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Where is the dream team of economists to tackle the slump?
penguine
Posts: 1,101 Forumite
I thought this article was interesting. It gave me an insight into the world of economic theory, which I don't know much about and frankly wasn't very interested in until last autumn.
The success of Freakonomics and similar books tell their own story: until the crisis broke in 2007, it was assumed that the big picture was largely sorted and economists needed to concentrate on micro-economics, where much good work has been done, incidentally.
As a profession, economics not only has nothing to say about what caused the world to come to the brink of financial collapse last autumn, but also a supreme lack of interest in it. If, for example, you scroll down the list of papers scheduled for publication by the Review of Economic Studies, one of the prestigious UK journals, there is not the slightest sense that the world of general equilibrium and real business cycle models has been turned upside down in the past two years.
The big divide in economics is not between Keynesians and Hayekians, but between those who are interested in looking at the world as it is and those who are interested in how it would be if it conformed to the dictates of their mathematical models. The insights that Smith, Marx and Keynes brought to economics came not from differential calculus but from an attempt to understand what was happening during the early stages of the Industrial Revolution, the expansion of the mid-19th century and the Great Slump.
There are economists out there battling against the mainstream. Andrew Oswald, Amartya Sen, Robert Frank – you can take your pick of those who have insights into the way we live now. Paul Ormerod has written a series of books describing how general equilibrium theory has driven economics down a blind alley.
But it should be of concern that mainstream economics is disappearing up its own fundament, with the determination to see economics as a hard science crowding out a more nuanced and relevant approach.
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Comments
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an economist is someone who will tell you tomorrow why what they said yesterday didn't happen today.
t0ssers most of them"The problem with quotes on the internet is that you never know whether they are genuine or not" -
Albert Einstein0 -
the problem with mathematical models and a hoard of people following the same model is that it will be a self fulfilling prophecy. everything is hunky dory till someone does not follow how the model says they should be investing or managing their money. if everyone starts following what they 'should' be doing what the 200 day moving average suggests then the only people gaining will be the program traders and technicals followers. once in a while things go different when reality kicks in and instead of a hole in one they ball lands in the water. thats called life, too bad that cant be programmed into a machine.The big divide in economics is not between Keynesians and Hayekians, but between those who are interested in looking at the world as it is and those who are interested in how it would be if it conformed to the dictates of their mathematical models.
too bad quite a few of the economists havent learnt some basic common sense that you cant follow a policy of spending money that you dont earn and keep following the stupid deficit spending policy till eternity. sooner or later that policy is going to land us up shitscreek without a paddle.bubblesmoney :hello:0 -
!!!!!! and Wookie will save the day.Official MR B fan club,dont go............................0
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bubblesmoney wrote: »the problem with mathematical models and a hoard of people following the same model is that it will be a self fulfilling prophecy. everything is hunky dory till someone does not follow how the model says they should be investing or managing their money. if everyone starts following what they 'should' be doing what the 200 day moving average suggests then the only people gaining will be the program traders and technicals followers. once in a while things go different when reality kicks in and instead of a hole in one they ball lands in the water. thats called life, too bad that cant be programmed into a machine.
too bad quite a few of the economists havent learnt some basic common sense that you cant follow a policy of spending money that you dont earn and keep following the stupid deficit spending policy till eternity. sooner or later that policy is going to land us up shitscreek without a paddle.
well, my admitted fairly elementary book on economics tells me that there are economic cycles and refers to them as booms and busts.
explains the reasons for booms including too much borrowing etc and the inevitable bust.
seems about right, common sense supported by a bit of mathematics
seems to me its not economists that have no common sense that all those practical business men (rediculous overpriced take overs etc) , bankers (rediculous lending etc) , and consumers (rediculous borrowing etc) that take no notice of them.0 -
As a trained economist, though not a professional one, I am of the opinion that economics is a bit like meteorology -- better than nothing but don't bet your house on it. In both cases experts are trying to grapple with scenarios of immense complexity, in an ever changing environment. Predictions are more often that not correct in terms of general direction, but can be way off in terms of degree and timing. Economists have the added difficulty that people expect them to take (or recommend) actions (whereas for meteorologists this does not extend beyond "Hold the BBQ, and take a brolly".) I'm not necessarily trying to defend economists -- like all professions there are no doubt some t***pots, and also some genuises. But it's not an exact science. Most importantly, since it is mostly politicians who are respsonsible for listening to the advice and then taking prompt and objective action ............ need I say more ?No-one would remember the Good Samaritan if he'd only had good intentions. He had money as well.
The problem with socialism is that eventually you run out of other people's money.
Margaret Thatcher0 -
I thought this article was interesting. It gave me an insight into the world of economic theory, which I don't know much about and frankly wasn't very interested in until last autumn.
economists are better at explaining and telling us how things and why things happened in the past rather than predicting them.
in saying that they'll be better at doing it than anyone on this forum.0 -
Can't you just make a point without being personal or baiting ?, whether you agree with !!!!!!? or Wookie, they have contributed a lot more to the discussion on the board than the likes of yourself.
Ad - i don't believe that we have issues and swap viewpoints and discussions frequently.
why don't you reprimand Mewbie and the Downey entourage if you're going to mention "make a point without being personal or baiting"? Because all they've done in the past few weeks/months is just that.
because just like i have we've taken a good thread off topic unnecessarily...
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GeorgeHowell wrote: »As a trained economist, though not a professional one, I am of the opinion that economics is a bit like meteorology -- better than nothing but don't bet your house on it. In both cases experts are trying to grapple with scenarios of immense complexity, in an ever changing environment. Predictions are more often that not correct in terms of general direction, but can be way off in terms of degree and timing. Economists have the added difficulty that people expect them to take (or recommend) actions (whereas for meteorologists this does not extend beyond "Hold the BBQ, and take a brolly".) I'm not necessarily trying to defend economists -- like all professions there are no doubt some t***pots, and also some genuises. But it's not an exact science. Most importantly, since it is mostly politicians who are respsonsible for listening to the advice and then taking prompt and objective action ............ need I say more ?
Very succinctly put. The meteorology comparison is a good one; much as a meteorologist is dealing with the outcome of an uncountably huge set of variables, economists are trying to model the financial behavior of over six billion people. It's very much a case where chaos theory applies, though unfortunately that doesn't promise much in the way of predicting things.0 -
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