted treatment' to turn to and rely on. We only have other experiments, albeit while not calling them experiments and not treating them as if their outcomes are in doubt, simply forging ahead with blinders on. I can't imagine an argument that would justify that as more ethical than earnestly doing experiments.

It's obvious why: there are too many confounding variables to run experiments on macroeconomically relevant scales.

This is analogous to why econometrics is bullshit: lack of stationarity in the real world.

This is amplified by nonlinearities in the system. So even if things today were broadly comparable to, say, the 1990s (and they're emphatically not), what if there was this little thing somewhere (like an obscure accounting regulation) that led to massive differences in the outcome of the experiment?

Tbc, I think there are better and worse ways to deal with the problem, just because we know so little does not mean everything is equally meaningless.

Behavioural economics has predictive power, so I tend to think of it as scientific

aimed in particular at macro- and monetary economists. There are some nice results but they apply, as far as I could tell, mostly to smaller settings, not the aggregate economy.


Whether something is a science or not depends on the methods which are applied - not how much is known about the subject. You could argue that biology is not a science because we don't understand how lots of basic cell functions work.


The relevant question for those bemoaning policy implementations of economic theories is, "If not guided by economics, then by what?"

Personally, I prefer a discipline which attempts to treat its subject matter scientifically, even if the sum of experimentally proven knowledge is small. Psychology runs into the same difficulties.

But with both (or biology, or high-energy physics), I don't hold it over their practitioners that their subject matter is elusive to experimental inquiry. One does the best one can.

Behavioural psychology has actually given us a lot of the insights that have now been been expanded into behavioural economics, which is the only branch of economics that has some predictive power (and this in my view makes it scientific). So psychology has issues but I feel like a lot more science to it than people expect, if you look into the right circles.

There is definitely some science in economy, psychology, history, etc. The science of social engineering.

The problem is when our incomplete understanding is used to justify inadequate policy, simply because that's the part of the problem we understand. For instance, deregulating industries because markets are generally more efficient, thus disregarding whether that particular market naturally leads to monopoly. It sometimes leads to regulatory capture and whack-a-mole problem solving that are wholely inadequate.

Likewise there is the problem of central banks capturing the academy by lavishly funding their sycophants and cutting off researchers critical of their methods or policies. The conflict of interest is obvious, but nearly the entire field pretends it does not exist.

Unfortunately, people professing to know economics often gives lawmakers rationalizations for whatever they want to do. There’s always someone ready to defend whatever conclusion politicians are already decided upon.

In his Nobel lecture[0], Hayek condemned these rationalizations cloaked in superficial appearance of rigor as scientism.

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences – an attempt which in our field may lead to outright error. It is an approach which has come to be described as the “scientistic” attitude – an attitude which, as I defined it some thirty years ago, “is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.”[1] I want today to begin by explaining how some of the gravest errors of recent economic policy are a direct consequence of this scientistic error.

[0]: https://www.nobelprize.org/prizes/economic-sciences/1974/hay...

[1]: “Scientism and the Study of Society”, Economica, vol. IX, no. 35, August 1942, reprinted in The Counter-Revolution of Science, Glencoe, Ill., 1952, p. 15 of this reprint.

Or don't, because we're not listening to economists in general, but people who are employed/supported by the very wealthy (just like lobbyists and thinktanks) to give politicians something to say publicly when they do things that the very wealthy want them to do.

Economics as a discipline has been pretty relaxed about the need for state intervention in some cases and the idea that some government debt can be good - these aren't wacky, out-there ideas in the panoply of economic thought.

But they absolutely are when you turn on the TV and listen to the Koch brothers go on and on about taxes. So many people just learn the bit of economics that supports their world view and then repeat that ad nauseam. Then the discipline as a whole gets the blame, because no-one stops to think that the messenger is in fact a self-interested (surprise!!!) idiot.

Nobody pays attention to Goodman's problem of induction [1].

The truth is that nobody really knows how we ought to arrange society, and which arrangement is likely to work. Everybody is guessing!

The moment you arrange the system one way, people game it and your economic model no longer applies. What worked in 1999 needs not work in 2019.

Blaming the people you chose to listen to is just another form of avoiding the elephant in the room - that you don't know how to decide who to listen to.

1. https://en.wikipedia.org/wiki/New_riddle_of_induction


To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the over-confident because their experiments may after all produce some new insights. But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based – a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.


"Iatrogenics" is a handy metaphor to capture the sentiment above.


That's why game theory is so important. We definitely need more progress here.

Peter Boettke responds[0] by quoting Hayek’s Nobel banquet speech in which he warned about economists making pronouncements outside their respective areas of expertise

[Hayek’s worry about establishing the Prize in economics] is that the Nobel Prize confers on an individual an authority which in economics no man ought to possess.

This does not matter in the natural sciences. Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence.

But the influence of the economist that mainly matters is an influence over laymen: politicians, journalists, civil servants and the public generally.

and pointing out the op-ed piece’s mistaken diagnosis.

The problem with narratives like Appelbaum’s isn’t that he is suspicious of the pretensions of economists, it is that he is blaming the wrong culprit for the mess we’re in. Here it is important that every one of these critics read Gregory Mankiw’s very important piece[1], published before the financial crisis, on the macroeconomist as scientists (read Chicago New Classical and Monetarists) and the macroeconomists as engineers (read MIT/Harvard Keynesian and New Keynesians).

[0]: https://www.aier.org/article/blame-economists

[1]: https://www.aeaweb.org/articles?id=10.1257/jep.20.4.29

One of the many wonders of policy based evidence is that if the policy goes tits up, you can still always blame whichever profession you cherry picked.

Isn't economics one of those disciplines where the more seriously a prediction is taken the less likely it is to be accurate. If people believe a prediction they alter their behavior and as a result the prediction fails.

If I predict your car is going to crash based on the fact that the tyres are bald, the brakes are worn, and the steering wheel isnt attached. You probably (if you take the prediction seriously) want have a crash, because you'll get the car fixed.

So it isn't a particular problem of economics. The problem of economics is testing theories. I would guess that most economists have a theory that never gets tested, because you can't test them in a lab, only in real life, the depth of knowledge just isnt there to know what will work, what won't, and popular but wrong theories aren't proven wrong fast enough. I cant reasonably say whether bald tyres will cause a crash, because no ones seen bald tyres before.

What are Mr. Applebaum's qualifications to address such a weighty topic? He has a B.A. in history and seems to have been a journalist throughout his relatively short career: https://en.wikipedia.org/wiki/Binyamin_Appelbaum.

His arguments should be qualification enough. Of course, one's arguments are often not qualification enough to be listened to, but publication in the New York Times adds some weight on that side -- they lend him credibility, and if his arguments are well received he pays it back, and if they aren't he defaults and both he and they are poorer for it.

From 08-10 I was a flunky analyst at the federal reserve. First job out of undergrad and the first w2 I ever took home. The most important thing I learned is that the people in charge don’t know what they’re doing. The second most important thing I learned is that the same people will claim they do for money.

Some scary comments right here.

For those who believe that economics has never done anything useful or benefits the common man, here's a small counterclaim.

The widespread adoption of index funds was absolutely an outgrowth of academic financial economics. In particular the efficient market hypothesis and CAPM theories, as well as empirical research studying the (lack of) performance of active investment managers.

In the US alone, index funds now make up more than $3 trillion of assets. That's saving investors more than $30 billion in wasteful fees every single year. (Which doesn't even account for the downward pressure on fees for active funds.) Moreover this revolution has benefited ordinary and small investors the most.

Obviously, this is a completely "free lunch"!!! If we just buy index funds, which preferentially buy any larger company over a smaller company by design, we avoid all those "wasteful fees"!

This is a classic "seen" versus "unseen" problem - the "wasteful fees" saved is obvious, but what is unseen here? A couple of options might be: 1. indexing makes uneconomic acquisitions easier - a CEO can make stupid acquisitions to get bigger simply because indexing will bail him/her out as being larger for the sake of being larger and representing a greater portion of the index leads to great investor inflows. 2. smaller companies are hurt because there are fewer active investors to bother to analyze them as they have been crowded out by indexing.

This may have "benefited ordinary and small investors the most" thus far, but what happens in the next market crash when indexing investors are rushing for the exits? What has happened to Main Street as a result of the trend towards indexing being firms gain investment simply by being "big"?

It is doubtful many will agree with "bigness for the sake of bigness" is a positive development...

It no doubt benefits individual investors, but if index funds were to swallow up the market the main benefit of capitalism - the efficient allocation of capital - would at some point arguably be destroyed. That raises the question of whether/when a centrally planned economy would start to outperform such a passive system?

If index funds were to become an inefficient way to allocate capital then their returns would become subpar and money would go elsewhere.

I think this misses the point and lets legislators off too easy. Economics tends to be concerned with maximizing the size of the pie, not distribution of benefits. That’s generally seen as government’s domain, with the idea that (with proper distribution) growth can genuinely make everyone better off. As it happens, legislators (and their appointees) seem to be willing to implement the growth-oriented ideas, but not the programs that retrain/etc people who lost out.

Tangentially, there are some nice lists out there of things economists do agree on - here is one of them: http://gregmankiw.blogspot.com/2009/02/news-flash-economists...

This article is the definition of what's wrong with journalism. So many assumptions that aren't supported with facts and just proposed as facts; with an extreme amount of one sided bias.

If you actually 'understand economics' which is more about 'understanding that you don't understand economics'

One thing is for sure is that we are wealthier now than ever before in history. In 1969 how many households had infinite knowledge at their hands? How many even had basic appliances?

>The rise of economics is a primary reason for the rise of inequality.

It's literally supply/demand. https://en.wikipedia.org/wiki/Labor_force_in_the_United_Stat...

As women entered the workforce, men left the workforce. Which isn't a bad thing, talented women are now contributing to society and displaced the incompetent men.

Those men however are still looking for a job and so we have greater supply and same demand. It means those people at minimum wage are competing with each other and driving their wages down.

If you have the time and patience to listen to it I strongly recommend listening to Mark Blyth's 2016 lecture entitled "Global Trumpism" where as a political economist he discusses the implications of Keynsian economics, Neoliberalism and the class revolt we now see around the world.


Which individual or group calls themselves neoliberal?

In this regard, he was referring to the transformations in policy away from full employment as a target towards zero inflation as a target. These policies began I think under Ford, but really took off under Reagan.

I get tired of 'blame economist' articles. They're almost always cheap and circumstantial. People often forget that Economics is considered a philosophy and not a science. Sure, its great for coming up with ideas and theories but with this perspective would never put your faith into it like you would STEM.

The whole reason for the 1968 creation of the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel" (misleadingly often referred to as the Economics Nobel Prize, although Nobel had nothing to do with its creation) is to make the public think that it is a science on par with physics, physiology/medicine and chemistry, though.

Absolutely, but politicians use it as if it was scientifically reliable

Politicians ignore economists unless and until they happen to propose something politically convenient.

Also true

I've never heard (let alone forgotten) that 'Economics is considered a philosophy', whatever that might mean.

Wikipedia: "Economics is the social science that studies..."

> Markets are constructed by people, for purposes chosen by people — and people can change the rules.

Economic law is immutable. There is no changing the law of demand. Price caps will always create shortages and price floors gluts. Even Marx knew this and tried to paper over it with nonsense about historical determinism and the rise of the New Socialist Man.

Blame Economists/Scientists

Blame Law/Politicians

Blame News/Social Media


Blame anyone but yourself?

But blaming doesn't score much on HN, no?

Like people don't have the option to vote.

No, let's blame the real culprit, ignorance.

1. Using 19th century trade implements (tariffs) to wage a 21st century trade war was a dumb idea.

2. Bernake and Powell did too little to raise interest rates higher. While it would have been painful to do so, not doing it will make the next recession more difficult to weather and will likely compound recession with a liquidity crisis.

3. We have learned nothing from the last 40 years of boom and bust and are to scared of to end laissez faire capitalism to prevent it from happening again.

4. Because economics is not taught or is taught poorly the general public don't understand the difference between debt instruments and debt. They then shout ignorant stupidity into their favorite echo chamber and when it echos back they nod in agreement. When their idiot politicians repeat these dumb ideas back to them later they can do nothing but nod their heads in unison and cast their vote for another idiot.

Non-paywall https://archive.is/4dn8na

But don't even bother. It has no clear reasoning, only a handful of anecdotes and hurling an insult to Friedman. It's a weak hit piece to sell you a book. NYT is a joke.

I blame politicians.

1980s/1990s economists:

"Here is what we will do, we will pass laws and make it easy to outsource all of the jobs, and then we will import tons of foreign labor. Then, our gracious corporations will happily retrain all of our workers for new jobs with completely new skills. Mid/Late career workers can change on a dime right? Next, when the economy crashes in 2008, we will print unprecedented levels of money to save the economy by pushing up financial assets. That money will mostly end up in the hands of the upper class. Then we will scream wealth inequality! Telling those disenfranchised middle class citizens that it was not us who created such a disparity... we are not the enemy. As China continues to destroy and hollow our economy, we will paint all dissenting politicians as crazies, surely China's unprecedented wealth did not came at our own cost. We need more free trade, more immigration, and more outsourcing."

> ... we will pass laws and make it easy to outsource all of the jobs ...

Not just laws. During the Reagan era, there were US government programs to promote outsourcing jobs. And to coach firms on how to do it.

That’s an interesting claim. I’d like to read more about it. Do you have a citation?

I can't find it now, but I recall an article about it from the mid 80s. A reporter, posing as an executive, attended a government-run training/conference. I think that it was Michael Moore, but I'm not sure.

> "Why did America listen to the people who thought we needed “more millionaires and more bankrupts?”"

Pardon my somewhat unorthodox HN tone but who is "America" here? I'll tell you who it's not...plenty of those who voted for the current POTUS.

There was - and still is? - an economic narrative that's pumped out of W.DC via the the corporate media shoveling machine. That spin is disconnected from the reality that plenty of people are experiencing.

Regardless of the static thinking of leading economists, those theories have been tested time and again, and the market has spoken. There's a dark sad irony to the NYT taking notice of reality; mind you it's merely an op-ed.

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