Is economics a science, or just a dinner-party? ....

TruckerT

.... let's face it. economists failed to prevent the recent melt-down(s), and appear to have no way of either predicting or influencing current and future events...

TruckerT

atush

Actually some economists did forcast the last few meltdowns but no one paid much attention.

Given I am funding my son's double honors degree in Politics and Economics I am rather hoping it isn't a load of hogwash lol.

the_flying_pig

Economics - art or science? is, I'm sure, a bog-standard GCSE/A level/undergraduate question. There are a whole bunch of arguments for and against. You'd need to start with a really good definition of what makes a science, no mean feat at all [e.g. does a science need to have experiments? does a science need to be able to predict?] - without this you'd be floundering around horribly. Even with a really good definition of a science you could still make the debate as robust or as poorly defined and superficial [hi, Hamish] as you wanted.

I'll take issue, though, with your statement, "economists failed to prevent the recent melt-down...". What you must appreciate is just how complex and unfathomable financial markets have become. You or I probably has only the faintest notion of what a collateralized debt obligation (CDO) or a credit default swap (CDS) is at even a high level but the fact is that there were actually very few people in the whole world who did properly understand the finer intricacies of these sorts of things. The people who understood them best worked in the banks, and you must appreciate what the incentives of these people were, namely to make as much money as possible in the shortest period of time possible. I very much doubt that any of them cared one jot for the consequences a few years down the line. I don't know what you think "economists" are, but something I can say categorically is that governments [much less for-profit organizations] don't pay good wages to employ zillions of people with a good understanding of economics just to keep an eye on things, to make sure the world is a better place. I very much doubt that the "economists" whose job it was technically, I suppose, to keep things on an even keel [at financial regulators?] were nearly numerous, skilled, or empowered enough to take on the vastly better resourced banks.

TruckerT

atush wrote: »

Actually some economists did forcast the last few meltdowns but no one paid much attention

You didn't have to be an economist to forecast the collapse of the housing market (which is where it all started) - but why were the economists unable to prevent it?

TruckerT

TruckerT

the_flying_pig wrote: »

I very much doubt that the "economists" whose job it was technically, I suppose, to keep things on an even keel [at financial regulators?] were nearly numerous, skilled, or empowered enough to take on the vastly better resourced banks.

I guess money talks louder than economists, then, or maybe the bankers and economists just don't meet socially

TruckerT

worldtraveller

IMHO it's been patently obvious, especially over the past few years, that the vast majority of todays economists have absolutely no comprehension whatsoever of what's been going on in the real world. They are largely ivory-towered employees, with little, if any, experience in commerce and business, especially on a global platform. As a result they have, on the whole, been so well wide of the mark with most of their their forecasts, as to be pretty pointless to anyone at all.

Thrugelmir

TruckerT wrote: »

but why were the economists unable to prevent it?

When hedge funds employed rocket scientists to perfect trading systems that they believed were infallible, why did they still fail?

olly300

TruckerT wrote: »

I guess money talks louder than economists

Yep.

You know what commonly happens to whistleblowers don't you?

Unless you are terminally ill, or rich enough not to work again (and can afford lawyers) sometimes it pays to keep your mouth shut.

TruckerT

worldtraveller wrote: »

they have, on the whole, been so well wide of the mark with their forecasts, as to be pointless to anyone at all.

I heartily agree with your conclusion, but I would blame not their inexperience, but the simple fact that their theories are not sufficiently developed to be useful in real-life situations

TruckerT

TruckerT

Thrugelmir wrote: »

When hedge funds employed rocket scientists to perfect trading systems that they believed were infallible, why did they still fail?

Ummm... pass! Is it because rocket scientists understand trading systems even less than economists do?

TruckerT

Thrugelmir

TruckerT wrote: »

Ummm... pass! Is it because rocket scientists understand trading systems even less than economists do?

Because when the perfect storm strikes and prices turn totally red across the all the exchanges boards without exception. There is only one outcome......... loss. As was the case in 2008.

Nobody had factored that event into the equations.