Do Economists have the answers?

Written By: - Date published: 7:40 am, June 9th, 2012 - 372 comments
Categories: Deep stuff, economy - Tags: , ,

Most economists seem to be stuck in an an orthodoxy rut, leading many to wonder why we take economists so seriously:

Why all this panic, though? Aren’t economists in charge of it all? Yes. And this is the problem. These highly skilled people carry on, though they exhibit not only a lack of foresight but an astonishing lack of hindsight. Why on earth are they taken seriously when they keep getting things wrong? […]

Economics is not a science; it’s not even a social science. It is an antisocial theory. It assumes behaviour is rational. It cannot calculate for contradiction, culture, altruism, fear, greed, love or humanity at all. […]

This is economic sense as it is practised by the deliberately dumb, those who bow down before the calculation that we can have even Spanish levels of youth unemployment (40%-50%) if it reduces the deficit by the next election. Meanwhile, if you have a job, do save up for your pension, because they have gone down the pan.

“Orthodox” economics has led to the incredible increase in inequality, and to the Global Financial Crisis and Great Recession.  Now the same economists want to tell us that the only way out is for us to all tighten our belts – even though their solution defies history.

As Paul Krugman puts it:

“My spending is your income, and your spending is my income. If both of us try to slash our spending at the same time, then we are also slashing our incomes, so we don’t actually end up saving more.”

“Ending this depression,” he writes, “should be, could be, almost incredibly easy. So why aren’t we doing it?”

As Ha-Joon Chang of Cambridge University shows us, history knows austerity doesn’t work – in the Great Depression, the 1982 developing world debt crisis, the 1994 Mexican crisis, the 1997 Asian crisis, the Brazilian and the Russian crises in 1998, and the Argentinian crisis of 2002.

On cutting social spending:

From 1945 to 1990, per capita income in Europe grew considerably faster than in the US, despite its countries having welfare states on average a third larger than that of the US. Even after 1990, when European growth slowed down, countries like Sweden and Finland, with much larger welfare spending, grew faster than the US.

On tax cuts for the rich ‘wealth creators’, and deregulation for business:

this was tried in many countries after 1980, with very poor results. Compared to the previous three decades of higher taxes and stronger regulation, investment (as a proportion of GDP) and economic growth fell in those countries. Also, the world economy in the 19th century grew much more slowly than in the high-tax, high-regulation era of 1945-80, despite the fact that taxes were much lower (most countries didn’t even have income tax) and regulation thinner on the ground.

The argument on hiring and firing is also not grounded in historical evidence. Unemployment rates in the major capitalist economies were between 0% (some years in Switzerland) and 4% from 1945-80, despite increasing labour market regulation. There were more jobless people during the 19th century, when there was effectively no regulation on hiring and firing.

Where Keynesianism has worked, instead orthodox economics leads us into a spiral of recession, and a continuing wealth transfer from the many to the few.  We end up with programmes like the UK’s where jobseekers are forced to work for private companies for free as “work experience” – or risk losing their dole. Which has ended up with stories like the bussed-in unpaid guards of the Queen’s Jubilee River Pageant being forced to sleep rough under London Bridge before a 14 hour rain-drenched shift in a plastic poncho, and then being abandoned in the dark in North London to camp out in the rain.

And stories of how the public sector cuts are hurting those who are already vulnerable.  (Will we get such stories in our papers?)

Michael Meecher, UK Labour MP has an alternative source of funding for the public sector plus a stimulus.  If the richest 1000 people in Britain (the 0.003%) paid a capital gains tax on the £155bn increase in wealth they’ve had since the GFC, there’d be a fund to create 1.5 million jobs.  That would really kick-start their economy.

There are other economists who think that the likes of Paul Krugman and other neo-Keynesians – while better than the Austerions – still have it wrong.  Professor Steve Keen would have a Jubilee bond to break us out of the debt that he suggests is the cause of stagnation, deflation and depression.  Essentially instantly inflating us out of the problem, there still seems a fairly strong consensus of the need for greater regulation and less cheap debt among the non-Austerions – versus those who are just desperate to get us back to Business As Usual.

But whether Business As Usual is moral is a question we need to ask:

Do we want a society where 50% of young people are kept out of work in order to bring the deficit down from 9% of GDP to 3% in three years? A society in which the rich have to be made richer to work harder (at their supposed jobs of investing and creating wealth) while the poor have to be made poorer in order to work harder? Where a tiny minority (often called the 1% but more like the 0.1% or even 0.01%) control a disproportionate, and increasing, share of everything – not just income and wealth but also political power and influence (through control of the media, thinktanks, and even academia)?

I hope to hear discussion of all these ideas from some of New Zealand’s more free-thinking economic types at The Voyage tomorrow.  Bernard Hickey certainly has some different ideas on how to structure our economy; Rod Oram is no fan of Bill English’s slash, burn and sell economics; and Rick Boven recognises the importance of the environment in our (and the world’s) economic future, as we pass tipping point for our unsustainability…  It should be a great event.

372 comments on “Do Economists have the answers?”

  1. BLiP 1

    .

    First the lawyers – then the economists.

  2. I saw somewhere a long time ago: Economists were invented to make weather forecasters look good.

    Apologies to my son-in-law, who is an environmental economist. Maybe that deserves it’s own quote.

    Environmental economists were invented to save the world, economically?

    • mike e 2.1

      Pathetic and Gullible.Economists spin their pay masters propaganda economic research has advanced considerably since modern computers have arrived.
      That research is ignored mainly by the right wing and belittled by ignorant little twirps like your self who want people to put that research in a bad light so those in power can carry on fucking this country over.
      PG you are part of the problem
      Start reading about economics before you make your pathetic throw away comments no originality there no surprises!

  3. DH 3

    I’m not so sure that economics is an anti-social theory. I think it’s more that many economists are anti-social, perhaps even amoral, people. There are those who do postulate economic theory in a more moral framework and their views are often very different to the ‘orthodox’. I think economists can be lumped into two categories; those with a social conscience and those without one (there doesn’t seem to be an in-between)

    Economics is ultimately about people and how we behave collectively as a group, if the formulation of economic theories isn’t underpinned by the basic concept of right & wrong then we’ll get the kind of crap we’ve had from economists this last 30years or more.

    To sum that briefly; I think perhaps the real problem is that too many economists are just arseholes. Maybe the study of economics attracts too many of the wrong type of people.

    • Draco T Bastard 3.1

      Economics is ultimately about people and how we behave collectively as a group, if the formulation of economic theories isn’t underpinned by the basic concept of right & wrong then we’ll get the kind of crap we’ve had from economists this last 30years or more.

      Economics is about supporting society in its social endeavours from the resources that that society has available to it. Unfortunately, the economists and capitalists have made it so economics is now about profit and nothing else. When that happens we get poverty and a collapsing society.

  4. tsmithfield 4

    It isn’t economists that have got us into this mess. It is the basic human condition of wanting more than can actually be afforded. Politicians tend to feed into this condition because it gets the reelected.

    Various ingenious schemes have been developed to facilitate the resulting excess. However, all that happens is that a progressively deeper hole is dug. Eventually, austerity is the only option, since borrowing further money is no longer an option. Unfortunately, sometimes the austerity is so severe it ends up killing the patient.

    Greece is an extreme example of this phenomenom. For instance, when people in “arduous” occupations in Greece can retire at 50 and 55 for women and men respectively, and when multitudes of occupations such as hairdressing and radio announcing can get classified as “arduous”, then it seems clear the country is headed for trouble. Especially when Greece simply doesn’t generate the income to pay for this sort of excess.

    Eventually, the US will also find themselves in a similar situation. Sure, they are a reserve currency and can print as many USD as they like. However, this will just result in the true currency, commodities, becoming exponentially more expensive, since, unlike USDs, many commodities are finite. So, eventually there will be no way out, other than austerity, even for the US.

    • ianmac 4.1

      On the other hand TS, maybe if the top Rich Greek 10% paid any tax at all, maybe the hairdressers and street sweepers would be better off. Same in NZ.

      • tsmithfield 4.1.1

        True. Read the article. Tax avoidance is like a sport in Greece. Not just for the rich ones either, if you read the article. Its all part of the same condition I mentioned above. Wanting more than can actually be afforded. Cheating on tax allows people to consume more, while still expecting the government to front up with early retirement etc.

      • mike e 4.1.2

        ianmac I thought all these short sighted right whingers would be on the first plane to Athens.
        As it is their god given right to pay no tax.

      • Rodel 4.1.3

        ianmac: nail on the head.well said

      • joe90 4.1.4

        Without the tax exempt status of the oligarchy things would be different.

    • RedLogix 4.2

      So if we all slash our expenditure to zero smitty we will all be rich beyond our wildest dreams eh?

      • tsmithfield 4.2.1

        “ianmac I thought all these short sighted right whingers would be on the first plane to Athens.
        As it is their god given right to pay no tax.”

        I believe the amount of tax paid to equal or exceed the amount the government spends, other than for borrowing for long-term expenditure such as infrastructure which is funded over a number of generations.

        Do you believe the same, or do you believe governments spend more than they earn indefinitely until they can’t borrow any more?

        “So if we all slash our expenditure to zero smitty we will all be rich beyond our wildest dreams eh?”

        See my comment above. I suspect you probably would think the same. I suspect the only difference would be where we think the levels of taxation and government expenditure should be. As a right winger, I see that the market largely left to itself will result in prosperity for most, although the government can have a role in smoothing out the peaks and troughs. From my perspective, the role of government should be a lot more limited than what it currently is. I suspect you might believe there should be more government control and more taxation.

        When it boils down though, I expect we would both believe that spending more than what is earned indefinitely is nuts.

        • felix 4.2.1.1

          “As a right winger, I see that the market largely left to itself will result in prosperity for most”

          Ah, you “see” it. Tell me, where do you “see” it?

          • mike e 4.2.1.1.1

            Felix Kim Hill was talking to David Schilling this morning. The Silly Monetarist you should have a listen and widen your patheticly narrow blinkered propaganda view.
            Thank god less than 1% beleive in your leave the market to itself bullshit.
            Show me a successful economy thats done that and I’ll march from bluff to cape reinga naked in winter.

            • Rodel 4.2.1.1.1.1

              Felix / mike e
              I also listened to David Skilling a so called economist with amazement.this morning on RNZ.
              Kim Hill, brilliant but too subtle showed him up to be a well paid bull artist who can string together so many meaningless cliches that he almost sounds plausible and probably command high fees from easily impressed politicians.
              The only thing he said of any consequence was that we should be using our people to add value to primary products. Something Dr Sutch said decades ago.Ho..hum….At least he didn’t claim it was his original idea.

              Otherwise it was just like listening to another Amway wannabe.
              Are they all like that?

        • mike e 4.2.1.2

          The Stupid Moneterist The sarah palin school of home spun bullshit economics .You obviously have never read anything more tan an Act political pamphlet.
          I’ve read more on economics than you’ve had hot breakfasts.
          Naive right wing nut job.

        • Kotahi Tane Huna 4.2.1.3

          Felix has got you there TS: come on, where is this magical place that you “see”?

          Surely the people who spun the story you are repeating didn’t expect you to believe them without so much as a single real-world example, did they?

          • tsmithfield 4.2.1.3.1

            Show me somewhere that the market has been left largely to itself without unnecessary interference from government.

            • felix 4.2.1.3.1.1

              No tsmithfield, you claimed you could see it so you show it.

              • tsmithfield

                There are plenty of examples of the opposite. Where governments push their sticky beaks in where they’re not wanted. But, if left to the market, things would have been much better.

                Unfortunately, governments don’t seem to be willing to tolerate the short-term pain that can result when the market is left to itself, and so think they can do better through artificial means that end up exacerbating the problem.

                • felix

                  So what? You said you can “see” it, not that you could point to something completely different.

                  I don’t think you can “see” it at all, I think you can imagine it.

                  • bbfloyd

                    TS “imagining” it?? i think you may be giving him too much credit for thought….

                    it’s fun watching him try to wriggle of his petard though…..

                • Colonial Viper

                  Unfortunately, governments don’t seem to be willing to tolerate the short-term pain that can result when the market is left to itself, and so think they can do better through artificial means that end up exacerbating the problem.

                  Global markets are controlled by perhaps 50 large institutional players.

                  And they aren’t in the game to help you and me; they are in the game to maximise the bonuses of their executives.

                  The ideal solution: force these players back to boring, sleep inducing, cost plus, low profit margin vanilla banking and financing.

                • Draco T Bastard

                  And we’ve got the entire 19th century to prove that low regulation and taxes doesn’t produce nirvana.

                • Foreign Waka

                  TS I have been following this conversation and cannot help but to give comment. Especially if you say the government is not willing to tolerate short term pain.
                  The last time I looked, we were called a democracy. It is true that a consensus policy is not everyone’s cup of tea. But given the alternatives, is by far the better way. So in that sense the government are WE, all of us. As long as the middle class and poor outnumber the well and very well off the scale will have to tip towards no pain. Because it will be the middle class and poor ones experiencing the pain, certainly not the upper classes. And wasn’t NZ suppose to be the place where these class structures will no longer apply? Really?
                  The so called market with its invisible hand has done enough damage, thank you very much. It is time for a change and one where the next generation can participate and realize their dreams without having to fear where their food is coming from or whether things will ever improve. Human beings are not cattle as economist have the tendency to see the wider population as “units” who “produce” and the “outcome” will be measured. God forbid we do not run and produce fast and cheap enough the sky will fall. And yet these people are creating our reality, how ridicules.

            • Te Reo Putake 4.2.1.3.1.2

              I think I’ve found it! Two decades without any of that pesky gummint interference and, voila!, we has launched a laundromat.

              • prism

                The Somalian man is an example of how we can survive in NZ after we have escaped being drowned or suffocated in milk products and the commerce of NZ has declined. Providing services to the wealthy will get us going again. Keep your local wealthy under surveillance, don’t let them escape, they may have a use they never imagined as they go about their business buying up land, speculating, selling vehicles, selling alcohol, distributing pokie profits to sporting clubs etc. All that job creation!

            • Kotahi Tane Huna 4.2.1.3.1.3

              What Felix said. Stop trying to weasel out TS: you are the one with the preposterous claim. Is it supported by a single real world example, or not?

              • tsmithfield

                As mentioned, I don’t think there is a pure real world example of the market being left to itself. And I did say that I believe that governments can perform a role in smoothing the peaks and troughs.

                I would tend to subscribe to the invisible hand theory of market behaviour. Examples of how the market can contribute to prosperity in a country are when corporations invest in low cost economies to benefit from the low wages in those countries. Eventually, wages rise, and the overall economy improves. The likes of Japan, Taiwan, and South Korea, and even NZ recently with Australian businesses setting up jobs here, are examples of this type of effect.

                • felix

                  “As mentioned, I don’t think there is a pure real world example of the market being left to itself. “

                  Then stop saying you can see it, dick.

                  The word you’re looking for is “imagine”.

                • Kotahi Tane Huna

                  “…even NZ recently with Australian businesses setting up jobs here…”

                  So the way to increase wages is to slash wages. They don’t call it “fucking delusional” for nothing do they? I have a better idea – let’s make sure no-one who espouses these fantasies gets paid more than minimum wage ever again. It’s performance-based pay for you from now on.

                  How could you possibly argue that you are worth more than you begrudge to others?

                  • tsmithfield

                    “So the way to increase wages is to slash wages.”

                    I guess from the perspective of the workers, it has to be better than what they are doing now, or otherwise they wouldn’t take the jobs. So, do you begrudge these workers being better off than what they were previously?

                    • Draco T Bastard

                      Meanwhile the workers in Australia are unemployed. All your policy setting have done is move jobs from one place to another making both sets of workers worse off and this is exactly what we’ve been seeing from free-market economics for the last two centuries.

                      Increased productivity in a profit driven free-market environment must result in three things:
                      1.) Over production
                      2.) Deflation and
                      3.) Poverty
                      as the overproduction swamps the market and the capitalists, in an effort to protect their profits, lay off workers.

                • tsmithfield

                  “Then stop saying you can see it, dick.”

                  I haven’t said that once in the posts I have made here today. Its just you creating a strawman argument again as usual.

                  • Kotahi Tane Huna

                    TS: “As a right winger, I see that the market largely left to itself will result in prosperity for most,”

                    Memory not too flash is it? That was little more than three hours ago.

                    You said you “see” it – and then once you were challenged, you admitted that you “see” no such thing. So, why do you swallow this bullshit? It’s not like you made it up yourself. Critical faculties impaired along with the memory?

                    • tsmithfield

                      I never said there was a real world example of a pure market economy, which is what Felix accused me of saying.

                      Even in the quote you gave from my first post, I qualified my statement with the word “largely” in case you didn’t notice. I also said that there was a role for government in smoothing out the peaks and troughs in a market economy. So, I have never advocated for “pure” market conditions or suggested they exist.

                      However, I have provided examples of where over-regulating the market causes problems, and examples where countries have benefited from a market-type economy being expanded within a country.

                    • Kotahi Tane Huna

                      You’re still not off the hook. As I said below – you have defined “prosperity for most” as the benchmark – so go on, follow the money – which countries deliver prosperity to most? Are they following your policy prescriptions?

                      Are they fuck.

                    • tsmithfield

                      Let me ask you.

                      Where would you rather live. South Korea or North Korea?

                    • felix

                      “I never said there was a real world example of a pure market economy, which is what Felix accused me of saying.”

                      No I didn’t tsmith you miserable liar. I accused you of saying you could “see” it, which is exactly what you said.

                      Why don’t you just stop digging and admit that when you used the word “see” you used it in the sense that means “imagine”?

                    • tsmithfield

                      Rubbish:

                      Here is your post, including what you quoted from me:

                      “As mentioned, I don’t think there is a pure real world example of the market being left to itself. “

                      Then stop saying you can see it, dick.

                      The word you’re looking for is “imagine”.

                      When you said “Then stop saying you can see it, dick” it was clearly in answer to the statement you quoted from me. Your answer, as would be understood by anyone with at least one brain cell, implied that I had said that I could see a pure market operating efficiently by its own devices. I never said such a thing. You are the liar, not me.

                    • felix

                      That’s quite inventive of you Tarquin, but guess what. When I said “stop saying you can see it” I was actually referring to, wait for it….. drumroll…..

                      …the bit where you said you could see it.

                      You. Fucking. Moron.

                    • felix

                      Actually, seeing as how you’ve not only tried (and failed) to shift the goalposts several times already, but also flatly denied saying what everyone can see you said, let’s start again.

                      As a right winger, I see that the market largely left to itself will result in prosperity for most

                      What do you mean by “see”, Tarquin?

                    • tsmithfield

                      You are just trying to back pedal to extricate yourself.

                      Quite clearly, when using the word “see” in the context of an economy, or some abstract concept it is not being used in the same way as “I can see a car driving down the road”.

                      In the former case, the word “see” implies an ability to visualise, or grasp a concept. This should be obvious to even you. So I don’t know why you are making an issue of it.

                    • As a whatever-I-am-called-on-this-blog I question that quote too. I think it likely that “the market largely left to itself” will not serve a decent society well, and will result in greed induced messes.

                    • Kotahi Tane Huna

                      TS, North Korea follows your economic model – the strong feeding on the weak, and yet you are still not off the hook because your benchmark is “the most prosperity to the most people” – not some cherry-picked strawman.

                      Answer the question: which countries deliver the most prosperity to the most people? Are you even prepared to accept the results of your own test?

                    • felix

                      “You are just trying to back pedal to extricate yourself.”

                      Not at all. I’m re-stating what you originally said as you seem to have pretended to have forgotten.

                      “Quite clearly, when using the word “see” in the context of an economy, or some abstract concept it is not being used in the same way as “I can see a car driving down the road”.”

                      Not necessarily. You could have been referring to something that actually exists, but you weren’t. Which is exactly what I’ve been implying.

                      “In the former case, the word “see” implies an ability to visualise, or grasp a concept.”

                      Yes. An imaginary idea. Not a real thing that exists, but an idea. Something in your mind. Finally we get there. Clap. Clap. Clap.

                      “This should be obvious to even you. So I don’t know why you are making an issue of it.”

                      It’s very obvious to me Tarquin, as I’m sure it is to everyone else. And it wouldn’t have become an issue at all if you had just answered the question honestly all those hours ago. Dick.

                    • tsmithfield

                      “Not at all. I’m re-stating what you originally said as you seem to have pretended to have forgotten.”

                      Yes you are.

                      Here is what you said:

                      “Then stop saying you can see it, dick.”

                      If your explanation was correct you would have omitted the word “it”. However, you did include the word “it” which refers directly back to the quote from me that you included in your post.

                      So, stop being a fuck wit.

                    • tsmithfield

                      “TS, North Korea follows your economic model – the strong feeding on the weak…”

                      Very poor thinking on your part. North Korea is the very extreme of state control which is the exact opposite of a free market. So, what you are in effect arguing is that the more a state exerts control over its citizens, the more its wealth is concentrated in a few. I would agree with that.

                      Lets see what the satellite says about relative prosperity between South Korea and North Korea.

                      The relative spread of lights tells me that South Koreans on average are much more prosperous than North Koreans. South Korea is much closer to the free market end of the scale than North Korea and appears to be much more prosperous across the board, if the spread of lights is any indication.

                    • felix

                      Oh tsmithfield. Even for you that’s so very sad. Even for you.

                      I suppose if you’re lucky no-one will bother scrolling up to see who told the truth. Good luck with that, dick.

                    • Kotahi Tane Huna

                      “Very poor thinking on your part. North Korea is the very extreme of state control which is the exact opposite of a free market.”

                      Bullshit. North Korea isn’t a “State” it’s a rich man’s play thing – precisely what you would make of New Zealand. Is the Randian superhero in charge of North Korea subject to excessive state regulation?

                    • tsmithfield

                      “Bullshit. North Korea isn’t a “State” it’s a rich man’s play thing…”

                      Call it what you like. But it is absolutely nothing like the free market that I was espousing. So, you can’t use it as an example of the free market concentrating wealth in the hands of a few. In fact it is the case of extreme intentional control concentrating the wealth in the hands of a few.

                      South Korea is much closer to that free market concept and has much more prosperous citizens than the North as a result.

                    • Kotahi Tane Huna

                      Are there any countries in the world that do an even better job of “prosperity for the most people” than South Korea? If so which and what sort of economic policy settings do they have?

                      Your claim that the freer the market the more prosperous the country doesn’t hold water, and is contradicted by the real world. Can you cope with that? Or do you prefer to only consider the differences between North and South Korea. Cherry picking much?

                    • Draco T Bastard

                      But it is absolutely nothing like the free market that I was espousing.

                      It’s nothing like what you believe the free market to be. Reality, where most people are made worse off and a few get to do what they like by free-market ideology, shows that you are wrong in your beliefs.

                • DH

                  “I would tend to subscribe to the invisible hand theory of market behaviour. Examples of how the market can contribute to prosperity in a country are when corporations invest in low cost economies to benefit from the low wages in those countries. Eventually, wages rise, and the overall economy improves. ”

                  I’m sure many residents of Bhopal would disagree with that.

                  You only need think about it for a while to see how shallow the ‘invisible hand’ argument is. The cornerstone of the free market is the rule of law, every free-market economist admits that. Without it you get the likes of Somalia. But law can’t work without a strong & cohesive set of social mores.

                  If people don’t believe in the tenets of law then law itself becomes a part of the market; up for sale to the highest bidder. It’s generally known as corruption and is endemic in countries that are more market driven than we are. Why would a free-market Policeman or bureaucrat work for (low) wages defending the law when the market is prepared to offer them more?

                  In essence if a society doesn’t have a collective morality then we won’t have the rule of law and the market won’t work for the betterment of society either. But if we do have that morality then we won’t accept poverty or exploitation or corruption & all the other things that are what we perceive as ‘wrong’ with free market dogma.

            • Huginn 4.2.1.3.1.4

              @ tsmithfield, 9 June 2012 at 10:56 am

              ‘Show me somewhere that the market has been left largely to itself without unnecessary interference from government.’

              Somalia

              • tsmithfield

                You forgot about the word “unnecessary”. Sometimes governments do need to intervene. I also believe that a government needs to provide for security and safety of its citizens. So, Somalia wouldn’t be a good example. However, the invisible hand effect of the market as I outlined above may eventually lift Somalia out of poverty.

                • Kotahi Tane Huna

                  No, Somalia is a perfect example of your inhuman dogma writ large. A very few citizens have made themselves extremely wealthy – nothing but the same old story of the strong feeding on the weak, and after all, that’s exactly what the text book says is their destiny, isn’t it?

                  • tsmithfield

                    Somalia is a terrible example of a market economy.

                    Don’t you realise that a strong market is needed for socialism to exist. Otherwise there is nothing to tax and redistribute.

                    The invisible hand theory of the market might result in corporations setting up in Somalia to take advantage of cheap labour. As more corporations do this, the demand for labour will increase, increasing wages as a result. Eventually, there will be enough income within the economy for service industries to arise, etc. Eventually, people, generally would be better off as a result of the market.

                    But for this to work, a government capable of enforcing law and order would be required. I don’t see that at the moment in Somalia.

                    • Kotahi Tane Huna

                      “Free” markets enslave and exploit people. The only circumstances in which they can provide the prosperity you mention is when they exist in tandem with strong democratic governments.

                      You set prosperity as the benchmark – so which countries are prosperous? Do any of them follow the policies your fantasies dictate?

                      Yes, that’s right, the opposite of your silly notions isn’t “soc1alism”, it’s democracy.

                    • tsmithfield

                      So you and I don’t really differ that much, do we. We both see the benefit of a market economy alongside appropriate governmental controls. The only aspect we differ on is the degree of control a government exercises.

                      “You set prosperity as the benchmark – so which countries are prosperous? Do any of them follow the policies your fantasies dictate?”

                      I have given examples where excessive governmental control over the market has been to the detriment of citizens. I have also given the example of emerging economies where prosperity is increasing due to market forces. China is another good example where a more market oriented approach has been adopted and prosperity is increasing. Although, the Chinese government has also taken action to smooth the substantial trough that has hit the world economy over recent years.

                    • Kotahi Tane Huna

                      Yes, I have noticed that in the real world, the prosperous countries are the ones that reject your policy prescriptions, and since you are the one who wants “prosperity for most” I am pointing at the massive cognitive chasm, and wondering if you really want “prosperity for most” at all.

                      Your formula in fact delivers “prosperity out of all proportion to a tiny few” – that’s all it’s ever done, and therefore I suspect your stated aims are little more than window dressing.

                      If you said “this policy will make me and a few of my mates rich and the rest of you can starve for all I care”, your politicians wouldn’t get elected. When you can’t tell the truth what’s left?

                      PS: government spending -32% of GDP in 1999, 32% of GDP in 2008, 35% of GDP today. You don’t even support the party your own benchmarks indicate. Reality intruding on your reverie?

                    • RedLogix

                      China has prospered mainly because it’s tightly state-controlled banking sector has been allowed to fix the value of it’s currency well below it’s true value gaining an unfair competitive advantage.

                      Besides if you read the article you linked to ts, it doesn’t really say what you claim it does.

                    • vto

                      I know where there is an example of an unregulated market place for you to “see” tsmithfield, but it is just a very small part of a wider economy. A microcosm of what you are claiming. But seeing as a real world example has never been tried except in Somalia, this is best example there is. It is the finance sector of the economy. And doesn’t it serve the populace well. Like the leaky house building sector and the mine safety sector. Yep we can certainly trust ourselves to do things well under a hands-off approach.

                    • Draco T Bastard

                      Don’t you realise that a strong market is needed for socialism to exist. Otherwise there is nothing to tax and redistribute.

                      Wrong, so very, very, wrong.

                      Communities always start off as commun1st. Once the commun1st system starts to work and the community becomes wealthy (effectively once the community is no longer struggling and has grown bigger than the couple of hundred that allows everyone to know everyone) then capitalism takes over and destroys it.

                      As for the second sentence – the wealth existed before money or taxes did thus we don’t need either. The community, acting collectively and not through dictators, decides what wealth (resources) needs to be collected and what can be done with them. Those resources are then directly distributed to where they need to go.

                      As more corporations do this, the demand for labour will increase, increasing wages as a result. Eventually, there will be enough income within the economy for service industries to arise, etc. Eventually, people, generally would be better off as a result of the market.

                      And yet this didn’t happen in the 19th century where those condition existed.

                    • Colonial Viper

                      Don’t you realise that a strong market is needed for socialism to exist. Otherwise there is nothing to tax and redistribute.

                      Uh, minimal redistribution is needed if the people own and control the commercial enterprises that they work in eg. as workers co-operatives.

                  • tsmithfield

                    “Communities always start off as commun1st. Once the commun1st system starts to work and the community becomes wealthy (effectively once the community is no longer struggling and has grown bigger than the couple of hundred that allows everyone to know everyone) then capitalism takes over and destroys it.”

                    So, why has China moved away from centralised control to a more market oriented economy?

                    • Draco T Bastard

                      Probably because state capitalism doesn’t work*. Doesn’t mean that slightly decentralised capitalism works though.

                      * The Peoples Republic of China has never been commun1st.

            • Kotahi Tane Huna 4.2.1.3.1.5

              Sweden. A good example of necessary participation in the economy by the government, leading to prosperity. There you go TS I’ve found your prosperous country, and it fits your description of having “no unnecessary interference”, since the government has done precisely what is necessary to ensure prosperity for as many citizens as possible.

              I agree with you. let’s implement similar policies here.

              Or did you have somewhere else in mind? Come on, it’s not that hard to find your Randistan, surely.

              • I just wish that RWNJs would realise and acknowledge that when we (leftys) talk about better societies we are referring to Sweeden and not to North Korea.

                It is really dishonest for them to suggest we want a North Korean type society.  We don’t.  None of us.  Even the most insane of us. 

                • Kotahi Tane Huna

                  Yes, it’s hard to imagine there could be two Roger Douglas types in the space of a generation.

              • Foreign Waka

                NZ used to try to be on the same level as Sweden but that has been utterly abandoned with National coming to power. NZ is now following the US model “all for one, none for anybody else”.

    • It isn’t economists that have got us into this mess. It is the basic human condition of wanting…

      …more than they deserve
      …more than they need
      etc

      Free market doesn’t work because of it.
      Socialiam doesn’t work becasue of it.
      Government dominance doesn’t work because of it.

      So we keep trying to find the right balance of freedom and regulation and equality and power.

      And those who argue for one extreme or the other will always be far more disappointed (and disappointing) than the pragmatists striving for the most practical balance.

      • Pascal's bookie 4.3.1

        And those who argue for one extreme or the other will always be far more disappointed (and disappointing) than the pragmatists who cut the baby in half.

      • felix 4.3.2

        That’s not how you spell “parasites”.

        Or “personal ballast”.

        • Pete George 4.3.2.1

          Who are the parasites – those who exploit others to get more than they need? Or those who live off the efforts of others? Exclude kids from the latter, they’re expected to be supported.

          • felix 4.3.2.1.1

            In this instance I assumed the “pragmatists” you refer to are those who place themselves in the political process for no tangible reason other than self-serving ones.

            For instance an independent MP who claims in public to be keeping the govt honest or balanced or some such, but in reality never withholds his supporting vote, no matter what the issue, and therefore can not be shown to serve any such function.

      • bbfloyd 4.3.3

        a wiffle, a waffle, a wiffle….. little pete does the tory tango so well…

      • Foreign Waka 4.3.4

        You are right for 20% of the population that none of the options work. These are the ones who belief that the are answerable to no one.
        I belief that most people care and don’t want to live in a community that ends up with no empathy but want an intrinsic knowledge of a continuation of a fair and free society across generations. It is the way this is translated by the head of state- whoever that is- that makes the difference. If, as we constantly hear, the beneficiaries are the ones making us all poor, many will at least think about it. And yet these are the people who will need our empathy and help. No one is suggesting that there is no responsibility involved, but this also applies to the non tax paying wealthy. Where I come from we call this: ” the fish stinks from the head”. And so it is.

    • Draco T Bastard 4.4

      Eventually, austerity is the only option, since borrowing further money is no longer an option.

      The government should never borrow money and the people should never need to.

      Greece is an extreme example of this phenomenom. For instance, when people in “arduous” occupations in Greece can retire at 50 and 55 for women and men respectively, and when multitudes of occupations such as hairdressing and radio announcing can get classified as “arduous”, then it seems clear the country is headed for trouble. Especially when Greece simply doesn’t generate the income to pay for this sort of excess.

      Load of bollocks. No country needs a monetary income, it just needs to distribute its own resources correctly (and, yes, that means population control). What we’re seeing with the orthodox economics that you support is maldistribution of those resources causing poverty.

    • muzza 4.5

      Showing yet again what little you know about monetary supply, and actual financial world affairs! Try some reading, it will do you know end of good!

      It is sweet FA to do with the average Greek, but I think you know that, and just can’t handle the facts its the “capitalists”, read fasc*sts, who have really created the global situation..

      So unless thats what you are TS, you get an out, cos its not technically “your team” who have created the problem, nor was it the “left”

    • seeker 4.6

      @tsmithfield 9-6-12 9.43 am

      “It isn’t economists that have got us into this mess.”

      I am sure Milton Friedman was an American Economist.

  5. captain hook 5

    the purpose of economists is to make astrology look good.
    J.K. Galbraith.
    Mostly the only thing economists make is doo doo in the morning.

  6. just saying 6

    Excellent post Ben.
    I just wish I was confident that phenomena like “The Voyage” might provide some part of a solution.
    More than happy to be pleasantly surprised.

  7. Kotahi Tane Huna 7

    A modest proposal: that Treasury economists are paid according to their economic philosophy. The neo-cons, for example, should accept performance based-pay with no minimum hourly rate. They can earn their salaries by providing accurate forecasts, and lose wages when (not if) they fail.

    That should sort the problem out by lunchtime.

    • Draco T Bastard 7.1

      +1

      Give them a reason to question their ideology.

    • +2

      Those that live by the market should die by the market … 

    • muzza 7.3

      But its not set up to work that way is it…

      Central Bank Cartels see to that!

      • Kotahi Tane Huna 7.3.1

        There’s a job for you then – advocating for Treasury employees at their quarterly pay assessments. All you’ll have to do is provide the evidence and they’ll be off the hook.

  8. prism 8

    Great. I like the statement on the Voyage invitation that the event is honouring distinguished guests with complimentary beverages. It would be a cute idea that could be patented and exported, to have a small chip with a covering which would be activated by liquid when dropped into a glass which would pop up and say things like “We welcome you”, or Thank you for being here, or Your presence will make our event the best or We hope you will enjoy our event”. Or they could have something more pointed and humorous etc.

  9. Plan B 9

    I think that in order to understand the England you need to view it more like a disease than as a country. When we choose to have the English run Treasury and our education departments we need to look at it as an infection.
    The interesting idea that was raised to me when I mentioned the English infection of these two departments was that it is very similar to the takeover by the English of the two Supermarket groups in Australia. The leadership changed and you have seen in the case of Coles and very nasty and aggressive mentality take control. Whole departments that once used to have Australians in them are now staffed with English men and women (but predominantly men) who have come in from the UK supermarketing industry and have ruthlessly taken to suppliers, councils staff etc. The idea is that the UK environment creates some really nasty thinking and behaviours that look superficially successful but usually lead t long term decline. The UK has been in decline for so long but hs been so rich that it is hard to notice.

    • muzza 9.1

      The same thing can be seen in NZ, with certain industries having become simply horrid with English in “key positions”

      One member of a team of mine, English, actually said ” Not sure what the story is with your country mate. but there is too many bloody pomes here” –

      Interestingly in the UK those I worked with seemed reasonable by and large, those I have worked with here, in key positions truly awful. That said many companies are simply run over these days by imported managers and the company culture becomes the opposite of what I came back hoping to experience.
      I’ve not come across much of the laid back Kiwiana attitude so far, and again it in my experience, the cultural mixture seemed worked better in UK, than I have found in NZ…

      Perhaps those who have come to NZ, and those who have stayed are not the first grade players.

      • Foreign Waka 9.1.1

        Knowing a case like you describe, I am absolutely confident that Kiwis deal with that very, very successfully. Just give it some time 🙂

        • muzza 9.1.1.1

          FW, chur – So we need some more Kiwis to return home, and provide a platform for reclaiming some lost ground then IMO.

          I personally do not mind where anyone comes from, but if you are in management, then manage, effectively, with humility, and a mindful attitude, that you have to manage to all directions.
          Not just with your nose up the guy ahead of you on the org charts arse…

          • Foreign Waka 9.1.1.1.1

            Needs some back bone and integrity.
            I remember when I came to NZ some decades ago we were screened whether we “fit into the society” by way of being interviewed, kind of a psych assessment. This was part of the point system at the time and it was not very easy to appease NZ regulators. And there is nothing wrong with that I may add. Mind you that was for non commonwealth countries.

  10. Draco T Bastard 10

    Modern consumer capitalism will flourish as long as what people desire outpaces what they have. It is thus vital to that system that individuals are constantly made to feel dissatisfied with what they have. The irony should not be missed: While economic growth is said to be the process whereby people’s wants are satisfied so that they become happier – and economics is defined as the study of how scarce resources are best used to maximise welfare – in reality economic growth can only be sustained as long as people remain discontented. Economic growth does not create happiness: unhappiness sustains economic growth. Thus discontent must be continually fomented if modern consumer capitalism is to survive. This explains the indispensable role of the advertising industry.

    Thousands of the most creative individuals in modern society, such as Zaltman and his colleagues, devote their lives to helping corporations manipulate people into buying more of their brand of margarine or running shoes at the expense of another corporation selling a virtually identical product. This is not just a waste of talent. The work of Zaltman and many like him is at best meaningless and at worst a subtle form of cultural brainwashing whose purpose is to sustain a system that leaves people miserable.

    Growth Fetish, Noam Chomsky, page 79, 80, 83, 84
    This is what the free-market ideology brings about – waste. A huge amount of it used to produce discontent so that profits for the few can be maintained.

    Do economists have the answers? Well, not the mainstream ones, the ones that tell us that capitalist free-market is the most efficient means of distribution. A system that produces huge amounts of waste and uses up those scarce resources at exponential rates.

  11. prism 11

    Winner of the thread today..tah dah… t.smithfield.

  12. tsmithfield 12

    A market based economy functions best when there is a base level of prosperity. That is because the members of the society have sufficient disposable income to participate in the market. If wealth is too concentrated in a few, then the market will cease to function.

    Notice that NZ, a market based economy, has reasonable prosperity amongst its members. That is not to say that there isn’t a wide divergence in income. But it does mean that we don’t tend to see much of the poverty that exists in poor countries.

    • Draco T Bastard 12.1

      Note the growing poverty over the last three decades that we’ve had “free-market” economics.

      You just don’t want to see the reality because it disproves your beliefs.

    • Colonial Viper 12.2

      But it does mean that we don’t tend to see much of the poverty that exists in poor countries.

      Fuck off, its not the “market based economy” which prevents widespread poverty in NZ, its the social welfare system, including NZ Super.

      • Foreign Waka 12.2.1

        CV – NZ Super is not a benefit! If you belief that than you are disowning the current and following older generation. They have paid their dues. In fact your statement makes me think that you are advocating the new Russian oligarchy, because this is exactly what they do. No matter how, where and when, if we as a society abandon children, sick, poor and elderly than we, our self’s are not fit to be called humans. A society has to function as a whole or it is disintegrating. But maybe you belief that it is the few who deserve and the rest can go to hell?

        • Draco T Bastard 12.2.1.1

          NZ Super is not a benefit

          Then neither is the UB – both of which are paid out through the governments welfare budget.

          Actually, I can’t see your problem with CV’s comment. He’s just telling tsmithfield that it’s not the market system that keeps poverty at bay but the welfare system.

          • Foreign Waka 12.2.1.1.1

            DTB – sorry disagree with you on the benefit side of things.
            The real culprit is the tax avoiding person.
            But of cause a mother on DBP is a far easier target than lets say, a business person getting the benefit of cars, rents, petrol groceries etc. and making this tax deductible. Or the farmer, same thing, or the corporate transferring funds oversees. Before you say it is not so, I have had a couple of businesses, so I know what the possibilities are. And it is so easy! No other group in society can swindle their way out of their obligation that easily. Super is part of the tax take in the same way as all other tax collected for infrastructure, schools and universities, hospitals etc. People are entitled to a rest after decades of work and if you say that is not so NZ is a very sorry place to be. In fact in this case I would set it on par with a 3rd world country.

            • Draco T Bastard 12.2.1.1.1.1

              People are entitled to a rest after decades of work and if you say that is not so NZ is a very sorry place to be.

              I didn’t say it wasn’t but that doesn’t make Super not part of the general welfare system. People are also entitled to be ensured of not dropping into poverty if temporarily out of work.

              It’s been said on here before and agree – benefit is the wrong word, entitlement would be far better.

        • Colonial Viper 12.2.1.2

          CV – NZ Super is not a benefit!

          Uh, NZ Super is an integral part of NZ’s social welfare system. Just like our education system and our public health system are integral parts of our social welfare system. In other words, a public system which cares for the widespread socialised good (i.e. welfare) of the country.

          I never said anything about the term “benefits”.

          • Foreign Waka 12.2.1.2.1

            DTB and CV – sorry about the semantics here, just getting a bit touchy as older people are now the new “target group” (I am not one of them – yet). How many sheep sharer are able to work beyond 60? There maybe a few but the back is pretty much buggered at that age. And so it is with many manual jobs and NZ has more of those than desk jockeys. I see my fair share of these “old” hands who start to get their wear and tear illnesses and would need more care not a “stiff upper lip” carry on working approach.
            In fact I find it cruel and may I say uncivilized to the point of being regressive to the days of hunting mammoths.
            Today’s TV program once more has the elderly in its visor and low and behold! Get ready, we now can look forward to reach the ripe old age of 100. Where did that nonsense originate?
            It is already so that many over 65 have to work (no choice) because they would otherwise loose the roof over their heads.
            Realistically, employers will not want to see you beyond 65 and the young ones need the jobs. All in all, to scare an elderly person so much that they will work no matter how unwell they feel (and many do!) is both undignified and uncivilized. In fact I find it utterly disgusting.

            • Draco T Bastard 12.2.1.2.1.1

              And WTF are you getting the idea that we want to throw the elderly into poverty? Nowhere have either I or CV said that. I don’t like NZ Super as it stands as it’s not means tested whereas a Universal Income is taxed correctly. And a Universal Income also allows people to retire when they’re ready.

    • mike e 12.3

      the stupid monetarist baffling people with your bs again

  13. joe90 13

    Economists, rewarding their owners by driving profits up and wages down.

  14. Afewknowthetruth 14

    Do Economists have the answers?

    No.

    Nor do politicians.

  15. Afewknowthetruth 15

    I don’t see anyone on the list of those speaking at ‘The Voyage’ I’d bother listening to: just another bunch of clowns.

  16. Do economists have the answers? Depends on the questions.
    Personally I question capitalism. As does Michael Roberts.
    http://thenextrecession.wordpress.com/2012/04/21/paul-krugman-steve-keen-and-the-mysticism-of-keynesian-economics/

    • mike e 16.1

      The free market is a wild beast with out taming it can’t provide to the majority.
      The analogies used in the stock market sum it up Bull or Bear market.
      Countries that have successfully harnessed the wild beast do much better for the majority of their citizens.
      While those countries that leave the market to its own devices have poorer overall economies, and more widespread poverty!

  17. For a knowledgeable take on Suzanne Moore piece you may want to try the blog (Stumbling and Mumbling) of the leftwing economist Chris Dillow (he lists his intellectual heroes as John Stuart Mill, David Ricardo, Michal Kalecki, Alasdair MacIntyre, Jon Elster and John Roemer!). He discusses the Moore article under the title ““ECONOMICS” & RATIONALITY“.

    Actually Dillow’s blog shows just what good economics blogging – from a left perspective – can look like. The Standard could so worse than follow his example.

    • I should have added to the above comment Dillow’s couple of sentences:

      “One of the great irritations of our age is the tendency for non-economists to tell us what’s wrong with economics. We’ve seen two egregious examples of this recently, with a common theme. “

      • McFlock 17.1.1

        Bear in mind that the Cartwright Inquiry was precipitated by an article by two non-doctors.
               
        Sometimes it’s those who advocate for the rights and welfare of the patients who can most clearly see how corrupt and farcical the system has become. Oh, the doctors might say that valuable information was gathered, that it was theoretically reasonable, and so on – but it’s the patient advocate who point out that people are dying.
              
         

        • Paul Walker 17.1.1.1

          Based on a whole pile of information from doctors.

          • McFlock 17.1.1.1.1

            But funnily enough it took the Cartwright Inquiry (run by a judge) to beef up the rules on informed consent, among other things.
                       
            It took non-medical people to point out systemic problems in the medical profession in a way to be improved. Outside criticism is a very useful tool to keep organisations and people grounded. But economists regard it as an “irritation” that people criticize things like the consistent re-implementation of “austerity” which seems to just prolong the problem.

            • Colonial Viper 17.1.1.1.1.1

              Paul Walker saying that Dillow is a “left wing economist” is a load of shit.

              Neoliberal economics has a very clear (and twisted beyond English) definition of the term “rational”.

              Its the ability to make an economic decision which maximises ‘utility’, which implies being able to accurately predict the future, thereby knowing the likely future consequences and implications of all the decision options available on the table.

              Which is of course also a load of shit. Which summarises neoliberal economics.

              • @ Colonial Viper

                “Paul Walker saying that Dillow is a “left wing economist” is a load of shit.”

                Good god man, Dillow’s intellectual heroes incude Alasdair MacIntyre, Jon Elster and John Roemer! What else apart from left-wing can you be with hero like these?!

                “Neoliberal economics has a very clear (and twisted beyond English) definition of the term “rational”.”

                1) there is no such thing as “neoliberal economics”
                2) rational in economics means little more than having an objective and setting out to achieve said objective in a sensible manner. That is you don’t choose what to so randomly or in a way that works against your objective. The standard utility maximisation model is a model that fits this description but so do the other models of behaviour that economists use. For example when faced with risk, decision making via von Neumann-Morganstern expected utility model also fits the description.

                • felix

                  “That is you don’t choose what to so randomly or in a way that works against your objective.”

                  Actual people make decisions that work against their objectives all the time. A model that ignores that fact is about as smart a model as Derek Zoolander.

                  • No. What is interesting is just how well these models do when compared to other models of decision making both empirically and experimentally. A lot of the behavioural issues that occur at the individuals level disappear at the market level.

                    • felix

                      Wow, actual decisions made by actual people just disappear.

                      Like magic.

                    • McFlock

                      Shame that the practical application doesn’t do quite so well. 
                       

                    • Campbell Larsen

                      So we affirm the validity of the market model and uphold the its version of truth by ignoring that pesky data (the individuals) that don’t conform to it – neat.
                      That approach is so versatile, I just can’t think of a single instance where it wouldn’t work….

                    • “Wow, actual decisions made by actual people just disappear.”

                      Oh dear, oh dear, this really is sad.

                      A couple of things could be happening: 1) if the group is large enough you get a kind of law of large numbers thing going on. If I make a decision which is crazy in one way then someone else will make a decision which is crazy in a opposite way and they cancel out. 2) stupid behaviour gets punished in markets. People lose money or don’t make sales or can buy what they want etc because of their decisions so they change their behaviour. (or 3; a bit of both)

                    • @ Campbell Larsen

                      Can you explain the “logic” of how you got from what I said to what you said? Your statement doesn’t follow from what I said.

                    • felix

                      Paul, you’re illustrating the problem very well. Two crazy decisions don’t actually cancel each other out, they’re just two different kinds of crazy decisions.

                      But as long as you don’t compare the model with the real world, you can pretend they’ve both “disappeared”.

                      As I said, like magic.

                    • McFlock

                      All theoretically reasonable, apart from the fact that a market is a chaotic system that feeds back on itself. This creates a corresponding risk of low incidence, high consequence events. Like bubbles collapsing.

                      edit-@paul. Felix beat me to the draw 🙂

                    • If I make a decision which is crazy in one way then someone else will make a decision which is crazy in a opposite way and they cancel out.
                      Or “on average, things are average”? Well, that’s just a tautology and surely you can come up with something better than that. Thomas Bayes started the ball rolling about 250 years ago.
                      stupid behaviour gets punished in markets.
                      That’s only true if you define all behaviour that gets punished in markets as stupid. I’d be more inclined to agree with a statement like “unusual/different/non-conformist behaviour usually gets punished in markets”, however I have noticed that you tend to be imprecise in your comments and blog posts, so I will give you the benefit of the doubt and assume that you didn’t quite mean what you say.

                    • “Paul, you’re illustrating the problem very well. Two crazy decisions don’t actually cancel each other out, they’re just two different kinds of crazy decisions.”

                      Seriously you have to be having me on! When you look at the market level data you don’t see the kinds of behaviour you see in individual level data, so something has to be going on. The two examples I gave give the intuition as what could be happening.

                      “But as long as you don’t compare the model with the real world, you can pretend they’ve both “disappeared”.”

                      The data comes from laboratory and field experiments and from empirical studies, so looks “real world” to me.

                    • @ Armchair

                      No the kind of things you see are, for example, supply equals demand in market studies whereas the behaviour at the individual would say that it won’t.

                    • @ McFlock

                      Market are not by and large chaotic systems. Also creating asset bubbles doesn’t need chaos, it is done often in experimental studies without any chaos at all/

                    • McFlock

                      Not “by and large” chaotic systems?
                           
                      Oh well then, that would make me not “entirely impressed” with your argument. I mean, an economic market is only an arbitrary collection of large numbers of actors who are all sensitive to initial conditions and feed back on each other. That might not “by and large” be chaotic, but it’s pretty damned close.
                           
                      And I didn’t say that bubbles needed chaos to occur, I just said that bubbles were a consequence of chaos. Like droughts and storms.

                    • felix

                      “When you look at the market level data you don’t see the kinds of behaviour you see in individual level data, so something has to be going on.”

                      Well yeah, it’s blatantly obvious what’s going on. As AC put it, “on average, things are average”.

                      Remember Paul, your contention was that people don’t behave irrationally, or don’t make choices that go against their objectives.

                    • McFlock

                      Felix, don’t put words into pauls mouth.
                      Paul’s saying that on aveage, the laws of large numbers mean that people act rationally in their best interest.
                           
                      Now let’s just sit back and enjoy the warming glow of this extended period of global economic growth. 🙂

                    • “Well yeah, it’s blatantly obvious what’s going on. As AC put it, “on average, things are average”.”

                      There need be no averages here, as I said before it could be that supply equals demand.

                      “Remember Paul, your contention was that people don’t behave irrationally, or don’t make choices that go against their objectives.”

                      That is the best place to start modelling their behaviour. Chris Dillow points it nicely: “Now, economists have conventionally assumed rational behaviour. There’s a reason for this.Such an assumption generates testable predictions, whereas if we assume people are mad then anything goes. What’s remarkable is that these predictions are quite often correct; demand curves usually do slope downwards and stock markets are sufficiently efficient that very few investors out-perform them.”

                    • McFlock
                       
                       

                      I want to make a prediction.
                        
                      If I treated the world the way it really was, my predictions wouldn’t be consistent.
                         
                      So I will assume a fiction that enables me to make consistent predictions. A lot of the time I will be right. A lot of the time I will be wrong. I will never know which ones will be correct.
                              
                      And I will expect governments to change public policy based on my predictions, even to the apparent detriment of the majority of its citizens.
                          
                      Do you have a problem with that model, paul?

                    • You genuinely are a fascinating bloke, Paul.
                      I can see how you might think your comment addressed mine, and it would not surprise me at all to find that you sincerely believe what you have written throughout this thread, through other threads you have commented on, and on your own blog.
                      It all comes across very university-lecturer-ish, where you seem to have a deep knowledge of the theory and how it should work, but when you are challenged with practical examples there’s a consistent pattern of falling back on the theory (“it should work”) and a refusal to be drawn into discussion on whether there is a mismatch between the theory and practice. The things is, it doesn’t matter how many times a theory does work in practice, once it is shown not to work in one practical situation, the theory has reached a limit and outside the limit, it goes without saying that the theory is not applicable. IIRC this is an area where Popper did a lot of work, based on something very simple credited to a chap called William of Ockham.
                      Anyway, that’s the perspective that a lot of the commenters are coming from, or at least that’s how I see it. It would be nice to see you critically examining the theories or models you are talking about, and looking at the underlying assumptions. But I have low expectations; you seem to be a creature of habit.
                      And in response to your example, (1) the relationships that are being generalised in this discussion seem to me to be massively simplified and fitting to them is wilfully misleading, as well as ignoring the interesting bits (the outliers) and (2) I can’t accept that “supply equals demand” is anything but a base and usually invalid assumption. I could go for “supply and demand approximate each other”, and while that might be closer to the truth, it’s pretty general.

                    • “If I treated the world the way it really was, my predictions wouldn’t be consistent.”

                      But if you treat the world the way it is, that is, you know the true model then doesn’t your prediction have to be prefect?

                      So I will assume a fiction that enables me to make consistent predictions. A lot of the time I will be right. A lot of the time I will be wrong. I will never know which ones will be correct.

                      Consistent how? In the statistical sense? Or somehow else? Or are you saying given the information available to you, your predictions would be right on average? That is, you are using a very simple form of rational expectations.

                      “And I will expect governments to change public policy based on my predictions, even to the apparent detriment of the majority of its citizens.”

                      Detriment meaning what? After all you are getting things right on average so any other predictor has to be getting things right on less than the average number of times so using any other prediction would be to the “detriment of the majority of its citizens” more often than using your prediction.

                      “Do you have a problem with that model, paul?”

                      Given the alternative, no.

                    • “Paul’s saying that on aveage, the laws of large numbers mean that people act rationally in their best interest.”

                      No I’m not saying that.

                    • McFlock

                      Paul,
                      If GDP grows 1% but 60% of the country experience a decline in income, that would be good on average but to the detriment of everyone else.
                          
                      And the alternative is firing the lot of the entrails-pokers and going with your gut. At least you save money on their salaries.

                    • “If GDP grows 1% but 60% of the country experience a decline in income, that would be good on average but to the detriment of everyone else.

                      And the alternative is firing the lot of the entrails-pokers and going with your gut. At least you save money on their salaries.”

                      But that wasn’t the model you where putting forward.

                    • Colonial Viper

                      McFlock just put forward that model, duh.

                    • McFlock

                      Yeah it was.
                           
                      It’s also pretty much the current real-word practise.

                    • “It all comes across very university-lecturer-ish, where you seem to have a deep knowledge of the theory and how it should work, but when you are challenged with practical examples there’s a consistent pattern of falling back on the theory (“it should work”) and a refusal to be drawn into discussion on whether there is a mismatch between the theory and practice. ”

                      But for their to be a discussion the data and the theory have to be shown to be at odds. Also you have to keep in mind that one example where something is shown not to work ot to work is just that, one example. What has been shown is that things work or don’t work for that particular data set, there is no guarantee that this means that the result holds for ALL the data. It may just be that the data set used is “strange” for non-representative for some reason and gives you your results because of this. This is why we want to see the same result shown in many different data sets covering different industries and/or different countries and/or different time periods etc.

                      “The things is, it doesn’t matter how many times a theory does work in practice, once it is shown not to work in one practical situation, the theory has reached a limit and outside the limit, it goes without saying that the theory is not applicable.”

                      May be yes but may be no. See comment above.

                      Again this has to be shown and to quote Oliver Williamson, “it takes a theory to be a theory”. This basically means to get rif of one theory you have to have something better to replace it with. For example we know there are problems with all the current theories of the firm but no one has yet some up with a theory that is better than all the others. This is what keeps us in business, trying t find that theory.

                      “IIRC this is an area where Popper did a lot of work, based on something very simple credited to a chap called William of Ockham.
                      Anyway, that’s the perspective that a lot of the commenters are coming from, or at least that’s how I see it. It would be nice to see you critically examining the theories or models you are talking about, and looking at the underlying assumptions. But I have low expectations; you seem to be a creature of habit.”

                      As economists we spend a lot of time looking at your models and trying to improve them. This is why we keep on writing papers, trying to come up with a better model.

                      “And in response to your example, (1) the relationships that are being generalised in this discussion seem to me to be massively simplified and fitting to them is wilfully misleading, as well as ignoring the interesting bits (the outliers)”

                      Sometimes outliners are interesting and explaining them can lead to new ideas and theories but in other cases it can be the “average” outcome that we are interested in. For example we know that on “average” increasing the money supply causes inflation and thus economists argue that government shouldn’t expand the money supply. There will be times when an increase in the money supply doesn’t have a huge effect on inflation but this doesn’t mean that economists are wrong to tell governments to restrict money growth. Another example would be that economists assume most of the time that demand curves slope downwards but we also know that sometimes they don’t (Giffen goods). But as they are very rear we don’t much worry about them in practice. As outlines Giffen goods are interesting and studied but on “average” saying demand curve slope downwards is the right thing to assume.

                      “and (2) I can’t accept that “supply equals demand” is anything but a base and usually invalid assumption. I could go for “supply and demand approximate each other”, and while that might be closer to the truth, it’s pretty general.”

                      The demand equals supply bit I was using comes from the results of experiments. There you can get them to equal.

                    • Colonial Viper

                      Can’t believe someone here still believes in downward sloping demand curves.

                      The ignorance of neoliberal economists about neoliberal economics is unbelievable.

                    • But for their to be a discussion the data and the theory have to be shown to be at odds. Also you have to keep in mind that one example where something is shown not to work or to work is just that, one example. What has been shown is that things work or don’t work for that particular data set, there is no guarantee that this means that the result holds for ALL the data. It may just be that the data set used is “strange” for non-representative for some reason and gives you your results because of this. This is why we want to see the same result shown in many different data sets covering different industries and/or different countries and/or different time periods etc.
                      Paul, I’m a datahead. I’ve spent my career building a large range of models. There’s nothing above that is a new idea to me. My point, in case you missed it, is that every model has some underlying assumptions. Once those assumptions are violated or shown to be untrue, the value of the model is reduced, often to nothing. With regard to the von Neumann-Morganstern expected utility model, it is used for identifying rational decision making. Yet individuals do make irrational decisions. A model for rational decision making is at best a guide for understanding irrational decisions.
                      Again this has to be shown and to quote Oliver Williamson, “it takes a theory to be a theory”. This basically means to get rid of one theory you have to have something better to replace it with.
                      No, it doesn’t. Some theories are just crap, are recognised as such, and are abandoned. Phrenology, for example.
                      For example we know there are problems with all the current theories of the firm but no one has yet some up with a theory that is better than all the others. This is what keeps us in business, trying to find that theory.
                      As economists we spend a lot of time looking at your models and trying to improve them. This is why we keep on writing papers, trying to come up with a better model.
                      Like other commenters, I question the value of the “trying to come up with/find” you refer to. It doesn’t seem to have produced much of anything useful.
                      Sometimes outliners are interesting and explaining them can lead to new ideas and theories but in other cases it can be the “average” outcome that we are interested in. For example we know that on “average” increasing the money supply causes inflation and thus economists argue that government shouldn’t expand the money supply. There will be times when an increase in the money supply doesn’t have a huge effect on inflation but this doesn’t mean that economists are wrong to tell governments to restrict money growth. Another example would be that economists assume most of the time that demand curves slope downwards but we also know that sometimes they don’t (Giffen goods). But as they are very rear we don’t much worry about them in practice. As outlines Giffen goods are interesting and studied but on “average” saying demand curve slope downwards is the right thing to assume.
                      The outliers, in my experience, are always the most interesting bits. In terms of income, for example, knowing the average or median value is useful, but looking at the outliers in both directions (extremely rich and extremely poor) tells us a whole lot more about our society. Looking at temporal aspects for physical systems, unusual events such as large earthquakes or flood events are the ones that make the news and really change people’s lives, and societies.
                      Of course they don’t follow normal distributions, so the modelling and statistical approaches are quite different to studying averages, but you probably already knew that. Models of unusual events tend to be poor at predicting timing (though with the power of weather forecasting, extreme weather events can be predicted with enough time to issue warnings), but they can be good at predicting locations and consequences.
                      I cannot agree with your suggestion, elsewhere on this thread, that the GFC could not have been predicted. Your suggestion that if it could have been it would have let people “beat the market” shows a venal streak, and is akin to suggesting that weather forecasters would not inform people of extreme weather.
                      The demand equals supply bit I was using comes from the results of experiments. There you can get them to equal.
                      I was talking about the real world, not an experiment, because my life is not an experiment.

                  • “Can’t believe someone here still believes in downward sloping demand curves.”

                    The sad bit here is that you probably don’t believe that demand curves slope downwards. But that is a comment on you rather than economics.

                    • Colonial Viper

                      Demand curves can undertake any polynomial shape; there is no way of determining experimentally and practically what a demand curve actually is, and it is utterly false to suggest that you can “sum” or “average” together the demand curves of a lot of different products (and a lot of different consumers) and somehow then get a generalised demand curve for a whole economy.

                      Basically neoliberal economics is fake and full of shit.

                    • “Demand curves can undertake any polynomial shape; there is no way of determining experimentally and practically what a demand curve actually is, and it is utterly false to suggest that you can “sum” or “average” together the demand curves of a lot of different products (and a lot of different consumers) and somehow then get a generalised demand curve for a whole economy.”

                      What I actually said was that they are downward sloping.

                • “Oh well then, that would make me not “entirely impressed” with your argument. I mean, an economic market is only an arbitrary collection of large numbers of actors who are all sensitive to initial conditions and feed back on each other. That might not “by and large” be chaotic, but it’s pretty damned close.”

                  But remember there are feedback mechanisms that keep thing under control. A simple example would be, let the price of the good rise above the equilibrium price, Does this mean equilibrium is lost, with an excess supply of the good? No since the excess supply you see in the short run will be removed by the price decreasing. Producers can’t sell their output at the current price so they are forced to lower it. Such a decrease will reduce the quantity supplied and increased the quantity demanded and both theses changes will move the market back towards equilibrium again.

                  “And I didn’t say that bubbles needed chaos to occur, I just said that bubbles were a consequence of chaos. Like droughts and storms.”

                  Ok so chaos may be a sufficient, if strange, condition for bubbles but it is not a necessary condition.

                  • McFlock
                     
                     

                    Oh come on -weather has feedback loops too. It can’t work without them.
                        
                    Your equilibrium price example does not rule out bubbles. If the commodity is speculated on (rather “than only those people who need to use widgets are the ones who buy widgets”, it becomes “I think I can sell widgets to some mug at a higher price than what I bought them for”, or even short-selling etc), the equilibrium price rises with the speculative demand, then crashes as demand suddenly disappears. 
                         
                    There is not “control” in the economy. There is no self-regulating machine. No gyro-stabiliser. That could only exist if humans were completely rational and had perfect information (otherwise it would be perfect rationality that is not optimised for the real world).  It’s just the temperature differences of 7 billion gas particles bouncing off each other on the surface of a sphere in a vacuum – and these gas particles don’t have the decency to consistently follow the laws of thermodynamics or motion when they react to each other.

                    • “Your equilibrium price example does not rule out bubbles. If the commodity is speculated on (rather “than only those people who need to use widgets are the ones who buy widgets”, it becomes “I think I can sell widgets to some mug at a higher price than what I bought them for”, or even short-selling etc), the equilibrium price rises with the speculative demand, then crashes as demand suddenly disappears.”

                      Speculation may be part of the adjustment mechanism. If someone thinks a good is overpriced and starts selling it that forces down the price. If there is a demand or supply which is “irrational” then you have to ask why? For example if subprime mortgages are being sold at a high price because the government has told everyone that top grade securities it can take awhile before people find out the truth and demand drops,And the price goes down to where it should be. But this isn’t a problem with the market as it is a problem with wrong information being supplied to investors.

                    • Colonial Viper

                      Fuck that’s the stupidest lot of neoliberal nonsense I’ve ever heard Paul, and I’ve heard some.

                      Speculation is done by ultra-high speed trading algorithms designed to drive prices up and down and wipe out small players in the market.

                      And “regulating markets” is bullshit and a failure

                      Regulating people and holding them to account is the only way to go – eg. by jailing the masterminds and main profiteers of the liars loan frauds in the US.

                      By the way, over 90% of the subprime mortgage loan frauds in the US were perpetrated by the lenders, not the borrowers.

                    • McFlock
                       
                       

                      But this isn’t a problem with the market as it is a problem with wrong information being supplied to investors.

                          
                      But the information that the investors are given drastically affects the way they behave in the market. Basically, you just said that the rain isn’t caused by the weather, it’s just caused by the fact that the air was too humid when it dropped in temperature.
                           
                      Hell, investor information IS a market, so if it’s supplying the wrong information, doesn’t that mean that the investor-information market is bunk?
                           
                      This has been fascinating, but I might be going to bed soon. I’ve got actual sciencey stuff to do in the a.m.
                       

                       
                    • “But the information that the investors are given drastically affects the way they behave in the market.”

                      Exactly, so if you get misleading information being supplied you should not be surprised when you get a big mess.

                    • Colonial Viper

                      Shame that neoliberal economics assumes that market actors have rational expectations i.e. can predict the future with accuracy.

                      its a load of garbage.

                    • McFlock

                      Exactly, so if you get misleading information being supplied you should not be surprised when you get a big mess.

                      Wow, you saved the best for last, didn’t you.
                      Your model is fine, it’s reality that’s wrong. It’s actually supposed to go the other way.
                           
                      “Dismal”: yes.
                      “Science”: not the way you work it. 

                    • “Exactly, so if you get misleading information being supplied you should not be surprised when you get a big mess.

                      Wow, you saved the best for last, didn’t you.
                      Your model is fine, it’s reality that’s wrong. It’s actually supposed to go the other way.

                      “Dismal”: yes.
                      “Science”: not the way you work it. ”

                      What??????? How does what you wrote relate to what I said?

                      It seems clear that if investors are given wrong information they may end up making wrong decisions. You have some issues with this?

                    • felix

                      Wrong decisions? What, you mean people do make decisions that work against their objectives?

                      Jeez I wish you’d make up your mind about this.

                    • McFlock

                      It seems clear that if investors are given wrong information they may end up making wrong decisions. You have some issues with this?

                      Nope. 
                             
                      I have an issue with the fact that the GFC was predicted by only a few economists while others predicted it wasn’t going to happen, or was a long way off. 
                               
                      Investor information is not outside of or sequestered from the market, in theory or practise. Investor information is a fundamental part of their ability to make rational decisions in the market, and is itself a traded commodity.
                           
                      So to argue that enough of the market operated under incorrect information to lead to a massive financial collapse is to completely negate the practical reality of aggregate rational behaviour, “large numbers” or not.
                             
                      You think the GFC happened because information was bad?  Information is an inherent piece of the market. If the market in reality behaves differently to expectations of a model, the model is bad.
                       
                      But you simply blame bad information, when economic models should have accounted for bad information. Which is another example of why economics is bunk.

                    • “the biggest financial insitutions, the ones with the neolib economists and financiers, as well as the staff of all the major universities with orthodox economics departments all missed the GFC.

                      They missed it because events like the GFC cannot happen under neoliberal assumptions of market equilibrium.”

                      No under the EMT such a crisis can not be predicted, they can happen, you just can’t predict them.

                      “”Even in the most simple versions of rational expectation models it is assumed that people are right only on average.”

                      Nope.”

                      Actually yes, the simple models of rational expectations assume people are right on average.

                      You really don’t know a damn thing about economics do you?

                    • Colonial Viper

                      You really don’t know a damn thing about economics do you?

                      And Chicago school neoliberal economics doesn’t know a damn thing about the economy.

                      By the way, you just made excuses for orthodox economics sailing the world blindly straight into the GFC.

                      Debt and banks don’t exist in neoliberal economic modelling so its no wonder they missed the big fucking iceberg in front of them.

                    • “And Chicago school neoliberal economics doesn’t know a damn thing about the economy.”

                      What what exactly is this “neoliberal economics” thingy of yours?

                      “By the way, you just made excuses for orthodox economics sailing the world blindly straight into the GFC.”

                      I think the only thing I have said is that a crisis can not be predicted.

                      “Debt and banks don’t exist in neoliberal economic modelling so its no wonder they missed the big fucking iceberg in front of them.”

                      Then what do we make of a model which has a government budget constraint which includes government debt in it?

                    • Colonial Viper

                      Neoliberal (“freshwater” or “Chicago” school) economics has been one of the most destructive forces undermining the cohesion of local communities and societies. Especially since it has been co-opted by wealthy financial interests.

                      Then what do we make of a model which has a government budget constraint which includes government debt in it?

                      That debt is considered incidental, according to neoliberal economics, until it exceeds an extremely high threshold vs GDP.

                      I’m not talking accounting models here, which you seem to be. I’m talking about neoliberal macro-economic modelling.

                      And on a macroscale, neoliberal economics considers debt unimportant as it assumes (wrongly) that it simply nets off against savings made elsewhere in the system.

                    • Colonial Viper

                      By the way, I consider you a neolib troll (“what is this neolib economics thingy” – seriously???)

                    • “Neoliberal (“freshwater” or “Chicago” school) economics has been one of the most destructive forces undermining the cohesion of local communities and societies. Especially since it has been co-opted by wealthy financial interests.”

                      I like I asked, What exactly is this “neoliberal economics” thingy of yours. I mean when I look at the stuff I do, the theory of the firm, I see no difference in what people at Chicago do compared to what those at Harvard do or people at the LSE do.

                      “Then what do we make of a model which has a government budget constraint which includes government debt in it?

                      That debt is considered incidental, according to neoliberal economics, until it exceeds an extremely high threshold vs GDP.”

                      When debt gets high it is a problem but when it is low it isn’t, thats as true for governments and it is for households.

                      I’m not talking accounting models here, which you seem to be. I’m talking about neoliberal macro-economic modelling.

                      But macro models (don’t know if they are “neoliberal” macro models, whatever that is) have debt in them and this debt can have important consequences. Just think of “Some Unpleasant Monetarist Arithmetic” type arguments.

                      “And on a macroscale, neoliberal economics considers debt unimportant as it assumes (wrongly) that it simply nets off against savings made elsewhere in the system.”

                      Nets off savings? If bonds are sold then someone must have bought them and those someones will see that as savings.

                    • “Ok so no country has such an income distribution and thus the point of your argument is?

                      Assuming no country ever has had zero people at <60% median income, is the economist seriously suggesting that because it has never happened before, it can never happen?"

                      I'm willing to take a bet that it will never happen.

                      "I’m just taking the approximate relative income level at which sociologists and people who study hardship regard as the point at which people have difficulty merely existing and become alienated and fractured away from the rest of society."

                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill's is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don't you think.

                      “If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”
                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.
                      “bet”? “beat”? wtf does either even mean?
                      Beat. It mean exactly what is says. You can’t outdo the market over time.

                      Jesus at least own your typos. “you can bet the market” is exactly what it said, so you can understand my confusion. And what is “beating” the market by your definition, and why can’t I do it?"

                      Make excess returns on a regular basis. The EMT tells us you can't do it. Nobody can systematically make excess returns in the stock market. Put overly simply, you can't get above average returns on a continuing basis.

                      See

                      http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invemgmt/effdefn.htm

                      "If its luck then they didn’t predict the crisis, if they are gurus then show the evidence that they are.

                      But your only measure is along the lines of “did they get rich as a result of short-selling just before the GFC?”. There is no way to distinguish between luck and knowledge in that case. You could do a statistical analysis and see whether the number of people who made money(and there had to have been some who made money) was outside the bounds of statistical probability, but you have nothing to hold that against. And if nobody got rich, that could be very bad luck or even imply “reverse gurus” who’s models were fairly reliable but with inverted expectations. So how do you distinguish between luck and design? You can do it in science. Why not economics?"

                      You would want a large sample. If people can beat the market then there should be a large enough sample to get significance. Also if people can predict the crisis then they should be able to predict outcomes even more easily in non-crisis times so you could look at their before and after crisis returns as well.

                    • McFlock

                      “Ok so no country has such an income distribution and thus the point of your argument is?
                      I’m willing to take a bet that it will never happen.

                      That’s economics, is it? It hasn’t happened before so it won’t? And we shouldn’t even try, even though any attempt could reduce poverty even if it’s not quite eliminated?

                       
                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill’s is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think.

                      Given what the price of groceries and rent might be in that society, I’m not so sure you thought that one through. 

                      “If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”
                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.
                      “bet”? “beat”? wtf does either even mean?
                      Beat. It mean exactly what is says. You can’t outdo the market over time.
                      Jesus at least own your typos. “you can bet the market” is exactly what it said, so you can understand my confusion. And what is “beating” the market by your definition, and why can’t I do it?”
                      Make excess returns on a regular basis. The EMT tells us you can’t do it. Nobody can systematically make excess returns in the stock market. Put overly simply, you can’t get above average returns on a continuing basis.
                      See
                      http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invemgmt/effdefn.htm

                      So let me get this straight: not only can’t economists predict a calamity, they can’t even predict day-to-day transactions?
                      What good are they then? What do you add to society? Why does Treasury pay people to issue forecasts that, according to you, cannot be accurate predictions of the market?

                       
                      So how do you distinguish between luck and design? You can do it in science. Why not economics?”
                      You would want a large sample. If people can beat the market then there should be a large enough sample to get significance. Also if people can predict the crisis then they should be able to predict outcomes even more easily in non-crisis times so you could look at their before and after crisis returns as well.

                      But we’re not saying that a lot of people can beat the market. Just one would do. They might spend their entire career beating the market, and statistically they’d be indistinguishable from the guy who just got lucky all his life.

                    • “Ok so no country has such an income distribution and thus the point of your argument is?
                      I’m willing to take a bet that it will never happen.

                      That’s economics, is it? It hasn’t happened before so it won’t? And we shouldn’t even try, even though any attempt could reduce poverty even if it’s not quite eliminated?

                      What??? I didn’t say a thing about poverty in the above. I was just making a point the likely of a certain income distribution. How did you get from what I said to what you said?

                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill’s is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think.

                      Given what the price of groceries and rent might be in that society, I’m not so sure you thought that one through.

                      Actually I have, note I am talking about real incomes so the price level is taken out of equation. Assume that the base year for calculating real income is 2012. So back to the question: Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think?

                      “If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”
                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.
                      “bet”? “beat”? wtf does either even mean?
                      Beat. It mean exactly what is says. You can’t outdo the market over time.
                      Jesus at least own your typos. “you can bet the market” is exactly what it said, so you can understand my confusion. And what is “beating” the market by your definition, and why can’t I do it?”
                      Make excess returns on a regular basis. The EMT tells us you can’t do it. Nobody can systematically make excess returns in the stock market. Put overly simply, you can’t get above average returns on a continuing basis.
                      See
                      http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invemgmt/effdefn.htm

                      So let me get this straight: not only can’t economists predict a calamity, they can’t even predict day-to-day transactions?
                      What good are they then? What do you add to society? Why does Treasury pay people to issue forecasts that, according to you, cannot be accurate predictions of the market?

                      What the EMH tells us is that deviations from true value are random and thus you could pick what will happen tomorrow, you just can’t pick what will happen for every day.

                      So how do you distinguish between luck and design? You can do it in science. Why not economics?”
                      You would want a large sample. If people can beat the market then there should be a large enough sample to get significance. Also if people can predict the crisis then they should be able to predict outcomes even more easily in non-crisis times so you could look at their before and after crisis returns as well.

                      But we’re not saying that a lot of people can beat the market. Just one would do. They might spend their entire career beating the market, and statistically they’d be indistinguishable from the guy who just got lucky all his life.

                      Well the EMT as the guy who beats the market for his entire career can’t exist and the probability of beating the market by luck for an entire career is near zero so that person doesn’t exist either. So if you can’t show that such a person does in fact exist then you have a seriously big result.

                    • McFlock

                      “Ok so no country has such an income distribution and thus the point of your argument is?
                      I’m willing to take a bet that it will never happen.
                      That’s economics, is it? It hasn’t happened before so it won’t? And we shouldn’t even try, even though any attempt could reduce poverty even if it’s not quite eliminated?
                      What??? I didn’t say a thing about poverty in the above. I was just making a point the likely of a certain income distribution. How did you get from what I said to what you said?

                      Why do you think ensuring that nobody has an income of less than 60% of the median would be an objective? Elimination of poverty. As I said earlier. Keep up.
                       

                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill’s is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think.
                      Given what the price of groceries and rent might be in that society, I’m not so sure you thought that one through.
                      Actually I have, note I am talking about real incomes so the price level is taken out of equation. Assume that the base year for calculating real income is 2012. So back to the question: Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think?

                      It does indeed sounds strange, but what an awesome kind of strange it would be! I’m not sure that we can achieve that in the real world, but by gum I’m prepared to try.
                       

                      So let me get this straight: not only can’t economists predict a calamity, they can’t even predict day-to-day transactions?
                      What good are they then? What do you add to society? Why does Treasury pay people to issue forecasts that, according to you, cannot be accurate predictions of the market?
                      What the EMH tells us is that deviations from true value are random and thus you could pick what will happen tomorrow, you just can’t pick what will happen for every day.

                      But if you know what will happen tomorrow, doesn’t that let you beat the market tomorrow, because then you have knowledge that some other people wouldn’t have?
                      And tomorrow, would you be able to predict what would happen the day after? 
                       

                      So how do you distinguish between luck and design? You can do it in science. Why not economics?”
                      You would want a large sample. If people can beat the market then there should be a large enough sample to get significance. Also if people can predict the crisis then they should be able to predict outcomes even more easily in non-crisis times so you could look at their before and after crisis returns as well.
                      But we’re not saying that a lot of people can beat the market. Just one would do. They might spend their entire career beating the market, and statistically they’d be indistinguishable from the guy who just got lucky all his life.
                      Well the EMT as the guy who beats the market for his entire career can’t exist and the probability of beating the market by luck for an entire career is near zero so that person doesn’t exist either. So if you can’t show that such a person does in fact exist then you have a seriously big result.

                      Really? “Near zero”? How close? Base on what timesan for career? How many trades? What are the odds compared to, say, winning a lottery?
                             
                      But even then, if a person did exist, by definition you’d say they were a guru simply because the odds are so small it almost certainly didn’t happen by change. But it could have, and there’s no way to prove it didn’t. Unlike a science.
                       

                    • “Ok so no country has such an income distribution and thus the point of your argument is?
                      I’m willing to take a bet that it will never happen.
                      That’s economics, is it? It hasn’t happened before so it won’t? And we shouldn’t even try, even though any attempt could reduce poverty even if it’s not quite eliminated?
                      What??? I didn’t say a thing about poverty in the above. I was just making a point the likely of a certain income distribution. How did you get from what I said to what you said?

                      Why do you think ensuring that nobody has an income of less than 60% of the median would be an objective? Elimination of poverty. As I said earlier. Keep up.

                      There is nothing to keep up with. The point I have been making is simple, even if to complicated for some. I was just making a point about the likely of a certain income distribution. Never mentioned poverty. Got it?

                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill’s is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think.
                      Given what the price of groceries and rent might be in that society, I’m not so sure you thought that one through.
                      Actually I have, note I am talking about real incomes so the price level is taken out of equation. Assume that the base year for calculating real income is 2012. So back to the question: Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think?

                      It does indeed sounds strange, but what an awesome kind of strange it would be! I’m not sure that we can achieve that in the real world, but by gum I’m prepared to try.

                      But you can’t achieve this using your measure of poverty. Not without a very, very highly unlikely income distribution.

                      So let me get this straight: not only can’t economists predict a calamity, they can’t even predict day-to-day transactions?
                      What good are they then? What do you add to society? Why does Treasury pay people to issue forecasts that, according to you, cannot be accurate predictions of the market?
                      What the EMH tells us is that deviations from true value are random and thus you could pick what will happen tomorrow, you just can’t pick what will happen for every day.

                      But if you know what will happen tomorrow, doesn’t that let you beat the market tomorrow, because then you have knowledge that some other people wouldn’t have?
                      And tomorrow, would you be able to predict what would happen the day after?

                      No. the deviations are random so you may be right one day but you won’t be right the next day; unless of course you believe you can predict a random variable.

                      So how do you distinguish between luck and design? You can do it in science. Why not economics?”
                      You would want a large sample. If people can beat the market then there should be a large enough sample to get significance. Also if people can predict the crisis then they should be able to predict outcomes even more easily in non-crisis times so you could look at their before and after crisis returns as well.
                      But we’re not saying that a lot of people can beat the market. Just one would do. They might spend their entire career beating the market, and statistically they’d be indistinguishable from the guy who just got lucky all his life.
                      Well the EMT as the guy who beats the market for his entire career can’t exist and the probability of beating the market by luck for an entire career is near zero so that person doesn’t exist either. So if you can’t show that such a person does in fact exist then you have a seriously big result.

                      Really? “Near zero”? How close?

                      0.00000001234

                      Base on what timesan for career?

                      31.56932 years.

                      How many trades?

                      10000000002341002

                      What are the odds compared to, say, winning a lottery?

                      Much lower, unless of course you think you can predict a random variable.

                      But even then, if a person did exist, by definition you’d say they were a guru simply because the odds are so small it almost certainly didn’t happen by change. But it could have, and there’s no way to prove it didn’t. Unlike a science.

                      BTW no science can prove anything.

                    • McFlock

                      “Ok so no country has such an income distribution and thus the point of your argument is?
                      I’m willing to take a bet that it will never happen.
                      That’s economics, is it? It hasn’t happened before so it won’t? And we shouldn’t even try, even though any attempt could reduce poverty even if it’s not quite eliminated?
                      What??? I didn’t say a thing about poverty in the above. I was just making a point the likely of a certain income distribution. How did you get from what I said to what you said?
                      Why do you think ensuring that nobody has an income of less than 60% of the median would be an objective? Elimination of poverty. As I said earlier. Keep up.
                      There is nothing to keep up with. The point I have been making is simple, even if to complicated for some. I was just making a point about the likely of a certain income distribution. Never mentioned poverty. Got it?

                      Seriously, are you brain damaged? You thought you’d just chop off all the conversation before that point, so we’re randomly discussing the probability of a particular income curve occurring in a society, when you know very well that my position is that economics can’t predict shit? That’s just retarded.

                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill’s is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think.
                      Given what the price of groceries and rent might be in that society, I’m not so sure you thought that one through.
                      Actually I have, note I am talking about real incomes so the price level is taken out of equation. Assume that the base year for calculating real income is 2012. So back to the question: Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think?
                      It does indeed sounds strange, but what an awesome kind of strange it would be! I’m not sure that we can achieve that in the real world, but by gum I’m prepared to try.
                      But you can’t achieve this using your measure of poverty. Not without a very, very highly unlikely income distribution.

                      And, of course, with your straw man of a society where in real terms bill gates is the poorest person in the country. For entertainment’s sake, which bit do you think is more likely: a much less unequal society, or bill gates in real terms being the poorest person in the country?
                       

                       
                      But if you know what will happen tomorrow, doesn’t that let you beat the market tomorrow, because then you have knowledge that some other people wouldn’t have?
                      And tomorrow, would you be able to predict what would happen the day after?
                      No. the deviations are random so you may be right one day but you won’t be right the next day; unless of course you believe you can predict a random variable.

                      So economics can’t predict which prediction will be correct. It can’t predict major calamities. It can’t predict minor daily fluctuations. 
                      What the fuck is it good for? Nothing.

                      So how do you distinguish between luck and design? You can do it in science. Why not economics?”
                      […]
                      Well the EMT as the guy who beats the market for his entire career can’t exist and the probability of beating the market by luck for an entire career is near zero so that person doesn’t exist either. So if you can’t show that such a person does in fact exist then you have a seriously big result.
                      Really? “Near zero”? How close?
                      0.00000001234

                      [thinks to self: Why do I get the impression economists just pull figures out of their arses?]

                      Base on what timesan for career?
                      31.56932 years.

                      [Continues thinks: I mean, it’s not like economists are always trying to tell us that the shit their feeding us tastes like cheesecake.]

                      How many trades?
                      10000000002341002

                      [even more thinks: maybe I’m just cynical]

                      What are the odds compared to, say, winning a lottery?
                      Much lower, unless of course you think you can predict a random variable.
                       

                      [another thinks: isn’t that, in practise, what a lottery is supposed to be? Maybe Paul really is that dumb]

                      But even then, if a person did exist, by definition you’d say they were a guru simply because the odds are so small it almost certainly didn’t happen by change. But it could have, and there’s no way to prove it didn’t. Unlike a science.
                      BTW no science can prove anything.

                      Incorrect. A science can repeatedly demonstrate that a model does not reflect reality. In economics, you just say that reality had bad information.
                         
                      Or are you next going to doubt the existence of an objective reality – take the universe down with the farce that is economics, as it were?

                    • “Ok so no country has such an income distribution and thus the point of your argument is?
                      I’m willing to take a bet that it will never happen.
                      That’s economics, is it? It hasn’t happened before so it won’t? And we shouldn’t even try, even though any attempt could reduce poverty even if it’s not quite eliminated?
                      What??? I didn’t say a thing about poverty in the above. I was just making a point the likely of a certain income distribution. How did you get from what I said to what you said?
                      Why do you think ensuring that nobody has an income of less than 60% of the median would be an objective? Elimination of poverty. As I said earlier. Keep up.
                      There is nothing to keep up with. The point I have been making is simple, even if to complicated for some. I was just making a point about the likely of a certain income distribution. Never mentioned poverty. Got it?

                      Seriously, are you brain damaged? You thought you’d just chop off all the conversation before that point, so we’re randomly discussing the probability of a particular income curve occurring in a society, when you know very well that my position is that economics can’t predict shit? That’s just retarded.

                      No, what I said and am saying yet again is that no country would have the kind of income distribution that results in there being no poverty under the definition of poverty that you are using. For any real distribution poverty will always exist by your definition and thus you can’t remove it.

                      Lets take for the sake of the argument that there is a society in which Bill Gates is the poorest person. Everybody else in the society has an (real) income greater than Bill. The incomes will vary across people but Bill’s is the lowest. Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think.
                      Given what the price of groceries and rent might be in that society, I’m not so sure you thought that one through.
                      Actually I have, note I am talking about real incomes so the price level is taken out of equation. Assume that the base year for calculating real income is 2012. So back to the question: Now by the measure you are using there is poverty in this society. Sounds a bit strange don’t you think?
                      It does indeed sounds strange, but what an awesome kind of strange it would be! I’m not sure that we can achieve that in the real world, but by gum I’m prepared to try.
                      But you can’t achieve this using your measure of poverty. Not without a very, very highly unlikely income distribution.

                      And, of course, with your straw man of a society where in real terms bill gates is the poorest person in the country. For entertainment’s sake, which bit do you think is more likely: a much less unequal society, or bill gates in real terms being the poorest person in the country?

                      Well deal with the issue I raised. If Gates was the poorest person in the society your measure of poverty would say he was in poverty. Bill Gates being in poverty does seem strange. My point is to highlight a problem that the types of poverty measures using have.

                      But if you know what will happen tomorrow, doesn’t that let you beat the market tomorrow, because then you have knowledge that some other people wouldn’t have?
                      And tomorrow, would you be able to predict what would happen the day after?
                      No. the deviations are random so you may be right one day but you won’t be right the next day; unless of course you believe you can predict a random variable.

                      So economics can’t predict which prediction will be correct. It can’t predict major calamities. It can’t predict minor daily fluctuations.
                      What the fuck is it good for? Nothing.

                      What definition of useful are you using? The fact that we are told that predictions can’t be made is an important result.

                      So how do you distinguish between luck and design? You can do it in science. Why not economics?”
                      […]
                      Well the EMT as the guy who beats the market for his entire career can’t exist and the probability of beating the market by luck for an entire career is near zero so that person doesn’t exist either. So if you can’t show that such a person does in fact exist then you have a seriously big result.
                      Really? “Near zero”? How close?
                      0.00000001234

                      [thinks to self: Why do I get the impression economists just pull figures out of their arses?]

                      Base on what timesan for career?
                      31.56932 years.

                      [Continues thinks: I mean, it’s not like economists are always trying to tell us that the shit their feeding us tastes like cheesecake.]

                      How many trades?
                      10000000002341002

                      [even more thinks: maybe I’m just cynical]

                      What are the odds compared to, say, winning a lottery?
                      Much lower, unless of course you think you can predict a random variable.

                      [another thinks: isn’t that, in practise, what a lottery is supposed to be? Maybe Paul really is that dumb]

                      But a lottery isn’t prediction. With a lottery you are not predicting in any serious way. You are gambling. You take a number and hope it wins. Thats not prediction its about guessing. If you do win its because of luck. This is because it is a random variable. But that is my point the way you win with a random variable is get lucky.

                      But even then, if a person did exist, by definition you’d say they were a guru simply because the odds are so small it almost certainly didn’t happen by change. But it could have, and there’s no way to prove it didn’t. Unlike a science.
                      BTW no science can prove anything.

                      Incorrect. A science can repeatedly demonstrate that a model does not reflect reality.

                      That is true, but that isn’t proving. Science can falsify or verify but it can not prove anything.

                      In economics, you just say that reality had bad information.

                      No. When did I say that?

                      Or are you next going to doubt the existence of an objective reality – take the universe down with the farce that is economics, as it were?

                      Many philosophers would happily spend a many year arguing that there is no such thing as objective reality. Me I don’t really care, we seem to get on ok assuming there is such a thing.

                    • McFlock
                       
                       

                       

                      No, what I said and am saying yet again is that no country would have the kind of income distribution that results in there being no poverty under the definition of poverty that you are using. For any real distribution poverty will always exist by your definition and thus you can’t remove it.

                       
                      Based on: It hasn’t happened yet, therefore it won’t happen.
                      Followed by: It would be realistically impossible to achieve 100%, therefore we shouldn’t even try.
                      Impressive justification to avoid dealing with poverty./sarc
                       

                       
                      But you can’t achieve this using your measure of poverty. Not without a very, very highly unlikely income distribution.
                       
                      And, of course, with your straw man of a society where in real terms bill gates is the poorest person in the country. For entertainment’s sake, which bit do you think is more likely: a much less unequal society, or bill gates in real terms being the poorest person in the country?
                       
                      Well deal with the issue I raised. If Gates was the poorest person in the society your measure of poverty would say he was in poverty. Bill Gates being in poverty does seem strange. My point is to highlight a problem that the types of poverty measures using have.

                       
                      Well, if gates really were the poorest person, would <60% of median result in hardship? Nope. So it wouldn’t be the poverty level, would it? But it sure as shit is today.
                       
                       
                       

                      So economics can’t predict which prediction will be correct. It can’t predict major calamities. It can’t predict minor daily fluctuations.
                      What the fuck is it good for? Nothing.

                       

                      What definition of useful are you using? The fact that we are told that predictions can’t be made is an important result.

                       
                      A result that makes the existence of economic forecasts an anachronistic con.
                       
                       

                      What are the odds compared to, say, winning a lottery?
                      Much lower, unless of course you think you can predict a random variable.

                       

                      [another thinks: isn’t that, in practise, what a lottery is supposed to be? Maybe Paul really is that dumb]

                       

                      But a lottery isn’t prediction. With a lottery you are not predicting in any serious way. You are gambling. You take a number and hope it wins. Thats not prediction its about guessing. If you do win its because of luck. This is because it is a random variable. But that is my point the way you win with a random variable is get lucky.

                       
                      So treasury forecasts are the equivalent of gambling?
                      What if someone has a lucky number that they think has a higher chance of being drawn? Surely that’s just a flawed model based on bad information?

                       
                      But even then, if a person did exist, by definition you’d say they were a guru simply because the odds are so small it almost certainly didn’t happen by change. But it could have, and there’s no way to prove it didn’t. Unlike a science.
                      BTW no science can prove anything.
                      Incorrect. A science can repeatedly demonstrate that a model does not reflect reality.
                      That is true, but that isn’t proving. Science can falsify or verify but it can not prove anything.
                       

                      Yep. The fact that the model fails to match reality proves that the model didn’t match reality.

                      In economics, you just say that reality had bad information.
                      No. When did I say that?

                       
                      You attributed the GFC in part to bad information, not bad models. Before you admitted that economics can’t predict cataclysms. Before you admitted that economics can’t predict daily fluctuations. Before you admitted that the only thing economics is good for is demonstrating that economics is good for nothing.
                       

                  • “Shame that neoliberal economics assumes that market actors have rational expectations i.e. can predict the future with accuracy.”

                    What is “neoliberal economics”? Note that many Marxists use the same basic economics as mainstream economists.

                    Note also that there is no assumption that actors can “can predict the future with accuracy”. Even in the most simple versions of rational expectation models it is assumed that people are right only on average.

                    • McFlock

                      What are “mainstream economists”? 
                            
                      As you yourself said, nobody has a perfect (which I take to read as “useful”) economic model. Everyone has their own interpretation, which is why e.g. some economists think TARP worked wonderfully, others thing it failed pathetically, others think it just provided moral hazard, and others think it was a lost opportunity to introduce state-assisted private home ownership on a massive scale (which would have eased the pain on people who made decisions with less information, but reduced the bankers’ moral hazard. As an aside, the real moral hazard of bankers is that most of them have none).
                          
                         
                      It’s not most of the basic economic principles that are bunk, it’s whether they can ever consistently apply to the real world in a useful way. 
                           

                               

                    • “What are “mainstream economists”? ”

                      Colander, Holt and Rosser (2004: 490) argue that the “[m]ainstream consists of the ideas that are held by those individuals who are dominant in the leading academic institutions, organizations, and journals at any given time, especially the leading graduate research institutions. Mainstream economics consists of the ideas that the elite in the profession finds acceptable, where by elite we mean the leading economists in the top graduate schools. It is not a term describing a historically determined school, but is instead a term describing the beliefs that are seen by the top schools and institutions in the profession as intellectually sound and worth working on”. Dequech (2007: 281) says “[ . . . ] that mainstream economics is that which is taught in the most prestigious universities and colleges, gets published in the most prestigious journals,
                      receives funds from the most important research foundations, and wins the most prestigious awards”.

                      “As you yourself said, nobody has a perfect (which I take to read as “useful”) economic model.”

                      No perfect means perfect. A model may be imperfect but still useful. We may not know the exact inflation rate we will get from. say, a 20% increase in the money supply, so our model isn’t perfect, but we do know that we will get inflation, so your model is still useful.

                      “Everyone has their own interpretation, which is why e.g. some economists think TARP worked wonderfully, others thing it failed pathetically, others think it just provided moral hazard, and others think it was a lost opportunity to introduce state-assisted private home ownership on a massive scale (which would have eased the pain on people who made decisions with less information, but reduced the bankers’ moral hazard. As an aside, the real moral hazard of bankers is that most of them have none).”

                      A good part of the problem here is that we are too close to the event to really know what happened – economic historians are still arguing about the industrial revolution – and people are looking at different parts of the problem.

                      “It’s not most of the basic economic principles that are bunk, it’s whether they can ever consistently apply to the real world in a useful way.”

                      History would tell us yes but, and this is something I was arguing just the other day, you have to keep in mind that politics always overrides economics.

                    • McFlock

                      Colander, Holt and Rosser (2004: 490) argue that the “[m]ainstream consists of the ideas that are held by those individuals who are dominant in the leading academic institutions, organizations, 

                      And I bet you that many more economists think they’re mainstream than actually are. 
                         
                      And the current mainstream beliefs?
                       

                      A model may be imperfect but still useful. We may not know the exact inflation rate we will get from. say, a 20% increase in the money supply, so our model isn’t perfect, but we do know that we will get inflation, so your model is still useful.

                      Not in a chaotic system. You know that most of the previous occasions where money supply increased, inflation occurred. You think it’s likely to happen again, and it seems plausible. But you don’t know, for example, if people will just put their money under their bed because they no longer trust banks and culturally want to save for a rainy day. An imperfect model in a large system is only “useful” to people gambling with other people’s money. It’s not a basis on which to run a country, any more than augury was.
                       

                       A good part of the problem here is that we are too close to the event to really know what happened – economic historians are still arguing about the industrial revolution – and people are looking at different parts of the problem.

                      Which does nothing to boost my confidence in economics as anything other than a cabal of charlatans setting themselves careers for life.

                       

                       “It’s not most of the basic economic principles that are bunk, it’s whether they can ever consistently apply to the real world in a useful way.”
                       
                      History would tell us yes but, and this is something I was arguing just the other day, you have to keep in mind that politics always overrides economics.

                      And yet politicians can always find “mainstream” economists who agree with their policies (or even design their economic plan), no matter which way it goes. Not something you get with physics, for example.
                         
                      For example, if Treasury analysts were physicists or engineers, Apollo 11 would have been made out of Rhino horn and raspberry jelly.
                       
                       
                       
                       

                    • “And the current mainstream beliefs?”

                      With regard to what? Monetary policy? Fiscal policy? Growth theory? Health economics? Development economics? Public choice? Real business cycle models? Theory of the firm? Public economics? Regulatory economics? Insurance economics? International trade? Industrial organisation? International finance? Corporate finance? Economic history? New institutional economics? Econometric theory? Applied econometrics? Cultural economics? Behavioural economics? Experimental economics? ……………….

                      “Not in a chaotic system.”

                      But I have seen no evidence that says it is a chaotic system.

                      ” You know that most of the previous occasions where money supply increased, inflation occurred. You think it’s likely to happen again, and it seems plausible. But you don’t know, for example, if people will just put their money under their bed because they no longer trust banks and culturally want to save for a rainy day.”

                      Which our model would tell us means there will be less inflation because fo these things. And once the money comes out from under the bed inflation will increase.

                      “An imperfect model in a large system is only “useful” to people gambling with other people’s money. It’s not a basis on which to run a country, any more than augury was.”

                      An imperfect model is useful insofar as it is better than the alternative.

                      “Which does nothing to boost my confidence in economics as anything other than a cabal of charlatans setting themselves careers for life.”

                      No it just means you are dealing for a very complex problem. Tim Hazeldine tells his students that economics is harder than physics- at least atoms have the decency to obey universal laws. Us humans are far more capricious.

                      “And yet politicians can always find “mainstream” economists who agree with their policies (or even design their economic plan), no matter which way it goes. Not something you get with physics, for example.”

                      No. Try, for example, finding any economist who will say that building a stadium is a good idea. But there are a whole bunch of politicians in Christchurch and Auckland who say it is.

                    • McFlock

                      “And the current mainstream beliefs?” With regard to what? Monetary policy? Fiscal policy? Growth theory? Health economics? Development economics? Public choice? Real business cycle models? Theory of the firm? Public economics? Regulatory economics? Insurance economics? International trade? Industrial organisation? International finance? Corporate finance? Economic history? New institutional economics? Econometric theory? Applied econometrics? Cultural economics? Behavioural economics? Experimental economics? ……………….

                      Funnily enough, if economics were a science they’d all have a core set of principles that they’re built on, and work together to support, so you wouldn’t have to be a pretentious dick. Just saying.

                       

                      “Not in a chaotic system.”
                      But I have seen no evidence that says it is a chaotic system.

                      Really? I there are no similarities at all then I must be the only person in the world to have made that connection…
                           
                       

                      ” You know that most of the previous occasions where money supply increased, inflation occurred. You think it’s likely to happen again, and it seems plausible. But you don’t know, for example, if people will just put their money under their bed because they no longer trust banks and culturally want to save for a rainy day.” Which our model would tell us means there will be less inflation because fo these things. And once the money comes out from under the bed inflation will increase.

                      But your model won’t tell us whether people will put the money under their bed, or yell “paarrrttt-aayyy!!!” and spend up large.
                             
                      Which makes me wonder if your model is any use whatsoever.
                        
                          

                      “An imperfect model in a large system is only “useful” to people gambling with other people’s money. It’s not a basis on which to run a country, any more than augury was.” An imperfect model is useful insofar as it is better than the alternative.

                      What’s the alternative? Why is acting on models that don’t reflect reality any better than throwing those models away?

                       

                      “Which does nothing to boost my confidence in economics as anything other than a cabal of charlatans setting themselves careers for life.” No it just means you are dealing for a very complex problem. Tim Hazeldine tells his students that economics is harder than physics- at least atoms have the decency to obey universal laws. Us humans are far more capricious.

                         
                      My point entirely. It’s useless. Any prediction is almost randomly wrong, and any explanation for past events is simply a reflection of the economist’s own bias.
                           

                      “And yet politicians can always find “mainstream” economists who agree with their policies (or even design their economic plan), no matter which way it goes. Not something you get with physics, for example.” No. Try, for example, finding any economist who will say that building a stadium is a good idea. But there are a whole bunch of politicians in Christchurch and Auckland who say it is.

                       
                      Funnily enough, they found some in Dunedin. Reckoned it was going to be a good investment, they did. Quite a few economists also said the fubar stadium was a damned fool idea, but then it needed no special knowledge to point that out: most of the opponents were not economists.

                    • “Funnily enough, if economics were a science they’d all have a core set of principles that they’re built on, and work together to support, so you wouldn’t have to be a pretentious dick. Just saying.”

                      Try actually opening an economics textbook and you will find the basis principles there, I Greg Mankiw lists 10 in the first chapter of this first year book, but as with all science the benefits of specialisation and the division of labour are well recognised in economics and thus the subject get divided up into subsectors.

                      ““Not in a chaotic system.”
                      But I have seen no evidence that says it is a chaotic system.

                      Really? I there are no similarities at all then I must be the only person in the world to have made that connection…”

                      Yes you may well be the only person who has made that connection!! But given you have made it I look forward to seeing it published in a forthcoming issue of the AER.

                      “But your model won’t tell us whether people will put the money under their bed, or yell “paarrrttt-aayyy!!!” and spend up large.”

                      Given the model I was talking about wasn’t designed to tell us that, it is hardly surprising that it doesn’t. It may well be that the behavioural guys (or the economic phycologists) will tell us that. Remember the advantages of the division of labour.

                      “Which makes me wonder if your model is any use whatsoever.”

                      Why am I not surprised you miss the obvious.

                      ““An imperfect model in a large system is only “useful” to people gambling with other people’s money. It’s not a basis on which to run a country, any more than augury was.” An imperfect model is useful insofar as it is better than the alternative.

                      What’s the alternative? Why is acting on models that don’t reflect reality any better than throwing those models away?”

                      Because you will then need to act on the alternative, which will be worse. Again, a given model may not be perfect, no model is, what is has to be is better than whatever is the alternative.

                      ““Which does nothing to boost my confidence in economics as anything other than a cabal of charlatans setting themselves careers for life.” No it just means you are dealing for a very complex problem. Tim Hazeldine tells his students that economics is harder than physics- at least atoms have the decency to obey universal laws. Us humans are far more capricious.

                      My point entirely. It’s useless. Any prediction is almost randomly wrong, and any explanation for past events is simply a reflection of the economist’s own bias.”

                      Randomly wrong???? None of what I said means that economics is useless, it just means that economics is complex.

                      ““And yet politicians can always find “mainstream” economists who agree with their policies (or even design their economic plan), no matter which way it goes. Not something you get with physics, for example.” No. Try, for example, finding any economist who will say that building a stadium is a good idea. But there are a whole bunch of politicians in Christchurch and Auckland who say it is.”

                      “Funnily enough, they found some in Dunedin. Reckoned it was going to be a good investment, they did. Quite a few economists also said the fubar stadium was a damned fool idea, but then it needed no special knowledge to point that out: most of the opponents were not economists.”

                      Excellent, can you give a reference to the study that showed the stadium was a good investment? That is a study I would like to see, given that the standard view of the benefits of stadiums as determined by economists was recently summed up by Professor Dennis Coates writing at the Sports Economist blog,

                      “As readers of The Sports Economist are well aware, evidence that sports franchises and stadium and arena construction generate large impetus to economic growth and urban development exists only in the minds and reports of consultants to sport franchises and their rent-seeking employers.”

                      Dr Sam Richardson, an economist at Massey University, who has studied stadiums in New Zealand was recently quoted in a newspaper article on the Dunedin stadium as follows:

                      “Vandervis mentions Massey University academic Sam Richardson’s paper “Oasis or Mirage”, which studied the impact of Wellington’s Westpac Stadium and concluded it had no long-term impact on the local economy or employment, and that stadiums were usually unprofitable.

                      Both Chin and Brown see the stadium as a catalyst for Dunedin’s revitalisation, and say new plans for a five-star hotel on the city waterfront show it’s already having an impact.

                      But Dr Richardson says expectations for the stadium were “off the mark” and it would never be an economic stimulant.”

                    • McFlock
                       
                       

                      Yes you may well be the only person who has made that connection!! But given you have made it I look forward to seeing it published in a forthcoming issue of the AER.

                      You really ought to learn how to identify a hyperlink:
                      William J. Baumol, J. B. (1989). Chaos: Significance, Mechanism, and Economic Applications. Journal of Economic Perspectives, 3(1), 77-105.
                      Peters, E. E. (1994). Fractal Market Analysis: Applying Chaos Theory to Investment and Economics: John Wiley & Sons, Inc.
                       
                      and even:
                      Hayek, F. A. V. (1989). The Pretence of Knowledge. The American Economic Review, 79(6), 3-7.
                       
                      All one click from page one of a google search.
                       

                      Given the model I was talking about wasn’t designed to tell us that, it is hardly surprising that it doesn’t. It may well be that the behavioural guys (or the economic phycologists) will tell us that. Remember the advantages of the division of labour

                       
                      Well, it didn’t stop the GFC.
                      Don’t blame the politicians, because their economic advisors advised the politicians and said it was fine.
                       

                      Because you will then need to act on the alternative, which will be worse. Again, a given model may not be perfect, no model is, what is has to be is better than whatever is the alternative.

                       
                      WHY? That’s just a declaration of faith! Economics as a field is only a couple of hundred years old – did we not have periods of growth before then?
                       
                      Oh, and as to the stadium, check out the DCC for that. They had business plans signed off by consultants and everything. Yes, it was a fucking stupid idea, but they still had talking heads to back them up.

                    • “You really ought to learn how to identify a hyperlink:
                      William J. Baumol, J. B. (1989). Chaos: Significance, Mechanism, and Economic Applications. Journal of Economic Perspectives, 3(1), 77-105.
                      Peters, E. E. (1994). Fractal Market Analysis: Applying Chaos Theory to Investment and Economics: John Wiley & Sons, Inc.”

                      Back then there were a group of people who were excited about applying chaos theory to economics, it just hasn’t really gone anywhere.

                      and even:
                      Hayek, F. A. V. (1989). The Pretence of Knowledge. The American Economic Review, 79(6), 3-7.

                      Actually “The Pretence of Knoweldge” was Hayek’s 1974 (not 1989) Nobel speech and I don’t remember it having much to do with chaos theory. No, 1989 was its publication date for the AER, there was a big delay in it coming out there.

                      “Given the model I was talking about wasn’t designed to tell us that, it is hardly surprising that it doesn’t. It may well be that the behavioural guys (or the economic phycologists) will tell us that. Remember the advantages of the division of labour

                      Well, it didn’t stop the GFC.
                      Don’t blame the politicians, because their economic advisors advised the politicians and said it was fine.”

                      Actually no, take as a simple example the drive to increase home ownership in the US. This lead to a lot of subprime mortgages being issued and had nothing to do with economics, it was just politics.

                      “Because you will then need to act on the alternative, which will be worse. Again, a given model may not be perfect, no model is, what is has to be is better than whatever is the alternative.

                      WHY? That’s just a declaration of faith! Economics as a field is only a couple of hundred years old – did we not have periods of growth before then?”

                      What? All I said was the obviou,s that if you have to choose between two both imperfect alternatives pick the best one. The best one doesn’t have to be perfect, just better than the alternative.

                      “Oh, and as to the stadium, check out the DCC for that. They had business plans signed off by consultants and everything. Yes, it was a fucking stupid idea, but they still had talking heads to back them up.”

                      See the comment from Professor Dennis Coates writing at the Sports Economist blog. This give you the ideas as to what economist actually think about stadiums. Note the benefits being “only in the minds and reports of consultants to sport franchises and their rent-seeking employers” bit.

                      “As readers of The Sports Economist are well aware, evidence that sports franchises and stadium and arena construction generate large impetus to economic growth and urban development exists only in the minds and reports of consultants to sport franchises and their rent-seeking employers.”

                    • McFlock
                       
                       

                      Point being I’m definitely not the only person who made the connection between economics and chaos theory.
                      If I were a cynic I’d suggest that the reason that “it never went anywhere” (according to you) is because it demonstrates economics to be useless bunk.

                      Actually no, take as a simple example the drive to increase home ownership in the US. This lead to a lot of subprime mortgages being issued and had nothing to do with economics, it was just politics.

                      So they had absolutely no economic advisors around the US cabinet? Doubtful./sarc

                      What? All I said was the obviou,s that if you have to choose between two both imperfect alternatives pick the best one. The best one doesn’t have to be perfect, just better than the alternative.

                      The declaration of faith is that knowing next to fuck all, and making large decisions based on that (pretending it’s not your fault when it goes wrong), is better than knowing nothing and just muddling on through.
                       
                      There is no reason why austerity, for example, would be better long term than being more humane in social policy and getting the rich to pay more tax. You don’t know, because you can’t predict economic systems. So why not to the nice thing, rather than the painful thing? 
                       

                      See the comment from Professor Dennis Coates writing at the Sports Economist blog. This give you the ideas as to what economist actually think about stadiums. Note the benefits being “only in the minds and reports of consultants to sport franchises and their rent-seeking employers” bit.
                      “As readers of The Sports Economist are well aware, evidence that sports franchises and stadium and arena construction generate large impetus to economic growth and urban development exists only in the minds and reports of consultants to sport franchises and their rent-seeking employers.”

                      That’s what that economist thinks. Are you saying that the “consultants” did not include economists making predictions about economic growth? Which is sort of my point – millions of economists predict a variety of things, and the few who turn out to be spot on 2 or 3 times in a row (by pure chance) are called “gurus”.
                       

                       
                    • “Point being I’m definitely not the only person who made the connection between economics and chaos theory.
                      If I were a cynic I’d suggest that the reason that “it never went anywhere” (according to you) is because it demonstrates economics to be useless bunk.”

                      Checkout the literature there isn’t hell of a lot being made of it today.

                      “Actually no, take as a simple example the drive to increase home ownership in the US. This lead to a lot of subprime mortgages being issued and had nothing to do with economics, it was just politics.

                      So they had absolutely no economic advisors around the US cabinet? Doubtful./sarc”

                      Actually very few. There are a lot more political advisors and its politics that politicians worry about.

                      “What? All I said was the obviou,s that if you have to choose between two both imperfect alternatives pick the best one. The best one doesn’t have to be perfect, just better than the alternative.

                      The declaration of faith is that knowing next to fuck all, and making large decisions based on that (pretending it’s not your fault when it goes wrong), is better than knowing nothing and just muddling on through.”

                      Ok, you are going to pick the worst alternative, ok if that’s what you want, go ahead. Me I stick to picking the best alternative.

                      “There is no reason why austerity, for example, would be better long term than being more humane in social policy and getting the rich to pay more tax. You don’t know, because you can’t predict economic systems. So why not to the nice thing, rather than the painful thing?”

                      Actually there are good reasons for austerity. The basic one being even governments can’t run up debt forever. Just ask those in Europe.

                      “See the comment from Professor Dennis Coates writing at the Sports Economist blog. This give you the ideas as to what economist actually think about stadiums. Note the benefits being “only in the minds and reports of consultants to sport franchises and their rent-seeking employers” bit.
                      “As readers of The Sports Economist are well aware, evidence that sports franchises and stadium and arena construction generate large impetus to economic growth and urban development exists only in the minds and reports of consultants to sport franchises and their rent-seeking employers.”

                      That’s what that economist thinks.”

                      Actually its what every economist I’ve read on the subject says.

                      ” Are you saying that the “consultants” did not include economists making predictions about economic growth? Which is sort of my point – millions of economists predict a variety of things, and the few who turn out to be spot on 2 or 3 times in a row (by pure chance) are called “gurus”.”

                      I’m sure they made all sorts of “predictions” about growth but that just brings me back to the comment that these growth effects are “only in the minds and reports of consultants to sport franchises and their rent-seeking employers”. These consultants aren’t paid to do good economics, even if any of them are economists, they are paid to provide advocacy. This is why most of this work is done either in-house by the council staff themselves or by paid consultant with a very restricted set of criteria to consider.

                    • McFlock
                       
                       

                      Checkout the literature there isn’t hell of a lot being made of it today.

                       
                      Yeah, well acolytes who call the existence of god into question have pretty short careers.
                       

                      Actually very few. There are a lot more political advisors and its politics that politicians worry about.

                      Yep, always someone else’s fault. The “few” economists they consulted screamed and pled them npot to do it, but Clinton and Bush just laughed maniacally and carried on… /sarc
                       

                      Ok, you are going to pick the worst alternative, ok if that’s what you want, go ahead. Me I stick to picking the best alternative.

                      The worst alternative is to act with the belief based on nothing. Pride goeth before the great economic fall.
                         

                      Actually there are good reasons for austerity. The basic one being even governments can’t run up debt forever. Just ask those in Europe.

                      That’s right, Iceland ain’t in Europe…
                       

                      Actually its what every economist I’ve read on the subject says.

                      You didn’t even read the google link earlier.
                       

                       These consultants aren’t paid to do good economics, even if any of them are economists, they are paid to provide advocacy. This is why most of this work is done either in-house by the council staff themselves or by paid consultant with a very restricted set of criteria to consider.

                      Bang right there. If economics were worth anything those bad economists would be objectively wrong, like engineers talking about why a plan drops out of the sky or like the “global warming is a myth” nutbars get nuked every time they show their faces here.
                         
                      The fact that this didn’t happen with the Dunedin Stadium kind’ve shows how much room for bullshit there is in economics – much more than for any refutable science.
                       
                       
                       

                       
                    • “Yes. But they won’t be pretending that they’re “the smartest guys in the room”.
                      And a 60% median measure doesn’t guarantee the existence of poverty: 4, 4, 5, 5, 6, 6, 7, 7”

                      Now go and find me one, just one, yes only one, country with a income distribution that looks like that.

                      “Now that the economist knows basic maths, this is going in circles. You are simultaneously claiming that your models can reflect economic reality (which implies prediction) but that predicting the GFC was impossible. If the latter is correct, or models don’t lead to prediction, the economics is a waste of money that could be spent helping people.”

                      No I’m saying there lots of predictions that come out of economic models. Just go and look at the experimental literature, they spend their time testing these predictions. Not all economics models make predictions like the EMT when it says you can’t predict a crisis. One way to test this would be to find out how much money all these people who claim they did predict the crisis made because if they are right they should be some of the wealthiest people on the plant.

                    • Colonial Viper

                      Just go and look at the experimental literature, they spend their time testing these predictions.

                      BULLSHIT

                      Unless you mean that they test their elegant computerised models against other elegant computerised models. And not against the real world. And certainly not against real world Global Financial Crises or Greater Depressions.

                    • McFlock
                       
                       

                       

                      Now go and find me one, just one, yes only one, country with a income distribution that looks like that.

                       
                      Why? It’s just a model, it doesn’t have to reflect reality…
                       

                       
                       
                      “Now that the economist knows basic maths, this is going in circles. You are simultaneously claiming that your models can reflect economic reality (which implies prediction) but that predicting the GFC was impossible. If the latter is correct, or models don’t lead to prediction, the economics is a waste of money that could be spent helping people.”
                       
                      No I’m saying there lots of predictions that come out of economic models. Just go and look at the experimental literature, they spend their time testing these predictions. Not all economics models make predictions like the EMT when it says you can’t predict a crisis.

                       
                      If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.

                      One way to test this would be to find out how much money all these people who claim they did predict the crisis made because if they are right they should be some of the wealthiest people on the plant.

                       
                      Interesting theory. How would they have done that? I suggest that what actualy happens is that x% of economists say “told you so” to boost their reputation (like the dude KTH mentioned), while the ones who thought they could predict it but missed it blame incorrect information and politicians, so they keep they’re jobs, too. And as long as everyone keeps the faith, they all get to keep their cushy jobs.
                       

                       
                    • Colonial Viper

                      If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.

                      Neoliberal economists fervently believe in dynamic stochastic general equilibrium models. The market will always return to equilibrium after little upsets, they reckon. After all, that’s what markets do.

                      http://en.wikipedia.org/wiki/Dynamic_stochastic_general_equilibrium

                      The modelling is worse than useless (the NZ Treasury does shit loads of it), they have steered the global economy off a cliff.

                    • “Checkout the literature there isn’t hell of a lot being made of it today.

                      Yeah, well acolytes who call the existence of god into question have pretty short careers.”

                      This may well be true but what is also true is that chaos theory is not as popular in the literature today as it was 20 years ago.

                      “Actually very few. There are a lot more political advisors and its politics that politicians worry about.

                      Yep, always someone else’s fault. The “few” economists they consulted screamed and pled them npot to do it, but Clinton and Bush just laughed maniacally and carried on… /sarc”

                      No just the basic fact that a politicians job is politics. Politics is what politicians do, in particular they want to stay in power and they play politics, at the cost of the economy, to achieve this. Good economics are in most cases bad politics and bad politics wins out over good economics.

                      “Ok, you are going to pick the worst alternative, ok if that’s what you want, go ahead. Me I stick to picking the best alternative.

                      The worst alternative is to act with the belief based on nothing. Pride goeth before the great economic fall.”

                      And fall you will if you keep picking the worst alternative.

                      “Actually there are good reasons for austerity. The basic one being even governments can’t run up debt forever. Just ask those in Europe.

                      That’s right, Iceland ain’t in Europe…”

                      Which makes my point government can’t run up debt forever.

                      “Actually its what every economist I’ve read on the subject says.

                      You didn’t even read the google link earlier.”

                      What google link on the economics of stadiums? Your right I didn’t see one.

                      “These consultants aren’t paid to do good economics, even if any of them are economists, they are paid to provide advocacy. This is why most of this work is done either in-house by the council staff themselves or by paid consultant with a very restricted set of criteria to consider.

                      Bang right there. If economics were worth anything those bad economists would be objectively wrong, like engineers talking about why a plan drops out of the sky or like the “global warming is a myth” nutbars get nuked every time they show their faces here.”

                      1) many of these consultant aren’t economists, good or bad. 2) more importantly, they are objectively wrong, these stadiums don’t make money. Seriously just go and look at the literature on this. (Or at least check out Sam Richardon’s blog. He is must likely NZ’s best man on this.) It says these things don’t make money. This just brings me back to my point about politicians playing politics. The local politicians don’t care about the real economics of the stadiums. They just know that they are good politics and they want so some report which says the stadium is a great idea to use as propaganda.

                      “The fact that this didn’t happen with the Dunedin Stadium kind’ve shows how much room for bullshit there is in economics – much more than for any refutable science.”

                      No what it says is there is good money to be made in providing political propaganda.

                    • Colonial Viper

                      No what it says is there is good money to be made in providing political propaganda.

                      This is the main job of mainstream economists.

                    • “Now go and find me one, just one, yes only one, country with a income distribution that looks like that.

                      Why? It’s just a model, it doesn’t have to reflect reality…”

                      Errrr no. Income distributions are empirical so come up this the data that shows a country has a income distribution of the form you claim.

                      “Now that the economist knows basic maths, this is going in circles. You are simultaneously claiming that your models can reflect economic reality (which implies prediction) but that predicting the GFC was impossible. If the latter is correct, or models don’t lead to prediction, the economics is a waste of money that could be spent helping people.”

                      No I’m saying there lots of predictions that come out of economic models. Just go and look at the experimental literature, they spend their time testing these predictions. Not all economics models make predictions like the EMT when it says you can’t predict a crisis.

                      If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”

                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.

                      “One way to test this would be to find out how much money all these people who claim they did predict the crisis made because if they are right they should be some of the wealthiest people on the plant.

                      Interesting theory. How would they have done that? I suggest that what actualy happens is that x% of economists say “told you so” to boost their reputation (like the dude KTH mentioned), while the ones who thought they could predict it but missed it blame incorrect information and politicians, so they keep they’re jobs, too. And as long as everyone keeps the faith, they all get to keep their cushy jobs.”

                      They could have that because if they can predict a crisis they can beat the market which by definition means they can make money. A lot of money. So no one could predict the crisis then which is what I said.

                    • McFlock
                       
                       

                       

                      This may well be true but what is also true is that chaos theory is not as popular in the literature today as it was 20 years ago.

                       
                      Yeah whatever dude. Because science is a popularity gig. Maybe the math has been pretty much nailed down, and they’ve moved their science ahead to other issues? That’s what sciences tend to do…
                         

                      No just the basic fact that a politicians job is politics. Politics is what politicians do, in particular they want to stay in power and they play politics, at the cost of the economy, to achieve this. Good economics are in most cases bad politics and bad politics wins out over good economics.

                       
                      Yeah whatever dude. It’s other people’s fault.

                       

                       

                      The worst alternative is to act with the belief based on nothing. Pride goeth before the great economic fall.”

                       

                      And fall you will if you keep picking the worst alternative.

                      Why is admitting prediction is impossible the “worst” alternative”? Hell, a net good would be that this entire discussion got reduced to “what happens if we give money to the poor?”-“I dunno. But it seems nice, let’s do it”-“Okay”.
                      You might well argue e.g. that it would make everyone poor, but you can’t, because you can’t predict shit.

                       
                       
                      “Actually there are good reasons for austerity. The basic one being even governments can’t run up debt forever. Just ask those in Europe.
                       
                      That’s right, Iceland ain’t in Europe…”
                       
                      Which makes my point government can’t run up debt forever.

                       
                      I thought your point was that austerity was necessary?

                      “Actually its what every economist I’ve read on the subject says.

                       

                      You didn’t even read the google link earlier.”

                       

                      What google link on the economics of stadiums? Your right I didn’t see one.

                       
                      Nah dude, the bit that showed  the google search on chaos theory and economics, demonstrating that I’m sure as shit not the only guy to make that connection. But it doesn’t compute with you, so gee whizz I must be the only one…
                       
                       

                      1) many of these consultant aren’t economists, good or bad. 2) more importantly, they are objectively wrong, these stadiums don’t make money. Seriously just go and look at the literature on this. (Or at least check out Sam Richardon’s blog. He is must likely NZ’s best man on this.) It says these things don’t make money. This just brings me back to my point about politicians playing politics. The local politicians don’t care about the real economics of the stadiums. They just know that they are good politics and they want so some report which says the stadium is a great idea to use as propaganda.

                       
                      Funny. “Many aren’t” != “none are”. Are you saying that no stadia in the entire world, not even one, makes money for the community?

                       
                      “The fact that this didn’t happen with the Dunedin Stadium kind’ve shows how much room for bullshit there is in economics – much more than for any refutable science.”
                       
                      No what it says is there is good money to be made in providing political propaganda.

                      There’s also good money in pretending you know what’s going on in the economy, obviously.
                       
                      And you seem to have framed “political propoganda” as “the economic predictions politicians use which turn out to be false. Not the ones that are right”.
                       
                       
                       
                       
                       
                       
                       

                    • McFlock
                       
                       

                      Errrr no. Income distributions are empirical so come up this the data that shows a country has a income distribution of the form you claim.
                         
                      Nope. I just said we should move people up so the lowest income is >60% of the median. Based on the fact that this is a relative measure of hardship within the society. I didn’t say there has been a single society ever that has manged it.
                       

                      If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”

                       

                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.

                       
                      “bet”? “beat”? wtf does either even mean?

                       
                      “One way to test this would be to find out how much money all these people who claim they did predict the crisis made because if they are right they should be some of the wealthiest people on the plant.
                      Interesting theory. How would they have done that? I suggest that what actualy happens is that x% of economists say “told you so” to boost their reputation (like the dude KTH mentioned), while the ones who thought they could predict it but missed it blame incorrect information and politicians, so they keep they’re jobs, too. And as long as everyone keeps the faith, they all get to keep their cushy jobs.”
                      They could have that because if they can predict a crisis they can beat the market which by definition means they can make money. A lot of money. So no one could predict the crisis then which is what I said.

                      But didn’t some people get rich out of it? Get a bit lucky? Sell just before the crash? Buy short? Are you saying that all of them did it by luck? Or are you calling them gurus who could beat the market? And how would one be distinguished from the other?
                       

                       
                    • “Errrr no. Income distributions are empirical so come up this the data that shows a country has a income distribution of the form you claim.

                      Nope. I just said we should move people up so the lowest income is >60% of the median. Based on the fact that this is a relative measure of hardship within the society. I didn’t say there has been a single society ever that has manged it.”

                      Ok so no country has such an income distribution and thus the point of your argument is?

                      “If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”

                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.

                      “bet”? “beat”? wtf does either even mean?

                      Beat. It mean exactly what is says. You can’t outdo the market over time.

                      “One way to test this would be to find out how much money all these people who claim they did predict the crisis made because if they are right they should be some of the wealthiest people on the plant.
                      Interesting theory. How would they have done that? I suggest that what actualy happens is that x% of economists say “told you so” to boost their reputation (like the dude KTH mentioned), while the ones who thought they could predict it but missed it blame incorrect information and politicians, so they keep they’re jobs, too. And as long as everyone keeps the faith, they all get to keep their cushy jobs.”
                      They could have that because if they can predict a crisis they can beat the market which by definition means they can make money. A lot of money. So no one could predict the crisis then which is what I said.”

                      But didn’t some people get rich out of it? Get a bit lucky? Sell just before the crash? Buy short? Are you saying that all of them did it by luck? Or are you calling them gurus who could beat the market? And how would one be distinguished from the other?”

                      You tell us. It a test of your idea. If a crisis can be predicted then someone should have gotten very rich. Who? First you have to find these people and then ask why they got rich. If its luck then they didn’t predict the crisis, if they are gurus then show the evidence that they are.

                    • Colonial Viper

                      the biggest financial insitutions, the ones with the neolib economists and financiers, as well as the staff of all the major universities with orthodox economics departments all missed the GFC.

                      They missed it because events like the GFC cannot happen under neoliberal assumptions of market equilibrium.

                      Even in the most simple versions of rational expectation models it is assumed that people are right only on average.

                      Nope. Because then the models would have to account for brief periods where people were mostly wrong, and made bad decisions. They don’t.

                      PS Steve Keen predicted the GFC, based on his metrics of debt deflation and debt vs income / debt vs GDP

                    • McFlock

                      Ok so no country has such an income distribution and thus the point of your argument is?

                      Assuming no country ever has had zero people at <60% median income, is the economist seriously suggesting that because it has never happened before, it can never happen?
                      I’m just taking the approximate relative income level at which sociologists and people who study hardship regard as the point at which people have difficulty merely existing and become alienated and fractured away from the rest of society.
                       

                      “If they can’t predict a crisis, what fucking use are they? You’ve invented a steering wheel for a car that only works if the road is straight.”
                      No. It tells you something very important, you can bet the market. Thus you can’t predict a crisis.
                      “bet”? “beat”? wtf does either even mean?
                      Beat. It mean exactly what is says. You can’t outdo the market over time.

                       Jesus at least own your typos. “you can bet the market” is exactly what it said, so you can understand my confusion. And what is “beating” the market by your definition, and why can’t I do it?

                       If its luck then they didn’t predict the crisis, if they are gurus then show the evidence that they are.

                       But your only measure is along the lines of “did they get rich as a result of short-selling just before the GFC?”. There is no way to distinguish between luck and knowledge in that case. You could do a statistical analysis and see whether the number of people who made money(and there had to have been some who made money) was outside the bounds of statistical probability, but you have nothing to hold that against. And if nobody got rich, that could be very bad luck or even imply “reverse gurus” who’s models were fairly reliable but with inverted expectations. So how do you distinguish between luck and design? You can do it in science. Why not economics? 
                       

                    • mike e

                      PW Right wing paid economists just baffle people with bullshit

                  • “I have an issue with the fact that the GFC was predicted by only a few economists while others predicted it wasn’t going to happen, or was a long way off.”

                    Actually it wasn’t predicted by anyone and for a good reason, you can’t predict such things. (you can guess and hope but that isn’t really prediction)

                    Queen Elizabeth famously asked why economists did not predict the financial crisis. The best answer I have seen so far comes from Bill Easterly, who offers us the “Idiot’s Guide to answering the Queen”. Easterly writes,

                    “First, Your Majesty, economists did something even better than predict the crisis. We correctly predicted that we would not be able to predict it. The most important part of the much-maligned Efficient Markets Hypothesis (EMH) is that nobody can systematically beat the stock market. Which implies nobody can predict a market crash, because if you could, then you would obviously beat the market. This applies also to other asset markets like housing prices. If you think it is useless to be told you cannot predict the market, then you should change your Palace investment advisor. This knowledge will protect you from a lot of investment scams like Mr. Madoff’s and will also provoke a serious discussion of how to protect your Royal Wealth against risk in an uncertain world.

                    Second, economists did just fine pointing to fundamentals that were creating large risks of a financial crisis. Even an outsider like me heard long before the crisis hit about the dangers of opaque instruments like derivatives, excessive mortgage lending and leverage, and the bubble in housing prices. Economists have contributed a lot to understanding bubbles, but we can’t time exactly when they will burst (see EMH above).”

                    If you come across someone who does claim to have predicted the crisis ask them how much money they made. Why are they not the wealthiest person in the world, since if they really could predict the crisis they should be.

                    “Investor information is not outside of or sequestered from the market, in theory or practise. Investor information is a fundamental part of their ability to make rational decisions in the market, and is itself a traded commodity.”

                    But being mislead is another thing. See below.

                    “So to argue that enough of the market operated under incorrect information to lead to a massive financial collapse is to completely negate the practical reality of aggregate rational behaviour, “large numbers” or not.”

                    No. Behaviour is rational given the information available at the time a decision is made, that is, ex ante. Ex post things may look bad but that doesn’t make the ex ante decision irrational. For example, many people will play rugby this weekend and some will be injured, may be seriously, does this make the secision to play irrational? No, given the probability of being hurt, which is small, the ex ante decision is rational.

                    “You think the GFC happened because information was bad?”

                    In part yes.

                    “Information is an inherent piece of the market. If the market in reality behaves differently to expectations of a model, the model is bad.”

                    No. See above. Ex post bad outcomes don’t have to imply ex ante irrationality. Also keep in min the point about being mislead. See below.

                    “But you simply blame bad information, when economic models should have accounted for bad information. Which is another example of why economics is bunk.”

                    Given there are an infinite ways you can be mislead, you can’t build a model to deal with them.

                    • Kotahi Tane Huna

                      Someone who predicted it and got rich? Steve Eisman of Frontpoint Partners. He wasn’t the only one.

                      ‘As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

                      “With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”’

                    • McFlock

                      So hang on – can economists predict a damned thing or not?
                             
                      Because you seem to have said that economic models are okay because they can control for economic irrationality, but now you’re saying that they can’t control for inaccurate information.
                             
                      So I’ll pose a question: is predicting irrational decisions made with perfect information any different to predicting rational decisions made with inaccurate information?
                             
                      So your models are fine, right up until they fail, at which point you say “oh, but they had imperfect information”: i.e. “reality was broken, not my model”. The point of your model is to reflect reality. If reality’s broken, then your model should reflect that. 

                    • Kotahi Tane Huna

                      McF, not quite: the point of models is to be useful, not to be right.

                      So, for example, a model that only allows for house prices to rise is useful for predicting a rising market, but you’re an idiot if you think it shows you the whole picture. Unfortunately, there seems to be a glut of idiocy.

                    • McFlock

                      Steve Eisman of Frontpoint Partners.

                      Or he could just be an example of millions of scryers are on drugs, each with their own subtly different delusion that a calamity is looming. A completely separate calamity happens,and kills 99% of the planet. 1% live because they listened to a few of the scryers who predicted floods, and ignored those who predicted asteroid strikes. They built boats, the people who dug shelters drowned. 
                           
                      But here’s the thing – the scryers had no more basis for believing a flood is coming than others had for believing the asteroid would hit. Hell, they were all on the same drugs, FFS.

                      [edit]-KTH: lolz
                       

                    • Kotahi Tane Huna

                      Perhaps it’s a big coincidence he made a fortune off Deutsche Bank betting against the “value” of their credit default swaps…

                    • “Because you seem to have said that economic models are okay because they can control for economic irrationality,”

                      No I didn’t say economic models can control for irrationality. I said economists assume, to start with, that people make decisions in a rational way. In a recent interview Gary Becker was asked:

                      Following the crisis, many economists and methodologists have argued that more realistic behavioral underpinnings of economic theory would have made forecasts more accurate. Do you think that one of the things the recent crisis has shown us is that people just do not behave rationally? Or did the crisis rather show exactly the opposite—that people did in fact react to incentives and that the consequences of introducing new financial instruments were just not foreseeable?

                      His answer:

                      I think it is mainly the latter. There were incentives, both on the borrower and on the lender side, that these subprime loans would be made available at the lowest interest rates; and there was pressure from the government to do so; and probably those involved did not understand the financial instruments. Now, is it that we have to change our theories radically with respect to their behavioral structure or even switch to a new behavioral framework? There is very little evidence that would support such a move.

                      There is a whole field of behavioral economics that I follow pretty closely, and parts of it I have even contributed to. But did the behavioral economists predict the crisis any better? When taking a look at the literature, one does not find better results. The rational choice model is an abstraction and as is the case with all abstractions and all theories from whatever discipline, say physics, you abstract from some things that sometimes may be important. And this is also true of the rational choice model. In terms of understanding the crisis, I do not think that more realistic behavioral assumptions would solve the problem. It has always been difficult in rational choice models to adequately account for the coordination of people’s expectations. To some extent, the crisis involved the coordination of irrational expectations. This might be something we should think about and improve.

                      With respect to how the crisis affects our models in terms of being based on a more realistic assumption structure: what will occur is that models become refined to help us understand what happened. But I do not see a fundamental change in the models with respect to the underlying structure of human behavior, nor do I see a need for such a change.

                      “but now you’re saying that they can’t control for inaccurate information.”

                      As already noted, there are an infinite ways you can be mislead, you can’t build a model to deal with them.

                      “So I’ll pose a question: is predicting irrational decisions made with perfect information any different to predicting rational decisions made with inaccurate information?”

                      If you have perfect information where’s the problem? You should get it right 100% of the time.

                      “So your models are fine, right up until they fail, at which point you say “oh, but they had imperfect information”: i.e. “reality was broken, not my model”. The point of your model is to reflect reality. If reality’s broken, then your model should reflect that.”

                      No. We model imperfect information all the time. A sequential game is one of imperfect information if a player does not know exactly what actions other players took up to that point. Technically, there exists at least one information set with more than one node. Intuitively, if it is my turn to move, I may not know what every other player has done up to now. Therefore, I have to infer from their likely actions and from Bayes rule which actions likely led to my current decision. This treats the problem as one of risk. What I’m saying is, as I have noted twice now, there are an infinite number of ways to be mislead and thus you can’t model this. That is, you are dealing with Knightian uncertainty.

                    • McFlock

                      If you have perfect information where’s the problem? You should get it right 100% of the time.

                      Sigh. Not if you’re an idiot or a nutbar.
                      “is predicting irrational decisions made with perfect information any different to predicting rational decisions made with inaccurate information?” is what I asked. To put it bluntly, nutbars with perfect information will still make nutbar decisions. But to an external observer, sane and with all the facts, the nutbar decisions will be indistinguishable from rational decisions made on the basis of imperfect information. 
                       

                      What I’m saying is, as I have noted twice now, there are an infinite number of ways to be mislead and thus you can’t model this. That is, you are dealing with Knightian uncertainty.

                      Now, given that every single economic transaction is made on the basis of the information that each party to the transaction has available to them, and given that you can’t model how that information might or might not be correct, what is the point of an economic model? 
                               
                      It’s not predictive. It’s not even explanatory, because you’ve said that economists are still arguing about the Industrial Revolution. What is it good for, other than a circle-jerk for economists?

                    • darkhorse

                      been sniffing those intoxicating fumes again Paul

                      The smell pf a country running on empty

                      thanks to quacks like yourself 

                    • “Sigh. Not if you’re an idiot or a nutbar.
                      “is predicting irrational decisions made with perfect information any different to predicting rational decisions made with inaccurate information?” is what I asked. To put it bluntly, nutbars with perfect information will still make nutbar decisions. But to an external observer, sane and with all the facts, the nutbar decisions will be indistinguishable from rational decisions made on the basis of imperfect information.”

                      They may be the same if being a nutbar just means you don’t know where you are in the game tree and I would think that nutbarism is more than that. The problem is if we assume people are mad then anything goes.

                      “What I’m saying is, as I have noted twice now, there are an infinite number of ways to be mislead and thus you can’t model this. That is, you are dealing with Knightian uncertainty.

                      Now, given that every single economic transaction is made on the basis of the information that each party to the transaction has available to them, and given that you can’t model how that information might or might not be correct, what is the point of an economic model?”

                      If you are dealing with Knightian uncertainty then it is not clear how to model that. This is an important point about uncertainty, we don’t have a probability distribution over outcomes and in fact we may not even know the full set of outcomes. One way around this is to assume that we can model the situation as one of risk with a subjective distribution over the outcomes.

                      Knight made the point that

                      “Uncertainty must be taken in a sense radically distinct from the familiar notion of risk, from which it has never been properly separated…. The essential fact is that ‘risk’ means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating…. It will appear that a measurable uncertainty, or ‘risk’ proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all.”

                      “It’s not predictive. It’s not even explanatory, because you’ve said that economists are still arguing about the Industrial Revolution. What is it good for, other than a circle-jerk for economists?”

                      All this says is, I have noted before: “it just means you are dealing for a very complex problem. Tim Hazeldine tells his students that economics is harder than physics- at least atoms have the decency to obey universal laws. Us humans are far more capricious.” Also you have to ask What is the alternative? People who understand even less.

                    • McFlock
                       
                       

                      They may be the same if being a nutbar just means you don’t know where you are in the game tree and I would think that nutbarism is more than that. The problem is if we assume people are mad then anything goes.

                      But unless we assume that people have all the correct information required to make a decision, then “anything goes” too.
                            
                      And in the real world, as you pointed out, people get bad or even very bad information (and similarly, no collection of rational people would have chosen the GFC, surely?).
                             
                      So given that already “anything goes”, knowing even less is not a problem.

                    • “But unless we assume that people have all the correct information required to make a decision, then “anything goes” too.”

                      No. Go back and think about the game tree of an imperfect or incomplete information (there is stuff about the other player you don’t know) game and ask what restrictions does an equilibrium place on the play of the game? Take as an example a perfect Bayesian equilibrium. (a very commonly used equilibrium). One requirement for a PBE is that the beliefs held by players in Bayesian games follow a simple rule. A belief system is an assignment of probabilities to every node in the game such that the sum of probabilities in any information set is 1. These beliefs are just that beliefs, information here is incomplete, there are things players don’t know. The beliefs of a player are exactly those probabilities of the nodes in all the information sets at which that player has the move (a player belief might be specified as a function from the union of his information sets to [0,1]). A belief system is consistent for a given strategy profile if and only if the probability assigned by the system to every node is computed as the probability of that node being reached given the strategy profile, i.e. by Bayes’ rule. This places a restriction on what players can believe along the equilibrium path.

                      The second requirement for a PBE is notion of sequential rationality. This is what determines the optimality of subsequent play in PBE. A strategy profile is sequentially rational at a particular information set for a particular belief system if and only if the expected payoff of the player whose information set it is (i.e. who has the move at that information set) is maximal given the strategies played by all the other players. A strategy profile is sequentially rational for a particular belief system if it satisfies the above for every information set.

                      Now a PBE is defined as a strategy profile and a belief system such that the strategies are sequentially rational given the belief system and the belief system is consistent, wherever possible, given the strategy profile.

                      What this means is that not all equilibria are PBE. We have restricted the set of acceptable outcomes.

                      Or in short, anything doesn’t go

                    • McFlock

                      PBE? Wow, my faith is restored.
                         
                      And yet as you say the GFC was impossible to predict.
                      So I again ask: Wouldn’t it be better to just take the money we currently give to economists, make them work for a living rather than come up with reasons why they can’t predict shit, and give the dosh to the poor?        
                       

                    • “PBE? Wow, my faith is restored.”
                      And yet as you say the GFC was impossible to predict.

                      I have to say I don’t see what PBE and the GFC have to do with each other.

                      “So I again ask: Wouldn’t it be better to just take the money we currently give to economists, make them work for a living rather than come up with reasons why they can’t predict shit, and give the dosh to the poor?”

                      Well define poor. How are you going to decide who get how much? Are you going to give out money or goods? What would be the welfare effects of each scheme? Many economic question need answers.

                    • McFlock
                       
                       

                       

                      “PBE? Wow, my faith is restored.”
                      And yet as you say the GFC was impossible to predict.
                      I have to say I don’t see what PBE and the GFC have to do with each other.

                      Didn’t you just say that the PBE enables you to model the possibility of actors acting on shit information? And didn’t you say earlier that the GFC happened “in part” because the actors were acting on bad information?
                          
                      Seems to me the GFC draws the use of PBE into doubt.
                       

                      Well define poor. How are you going to decide who get how much? Are you going to give out money or goods? What would be the welfare effects of each scheme? Many economic question need answers.

                      Here’s the thing: get social statisticians to measure income in the country. Arbitrarily tweak income supplements to 60% of the median and define that as “poverty” (or better yet use the hardship surveys to figure out the “poverty” level – those would be sociologists who do that). Shoot anyone who tries to make a prediction. If there’s still poverty, tweak it up. If there’s no poverty, tweak it down and see if poverty appears. If it does, tweak it up again. Then shoot anyone who tries to make a prediction.
                      No economists needed. Just statisticians, accountants, and sociologists.

                    • “Didn’t you just say that the PBE enables you to model the possibility of actors acting on shit information? And didn’t you say earlier that the GFC happened “in part” because the actors were acting on bad information?”

                      No I just used PBE as an example of how incomplete information could be modelled in such a way as to show that not anything can happen. There are other ways. Which one you use depends on exactly you are modelling.

                      “Seems to me the GFC draws the use of PBE into doubt.”

                      No, the GFC couldn’t be prodicted. Back to the Easterly point.

                      “Well define poor. How are you going to decide who get how much? Are you going to give out money or goods? What would be the welfare effects of each scheme? Many economic question need answers.”

                      “Here’s the thing: get social statisticians to measure income in the country. Arbitrarily tweak income supplements to 60% of the median and define that as “poverty” (or better yet use the hardship surveys to figure out the “poverty” level – those would be sociologists who do that). Shoot anyone who tries to make a prediction. If there’s still poverty, tweak it up. If there’s no poverty, tweak it down and see if poverty appears. If it does, tweak it up again. Then shoot anyone who tries to make a prediction.”

                      If being below 60% of the median income is poverty then this measure of poverty guarantees there will always be poverty. You really need to think more about your poverty measure, this is an example of why the economic literature on poverty measurement is so large.

                      “No economists needed. Just statisticians, accountants, and sociologists.”

                      You will find that your statisticians and sociologists will be drawing on the same literature as the economists.

                    • McFlock

                      You will find that your statisticians and sociologists will be drawing on the same literature as the economists.

                      Yes. But they won’t be pretending that they’re “the smartest guys in the room”.
                      And a 60% median measure doesn’t guarantee the existence of poverty: 4, 4,  5, 5, 6, 6, 7, 7
                       
                      Now that the economist knows basic maths, this is going in circles. You are simultaneously claiming that your models can reflect economic reality (which implies prediction) but that predicting the GFC was impossible. If the latter is correct, or models don’t lead to prediction, the economics is a waste of money that could be spent helping people.

                    • Colonial Viper

                      If being below 60% of the median income is poverty then this measure of poverty guarantees there will always be poverty. You really need to think more about your poverty measure, this is an example of why the economic literature on poverty measurement is so large.

                      Oh great, redefine the measure and poverty goes away.

                      this is an example of why the economic literature on poverty measurement is so large.

                      The economic literature on poverty measurement is large because free market neoliberal economics has no answers to poverty, only answers to measuring it.

                    • “Neoliberal.

                      Chicago School.

                      Now stop playing dumb. You don’t need to.”

                      The webpage on “neoliberal” is absolute crap. They have a section on “classical neoliberalism” Roughly classical can be seen as meaning old, neo can be seen as meaning new, so we have old-new-liberalism.

                      Also note this bit,

                      “In Capitalism and Freedom (1962), Friedman developed the argument that economic freedom, while itself an extremely important component of total freedom, is also a necessary condition for political freedom.”

                      If the author of the page had actually read Capitalism and Freedom they would have discovered that Friedman called, correctly, the ideas in the book “classical liberal”, not “neoliberal”.

                      As to the Chicago School their economics where not “neoliberal”, there is no school of economic thought called “neoliberal”, they were just neoclassical economists. A far as microeconomics goes the Chicago School where basically an applied neoclassical price theory group (take a look at Friedman’s or Stigler’s books on “Price Theory”) while in terms of macro they where most famous for developing monetarism..

                    • McFlock

                      You wanted to know what the terms meant.

                      So maybe you had indeed never heard those terms before. Maybe you know Freidman’s bullshit by another name. Whatever. From a generally left perspective (albeit I’m reluctant to refer to an imaginary grouping as such, but I’ve not heard too many toryboys use the term “neoliberal”. Too many syllables.), they are useful terms that denote the more bullshit areas of economics as applied by “the haves” against “the have-nots”. Because it is real-world application that counts, not a slide-rule in your imagination.

                  • “By the way, I consider you a neolib troll (“what is this neolib economics thingy” – seriously???)”

                    I know lots of classifications for different views on economics, Keynesian, neo-Keynesian, post-Keynesian, new-Keynesian, Monetarist, neo-classical, new-classical, behavioural, experimental etc, what I don’t know is neoliberal.

                  • Colonial Viper

                    CV is a great example of my definition. “Neoliberalism” is just stuff he hates.

                    Or not, as the case may be.

                    http://www.isg-fi.org.uk/spip.php?article80

                    • “Or not, as the case may be.

                      http://www.isg-fi.org.uk/spip.php?article80

                      Well I’m glad to see you’re keeping up with your Marxism.

                      A couple of comments on the three points at the start of the article. First they are neoliberalism is being defined there is terms of policy rather than an actual economic school of thought which backs-up the point I have been making all along.

                      Second the comment “In addition, the provision of such [public] services is seen as something which can best be provided by the private sector, with the role of the state mainly to manage the awarding of the relevant contracts and ensuring that no single monopoly provider gains too much power in the market at the expense of other capitalists.” As to the second point, competition policy, which is what I assume they mean is seen by most economists as a proper role for government. But no all. Many Austrian for example see competition policy as more of a problem than a help. This highlights a point I have made above. I’m guessing but I would think that Austrian economists would be put in the “neoliberal” grouping but as noted they are not keen on competition policy. This highlights the point that “neoliberalism” don’t work as a school of economic thought since it doesn’t define such a school. Also the bit about public services being provided by the private sector. I assume what they are getting at is things like the public-private-partnerships in the U.K. On my blog I have posted on PPPs. In one posting I said:

                      “Here is Phil Barry’s assessment:
                      The formal studies that have been undertaken generally provide a qualified “yes” to that question. I say qualified because the PPPs don’t always work. And even when they do work, the PPPs are by no means perfect.”

                      I also noted that:

                      “At the IEA website Richard Wellings discusses the British experience with PPPs. He explains Why PPPs may offer poor value for money.”

                      Note that economists are questioning the value of PPPs. And even the late Roger Kerr questioned PPPs on his website. And I’m sure that in NZ Roger would have been seen as “neoliberal”. In addition note that Richard Wellings questioned the value of PPPs in the UK at the Institute of Economic Affairs website. Again I would guess that in the UK the IEA would be seen as “neoliberal”.

                      But here we have “neoliberal” groups and economists questioning one of the very policies that defines “neoliberalism”.

                      Also much of the area I work in, normally called “organisational economics”, is about working out when different organisational form are optimal. That is, when should we use for-profit firms, not-for-profit firms, clubs, government departments, SOEs etc. So it isn’t just about letting the private sector do everything. There are cases, eg foreign affairs, army, where you don’t want private firms carrying out those activities. For the case of prison privatisation I have also posted at Anti-dismal on that. In one post I considered a paper by Hart, Shleifer and Vishny in which they say,

                      “In sum, our model suggests that a plausible theoretical case can be made against prison privatization.”

                      So again I ask where are these “neoliberal” economists?

                      As to the third point made:

                      “there is an extensive programme of domestic deregulation.”

                      No. What we have seen in re-regulation rather than deregulation. As to their comment,

                      “for example the Glass-Steagall Act separating commercial and investment banking, imposed in the wake of the 1930s depression in the USA, was recently repealed”

                      The should take a look at this article “Why I was won over by Glass-Steagall”
                      by Luigi Zingales. Zingales is Robert C. McCormack Professor of Entrepreneurship and Finance at the Univeristy of Chicago. Yes the “neoliberal” University of Chicago!

                      There are lots more you could say about the definition given in the article you point to, for example, if by “breaking down of national economic barriers” they mean globalisation then as we are into the third period of that in the last 100-150 years its not exactly new. Globalisation has been around a longer than “neoliberalism”.

                      So I’m really not sure what to make of the three point definition given in the Marxist article. There may be someone who believes all the things they say but I can’t see they they define any obvious large groups of economists or anyone else.

                    • Colonial Viper

                      But neoliberalism is not just whatever stuff I “happen to hate”?

          • Paul Walker 17.1.1.1.2

            @ Armchair Critic

            Paul, I’m a datahead. I’ve spent my career building a large range of models. There’s nothing above that is a new idea to me. My point, in case you missed it, is that every model has some underlying assumptions. Once those assumptions are violated or shown to be untrue, the value of the model is reduced, often to nothing.

            I take your point. One thing to keep in mind however is that if you take the Friedman position that (roughly put) “prediction is everything” then assumptions don’t matter. That is, if a model with totally wrong assumptions predicts better than a model with great assumption you take the bad assumptions model.

            Also as I noted before, to reject a model you need something to replace it with.

            With regard to the von Neumann-Morganstern expected utility model, it is used for identifying rational decision making. Yet individuals do make irrational decisions. A model for rational decision making is at best a guide for understanding irrational decisions.
            Again this has to be shown and to quote Oliver Williamson, “it takes a theory to be a theory”. This basically means to get rid of one theory you have to have something better to replace it with.
            No, it doesn’t. Some theories are just crap, are recognised as such, and are abandoned. Phrenology, for example.

            But there way no good theory of phrenology in the first place. That was part of the problem with it. Also phrenology in some forms lasted into the 20thC. Even so if for example you were to just stop using vNM decision theory, when there is nothing to replace it, how do you deal with decision making?

            For example we know there are problems with all the current theories of the firm but no one has yet some up with a theory that is better than all the others. This is what keeps us in business, trying to find that theory.
            As economists we spend a lot of time looking at your models and trying to improve them. This is why we keep on writing papers, trying to come up with a better model.
            Like other commenters, I question the value of the “trying to come up with/find” you refer to. It doesn’t seem to have produced much of anything useful.

            Useful in what sense? For example in what sense are the theories of the firm not useful? IF we where to stop using them how do we understand firm?

            Sometimes outliners are interesting and explaining them can lead to new ideas and theories but in other cases it can be the “average” outcome that we are interested in. For example we know that on “average” increasing the money supply causes inflation and thus economists argue that government shouldn’t expand the money supply. There will be times when an increase in the money supply doesn’t have a huge effect on inflation but this doesn’t mean that economists are wrong to tell governments to restrict money growth. Another example would be that economists assume most of the time that demand curves slope downwards but we also know that sometimes they don’t (Giffen goods). But as they are very rear we don’t much worry about them in practice. As outlines Giffen goods are interesting and studied but on “average” saying demand curve slope downwards is the right thing to assume.

            The outliers, in my experience, are always the most interesting bits. In terms of income, for example, knowing the average or median value is useful, but looking at the outliers in both directions (extremely rich and extremely poor) tells us a whole lot more about our society. Looking at temporal aspects for physical systems, unusual events such as large earthquakes or flood events are the ones that make the news and really change people’s lives, and societies.

            What you want to look at depends on the question you are trying to answer. For example if I am look at growth I may want to know what factors have in common that explain their growth pattern. I would also what to look at the outliers to see how they differ from the more “normal” group but I need to know about the normal group to make the comparison.

            Of course they don’t follow normal distributions, so the modelling and statistical approaches are quite different to studying averages, but you probably already knew that. Models of unusual events tend to be poor at predicting timing (though with the power of weather forecasting, extreme weather events can be predicted with enough time to issue warnings), but they can be good at predicting locations and consequences.
            I cannot agree with your suggestion, elsewhere on this thread, that the GFC could not have been predicted. Your suggestion that if it could have been it would have let people “beat the market” shows a venal streak, and is akin to suggesting that weather forecasters would not inform people of extreme weather.

            No. What the EMH tells really is that the GFC was not predicable. Basically all information is being used to predict an outcome so the unexplained bit is random. And predicting a random variable is a bit difficult!

            The demand equals supply bit I was using comes from the results of experiments. There you can get them to equal.
            I was talking about the real world, not an experiment, because my life is not an experiment.

            Well you would hope that the experiments tell us something about he real world and when this is looked at it is found the experiments do a good job of replicating the real world.

            • Armchair Critic 17.1.1.1.2.1

              Your comment is made more difficult to read due t o a lack of formatting.
              I take your point. One thing to keep in mind however is that if you take the Friedman position that (roughly put) “prediction is everything” then assumptions don’t matter. That is, if a model with totally wrong assumptions predicts better than a model with great assumption you take the bad assumptions model.
              Models give results in ranges. There is no such thing as bad or good assumptions, just valid and invalid ones. I’m yet to come across a model that produces good fits to data with extensive invalid assumptions.
              Also as I noted before, to reject a model you need something to replace it with.
              The first and most fundamental rule of modelling is entia non sunt multiplicanda praeter necessitate. On this basis models that are too simple must be rejected, if not outright then for use outside the bounds of their assumptions.
              But there way no good theory of phrenology in the first place.
              Back when there were phrenologists to debate this, I have no doubt their defence of their art would have been as gallant as your defence or yours.
              Even so if for example you were to just stop using vNM decision theory, when there is nothing to replace it, how do you deal with decision making?
              I have no difficulty with decision making. Many of my decisions meet the requirement of the vNM axioms, and some don’t.
              Useful in what sense? For example in what sense are the theories of the firm not useful? IF we where to stop using them how do we understand firm?
              My manager and clients have usually defined usefulness in terms of results, or outputs, rather than compliance to theories.
              No. What the EMH tells really is that the GFC was not predicable. Basically all information is being used to predict an outcome so the unexplained bit is random. And predicting a random variable is a bit difficult!
              There is a wide gulf between unpredicted and unpredictable. The GFC was not unexpected, the difficulties were the exact nature/sequencing of events, and the timing.

      • Puddleglum 17.1.2

        Given the overall point about “the tendency for non-economists to tell us what’s wrong with economics” it’s odd that Dillow repeatedly refers to Kahneman as an economist!

        Despite getting the Nobel prize in economics, he’s a psychologist (always has been and still is – see his latest book ‘Thinking, fast and slow‘).

        He made his name as a ‘non-economist telling economists what’s wrong with economics’ – to the point of getting a Nobel for his ‘telling’. 

        • Paul Walker 17.1.2.1

          If you read the comments to his post I did point out that a number of non-economists have made great contributions to economists. Think of Adam Smith, Karl Marx, Alfred Marshall, Ronald Coase, JM Keynes, Gordon Tulllock, to name but six.

          Its funny who people think are economists. I remember talking to a political scientist friend on the day the political scientist the late Professor Elinor Ostrom won the Nobel in economics. I said he should be very happy that a political scientist had won the Nobel. “Political scientist?” he asked. “I always thought she was an economist!”

          • Puddleglum 17.1.2.1.1

            Paul, you seem to see ‘economics’ as something quite constrained if you refer to Smith, Marx and Keynes as ‘non-economists’ (see, I’ll take the bait!).

            I’ve always thought of economics as studying economic behaviour – with the emphasis on behaviour. That means that it would naturally incorporate political, social, psychological, even biological theories. It seems, as a discipline, however, to have become rather enamoured solely with logical models.

            Popper, of course, argued that the strength of Hayek’s economic theory was that it was based upon a logical model, rather than a psychological one. But, then, Popper would say that (he also seemed quite personally smitten by Hayek if his comments in Poverty of Historicism are anything to go by – very adoring in tone.).

            Most scientists – and sciences – also have substantive (i.e., non-logical, empirically-based) models. Physicists, for example, actually proposed a structure for atoms (i.e., neutrons, protons and orbiting electrons); biologists theorised about physiological mechanisms (e.g., the circulatory system), etc..

            While I know many economists like to see their discipline as ’empirical’, its (over)reliance on logical models actually makes it ’empiricist’, instead. Like Skinnerian behaviourism in psychology (which is also a logical model of behaviour) it is strongly atheoretical, in this sense.

            But maybe I’m misrepresenting – or simply ignorant of – the rich set of substantive theoretical constructs that exist independently of the logical modelling? (supply and demand, for example, are part of the logic of the model just as stimulus and response are part of the logic of Skinnerian behaviourism – they are not theoretical constructs in the same sense as they occur in the (other) sciences). The only suggestion of a true theoretical construct I’ve heard of is Keynes’ ‘animal spirits’ (or was it ‘passions’?).

            • Paul Walker 17.1.2.1.1.1

              Paul, you seem to see ‘economics’ as something quite constrained if you refer to Smith, Marx and Keynes as ‘non-economists’ (see, I’ll take the bait!).

              My point was that Smith as trained as a philosopher as was Marx and Keynes was a statistician. Coase studied commerce, Tullock was a lawyer and Marshall was trained in maths.

              I’ve always thought of economics as studying economic behaviour – with the emphasis on behaviour. That means that it would naturally incorporate political, social, psychological, even biological theories. It seems, as a discipline, however, to have become rather enamoured solely with logical models.

              To take the obvious counter to that: behavioural economics.

              Popper, of course, argued that the strength of Hayek’s economic theory was that it was based upon a logical model, rather than a psychological one. But, then, Popper would say that (he also seemed quite personally smitten by Hayek if his comments in Poverty of Historicism are anything to go by – very adoring in tone.).

              Most scientists – and sciences – also have substantive (i.e., non-logical, empirically-based) models. Physicists, for example, actually proposed a structure for atoms (i.e., neutrons, protons and orbiting electrons); biologists theorised about physiological mechanisms (e.g., the circulatory system), etc..

              While I know many economists like to see their discipline as ‘empirical’, its (over)reliance on logical models actually makes it ‘empiricist’, instead. Like Skinnerian behaviourism in psychology (which is also a logical model of behaviour) it is strongly atheoretical, in this sense.

              But maybe I’m misrepresenting – or simply ignorant of – the rich set of substantive theoretical constructs that exist independently of the logical modelling? (supply and demand, for example, are part of the logic of the model just as stimulus and response are part of the logic of Skinnerian behaviourism – they are not theoretical constructs in the same sense as they occur in the (other) sciences). The only suggestion of a true theoretical construct I’ve heard of is Keynes’ ‘animal spirits’ (or was it ‘passions’?).

              Take the area I work in, the theory of the firm. The godfather of the area Ronald Coase makes the point that “An inspired theoretician might do as well without such empirical work, but my own feeling is that the inspiration is most likely to come through the stimulus provided by the pattens, puzzles and anomalies revealed by systematic gathering of data, particularly when the prime need is to break our existing habits of thought.” To this end he set up a centre for the collection of business contracts. Use of such data sets is increasing as large micro-data sets become more common. They are unfortunately difficult and expensive to create. But better data is becoming available and empirical work is increasing because of it. Some years ago I remember reading a book based on data from the Doomsday Book. The authors set about estimating production functions for different regions of the (now) UK. Add to this the drive that experimental economics is giving to theory development. The theories can now be tested in the laboratory. Much of behavioural economics had come out of the lab. Recently there have been a series of experimental papers test aspects of “reference theory” approach to the theory of the firm. This is an approach that some of my work applies to the human-capital based firm.

              My basic point is that empirically based theory is growing. As better data is available, better testing and development of theory follows.

              • Colonial Viper

                Kahnemann’s behavioural economics paradigms shows up the neoliberal approach to economics (which is in turn based on their neoclassical stooges in academia) as being a palace of bullshit based on false assumptions.

              • There’s also the ‘burgeoning’ field of neuroeconomics and the interesting work on trust (via oxytocin levels and the like).

                I’m well aware of behavioural economics/economic psychology and also well aware of the long-standing difficulties it has had being accepted.

                Then there’s evolutionary economics (check out some of the foci and issues considered there).

                There’s even a group name for ‘non-mainstream’ approaches – ‘heterodox economics‘.

                The telling point for me, however, is that none of these areas were mentioned by yourself when talking about schools of thought in economics (presumably because they are relatively marginal currents?).

                I may be wrong but I also imagine they receive scant attention in undergraduate economics degrees currently.

                ‘Solely’ was too strong, I accept. 

                • And ‘real’ ‘evolutionary economics‘ – 🙂

                • “The telling point for me, however, is that none of these areas were mentioned by yourself when talking about schools of thought in economics (presumably because they are relatively marginal currents?).”

                  You’re right the heterodox areas while not unknown do get little attention in teaching basically because they are marginal areas right now. There is more than enough mainstream stuff to fill up an undergrad degree without moving into the heterodox. I am working on a paper right now which contains the following

                  “In this survey we give a short overview of the way in which the theory of the firm has been formulated within the “mainstream” of economics, both past and present. That there has been a close relationship between the general economic mainstream and the development of the theory of the firm has been noted by Foss and Klein (2006),”

                  and

                  “Thus this essay’s concentration on the mainstream literature may do little damage to the story of the emergence of the theory of the firm but it does mean that little will be said of those non-mainstream or heterodox ideas, such as those from the overlap between economics and management or the Marxist approaches or the Austrian inspired theory of the firm or the relevant contributions from business history, that have developed outside of the orthodoxy.”

                  A footnote that goes along with this reads,

                  “Since the 1990s there has emerged a small Austrian literature on the firm, see for example Dulbeccoand Garrouste (1999), Ioannides (1999),Witt (1999), Yu (1999), Lewin and Phelan (2000), Sautet (2000), Jankovic (2010) and Bylund (2011). For general discussions of this literature see Foss (1994, 1997), Foss and Klein (2009, 2010), Klein (2010) and Langlois (forthcoming). For discussions of the contributionsfrom the resource-based theory of the firm see Wernerfelt (1984), Conner (1991) and Lockett, O’Shea andWright (2008). On the knowledge-based view see Kogut and Zander (1992, 1996), Conner and Prahalad (1996) and Demsetz (1997). For critiques of knowledge-based theories see Foss (1996a, 1996b). Examples of the capabilities literature are Barney (1991) and Jacobides and Winter (2005). The most important work in the evolutionary economics approach to the firm is Nelson and Winter (1982). A discussion of the insightful but largely neglected paper, Malmgren (1961), is missing from this survey, but see Foss (1996c). For a discussion of some of the critics of the theory of the firm see Foss and Klein (2008). Sawyer (1979: chapter 9) considers ‘radical critique and radical alternatives’ to the theory of the firm. Sawyer briefly discusses Galbraith’s ‘theory of countervailing power’ (Galbraith 1963), Baran and Sweezy on Monopoly Capital (Baran and Sweezy 1966), Rothchild’s ‘Price theory and Oligopoly’ (Rothchild 1947) and Galbraith’s The New Industrial State (Galbraith 1969). Hagendorf (2009) gives a Marxian critique of the theory of the competitive firm. The Marxian notion of the ‘conflict theory of the firm’ is examined in Baker and Weisbrot (1994). Another topic ignored here is the multinational firm, for an overview see Barba Navaretti et al (2004). On the relationship between the theory of the firm and entrepreneurship see Foss, Klein and Bylund (2011). For an overview of research into the growth of firms see Coad (2007, 2009). From business history comes Alfred D. Chandler’s classic works on the origins of the modern large-scale business enterprise, Chandler (1962, 1977, 1990). For a brief history of the development of the limited liability company see Hickson and Turner (2006). Walsh (2009) offers a Mengerian theory of the origins of the modern business firm. Another issue ignored here is corporate finance. On this see Tirole (2006). The conditions under which different forms of firm ownership are optimal are discussed in Hansmann (1996).”

                  The point is that, yes there are heterodox ideas but they get little attention since they are not (yet) big players in the area. You concentrate mainly on the big players simply because these are the ideas that students are most likely to meet and thus they are the ideas they need to understand. Also as the heterodox tend to be anti-mainstream, student need to understand the mainstream ideas to appreciate what the heterodox guys are attacking and saying.

                  • Colonial Viper

                    Yeah interesting but of no use to any one except neolibs and neoclassical economists. (See what i did there? Just for you!)

                    Economists don’t control the machine, the machine has a life of its own. As we have aptly seen over the last four years, and will keep seeing over the next four.

                    • Machine is not the way to think of things. Biology rather engineering is a better allegory.

                    • Colonial Viper

                      Yet neoclassical economics loves its mechanistic, fictitious, 2 dimensional sloping lines.

                    • “Yet neoclassical economics loves its mechanistic, fictitious, 2 dimensional sloping lines.”

                      Not so. Alfred Marshall one of the most important neoclassical economists used biological analogies all the time.

                    • Colonial Viper

                      Analogies aren’t of any use in DSGE models. And nature does not run itself in ways that agents in free markets run themselves.

                  • Hi Paul

                    Thanks for the comprehensive explanation. Yes, the mainstream has to be taught prior to the challenges to it. Even in an undergraduate degree, however, the challenges need some introduction to promote that vital ingredient, ‘critical thinking’.

                    BTW, sounds like an interesting paper. Good luck with it. 

  18. ad 18

    Did anyone get to big Fabians gig yesterday? packed out, very slick.
    Full of interesting ideas and people, like an alternative world operating and finally getting to meeting together.

  19. If economists truly believed their own blather they would have died out long ago if they lived according to their own principals – they would not have families or more particularly children as a child’s economic utility is negative.  They wouldn’t have any fun because fun has no intrinsic value.

    Also if economists held the universal truth we should all be rich now because we have all been living in their thrall for the past three decades. Odd as it may seem (to an economist anyway) there is a clear INVERSE link between the number of economist in a society and its current wealth and wellbeing.  China is rich and doesn’t have many economists and we have a plague of them and we are broke and getting broker.

      

  20. captain hook 20

    its like smacking kids.
    if it worked then you would not have to keep doing it.
    if economists knew as much as they thought they did then we would not be in this position now.
    can I put that any any clearer?

    • You could try being right. Much of the reason for the current mess has nothing to do with economics and a lot to do with politics. Bad politics will always win out over good economics.

      • mike e 20.1.1

        noelib policies pw are responsible not politics politicians continue to push this failed policy for the benefit of a few,

      • Colonial Viper 20.1.2

        Economics and politics are not separate things! Even though academics pretend that they are, or that they somehow should be.

        Its the game of political economics and it continues.

        PS neoliberalism is not “good economics”

  21. Colonial Viper 21

    Educating the Pretend-Ignorant Paul Walker

    Topic: Chicago School of Economics

    The Chicago school of economics describes a neoclassical school of thought within the academic community of economists, with a strong focus around the faculty of The University of Chicago, some of whom have constructed and popularized its principles. It is at times referred to as freshwater school of economics, in contrast to the saltwater school based in coastal universities (notably Harvard, MIT, and Berkeley)…

    Kaufman (2010) says that the School is characterized by:

    A deep commitment to rigorous scholarship and open academic debate, an uncompromising belief in the usefulness and insight of neoclassical price theory, and a normative position that favors and promotes economic liberalism and free markets.[1]

    Chicago macroeconomic theory rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations.

    http://en.wikipedia.org/wiki/Chicago_school_of_economics

    • Actually what you have posted backs up perfectly what I said!!

      Note this bit in the first sentence, “neoclassical school of though”. This is what I said, “they were just neoclassical economists”. Neoclassical school is a very well known school of thought, most commonly associated with Alfred Marshall.

      Also note this bit “an uncompromising belief in the usefulness and insight of neoclassical price theory”. Note what I said, “the Chicago School where basically an applied neoclassical price theory group”.

      In addition see this bit that you quoted, “macroeconomic theory rejected Keynesianism in favor of monetarism”. I said “in terms of macro they where most famous for developing monetarism.”.

      Thanks Colonial, I couldn’t have made my case any better myself!

      • Colonial Viper 21.1.1

        Oh so you knew what I was talking about the whole time but played dumb on the excuse of semantics?

        Thanks, I figured that was your style.

        Neoliberalism is the practical political and financialised application of academic neoclassical economic theory to destroy lives. Any clearer for you?

        • Paul Walker 21.1.1.1

          “Neoliberalism is the practical political and financialised application of academic neoclassical economic theory to destroy lives. Any clearer for you?”

          No, its just crap. There is no school of thought in economics called “neoliberalsim”. As you point out the Chicago School were a neoclassical school of thought.

        • Pete George 21.1.1.2

          What actually is neoliberalism? Depends on who’s talking.

          The meaning of neoliberalism has changed over time and come to mean different things to different groups. This lack of agreement creates major problems in creating an unbiased and unambiguous definition of neoliberalism.

          In academic social sciences outside of economics, the term “neoliberal” is often used to condemn privatization and its advocates.

          Definitions, explanations, primer: What is neoliberalism?

      • McFlock 21.1.2

        So you’re arguing that “Chicago School” economics doesn’t exist, because it’s called “neoclassical”? And this is some kind of point?
            
        A rose by any other name would feed on horseshit. You said you weren’t familiar with any such thing, and implied it didn’t exist. That’s like saying that XXX (whatever CV’s real name is) doesn’t exist because you’re only familiar with them using the name “Colonial Viper”.
             
        Interesting philosophical digression, though. 

        • Paul Walker 21.1.2.1

          “So you’re arguing that “Chicago School” economics doesn’t exist, because it’s called “neoclassical”? ”

          No. Can you show where I said the Chicago School doesn’t exist? I have never said that.

          The Chicago School has never been called neoclassical, it has always been called the Chicago School. If fact the Chicago School is a very well known group in economics. It is well known as having an “uncompromising belief in the usefulness and insight of neoclassical price theory” as Viper so kindly shows.

          • McFlock 21.1.2.1.1

            You know what? You’re right. I tumbled neoliberal and chicago school. But I’m still left with a strong sense of “you’re wasting my time with semantic bullshit”, followed by “to answer the post’s title, economists do not have the answers. When all’s said and done, all they have is semantic bullshit”.
               
             

            • Paul Walker 21.1.2.1.1.1

              There is no bullshit, its all very simple. Neoliberalism is meaningless (classical liberalism is a well recognised political philosophy), the Chicago School does exist and is grounded in neoclassical price theory (microeconomics), neoclassical being the school of thought. In macro they were about monetarism. If these simple idea are kept in mind a lot of wasted ink could be saved.

              • mike e

                PW The dictionary has been rewritten since adam smith was born.

                • Nice to know.

                  What has Adam Smith got to do with anything?

                  • Colonial Viper

                    Not much since the neoliberals (and neo-classicists) just use his name in vain these days.

                    • Don’t know about the nonexistent neoliberals but it is true that a number of Adam Smith experts claim some in the neoclassical school do misrepresent Simth’s work. But then so does just about every other school of economic thought.

                    • McFlock

                      Why do you say neoliberalism is meaningless and doesn’t exist, when it quite obviously has meaning for quite a lot of people?
                           
                      Was the term not sanctioned by Treasury? 

                    • “So that’s Weintraub’s opinion on what neoclassical economics is, then.”
                      No those would be a set of criteria which define a particular school of thought. You can ask does a a piece of work meet these criteria to see if it fits into that group or school.

                      A set of criteria defined by Weintraub. Is Weintraub’s definition an immutable law ofthe universe? Nope. It’s a term defined by criteria of his choice, built on the choices others but it’s still just an opinion.”

                      Its no more an opinion than any definition and we think of definitions as different from opinion. Is the meaning of the word “opinion” not just the opinion of those who use the word? The criteria Weintraub uses would be in general agreement of those economists who self-identify as neoclassical.

                      “The point is that there are clear demarcation lines (for want of a better expression) between the different schools of thought which amount to more than just opinion.

                      Defined by whom?”

                      By this stage the entire profession.

                      “Oh, they might be intimately-defined opinions (what would one expect from sophists and charlatans?), but stull opinions. Subjective, not objective.
                      Not. There is not subjective about whether you assume perfect information, for example.

                      That’s a slide from the definition being subjective/objective into a discussion as to whether someone conforms to that definition.”

                      Yes and after all what is important is whether someone confirms to that definition. Otherwise how do we know who is in which group?

                      “Its [self-identification] not the only thing that matters, it is however simple to ask an economist are a X (where X can be Marxist, neoclassical, modern etc) economist and get an answer, which seems a good place to start.
                      Another place to start is to ask whether others define a package of economic policies as “neoliberal”.”

                      Another issue with the policy approach is that it can capture more than one school of thought. I’m guessing that “neoliberal” would capture both some neoclassical and Austrian economists. Also while some neoclassical economists, for example, may be “neoliberal” others may not, so there is a clear demarcation who is and who isn’t in the group.

                      “Which we’ve demonstrated they do. So why is that not also a valid “start”?
                      A group of policy may meet such criteria however the point I have been making for I don’t know how long is that such criteria will not define an economic school of thought. As I have also said before such policies may be meaningful in other areas such as pol sci or sociology ot public policy or whatever, just not in economics.

                      Because definitions of economic schools of thought are handed down from on high? Did angels sing to Weintraub in his sleep, and he woke with the single perfect definition of “neoclassical economist”?”

                      No he uses the standard definition.

                      “Feel free to display some of your own thought into that particular area. All you’ve said so far is that you’ve never heard of it so it mustn’t exist.

                      No what I have said, must I really repeat myself again, is that it does exist as an economic school of thought. Also I would that all you have shown so far is neoliberalism looks like classical liberalism. Or at least you have yet to show how they differ. That is the point of these question which you deleted rather than answer: And what in particular follows from this for the difference between classical liberalism and neoliberalism? And what of the relationship between modern liberalism and neoliberalsim? Is there a change in view to do with how the two group see liberty, or example? For classical liberalism, liberty is negative liberty, for the modern liberals its positive liberty. What about neoliberalism? How do the views on the role government differ, if at all, between the groups? And if there are differences what are we to make of the claims quoted earlier that neoliberalsim is a revival of classical liberalism?

                      See below.

                      Do more than take one word or line out of context: consider how a “revival” decades or centuries after the initial movement might vary or have moved on from the exact doctrines of its predecessor.
                      Nothing has been taken out of context. Revival would mean you have bought back something. So a revival of classical liberalism would share the same basis ideas of the original (classical) liberalism, otherwise how can it be a revival, it would be something new.

                      Dude, the very line “revival of classical liberalism” is one line out of an entire article from the Encyclopaedia Britannica which you have still not bothered to read. Taken out of context. I have not bothered to answer your questions because you still haven’t bothered to open a fucking book that might actually broaden your horizon.”

                      The line that revival of classical liberalism is in is very clear. Neoliberalism is a revival of classical liberalism and as such must have the basics in common with classical liberalism. If not, what is being revived? This raises the question, that I have been asking, how do the two differ? If at all.

                      btw: was Frankenstein’s creation identical to the individuals he revived? A “revival” is different to the original. Otherwise the word “revival” would be redundant.

                      But Frankenstein did not revive anyone. He used bit of many people to create his “monster”.

                    • “CV is a great example of my definition. “Neoliberalism” is just stuff he hates.

                      No. If CV hated pumpkin, I doubt they’d describe pumpkin as neoliberal. If CV hated the Catholic Church, I doubt they’d call it neoliberal.”

                      If globalisation opens up the trade in pumpkins then would it not be part of “neoliberalisn”? And isn’t the Catholic Church part of “neoliberalism”?

                      “Neoliberal” is intimately tied with a number of economic policies consistently applied by Reagan, Thatcher, Lange/Douglas, Richardson, and so on. Neoliberal economists provided pseudo-scientific justification for those policies. Everyone’s been pretty clear about what counts as neoliberal. Of course, now you’re pretending you don’t understand it again.

                      What policies and what economists? What are these “pseudo-scientific justifications”? I don’t remember any new or radical in most of Reagan’s or Thatcher’s policies. They were standard economics, the problems for both Reagan and Thatcher were political rather than economic.

                      “The “you can’t predict” results only apply in a very small area of economics.
                      That area which deals with the real world on a daily basis. ”

                      So development isn’t a real issue on a daily basis? Health isn’t? Natural resources aren’t? The environment isn’t? Unemployment isn’t? ……………

                      What’s the unemployment rate going to be in six months time? The price of oil? The level of development in Zimbabwe?

                      You have no idea – you can’t predict those any more than you can predict what the stockmarket will be in six months.

                      For the case of unemployment and the price of oil you could model both reasonable well. Today’s unemployment rate would be a reasonable guide to the rate in six months out. Things don’t change that quickly. As to the stockmarket big changes are not predictable, we have already been there, done that.

                    • McFlock

                      oh wow, we’ve shifted threads. Trippy.

                      “CV is a great example of my definition. “Neoliberalism” is just stuff he hates.
                        
                      No. If CV hated pumpkin, I doubt they’d describe pumpkin as neoliberal. If CV hated the Catholic Church, I doubt they’d call it neoliberal.”
                         
                      If globalisation opens up the trade in pumpkins then would it not be part of “neoliberalisn”? And isn’t the Catholic Church part of “neoliberalism”?

                      Free trade in pumpkins, yes. The pumpkins themselves? No.
                      And the church: no idea. Is the pope pro-free trade? 
                       

                      “Neoliberal” is intimately tied with a number of economic policies consistently applied by Reagan, Thatcher, Lange/Douglas, Richardson, and so on. Neoliberal economists provided pseudo-scientific justification for those policies.
                      Everyone’s been pretty clear about what counts as neoliberal. Of course, now you’re pretending you don’t understand it again.
                        
                      What policies and what economists? What are these “pseudo-scientific justifications”? I don’t remember any new or radical in most of Reagan’s or Thatcher’s policies. They were standard economics, the problems for both Reagan and Thatcher were political rather than economic.

                           
                      Unemployment and inequality are economic problems as well as political problems.

                      “The “you can’t predict” results only apply in a very small area of economics.
                         
                      That area which deals with the real world on a daily basis. ”
                         
                      So development isn’t a real issue on a daily basis? Health isn’t? Natural resources aren’t? The environment isn’t? Unemployment isn’t? ……………
                            
                      What’s the unemployment rate going to be in six months time? The price of oil? The level of development in Zimbabwe?
                      You have no idea – you can’t predict those any more than you can predict what the stockmarket will be in six months.
                          
                      For the case of unemployment and the price of oil you could model both reasonable well. Today’s unemployment rate would be a reasonable guide to the rate in six months out. Things don’t change that quickly. As to the stockmarket big changes are not predictable, we have already been there, done that.

                      Really? So unemployment doesn’t fluctuate that much, even if the stockmarket crashes (and you can’t predict a stockmarket crash)? And oil prices don’t fluctuate that much, even with a war in the Middle East? Really?
                         
                      And you also said that neither big changes nor little changes were predictable in the stockmarket.
                             
                      Economics is good for nothing. You’re just flailing around, now.
                       

                  • Hi Paul,

                    I can understand that you wish to deny that there is, within the economic discipline, a school of economic theorists called ‘neoliberal economists’.

                    But surely you are (a) aware of the term and (b) don’t disallow those outside the discipline from noticing that a group of (let’s call them neoclassical or monetarist) economists who, on the basis of the economic theories they subscribe to, have been instrumental in a political push around the world to promote (others would say coercively enforce) a large scale economic liberalisation of trade and international financial markets as part of what is usually broadly termed ‘globalisation’?

                    You see – contra to your claim that they are ‘nonexistent’ – there are such people as ‘neoliberal economists’ and they have been identified by political scientists and sociologists, etc. as being responsible for a ‘new’ push for economic liberalisation on a global scale. (Prior liberalisation was, so far as I’m aware, mainly within countries or within empires – hence the current wave of liberalisation is correctly termed ‘neo’).

                    Don’t social scientists have a right to produce their own technical terms (e.g., right-wing politicians/economists) given that they are operating within a theoretical framework that involves trying to explain the political and social behaviour of various groups?

                    I honestly can’t see why you’re being so obtuse about this widely recognised term – or so seemingly defensive about the term being applied to economists.

                    It applies not so much to their theoretical category within economics (though, obviously, they, at least, believe that their theoretical understandings justify their neoliberal activity in the political and social sphere) but to their political and social advocacy. Given that they are economists and that they are pushing neoliberalism, they are ‘neoliberal economists’.

                    •  And, here’s something from the LSE that seems to confirm that some are aware of the term.

                    • RedLogix

                      And for his next act Paul argues that the LSE does not exist….

                    • And, here’s something from the LSE that seems to confirm that some are aware of the term.

                      The guy is a political scientist and it may be a term in political science, its just not a term I’ve seen in economics. If went up to an economist and ask them if they were a neoliberal economist, I’m sure they wouldn’t have much of an idea as to what you are on about. They may well think you meant neoclassical.

                    • And for his next act Paul argues that the LSE does not exist

                      The LSE does exist and has a great history in economics. Hayek was at the LSE, as was Lord Robbins, John Hicks, Ronald Coase, among others.

                    • Hi Paul,

                      Thanks for continuing with the responses.

                      As I said, I can understand that you deny that there is a theoretical school within the discipline of economics that goes by the name of ‘neoliberal’. This term describes policy recommendations and social prescriptions pushed by influential groups of economists.

                      Yes, the paper I linked to from the LSE was from a political scientist, which proves my point about its recognition and use within the social sciences.

                      You’ll be aware that, of all social scientists (if for the moment we term economics a social science), economists tend to be in the most influential policy-making positions – especially over the last 30 or so years (the ‘neoliberal’ era). Those economists are neoliberal by virtue of what they are trying to achieve politically.

                      Here’s an example from another discipline. This group of psychologists are aiming to achieve political ends. Someone might come up with a label for them (e.g., Progressive Psychologists or Progressivist Psychologists – in fact, many functionalist psychologists in the 19th century in America were major players in the Progressive movement – James, Dewey, etc. – so there would be some sense to it).

                      Now, would someone be being nonsensical to coin a term for these psychologists to identify just this group with their specific aims? Would they not actually exist as a group, given that such a term would not identify any theoretical school within psychology? 

                    • “I can understand that you wish to deny that there is, within the economic discipline, a school of economic theorists called ‘neoliberal economists’.

                      But surely you are (a) aware of the term”

                      No. As far as I know on group of economist refer to themselves as “neoliberal”.

                      “(b) don’t disallow those outside the discipline from noticing that a group of (let’s call them neoclassical or monetarist) economists who, on the basis of the economic theories they subscribe to, have been instrumental in a political push around the world to promote (others would say coercively enforce) a large scale economic liberalisation of trade and international financial markets as part of what is usually broadly termed ‘globalisation’?”

                      But many of those who support globalisation and thus I assume would be “neoliberals” are not economists. To a New Zealand example think of Mike Moore. Also what you are pointing to as a “definition” seems to have nothing to do with a persons economics thinking. I mean a neoclassical economist could be neoliberal but so could an Austrian economist or even a Marxist economist. So I don’t see that economics as such is a defining principle. Or am I missing something?

                      “You see – contra to your claim that they are ‘nonexistent’ – there are such people as ‘neoliberal economists’ and they have been identified by political scientists and sociologists, etc. as being responsible for a ‘new’ push for economic liberalisation on a global scale.”

                      As I note above if support for globalisation is the definition then neoliberal economists is not a well defined group. You seem to be pointing more to policy defined group rather than an economics defined group i.e. people who support globalisation. As I say couldn’t this group be amde up of neclassical guys, modern econ guys, Marxist guys, Austrian guys, classical guys (if there are still any) etc.

                      “(Prior liberalisation was, so far as I’m aware, mainly within countries or within empires – hence the current wave of liberalisation is correctly termed ‘neo’).”

                      I have seen economists argue that we are in the third (I think) wave of globalisation in the last 150 years.

                      “Don’t social scientists have a right to produce their own technical terms (e.g., right-wing politicians/economists) given that they are operating within a theoretical framework that involves trying to explain the political and social behaviour of various groups?”

                      So you are thinking of the expression in terms of political and social behaviour rather than in terms of economic theory?

                      “It applies not so much to their theoretical category within economics (though, obviously, they, at least, believe that their theoretical understandings justify their neoliberal activity in the political and social sphere) but to their political and social advocacy. Given that they are economists and that they are pushing neoliberalism, they are ‘neoliberal economists’.”

                      Neoliberalism? This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?

                      Also I take it there would be neoliberal political scientists, neoliberal sociologists, neoliberal physicists, neoliberal gardeners?

                    • McFlock

                      But surely you are (a) aware of the term
                      No. As far as I know on group of economist refer to themselves as “neoliberal”. 

                       

                      Lol.
                       
                      I don’t care if they refer to themselves as widgets, they’d still be “neoliberals”. And you must have lived in a vacuum (or self-selected a particularly narrow range of information sources throughout your life) to have never, ever heard the term in an economic context. So I think you’re either very, very dumb, or lying. 
                         
                      With fair to middling chances of both. 

                    • “I don’t care if they refer to themselves as widgets, they’d still be “neoliberals”. And you must have lived in a vacuum (or self-selected a particularly narrow range of information sources throughout your life) to have never, ever heard the term in an economic context”

                      Given the term is not used in economics and has no meaning in terms of economics, economists not knowing is in no way surprising. Also as I noted in a reply to Puddleglum I’m not sure how it fits into the political philosophy of liberalism: “Neoliberalism? This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”

                      “So I think you’re either very, very dumb, or lying.”

                      And you can produce any evidence for this?

                    • McFlock

                      “I don’t care if they refer to themselves as widgets, they’d still be “neoliberals”. And you must have lived in a vacuum (or self-selected a particularly narrow range of information sources throughout your life) to have never, ever heard the term in an economic context”

                      Given the term is not used in economics and has no meaning in terms of economics, economists not knowing is in no way surprising. Also as I noted in a reply to Puddleglum I’m not sure how it fits into the political philosophy of liberalism: “Neoliberalism? This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”

                      So you know everything about what every economist on the planet thinks? You have no idea about what might go on outside economics, e.g. how economists are perceived?
                           
                      I think that the proposition “I have not heard of it before, therefore it does not exist” is remarkably stupid. You mentioned “behavioural economics” a while ago – google brings up 595,000 hits. “Neoliberal” has 2.1 million. Maybe Chance the Gardner should leave his little walled-in sanctuary.
                            

                      “So I think you’re either very, very dumb, or lying.” And you can produce any evidence for this?
                       

                      Evidence that I think you’re dumb or lying:
                      The fact I said “I think”.
                          
                      Evidence that you are dumb:
                      The ambiguity of your demand for evidence.
                      Your constant pleading of ignorance about what “neoliberalism” is, despite the fact that several people have provided enough links and explanations to the point that even an inbred puppy would look at you like you’re a moron.
                            
                         
                      I really am leaning towards thinking that you are “dumb or both dumb and lying”. I think “smart and lying” is not a reasonable expectation at this point.
                       

                    • “So you know everything about what every economist on the planet thinks?”

                      But I do know about what I read in professional journals and what I gather from the other economics I interact with; and neoliberalism hasn’t come up.

                      “You have no idea about what might go on outside economics, e.g. how economists are perceived?”

                      How theya re perceived outside of economics isn’t something I have commented on. I have talked about what is going on within economics. See below.

                      “I think that the proposition “I have not heard of it before, therefore it does not exist” is remarkably stupid.”

                      What I actually said is I have not come across the term and as far as I know no group of economists refer to themselves as “neoliberal” and that neoliberal has no meaning – in the way that terms like classical, neoclassical, Marxist, Keynesian etc do – within economics. The term may have meaning outside of economics, but in this regard I did say,

                      “Neoliberalism? This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”

                      No I don’t spend that much time read political philosophy so neoliberal may be a well defined term there. If so can you explain that definition and how neoliberalism relates to classical and modern liberalism, explain whether liberty is thought of in negative or positive terms and outline who are some of the philosophers who developed this idea.

                      You mentioned “behavioural economics” a while ago – google brings up 595,000 hits. “Neoliberal” has 2.1 million. Maybe Chance the Gardner should leave his little walled-in sanctuary.

                      Great but do any of hits have anything to do with schools of thought within economics? Or are they from political science, sociology etc?

                      “So I think you’re either very, very dumb, or lying.” And you can produce any evidence for this?

                      Evidence that I think you’re dumb or lying:
                      The fact I said “I think”.

                      So no evidence then?

                      Evidence that you are dumb:
                      The ambiguity of your demand for evidence.

                      Ambiguity?

                      Your constant pleading of ignorance about what “neoliberalism” is, despite the fact that several people have provided enough links and explanations to the point that even an inbred puppy would look at you like you’re a moron.

                      And how does this deal with the issues I have raised? See my response to Puddleglum for more on what I asked.

                    • McFlock

                      “So I think you’re either very, very dumb, or lying.” And you can produce any evidence for this?
                      Evidence that I think you’re dumb or lying: The fact I said “I think”.
                      So no evidence then?

                      Lol.

                      It was self-evident: the evidence that I think you’re dumb or lying was the statement  “I think you’re either very, very dumb, or lying.” 

                      Evidence that you are dumb: The ambiguity of your demand for evidence.
                      Ambiguity?

                      The ambiguity about whether you were asking for evidence of whether you are “dumb or lying”, as opposed to asking for evidence about whether I think you’re “dumb or lying”.
                      I put the bold in so that you have a fighting chance of seeing the difference this time. 
                           
                      But I’m heavily leaning towards “dumb”, now. Not just over that – irrelevant to whether any group of economists self-identify as “neoliberal”, the term (as people have linked to or explained previously. And repeatedly.) is intimately connected with the practical application of economics.
                           
                      The fact that you obviously have no interest in economics beyond theoretical obscurantism and sophistry demonstrates exactly what economists are good for: bullshit and justifying their sinecures.

                    • “Evidence that you are dumb: The ambiguity of your demand for evidence.
                      Ambiguity?

                      The ambiguity about whether you were asking for evidence of whether you are “dumb or lying”, as opposed to asking for evidence about whether I think you’re “dumb or lying”.
                      I put the bold in so that you have a fighting chance of seeing the difference this time. ”

                      Well how about this, Ill make it simple for you, can you provide evidence that a) you do in fact think and b) I am dumb or lying?

                      “But I’m heavily leaning towards “dumb”, now. Not just over that – irrelevant to whether any group of economists self-identify as “neoliberal”, the term (as people have linked to or explained previously. And repeatedly.) is intimately connected with the practical application of economics.”

                      Let us go back to what I actually said rather than what you would lit it I had said: “What I actually said is I have not come across the term and as far as I know no group of economists refer to themselves as “neoliberal” and that neoliberal has no meaning – in the way that terms like classical, neoclassical, Marxist, Keynesian etc do – within economics. The term may have meaning outside of economics, but in this regard I did say,

                      “Neoliberalism? This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”

                      No I don’t spend that much time read political philosophy so neoliberal may be a well defined term there. If so can you explain that definition and how neoliberalism relates to classical and modern liberalism, explain whether liberty is thought of in negative or positive terms and outline who are some of the philosophers who developed this idea.”

                      Can you deal with this?

                    • McFlock

                      Well how about this, Ill make it simple for you, can you provide evidence that a) you do in fact think and b) I am dumb or lying?

                      a) I thought you weren’t into philosophy?
                      b) The above paragraph indicates stupidity leading to frustration, your made-up numbers indicate you lie on at least the off-chance of not being called on it, and only if you were very dumb could you truthfully say, after all the explanations and links people have already given you about what “neoliberalism” is, that you still have no inkling of how the term applies to economics.
                       

                      No I don’t spend that much time read political philosophy so neoliberal may be a well defined term there. If so can you explain that definition and how neoliberalism relates to classical and modern liberalism, explain whether liberty is thought of in negative or positive terms and outline who are some of the philosophers who developed this idea.” 

                      Maybe you should open an encyclopaedia.
                        

                       Can you deal with this?

                       The territory has already been covered. Repeatedly.

                    • Well how about this, Ill make it simple for you, can you provide evidence that a) you do in fact think and b) I am dumb or lying?

                      a) I thought you weren’t into philosophy?
                      b) The above paragraph indicates stupidity leading to frustration, your made-up numbers indicate you lie on at least the off-chance of not being called on it, and only if you were very dumb could you truthfully say, after all the explanations and links people have already given you about what “neoliberalism” is, that you still have no inkling of how the term applies to economics.

                      Errrrr???? Made-up numbers?

                      Try actually reading what I have written. Let me repeat it yet again: As far as I know on group of economist refer to themselves as “neoliberal”. May be there is such a group and I just haven’t some across them. I’m sure there are any number of small heterodox groupings out there I know nothing of. So what defines this group? How do their ideas differ from say, the classical school and the neoclassical school and the Marxist school, and the Austrian school etc? What ideas and methods do they have in common with other schools of thought? How do they differ from other schools?

                      Maybe you should open an encyclopaedia.

                      Something tells me I won’t find anything on this in there.

                      Can you deal with this?

                      The territory has already been covered. Repeatedly.

                      Actually no it hasn’t. So, as I noted in a reply to Puddleglum I’m not sure how “neoliberalism” fits into the political philosophy of liberalism. This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”

                      Can you address this?

                    • Colonial Viper

                      The scratching pens of the neoliberals late into the night will be coming to an end shortly.

                    • Colonial Viper

                      Time to disestablish 90% of economics schools as being captured by banking and corporate interests, and dangerous to the future of civilisation.

                    • McFlock
                       
                       

                       

                      Errrrr???? Made-up numbers?

                       
                      here

                      Try actually reading what I have written. Let me repeat it yet again: As far as I know on group of economist refer to themselves as “neoliberal”. May be there is such a group and I just haven’t some across them. 

                       
                      Why is self-identification the only denotation you will accept?
                       

                      Maybe you should open an encyclopaedia.
                      Something tells me I won’t find anything on this in there.

                       
                       
                      Like Encyclopaedia Britannica? Fucking moron – that is the easiest check you could have done before believing the imaginary voices telling you I was wrong. But no, your religious doctrine said I was wrong, so you didn’t need to check. You absolute arse.

                       
                      Can you deal with this?
                       
                      The territory has already been covered. Repeatedly.
                       
                      Actually no it hasn’t. So, as I noted in a reply to Puddleglum I’m not sure how “neoliberalism” fits into the political philosophy of liberalism. This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”
                       
                      Can you address this?

                      Maybe if you’d bothered opening a fucking encyclopaedia, or even a dictionary, or bothered showing any indication whatsoever that your academic curiosity had been piqued by the possibility that you’d missed something interesting that involved your career discipline so you did your own research into the issue, or even shown that you’d bothered reading the myriad of attempts that other people have already made to communicate this concept into your thick head, maybe then I’d have bothered.
                          
                      But you’re just a stupid, lying, lazy jerk. So if you genuinely wanted an answer, you fucked it up by being such an impressive moron.
                         
                      Before this thread, I just thought economists were slightly off, not really following the scientific method and becoming slaves to their philosophical indoctrination. Cheers for playing, though – now I know that at least one is such a massive idiot that he needs an ego the size of a planet to hide his stupidity from himself.
                       

                    • “Errrrr???? Made-up numbers?

                      here”

                      I should have known a piss take would be beyond you.

                      “Try actually reading what I have written. Let me repeat it yet again: As far as I know on group of economist refer to themselves as “neoliberal”. May be there is such a group and I just haven’t some across them.

                      Why is self-identification the only denotation you will accept?””

                      It would be a good start.

                      “Maybe you should open an encyclopaedia.
                      Something tells me I won’t find anything on this in there.”

                      “Like Encyclopaedia Britannica? Fucking moron – that is the easiest check you could have done before believing the imaginary voices telling you I was wrong. But no, your religious doctrine said I was wrong, so you didn’t need to check. You absolute arse.”

                      Yes, all very nice but nothing in the article accually address the point I have been making.

                      “Can you deal with this?

                      The territory has already been covered. Repeatedly.

                      Actually no it hasn’t. So, as I noted in a reply to Puddleglum I’m not sure how “neoliberalism” fits into the political philosophy of liberalism. This may be part of my problem. I think I have a basic understanding of ideas of classical liberalism – negative liberty and all that. The work of people like Locke, Hume, Smith JS Mill, Hayek etc – and “modern” liberalism – positive liberty following from the work of Green, L. T. Hobhouse, John Hobson, Keynes et al. – but where does neoliberalism fit in?”

                      Can you address this?

                      Maybe if you’d bothered opening a fucking encyclopaedia, or even a dictionary, or bothered showing any indication whatsoever that your academic curiosity had been piqued by the possibility that you’d missed something interesting that involved your career discipline so you did your own research into the issue, or even shown that you’d bothered reading the myriad of attempts that other people have already made to communicate this concept into your thick head, maybe then I’d have bothered.

                      But you’re just a stupid, lying, lazy jerk. So if you genuinely wanted an answer, you fucked it up by being such an impressive moron.

                      Before this thread, I just thought economists were slightly off, not really following the scientific method and becoming slaves to their philosophical indoctrination. Cheers for playing, though – now I know that at least one is such a massive idiot that he needs an ego the size of a planet to hide his stupidity from himself.”

                      Ok, so you can’t address the issues then. You could have said this is a lot less words.

                    • McFlock
                       
                       

                       
                       

                      I should have known a piss take would be beyond you.

                       
                      You mean the bit where you made a categorical statement about the probability of a trader or economist being accidentally correct over their career purely on the basis of chance, so I asked what the odds were? I figured it was a piss-take. But I also figured that you responded with a pisstake because you didn’t want to admit making a categorical statement when you had no idea whether it was true or not.
                      BTW, I think your pisstake odds were still slightly higher than the odds of winning lotto division one. But it’s late and my math might be off.
                       

                      Why is self-identification the only denotation you will accept?
                      It would be a good start.

                      But not the only start. Yet you refuse to accept any other.
                       

                      Yes, all very nice but nothing in the article accually address the point I have been making.

                      ” The result was a revival of classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan (1981–89) and in the United Kingdom under Prime Minister Margaret…”
                      Surely that’s enough of a teaser for you to open a book?
                       
                       

                      Can you address this?
                      […]
                      Ok, so you can’t address the issues then. You could have said this is a lot less words.

                      Why would I bother? You’ve ignored every other attempt people have made to get the point across. You’ve obviously made no attempt to do your own research. All you do is
                      try to find a way to make what was said match your hypothesis, or at least make it irrelevant when it doesn’t match.
                      That’s not how science works, btw. It is obviously how economists operate, though.
                           
                      Tell you what: go back, read up on some of the issues brought up here, then write a post about it for The Standard. Call it something like “why economics is a science and not a religion run by charlatans”. Then if the admins decide to run it and it looks like you’re prepared to do something other than semantic point-scoring, we can have a more structured debate constrained within the boundaries you define in your post.

                       
                    • “Why is self-identification the only denotation you will accept?
                      It would be a good start.

                      But not the only start. Yet you refuse to accept any other.”

                      Lets start at the beginning. As and example Puddleglum made reference to Evolutionary Economics. To show where we could learn what evolutionary economics is about he linked to The Association for Evolutionary Economics website which explains what evolutionary economics is about. But this is a group of economists who self-identify as evolutionary economists and thus they can outline the common set of beliefs and ideas that mean they are willing to so identify.

                      “Yes, all very nice but nothing in the article accually address the point I have been making.

                      ” The result was a revival of classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan (1981–89) and in the United Kingdom under Prime Minister Margaret…”
                      Surely that’s enough of a teaser for you to open a book?”

                      Take a look at the first sentence you quote: “[t]he result was a revival of classical liberalism, also known as “neoliberalism,””. Now if we accept this statement then neoliberalism is just classical liberalism so why not just call it that. If it is just classical liberalism then you do at least have a well articulated political philosophy. But note it is a political philosophy and not an economic one. More than one economic group could support classical liberalisms, e.g. classical economists, neoclassical economists, Austrian economists and it is not necessary that all members of these groups would support classical liberalism. For example many neoclassical economists would be liberal in the modern sense rather than the classical sense. Thus the mapping from the political to the economic is not one-to-one and on to.

                      “Can you address this?
                      […]
                      Ok, so you can’t address the issues then. You could have said this is a lot less words.”

                      Why would I bother? You’ve ignored every other attempt people have made to get the point across. You’ve obviously made no attempt to do your own research. All you do is try to find a way to make what was said match your hypothesis,”

                      And my “hypothesis” is?

                      “or at least make it irrelevant when it doesn’t match.
                      That’s not how science works, btw. It is obviously how economists operate, though.

                      Tell you what: go back, read up on some of the issues brought up here, then write a post about it for The Standard. Call it something like “why economics is a science and not a religion run by charlatans”. Then if the admins decide to run it and it looks like you’re prepared to do something other than semantic point-scoring, we can have a more structured debate constrained within the boundaries you define in your post.”

                      As you think science works by prediction let me add one more point about why prediction is difficult, if not impossible.

                      The idea is referred to as the Lucas Critique. Lucas summarised the idea as:

                      “Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models.”

                      So as far as predicting the effects of policy goes the Lucas critique suggests that you have a problem. If you want to predict the effect of a particular policy you have to model the parameters relating to things like preferences, technology and resource constraints, which are the things that govern individual behaviour. You can then try to predict what individuals will do, taking into account the change in policy, and then aggregate the individual decisions to calculate the macroeconomic effects of the policy change. But then the individuals will start to take into account the fact that you are taking into account how they will change their behaviour and so they change their behaviour, which means you have to model how people will change their behaviour given that people know you are modelling their behaviour, but when you do this people will work it out and change their behaviour which you must model ………….. I’m sure get see the problem and why it makes prediction difficult, at least for policy issues.

                    • McFlock
                       
                       

                      “Why is self-identification the only denotation you will accept?

                      It would be a good start.

                      But not the only start. Yet you refuse to accept any other.”

                      Lets start at the beginning. […] But this is a group of economists who self-identify as evolutionary economists and thus they can outline the common set of beliefs and ideas that mean they are willing to so identify.

                       
                      Let’ start at another beginning. Does a chair self-identify as a chair? No, of course not. But it’s still a chair. Chairs exist. I might not self-identify as “handsome”, but maybe I am. I don’t self-identify as “ugly”, but maybe I am. Some economists might not self-identify as “neoliberal”, but the term is in usage common enough to suggest the possibility it exists, and if it does then some economists might be identified as “neoliberal”, if not by themselves.
                      Is that clear enough?
                       
                       

                      “Yes, all very nice but nothing in the article accually address the point I have been making.

                      ”The result was a revival of classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan (1981–89) and in the United Kingdom under Prime Minister Margaret…”

                      Surely that’s enough of a teaser for you to open a book?”

                      Take a look at the first sentence you quote: “[t]he result was a revival of classical liberalism, also known as “neoliberalism,””. Now if we accept this statement then neoliberalism is just classical liberalism so why not just call it that. If it is just classical liberalism then you do at least have a well articulated political philosophy. But note it is a political philosophy and not an economic one. More than one economic group could support classical liberalisms, e.g. classical economists, neoclassical economists, Austrian economists and it is not necessary that all members of these groups would support classical liberalism. For example many neoclassical economists would be liberal in the modern sense rather than the classical sense. Thus the mapping from the political to the economic is not one-to-one and on to.

                       
                      That’s a lot of writing with absolutely no indication that you’ve read anything off your own bat. The only reason you’re critiquing that line is because you assumed an encyclopaedia wouldn’t mention neoliberalism. You were shown to be an idiot there, and now you want to critique that one line without context of the rest of the article? Idiot.
                      BTW, is “neogothic” as an artform the same as “gothic”? Post-modernism came out of modernism, are they the same? Your entire bullshit rests on the child being identical to the parent, and you made this assumption so you wouldn’t have to open a book. You tool.

                       
                      Why would I bother? You’ve ignored every other attempt people have made to get the point across. You’ve obviously made no attempt to do your own research. All you do is try to find a way to make what was said match your hypothesis,”

                      And my “hypothesis” is?

                       
                      That economics isn’t a waste of space.
                       
                       
                       

                      As you think science works by prediction let me add one more point about why prediction is difficult, if not impossible.
                      […]
                      I’m sure get see the problem and why it makes prediction difficult, at least for policy issues.

                      Oh wow, so the act of observing changes the state of the observed thing? I can see how that would make life difficult.

                      Quantum physicists manage to make verifiable and refutable predictions, though – they don’t automatically say “ooo, must have been mistaken information, this is very difficult, you know”. Why? Because they do the fucking groundwork and they stick to the scientific method.
                       

                       
                    • “Why is self-identification the only denotation you will accept?

                      It would be a good start.

                      But not the only start. Yet you refuse to accept any other.”

                      Lets start at the beginning. […] But this is a group of economists who self-identify as evolutionary economists and thus they can outline the common set of beliefs and ideas that mean they are willing to so identify.

                      Let’ start at another beginning. Does a chair self-identify as a chair? No, of course not. But it’s still a chair. Chairs exist. I might not self-identify as “handsome”, but maybe I am. I don’t self-identify as “ugly”, but maybe I am. Some economists might not self-identify as “neoliberal”, but the term is in usage common enough to suggest the possibility it exists, and if it does then some economists might be identified as “neoliberal”, if not by themselves.
                      Is that clear enough?

                      No its rubbish. Chairs are not people they are not able to self-identify.

                      “Yes, all very nice but nothing in the article actually address the point I have been making.

                      ”The result was a revival of classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan (1981–89) and in the United Kingdom under Prime Minister Margaret…”

                      Surely that’s enough of a teaser for you to open a book?”

                      Take a look at the first sentence you quote: “[t]he result was a revival of classical liberalism, also known as “neoliberalism,””. Now if we accept this statement then neoliberalism is just classical liberalism so why not just call it that. If it is just classical liberalism then you do at least have a well articulated political philosophy. But note it is a political philosophy and not an economic one. More than one economic group could support classical liberalisms, e.g. classical economists, neoclassical economists, Austrian economists and it is not necessary that all members of these groups would support classical liberalism. For example many neoclassical economists would be liberal in the modern sense rather than the classical sense. Thus the mapping from the political to the economic is not one-to-one and on to.

                      That’s a lot of writing with absolutely no indication that you’ve read anything off your own bat. The only reason you’re critiquing that line is because you assumed an encyclopaedia wouldn’t mention neoliberalism. You were shown to be an idiot there, and now you want to critique that one line without context of the rest of the article? Idiot.

                      No I quoted that sentence because of what it actually says: “a revival of classical liberalism”. Revival of classical liberalism. So according to this, neoliberalism is just classical liberalism, and thus why not just call it that.

                      And my “hypothesis” is?

                      That economics isn’t a waste of space.

                      Economics isn’t a waste if space. can the obvious really be a hypothesis?

                      As you think science works by prediction let me add one more point about why prediction is difficult, if not impossible.
                      […]
                      I’m sure get see the problem and why it makes prediction difficult, at least for policy issues.

                      Oh wow, so the act of observing changes the state of the observed thing? I can see how that would make life difficult.

                      Quantum physicists manage to make verifiable and refutable predictions, though – they don’t automatically say “ooo, must have been mistaken information, this is very difficult, you know”. Why? Because they do the fucking groundwork and they stick to the scientific method.

                      As always you are unable to understand even the simplest of ideas. Look at what Lucas said:

                      “Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models.”

                      This isn’t about observation changing the state or about “mistaken information” – I didn’t even mention “mistaken information”. This isn’t about observation at all, its about policy changes and the effects such changes have on the model use to develop the policy. This is about people learning and acting strategically. Its about having to take into account how people will respond to the policy change and having to build those changes into the model. Which of course changes the model and the policy which changes how people reaction to the new policy which changes ……

                      Milton Friedman made a similar point about the effects of dealing with the reaction s of people more than 60 years ago:

                      “Thus in the social sciences the enunciation of a result or law for predicting the stock market perfectly may make that law invalid. For example, if one where to state a technique for predicting the stock market perfectly, you know that if that technique were believed in it would then become wrong.”

                      Letter from Milton Friedman to Don Patinkin, January 18, 1949.

                    • McFlock

                      Once again you demonstrated an ability to read only what you want to see. “Chair” wasn’t the only example. I guess if you don’t self-identify as a “fucking moron” then you can’t be one.
                            
                      It’s painfully obvious that if you are a typical economist, economics truly is a waste of space.

                    • Once again you demonstrated an ability to read only what you want to see. “Chair” wasn’t the only example. I guess if you don’t self-identify as a “fucking moron” then you can’t be one.

                      Once again you have managed to write abuse and avoid all the real issues. The obvious problem with the handsome/ugly example is the it is just opinion and I would hope there is a more objective way of identifying “neoliberal economists”. The point I have been making all along is that there are no such objective criteria within economics. There may be such criteria in other subjects but the quote you gave for this just says that neoliberalism is classical liberalism. So why not just call it that?

                    • RedLogix

                      The point I have been making all along is that there are no such objective criteria within economics.

                      Now Paul Walker argues that economics has no scientific basis….

                      I mean the problem here is that if you a not going to accept the commonly accepted ‘objective’ meanings that words have, then discussing anything with you is utterly pointless. The moment anyone tries to pin down exactly what you mean by a word or definition, you can redefine it to anything else you please.

                      Meanwhile in the real world the rest of us have few problems with the commonly accepted definition of NeoLiberalism.

                    • McFlock
                       
                       

                      Once again you have managed to write abuse and avoid all the real issues. The obvious problem with the handsome/ugly example is the it is just opinion and I would hope there is a more objective way of identifying “neoliberal economists”.

                      Because self-identification isn’t “opinion”?
                      You make clangers like that while assuming you’re god’s gift to knowledge and you expect something other than abuse?
                       

                      The point I have been making all along is that there are no such objective criteria within economics. There may be such criteria in other subjects but the quote you gave for this just says that neoliberalism is classical liberalism. So why not just call it that?

                      “a revival of classical liberalism, also known as “neoliberalism,”” is not the same as “classical liberalism = neoliberalism”. And you still haven’t demonstrated any inclination to open a book to find out for yourself what neoliberalism might be.
                       
                      Gotta love that academic curiosity you’re displaying.
                       

                       
                    • Once again you have managed to write abuse and avoid all the real issues. The obvious problem with the handsome/ugly example is the it is just opinion and I would hope there is a more objective way of identifying “neoliberal economists”.

                      Because self-identification isn’t “opinion”?
                      You make clangers like that while assuming you’re god’s gift to knowledge and you expect something other than abuse?

                      Clangers? The simple point, but it seems not simple enough for some, is that for schools of thought within economics you some basic criteria that define that school. Austrian economists agree on what makes them Austrian, Marxist agree on what makes them Marxist, neoclassicals agree on what makes them neoclassical etc. There are no such criteria within economics for “neoliberal economists”.

                      The point I have been making all along is that there are no such objective criteria within economics. There may be such criteria in other subjects but the quote you gave for this just says that neoliberalism is classical liberalism. So why not just call it that?

                      “a revival of classical liberalism, also known as “neoliberalism,”” is not the same as “classical liberalism = neoliberalism”. And you still haven’t demonstrated any inclination to open a book to find out for yourself what neoliberalism might be.

                      So a revival of classical liberalism which is also known as neoliberalism isn’t classical liberalism? Then what is it a revival of? If classical liberalism doesn’t “equal” neoliberalisn what does neoliberalism “equal” and why did they bother with writing about classical liberlaism? What is the relationship between classical liberalism and neoliberalism?

                    • McFlock
                       
                       

                       
                       

                      Austrian economists agree on what makes them Austrian, Marxist agree on what makes them Marxist, neoclassicals agree on what makes them neoclassical etc. There are no such criteria within economics for “neoliberal economists”.

                      So “agree on” has nothing to do with opinion?
                      Although there seems to be some agreement here (yourself excluded) that there is a neoclassical approach to economics. So why is it only self-identification that matters to you?
                       
                       

                      So a revival of classical liberalism which is also known as neoliberalism isn’t classical liberalism? Then what is it a revival of? If classical liberalism doesn’t “equal” neoliberalisn what does neoliberalism “equal” and why did they bother with writing about classical liberlaism? What is the relationship between classical liberalism and neoliberalism?

                      The same as the relationship between marxist and neomarxist.
                       

                       
                    • “Austrian economists agree on what makes them Austrian, Marxist agree on what makes them Marxist, neoclassicals agree on what makes them neoclassical etc. There are no such criteria within economics for “neoliberal economists”.

                      So “agree on” has nothing to do with opinion?”

                      It’s more than opinion. As E. Roy Weintraub puts it for the case of neoclassical economics:

                      “Neoclassical economics is what is called a metatheory. That is, it is a set of implicit rules or understandings for constructing satisfactory economic theories. It is a scientific research program that generates economic theories. Its fundamental assumptions are not open to discussion in that they define the shared understandings of those who call themselves neoclassical economists, or economists without any adjective. Those fundamental assumptions include the following:

                      1. People have rational preferences among outcomes. 2. Individuals maximize utility and firms maximize profits. 3. People act independently on the basis of full and relevant information.

                      Theories based on, or guided by, these assumptions are neoclassical theories.”

                      Now compare that with, for example, current thinking in economics the criteria would change, in particular with regard to point 3 above: asymmetric information and strategic interaction are big parts of modern economics.

                      The point is that there are clear demarcation lines (for want of a better expression) between the different schools of thought which amount to more than just opinion.

                      “Although there seems to be some agreement here (yourself excluded) that there is a neoclassical approach to economics. So why is it only self-identification that matters to you?”

                      Its not the only thing that matters, it is however simple to ask an economist are a X (where X can be Marxist, neoclassical, modern etc) economist and get an answer, which seems a good place to start.

                      “So a revival of classical liberalism which is also known as neoliberalism isn’t classical liberalism? Then what is it a revival of? If classical liberalism doesn’t “equal” neoliberalisn what does neoliberalism “equal” and why did they bother with writing about classical liberlaism? What is the relationship between classical liberalism and neoliberalism?

                      The same as the relationship between marxist and neomarxist.”

                      And what in particular follows from this for the difference between classical liberalism and neoliberalism? And what of the relationship between modern liberalism and neoliberalsim? Is there a change in view to do with how the two group see liberty, or example? For classical liberalism, liberty is negative liberty, for the modern liberals its positive liberty. What about neoliberalism? How do the views on the role government differ, if at all, between the groups? And if there are differences what are we to make of the claims quoted earlier that neoliberalsim is a revival of classical liberalism?

                    • McFlock
                       
                       

                       

                      So “agree on” has nothing to do with opinion?” It’s more than opinion. As E. Roy Weintraub puts it for the case of neoclassical economics: […]

                      So that’s Weintraub’s opinion on what neoclassical economics is, then.
                       
                       

                      The point is that there are clear demarcation lines (for want of a better expression) between the different schools of thought which amount to more than just opinion.

                       
                      Oh, they might be intimately-defined opinions (what would one expect from sophists and charlatans?), but stull opinions. Subjective, not objective.
                       
                       

                      Its [self-identification] not the only thing that matters, it is however simple to ask an economist are a X (where X can be Marxist, neoclassical, modern etc) economist and get an answer, which seems a good place to start.

                       
                      Another place to start is to ask whether others define a package of economic policies as “neoliberal”. Which we’ve demonstrated they do. So why is that not also a valid “start”?

                       
                      What is the relationship between classical liberalism and neoliberalism?
                      The same as the relationship between marxist and neomarxist.”
                      [more blathery questions]

                      Feel free to display some of your own thought into that particular area. All you’ve said so far is that you’ve never heard of it so it mustn’t exist. Do more than take one word or line out of context: consider how a “revival” decades or centuries after the initial movement might vary or have moved on from the exact doctrines of its predecessor.
                        
                      Break the conceptual barriers of your indoctrination, dude!

                       
                    • “So “agree on” has nothing to do with opinion?” It’s more than opinion. As E. Roy Weintraub puts it for the case of neoclassical economics: […]

                      So that’s Weintraub’s opinion on what neoclassical economics is, then.”

                      No those would be a set of criteria which define a particular school of thought. You can ask does a a piece of work meet these criteria to see if it fits into that group or school.

                      The point is that there are clear demarcation lines (for want of a better expression) between the different schools of thought which amount to more than just opinion.

                      Oh, they might be intimately-defined opinions (what would one expect from sophists and charlatans?), but stull opinions. Subjective, not objective.

                      Not. There is not subjective about whether you assume perfect information, for example.

                      Its [self-identification] not the only thing that matters, it is however simple to ask an economist are a X (where X can be Marxist, neoclassical, modern etc) economist and get an answer, which seems a good place to start.

                      Another place to start is to ask whether others define a package of economic policies as “neoliberal”. Which we’ve demonstrated they do. So why is that not also a valid “start”?

                      A group of policy may meet such criteria however the point I have been making for I don’t know how long is that such criteria will not define an economic school of thought. As I have also said before such policies may be meaningful in other areas such as pol sci or sociology ot public policy or whatever, just not in economics.

                      What is the relationship between classical liberalism and neoliberalism?
                      The same as the relationship between marxist and neomarxist.”
                      [more blathery questions]

                      Feel free to display some of your own thought into that particular area. All you’ve said so far is that you’ve never heard of it so it mustn’t exist.

                      No what I have said, must I really repeat myself again, is that it does exist as an economic school of thought. Also I would that all you have shown so far is neoliberalism looks like classical liberalism. Or at least you have yet to show how they differ. That is the point of these question which you deleted rather than answer: And what in particular follows from this for the difference between classical liberalism and neoliberalism? And what of the relationship between modern liberalism and neoliberalsim? Is there a change in view to do with how the two group see liberty, or example? For classical liberalism, liberty is negative liberty, for the modern liberals its positive liberty. What about neoliberalism? How do the views on the role government differ, if at all, between the groups? And if there are differences what are we to make of the claims quoted earlier that neoliberalsim is a revival of classical liberalism?

                      Do more than take one word or line out of context: consider how a “revival” decades or centuries after the initial movement might vary or have moved on from the exact doctrines of its predecessor.

                      Nothing has been taken out of context. Revival would mean you have bought back something. So a revival of classical liberalism would share the same basis ideas of the original (classical) liberalism, otherwise how can it be a revival, it would be something new.

                    • McFlock
                       
                       

                       
                      So that’s Weintraub’s opinion on what neoclassical economics is, then.”
                      No those would be a set of criteria which define a particular school of thought. You can ask does a a piece of work meet these criteria to see if it fits into that group or school.

                       
                      A set of criteria defined by Weintraub. Is Weintraub’s definition an immutable law ofthe universe? Nope. It’s a term defined by criteria of his choice, built on the choices others but it’s still just an opinion.
                       

                      The point is that there are clear demarcation lines (for want of a better expression) between the different schools of thought which amount to more than just opinion.

                       
                      Defined by whom?

                       
                      Oh, they might be intimately-defined opinions (what would one expect from sophists and charlatans?), but stull opinions. Subjective, not objective.
                      Not. There is not subjective about whether you assume perfect information, for example.

                       
                      That’s a slide from the definition being subjective/objective into a discussion as to whether someone conforms to that definition.

                       
                      Its [self-identification] not the only thing that matters, it is however simple to ask an economist are a X (where X can be Marxist, neoclassical, modern etc) economist and get an answer, which seems a good place to start.
                      Another place to start is to ask whether others define a package of economic policies as “neoliberal”. Which we’ve demonstrated they do. So why is that not also a valid “start”?
                      A group of policy may meet such criteria however the point I have been making for I don’t know how long is that such criteria will not define an economic school of thought. As I have also said before such policies may be meaningful in other areas such as pol sci or sociology ot public policy or whatever, just not in economics.

                      Because definitions of economic schools of thought are handed down from on high? Did angels sing to Weintraub in his sleep, and he woke with the single perfect definition of “neoclassical economist”?
                       

                      Feel free to display some of your own thought into that particular area. All you’ve said so far is that you’ve never heard of it so it mustn’t exist.
                        
                      No what I have said, must I really repeat myself again, is that it does exist as an economic school of thought. Also I would that all you have shown so far is neoliberalism looks like classical liberalism. Or at least you have yet to show how they differ. That is the point of these question which you deleted rather than answer: And what in particular follows from this for the difference between classical liberalism and neoliberalism? And what of the relationship between modern liberalism and neoliberalsim? Is there a change in view to do with how the two group see liberty, or example? For classical liberalism, liberty is negative liberty, for the modern liberals its positive liberty. What about neoliberalism? How do the views on the role government differ, if at all, between the groups? And if there are differences what are we to make of the claims quoted earlier that neoliberalsim is a revival of classical liberalism?

                       
                      See below.
                       
                       
                       

                      Do more than take one word or line out of context: consider how a “revival” decades or centuries after the initial movement might vary or have moved on from the exact doctrines of its predecessor.
                      Nothing has been taken out of context. Revival would mean you have bought back something. So a revival of classical liberalism would share the same basis ideas of the original (classical) liberalism, otherwise how can it be a revival, it would be something new.

                       
                      Dude, the very line “revival of classical liberalism” is one line out of an entire article from the Encyclopaedia Britannica which you have still not bothered to read. Taken out of context. I have not bothered to answer your questions because you still haven’t bothered to open a fucking book that might actually broaden your horizon.
                       
                      btw: was Frankenstein’s creation identical to the individuals he revived? A “revival” is different to the original. Otherwise the word “revival” would be redundant.
                       

                       
                    • McFlock
                       
                       

                      You know, I was thinking “why the fuck do I bother with this fool”, but then trawling through your latest pit of religious bullshit, I saw:

                      I’m guessing that “neoliberal” would capture both some neoclassical and Austrian economists. Also while some neoclassical economists, for example, may be “neoliberal” others may not, so there is a clear demarcation who is and who isn’t in the group.

                      Oh great, we have actually made progress!
                      Back here you were saying:

                      there is no such thing as “neoliberal economics”

                      But now that when CV says things like:

                      Basically neoliberal economics is fake and full of shit.

                      you know pretty pretty much that he means economists who lean more towards neoclassical or Austrian school, rather than Marxist economists. So despite your best efforts, you’ve managed to get a rough handle on what people were talking about.
                         
                      My personal opinion is that any economist who tries to predict anything is fake and full of shit, but then you already knew that. And you yourself have said that economists can’t predict cataclysms like the GFC or even day to day economic fluctuations, so I’m not sure what else is left to predict.
                            
                      Economics is an obscure academic exercise (akin to studies of medieval plays) which charlatans and high priests have managed to make the lynchpin of government policy in order to benefit the already rich.
                        
                      Have a nice day.

                       
                    • KJT

                      AND. The Pete George memorial prize for this week.

                      For the greatest amount of pointless semantic circumlocution,

                      Goes to………………..

                      Paul Walker.

                    • You know, I was thinking “why the fuck do I bother with this fool”, but then trawling through your latest pit of religious bullshit, I saw:

                      I’m guessing that “neoliberal” would capture both some neoclassical and Austrian economists. Also while some neoclassical economists, for example, may be “neoliberal” others may not, so there is a clear demarcation who is and who isn’t in the group.

                      Oh great, we have actually made progress!
                      Back here you were saying:

                      there is no such thing as “neoliberal economics”

                      Right. And both statement are true and this is what I have been saying all along. There is no such thing as “neliberal economics”, the term is meaningless within economics. The reference to “neoliberal” in the quote is a reference to whatever the definition is as used outside of economics, a definition that is still very unclear, hence the reason I say “I’m guessing”.

                      Perhaps the best definition for “neoliberal” is “stuff we hate” where the stuff is defined by whichever groups is talking about “neoliberalism”. It seems to be a catch-all phases for whatever it is some group is complaining about.

                      But now that when CV says things like:

                      Basically neoliberal economics is fake and full of shit.

                      you know pretty pretty much that he means economists who lean more towards neoclassical or Austrian school, rather than Marxist economists. So despite your best efforts, you’ve managed to get a rough handle on what people were talking about.

                      My personal opinion is that any economist who tries to predict anything is fake and full of shit, but then you already knew that. And you yourself have said that economists can’t predict cataclysms like the GFC or even day to day economic fluctuations, so I’m not sure what else is left to predict.

                      Predictions can be made in the vast majority of areas of economics. The “you can’t predict” results only apply in a very small area of economics. Most of econ is unaffected by these results and you will see prediction and testing going on unabated in most areas. An example would be the use of laboratory and field experiments as well as empirical work in development economics or health economics or even the theory of the firm.

                      Look at the work of Daron Acemoglu on the role of institutions in economic development and political economy. He has several papers that argue that institutions play a more prominent role in development than was generally accepted. His 2002 QJE paper with Johnson and Robinson argues that countries that were relatively rich in 1500 are now relatively poor, a point that is inconsistent with the view that geography is destiny. The argument, supported by empirical evidence, is that this is due to colonizing countries treating rich and densely populated countries differently from poor and sparsely populated countries. In the former, they followed policies of extracting wealth and in the latter they followed policies that encouraged investment. Acemoglu’s 2001 AER paper, also with Johnson and Robinson, uses differences in mortality rates faced by Europeans in different countries to study further the degree to which different policies lead to different
                      institutions, which in turn lead to different development paths. Some of the methods and the conclusions of this paper are still being debated, but this line of Acemoglu’s work has already stimulated substantial research that rethinks the development process. In related work on political economy, for example with Robinson in APSR 2001, he has examined the dynamics of political processes and the persistence of inefficient policies. This work has been influential in political science.

                    • McFlock

                      There is such a thing as “neoliberal”.
                      Some neoliberals are economists.
                      Your guess as to which economists are “neoliberal economists” is near enough for the point CV was making.
                         
                      If you want a full academic dissection of the concept, try doing your own research into the area. “Neoliberal” by itself has been well described here and in attached links. Maybe you should pop over to the polsci department and ask them?
                         

                       The “you can’t predict” results only apply in a very small area of economics.   

                      That area which deals with the real world on a daily basis. 

                    • “There is such a thing as “neoliberal”.
                      Some neoliberals are economists.
                      Your guess as to which economists are “neoliberal economists” is near enough for the point CV was making.”

                      CV is a great example of my definition. “Neoliberalism” is just stuff he hates.

                      “The “you can’t predict” results only apply in a very small area of economics.
                      That area which deals with the real world on a daily basis. ”

                      So development isn’t a real issue on a daily basis? Health isn’t? Natural resources aren’t? The environment isn’t? Unemployment isn’t? ……………

                    • McFlock

                      CV is a great example of my definition. “Neoliberalism” is just stuff he hates.
                       

                      No. If CV hated pumpkin, I doubt they’d describe pumpkin as neoliberal. If CV hated the Catholic Church, I doubt they’d call it neoliberal.
                            
                      “Neoliberal” is intimately tied with a number of economic policies consistently applied by Reagan, Thatcher, Lange/Douglas, Richardson, and so on. Neoliberal economists provided pseudo-scientific justification for those policies. Everyone’s been pretty clear about what counts as neoliberal. Of course, now you’re pretending you don’t understand it again. 

                      “The “you can’t predict” results only apply in a very small area of economics.
                      That area which deals with the real world on a daily basis. ”

                      So development isn’t a real issue on a daily basis? Health isn’t? Natural resources aren’t? The environment isn’t? Unemployment isn’t? ……………

                      What’s the unemployment rate going to be in six months time? The price of oil? The level of development in Zimbabwe?
                             
                      You have no idea – you can’t predict those any more than you can predict what the stockmarket will be in six months.
                       
                       

                • Why do you say neoliberalism is meaningless and doesn’t exist, when it quite obviously has meaning for quite a lot of people?

                  What then is that meaning? Or what is the definition of a neoliberal economists and how does such an economic school of thought differ other economic schools of thought? Eg Marxists and neoclassicals.

                  Was the term not sanctioned by Treasury?

                  I have no idea and why would I care anyway?

                  • felix

                    Puddleglum gave you a very good description of what the term is widely used to mean.

                    You do this quite a lot – demand information that has just been provided. Are you even reading the replies?

  22. Colonial Viper 22

    Since Paul Walker is resorting to defending economists by using semantics, I think its safe to say that the point is made.

    Neoliberals in the financial, political and economic establishments have used academic neoclassical economics as cover for their reign of destruction and wealth transfer.

  23. Neoliberals in the financial, political and economic establishments have used academic neoclassical economics as cover for their reign of destruction and wealth transfer.

    If that is the answer, what was the question?

    If your statement is true then what about the Austrian economists? Having they too acted as a “cover for their reign of destruction and wealth transfer.”? I’m sure that supporters of Mises and Hayek will be pleased to hear they haven’t been a “cover for their reign of destruction and wealth transfer.”

    • Colonial Viper 23.1

      Austrian economists are an interesting bunch but no one uses them to run their country’s political economics.

    • Draco T Bastard 23.2

      On The Similarities Between Austrian and Neoclassical Economics
      I’ve considered Austrian and neo-liberal economics essentially the same for some time, this guy kindly wrote down the reasons why.

      • Paul Walker 23.2.1

        But neoliberal economists are neoclassical economists and now neoliberal economists are Austrian economists but Austrians are not neoclassical. How can that be?

        • McFlock 23.2.1.1

          Fucksake, now the economist demonstrates he has no idea about set theory. Like Venn Diagrams from 2nd form.
           

          • Paul Walker 23.2.1.1.1

            Its a simple definitions problems. I take from CV that noeliberal=neoclassical and also that neoliberal=Austrian. Now that can work iff neoclassical=Austrian but this is not true. So I am somewhat confused.

            • Te Reo Putake 23.2.1.1.1.1

              Paul, perhaps you would be best served by leaving that last sentence as your final contribution. It seems rather apt.

  24. The GFC isn’t a black swan event as it was inevitable.  It also isn’t over yet this current situation is like the drowning man coming up for a second gasp.

    Idiots like Paul W have no understanding of the exponential function because Paul can’t think he has been too busy learning.  He has spent his whole life learning to chant by rote his dogma.  Once we are on the up tick on an exponential function the consequences are inescapable in the same way as a car crash is for those moments between leaving the tarseal and hitting the power pole.

    I suggest you all read this excellent paper entitled “Dangerous exponentials”  (Link below)

    We are past the point of no return on a number of different factors that underpin our society and economy.  Any one of these exponentials would be dangerous for the future of our current form of society, that we have a range of factors all exhibiting the same trend means the crisis when it fully develops will be a complex one. 

    I am surprised so many people waste their time arguing with Paul – he is our societies equivalent of the taliban he can recite every verse of the Koran as he sets out to destroy on his jihad he only knows the words of the book of Dogma he worships the knowledge escapes him.  He is a fool.

    http://www.tullettprebon.com/Documents/strategyinsights/tp0510_TPSI_report_005_LR.pdf 

    • Colonial Viper 24.1

      Found the document here

      http://www.tlpr.com/Documents/strategyinsights/tp0510_TPSI_report_005_LR.pdf

      Thanks darkhorse.

      Civilisation as we know it is undergoing catabolic collapse. Many areas and many peoples will fare better for longer than others, but its happening.

      The upper middle class and elite will do what they need to in order to maintain the lifestyles that they have become accustomed to. Even if it means taking more of a shrinking pie, that’s what they will do.

      • darkhorse 24.1.1

        Hi CV the interesting paradox is that in the long run the poor are more likely to weather this all well than the rich.  The rich live more complex and societally dependent lives than the poor.  Much of their wealth is held in intangible forms.  They receive most of their services from the poor (the rest of us anyway) and their wealth is usually based on skimming the margin on the economic activity of the poor – if the poor are broke soon the rich will be broke too.  The poor have community to fall back on and less to lose and are more self reliant.  And in the end there are many more of them.

        Having a mansion and a rolls is little comfort when there is no petrol and no servants. 

        • Colonial Viper 24.1.1.1

          Hi CV the interesting paradox is that in the long run the poor are more likely to weather this all well than the rich.

          +1 fully agree

  25. Colonial Viper 25

    Paul Walkers unending rain of bullshit continued with assertions that US$40/bbl is the current breakeven for oil production. He is actually correct, when you average out cheap established conventional oil fields with much more expensive recent sources of unconventional liquids.

    What he doesn’t tell you: the countries which pump this oil absolutely need the oil price to be 2.0x to 2.5x that price to stay afloat, politically and socially. This includes big producers like Saudi Arabia, Iran and Russia.

    http://dailyresourcehunter.com/whats-with-oil-prices-byron-king-answers/

  26. McFlock 26

    Oh look, economists are disagreeing. Big surprise. Treasury think national will save us by the next election, the reserve bank disagree.

    • And so? Macro is like that. Micro is so much better!!

      • McFlock 26.1.1

        Shame the world isn’t a little self-contained micro-economic system then. 
           
        Economics is useless – what was the line you just quoted: “prediction is everything”?  

        • Paul Walker 26.1.1.1

          “Economics is useless – what was the line you just quoted: “prediction is everything”? ”

          You need to do more on the philosophy of science, many philosophers of science, and economists, would reject Friedman’s position (but I am glad to see you are a supporter of Milton Friedman!).

          • McFlock 26.1.1.1.1

            Fucksake you really can’t be consistent about anything, can you? 

            • Paul Walker 26.1.1.1.1.1

              Inconsistency where? But it is good to see you have been consistent in your support of Milton Friedman.

              • McFlock

                So let’s assume that you disagree with the quote
                Why bring it up, as anything other than an intentional distraction? Do you actually believe that an incorrect assumption invalidates a model?

                • “So let’s assume that you disagree with the quote.”

                  Take this line here:

                  “One thing to keep in mind however is that if you take the Friedman position that (roughly put) “prediction is everything” then assumptions don’t matter.”

                  You should have read that sentence carefully, not the “if” in it, it is there for a reason. IF you take Friedman’s position then assumptions don’t matter. About the only person in this thread who seems to believe that “prediction is everything” is you. You seem to be the most consistent supporter of Milton Friedman here.

                  “Why bring it up, as anything other than an intentional distraction?”

                  It is there because it is a position that you can take and, I assume, some people still do take.

                  “Do you actually believe that an incorrect assumption invalidates a model?”

                  Depends on what you are doing. All models to some degree will have incorrect assumptions in them, since they are by definition, simplifications. So in that sense no. If understanding of a phenomenon is the aim then it seems to me that an incorrect assumption is less likely to lead to understanding. It is also likely that an incorrect assumption will lead to worse prediction, if you are worried about that.

                  • McFlock

                    Okay, so now tell me where I believed “prediction is everything”, i.e. the assumptions don’t matter.
                           
                    I love the way you disowned the statement “prediction is everything” by emphasising the “if”, ignored the fact that it was your only response to AC’s comment, and then backpedalled a bit by saying that some assumptions (even if incorrect) don’t invalidate a model.
                            
                    So are you the Pete George of economics, or do you think that there’s a bit much economics in pete george? 

                    • “Okay, so now tell me where I believed “prediction is everything”, i.e. the assumptions don’t matter.”

                      Just take a look how often you have gone on about prediction in this thread.

                      “I love the way you disowned the statement “prediction is everything” by emphasising the “if”, ignored the fact that it was your only response to AC’s comment, and then backpedalled a bit by saying that some assumptions (even if incorrect) don’t invalidate a model.”

                      Actually I noted the “its takes a theory to beat a theory” bit. I just noted the Friedman line with the IF in there because it is a common position you see mentioned. Friedman’s paper is still referred to in the literature. The IF is there so that it is clear, to everybody but you it seems, that it the “assumptions don’t matter” position can be consistently held IF your think that “prediction is everything”, like you and Friedman.

                    • McFlock

                      Prediction is necessary, not sufficient. Being necessary, without it economics is bunk. You’ll note that much of my discussion was on the difference between predictive success that was the result of luck, vs that which is the result of a “guru” beating the market.
                                    
                      “It takes a theory to beat a theory”? The theory that beats economics is “economics can’t predict shit, but economists try, therefore economics is shit”. You’ve provided a lot of real-world data that supports that theory. It’s not a scientific theory, though – more common sense than anything else. 

                    • mike e

                      Pathetic Wanker no sense of humour you must be an accountant.

                      [lprent: Why? Where is your point? Pointless abuse tends to draw moderator attention that you really don’t want – we have our own sadistic sense of humour.. ]

                    • Prediction is necessary, not sufficient.

                      Well at least you have finally agreed with me, well done.

                    • McFlock

                      I said “necessary, not sufficient”.
                      You seem to think it’s sufficient, but not necessary.
                      I.e. economics has the complete inability to predict anything

                    • “I said “necessary, not sufficient”.”

                      Which is why I said “Well at least you have finally agreed with me, well done.”

                      “You seem to think it’s sufficient, but not necessary.”

                      Then clearly you have understood nothing.

                    • Colonial Viper

                      Any economic approach which doesn’t explicitly recognise energy and resource depletion, and the necessity of achieving a steady state economy for the benefit of all, needs to be binned.

                      Oh whoops that’s most of them.

                    • “Any economic approach which doesn’t explicitly recognise energy and resource depletion,”

                      Then checkout environmental and natural resource economics.

                    • McFlock

                      “You seem to think it’s sufficient, but not necessary.”
                      Then clearly you have understood nothing.

                       
                      Funny, because you write like an academic. I actually did quite well in the economics papers I took at uni, so I must have picked something up from those educators. I guess you’re just incompetent at explaining your position.
                              
                      Or maybe I just picked up more from your sliding, semantic bullshit than you have.

                    • Colonial Viper

                      Then checkout environmental and natural resource economics.

                      Don’t you see the fuck up in the economics profession?

                      ALL economics is environmental, energy and resource economics, not just a specialist 5% of it. Duh.

                    • Then checkout environmental and natural resource economics.

                      Don’t you see the fuck up in the economics profession?

                      ALL economics is environmental, energy and resource economics, not just a specialist 5% of it. Duh.

                      Which is why Lord Robbins defined economics to be about the allocation of scarce resources when he wrote that economics is,

                      “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”

                    • “Free trade in pumpkins, yes. The pumpkins themselves? No.”

                      Damn. The “neoliberal” theory of pumpkins is I’m sure a topic we could get our teeth into and make a real meal of it!

                      And the church: no idea. Is the pope pro-free trade?

                      No idea. I would guess no but who knows?

                      ““Neoliberal” is intimately tied with a number of economic policies consistently applied by Reagan, Thatcher, Lange/Douglas, Richardson, and so on. Neoliberal economists provided pseudo-scientific justification for those policies.
                      Everyone’s been pretty clear about what counts as neoliberal. Of course, now you’re pretending you don’t understand it again.

                      What policies and what economists? What are these “pseudo-scientific justifications”? I don’t remember any new or radical in most of Reagan’s or Thatcher’s policies. They were standard economics, the problems for both Reagan and Thatcher were political rather than economic.

                      Unemployment and inequality are economic problems as well as political problems.”

                      Yes and its the politics that get you (or politicians) every time.

                      ““The “you can’t predict” results only apply in a very small area of economics.

                      That area which deals with the real world on a daily basis. ”

                      So development isn’t a real issue on a daily basis? Health isn’t? Natural resources aren’t? The environment isn’t? Unemployment isn’t? ……………

                      What’s the unemployment rate going to be in six months time? The price of oil? The level of development in Zimbabwe?
                      You have no idea – you can’t predict those any more than you can predict what the stockmarket will be in six months.

                      For the case of unemployment and the price of oil you could model both reasonable well. Today’s unemployment rate would be a reasonable guide to the rate in six months out. Things don’t change that quickly. As to the stockmarket big changes are not predictable, we have already been there, done that.”

                      Really? So unemployment doesn’t fluctuate that much, even if the stockmarket crashes (and you can’t predict a stockmarket crash)? And oil prices don’t fluctuate that much, even with a war in the Middle East? Really?

                      And you also said that neither big changes nor little changes were predictable in the stockmarket.”

                      My point about the unemployment rate and oil price is that if you have enough autocorrelation in the data you will get a reasonable forecast. At least for most times. That is, times when the random stocks aren’t large so the known information predicts reasonable. But for the really big stocks, the GFC type stock, you will not predict these because you can’t predict the stocks themselves.

                    • McFlock

                      Unemployment and inequality are economic problems as well as political problems.”
                        
                      Yes and its the politics that get you (or politicians) every time.

                      Yeah. Funny how the hoi polloi get irritable when you implement economic policies that throw them out of work.

                      For the case of unemployment and the price of oil you could model both reasonable well. Today’s unemployment rate would be a reasonable guide to the rate in six months out. Things don’t change that quickly. As to the stockmarket big changes are not predictable, we have already been there, done that.” 

                         
                      Really? So unemployment doesn’t fluctuate that much, even if the stockmarket crashes (and you can’t predict a stockmarket crash)? And oil prices don’t fluctuate that much, even with a war in the Middle East? Really?
                         
                      And you also said that neither big changes nor little changes were predictable in the stockmarket.”
                         
                      My point about the unemployment rate and oil price is that if you have enough autocorrelation in the data you will get a reasonable forecast. At least for most times. That is, times when the random stocks aren’t large so the known information predicts reasonable. But for the really big stocks, the GFC type stock, you will not predict these because you can’t predict the stocks themselves.

                      So you can’t predict an unemployment or fuel price cataclysm. Even daily/quarterly fluctuations might be randomly up or down. Completely useless.
                               
                      This is getting to be a boring script.
                      I say you can’t predict shit, you say “I can predict X”, I call bullshit, you say “well, I can predict X except in big circumstances where it’s unpredictable”, I call bullshit, you say “oh, little circumstances also vary, but I can predict G, Y, Z and P”, ad infinitum. 
                       

                    • “For the case of unemployment and the price of oil you could model both reasonable well. Today’s unemployment rate would be a reasonable guide to the rate in six months out. Things don’t change that quickly. As to the stockmarket big changes are not predictable, we have already been there, done that.”

                      Really? So unemployment doesn’t fluctuate that much, even if the stockmarket crashes (and you can’t predict a stockmarket crash)? And oil prices don’t fluctuate that much, even with a war in the Middle East? Really?

                      And you also said that neither big changes nor little changes were predictable in the stockmarket.”

                      My point about the unemployment rate and oil price is that if you have enough autocorrelation in the data you will get a reasonable forecast. At least for most times. That is, times when the random stocks aren’t large so the known information predicts reasonable. But for the really big stocks, the GFC type stock, you will not predict these because you can’t predict the stocks themselves.

                      So you can’t predict an unemployment or fuel price cataclysm. Even daily/quarterly fluctuations might be randomly up or down. Completely useless.”

                      This is getting to be a boring script.
                      I say you can’t predict shit, you say “I can predict X”, I call bullshit, you say “well, I can predict X except in big circumstances where it’s unpredictable”, I call bullshit, you say “oh, little circumstances also vary, but I can predict G, Y, Z and P”, ad infinitum. ”

                      It depends on what you think would qualify as a prediction. We know that there are something we can’t predict, eg GFC. The EMT tells us this. But there are other things we can predict at least during non-GFC times. Also there are many areas in which the “we can’t predict” theorems don’t hold. Let take an example.

                      The property rights theory of the firm says that the ownership of non-human capital is important in determining the structure of a firm in a world of incomplete contracts. An implication of this is that the contractibility of actions affecting the value of an asset affects asset ownership. This can be examined by look at how truck ownership has changed with the diffusion of on-board computers (OBCs). You can develop and test the proposition that
                      driver ownership should decrease with OBC adoption, particularly for hauls where drivers have the greatest incentive to drive in non-optimal ways or engage in rent-seeking behaviour.

                      So you can look for evidence consistent with this proposition: driver ownership decreases with OBC adoption, especially for long hauls. In contrast, driver ownership falls less with adoption for hauls that use trailers for which demands are unidirectional than bidirectional, corresponding to differences in the rent-seeking costs of driver ownership.

                      Is that a prediction by your standard? If not why not?

                    • McFlock

                       

                      So you can look for evidence consistent with this proposition: driver ownership decreases with OBC adoption, especially for long hauls. In contrast, driver ownership falls less with adoption for hauls that use trailers for which demands are unidirectional than bidirectional, corresponding to differences in the rent-seeking costs of driver ownership.

                      Is that a prediction by your standard? If not why not?

                      No, it’s an observation. 
                      If you were to take that observation and then say “a proposed government regulation to install OBCs in all trucks would reduce driver ownership by[some specific)%”, that would be a prediction.
                             
                      But here’s the rub: unless driver-ownership subsequently reduced by the % you specified, and your specification was based on a valid justification to believe in a true relationship between OBC prevalence  and driver-ownership, you would not have predicted the outcome. You would have predicted an outcome other than what happened in the real world, or you would have simply taken a punt and won.
                             
                      Hence you might have “made a prediction”, but you failed to “predict the outcome”. Economics cannot predict outcomes, it is as simple as that.  
                       
                       

                    • So you can look for evidence consistent with this proposition: driver ownership decreases with OBC adoption, especially for long hauls. In contrast, driver ownership falls less with adoption for hauls that use trailers for which demands are unidirectional than bidirectional, corresponding to differences in the rent-seeking costs of driver ownership.

                      Is that a prediction by your standard? If not why not?

                      No, it’s an observation.

                      What??? It can not be an observation. You are not making observation, what is being predicted is that 1) driver ownership decreases with OBC adoption, especially for long hauls and 2) driver ownership falls less with adoption for hauls that use trailers for which demands are unidirectional than bidirectional, corresponding to differences in the rent-seeking costs of driver ownership.

                      They are predictions that follow from a theory (property rights theory of the firm is this case) which is falsified would put said theory in doubt.

                      “If you were to take that observation and then say “a proposed government regulation to install OBCs in all trucks would reduce driver ownership by[some specific)%”, that would be a prediction.”

                      1) why in Gods name would anyone put forward such a policy? 2) the prediction made above is about what the world is like now – it is about understanding what we see around us, not about how a policy change would change that world. The second question is of no interest for the testing of the theory that sets out to explain something about why firms are formed and what changes with vertical integration. This a question of testing a theory not a question about evaluating a policy proposal. These two issues may well be related but they are not the same. 3) your policy prediction would require another or extended theory which is designed to deal with that question. It would also have determine whether or not the specific % was consistent across all trucking, if not your prediction is meaningless. Your prediction would have to be either “a proposed government regulation to install OBCs in all trucks that work in trucking industry Z would reduce driver ownership by[some specific)%” or “a proposed government regulation to install OBCs in all trucks would on average reduce driver ownership by[some specific)%”.

                    • McFlock

                      What??? It can not be an observation. You are not making observation, what is being predicted is that 1) driver ownership decreases with OBC adoption, especially for long hauls and 2) driver ownership falls less with adoption for hauls that use trailers for which demands are unidirectional than bidirectional, corresponding to differences in the rent-seeking costs of driver ownership.
                         
                      They are predictions that follow from a theory (property rights theory of the firm is this case) which is falsified would put said theory in doubt.

                      Oh okay, so you predict what you’ll find, fair enough. I’m still a bit leery of looking for “evidence consistent with” your proposition – what you should be doing is fitting the theory to the data, not the other way around. But never mind.

                      The point is that you can call it a “prediction” all you want, but you need a refutable theory, i.e. a real-world result that makes you discard the model. Without an exclusion result, you have no prediction, because it isn’t based on a valid theory – it’s just a guess. Even if you get the result correct (even the crudest result, e.g. “it’ll go up, not down”), you still just guessed. You did’t “predict” shit.

                      “If you were to take that observation and then say “a proposed government regulation to install OBCs in all trucks would reduce driver ownership by[some specific)%”, that would be a prediction.”
                        
                      1) why in Gods name would anyone put forward such a policy?

                         
                      2) the prediction made above is about what the world is like now – it is about understanding what we see around us, not about how a policy change would change that world. The second question is of no interest for the testing of the theory that sets out to explain something about why firms are formed and what changes with vertical integration. This a question of testing a theory not a question about evaluating a policy proposal. These two issues may well be related but they are not the same.
                       
                      3) your policy prediction would require another or extended theory which is designed to deal with that question. It would also have determine whether or not the specific % was consistent across all trucking, if not your prediction is meaningless. Your prediction would have to be either “a proposed government regulation to install OBCs in all trucks that work in trucking industry Z would reduce driver ownership by[some specific)%” or “a proposed government regulation to install OBCs in all trucks would on average reduce driver ownership by[some specific)%”.

                      1) irrelevant, it’s an hypothetical
                      2) You’re getting dangerously close to matching the data to your theory, not the other way around. Gotta follow the scientific method. Besides, at best all you’ve done is match your theory to past data – it will not apply to data gathered in the future.
                      3) also applies to the “prediction” you made.
                              
                      Frankly, analyzing already-gathered data with an hypothesis in mind strikes me as being more like “observation” than developing a true “prediction”, where the empirical results are held by nobody and can’t affect the creation of the hypothesis. Call me finicky about it, but any decent journal would expect you to say “we observed”, not “we predicted”.
                       

                • “They are predictions that follow from a theory (property rights theory of the firm is this case) which is falsified would put said theory in doubt.

                  Oh okay, so you predict what you’ll find, fair enough. I’m still a bit leery of looking for “evidence consistent with” your proposition – what you should be doing is fitting the theory to the data, not the other way around. But never mind.”

                  The point is that you take a theory, use it to make a prediction and then go look at the data to see if the prediction holds or not. Yes you should use data to develop your theory but the theory you develop should in turn make predictions that you can do to the data to test.

                  “The point is that you can call it a “prediction” all you want, but you need a refutable theory, i.e. a real-world result that makes you discard the model.”

                  Yes and that is the point of the example I gave. Finding that the predictions made did not hold up in the data would have place the theory in doubt. The whole idea was to test the model againt the real-world.

                  “If you were to take that observation and then say “a proposed government regulation to install OBCs in all trucks would reduce driver ownership by[some specific)%”, that would be a prediction.”

                  1) why in Gods name would anyone put forward such a policy?

                  2) the prediction made above is about what the world is like now – it is about understanding what we see around us, not about how a policy change would change that world. The second question is of no interest for the testing of the theory that sets out to explain something about why firms are formed and what changes with vertical integration. This a question of testing a theory not a question about evaluating a policy proposal. These two issues may well be related but they are not the same.

                  3) your policy prediction would require another or extended theory which is designed to deal with that question. It would also have determine whether or not the specific % was consistent across all trucking, if not your prediction is meaningless. Your prediction would have to be either “a proposed government regulation to install OBCs in all trucks that work in trucking industry Z would reduce driver ownership by[some specific)%” or “a proposed government regulation to install OBCs in all trucks would on average reduce driver ownership by[some specific)%”.

                  1) irrelevant, it’s an hypothetical
                  2) You’re getting dangerously close to matching the data to your theory, not the other way around. Gotta follow the scientific method. Besides, at best all you’ve done is match your theory to past data – it will not apply to data gathered in the future.

                  Again the point of the exercise was to test the theory against the data. No the data in this case was collected independently of the investigators. But in general you do have to be careful of not matching data to the theory. Yes the matching is done to past data but that’s the only data we can have and the relationship may not hold in the future which is one reason why repeating the test of a theory on more than one data set, from different places, time periods etc, is important.

                  3) also applies to the “prediction” you made.

                  Les sso as what was most important in the test was the “sign” of the change rather than the “size” of the change.

                  Frankly, analyzing already-gathered data with an hypothesis in mind strikes me as being more like “observation” than developing a true “prediction”, where the empirical results are held by nobody and can’t affect the creation of the hypothesis. Call me finicky about it, but any decent journal would expect you to say “we observed”, not “we predicted”.

                  To test a theory you have to have a hypothesis in mind when testing against the data, it is the hypothesis that you are testing. The predictions just have to be made independently of the data. Again this is a reason to repeat tests, if the theory has been fitted to one data set it will not hold up in another.

                  • McFlock

                    Yes and that is the point of the example I gave. Finding that the predictions made did not hold up in the data would have place the theory in doubt. The whole idea was to test the model againt the real-world.

                    No, exclusion criteria invalidate the theory. Not “place the theory in doubt” – if you don’t get the predicted result, the theory is bunk: “redo from start” territory.
                     

                     To test a theory you have to have a hypothesis in mind when testing against the data, it is the hypothesis that you are testing. The predictions just have to be made independently of the data. Again this is a reason to repeat tests, if the theory has been fitted to one data set it will not hold up in another. 

                       
                    You mean reject the null hypothesis, surely? 
                         

                    • “No, exclusion criteria invalidate the theory. Not “place the theory in doubt” – if you don’t get the predicted result, the theory is bunk: “redo from start” territory.”

                      No one would go that far. The problem is that all you know about is the data used. That is, you know the prediction doesn’t hold for that data set, but what about other data sets? What if the data you are using is the only data set for which the prediction doesn’t hold, it may hold for all other sets. What you want is to see tests based on other data sets. Would a negative result worry people, hell yes, which is why I say it places the theory in doubt.

                      Also there is the point that you are dealing with stats tests here. So you may accept the null hypothesis at, normally, the 5% level but what about the 10% level, you may reject at that level. What’s so great about 5%? The accept/reject decision is not as clear cut as it may look.

                      You mean reject the null hypothesis, surely?

                      Yes but I speak informally.

                    • McFlock

                      I thought you guys were the dismal science, not the optimistic science? But no, you guys are all “ooo, dat might work. Damn, struck out. No wait, maybe exactly the same thing works with dis data set? Damn, struck out. what about dis other data set? …”.
                          
                      Most scientists do actually discard a theory and go back to the drawing board if a theory does not match the real world.
                          

                    • “I thought you guys were the dismal science, not the optimistic science? But no, you guys are all “ooo, dat might work. Damn, struck out. No wait, maybe exactly the same thing works with dis data set? Damn, struck out. what about dis other data set? …”.

                      Most scientists do actually discard a theory and go back to the drawing board if a theory does not match the real world.”

                      Yes we all do. The question when you are dealing with stats based tests is what does “not match the real world” mean. Let us say we can not reject the null at the 95% level. The theory is wrong, but this means there is still a 5% change we are wrong in thinking our theory is wrong. So, like I said, accept/reject is not as clear cut as it may look. So we look other other tests based on other data to see if we are in the 5% region.

                    • McFlock

                      Yes we all do. The question when you are dealing with stats based tests is what does “not match the real world” mean. Let us say we can not reject the null at the 95% level. The theory is wrong, but this means there is still a 5% change we are wrong in thinking our theory is wrong. So, like I said, accept/reject is not as clear cut as it may look. So we look other other tests based on other data to see if we are in the 5% region.

                       
                      You’re an economist: what’s a better use of your time? To recheck your assumptions for a theory that you’re 95% sure is wrong, or to run different tests on it? And then further tests, just in case it was the second group that was a false-positive? Or do you just search to success?
                        
                      Simply rerunning the tests in the hope you’ll get the “right” response seems to me that you’ve got more of an emotional investment in the theory than simple scientific curiosity.
                       

                    • “You’re an economist: what’s a better use of your time? To recheck your assumptions for a theory that you’re 95% sure is wrong, or to run different tests on it? And then further tests, just in case it was the second group that was a false-positive? Or do you just search to success?”

                      Both go on. You would got back and look at your model to see what could be improved in light of your empirical findings (the findings themselves may point the way) but you will also keep an eye out to see if someone else has empirical data or another model relevant to what you are doing.

                    • McFlock

                      meh.
                      I think we’re done here.

  27. Could I suggets you all watch the following

    http://www.stratfor.com/video/conversation-europes-political-economy-george-friedman-and-john-mauldin

    Now these are a pair of guys that Paul would most likely worship as high priests of his bizarre world view.   George Friedman in particular is a man of particular insight – the pair are in this view basically acknowledging that Paul’s idols and paul’s dogma have failed.  

    They are also acknowledging the importance of good leadership at both city and national level – maybe that is a part of our problem! 

  28. This conversation reflects all that is wrong with economic and economists.  There has been nothing but a long string of abuse and semantic debate – not one word of substance has been exchanged nor one original thought.

    I have never seen so many apparently intelligent people debate in such a futile manner. 

    It leads me to ask two questions

    1.  Don’t you guys have real lives?
    2.  Do your realise how bad things are? 

    If not then perhaps you would benefit from reading this ..

    http://www.businessinsider.com/raoul-pal-the-end-game-2012-6#for-more-on-why-the-economy-is-crumbling-31

    Which leads me to a third question.

    Are you all going to waste time chasing your own tails or are you going to do some thing useful with your lives by attempting to provide a meaningful response to these coming events? (bought about largely by the idiot-savant economists of this world)  

  29. Campbell Larsen 29

    @Paul Walker – Just agree to disagree – you’re not winning anyone over by banging on that

  30. Neoliberalism is really just born again neoclassical economics that was thrown up in the 1970s and 1980s to solve the structural crisis of capitalism of the 1960s, wrapped up in a load of bullshit to legitimate a changing role of the state. The acknowledged ‘launch’ was Chile 1973, though you could trace the trial runs in Vietnam and Indonesia. The modus operandi was to have a coup (lots of state there) to save the market from the reds.
    It preaches state out of the market where it interferes with market signals and where private profits can be made, but into the market where subsidies to capital, guns and coups are required. 
    Basically the crisis was one of falling profits due to stagflation i.e. the failure of Keynesian economics to restore profits. Since Keynesianism (or demand side economics) was the political target, neoliberalism was associated early on with supply side economics. But that is only one aspect of it. Neoliberalism is totally consistent with massive increases in money supply to fuel demand-side economics (eg bailing banks) except that the conditions for restoring supply don’t exist until enough capital is devalued and restructured, economically politically and militarily, into competitive productive units. And of course any mix and matches like PPPs are on the neoliberal spectrum. 
    Thus you won’t understand what neoliberalism is unless you see it as a bullshit ideological smokescreen that attempts to coverup and/or justify massive attacks on workers and peasants world wide to force them to cough up their resources and labour to boost the failing profit system. More market, or more state works for neoliberals as long as they bring in the profits. What doesnt work, is more market (as in organised labour) or more state (as in socialist policies) that eat into profits.
     

  31. prism 31

    Do economists have the answers indeed? 395 comments and still going. They might have some answers but probably for every one there is a question. This thread sure has legs. And I like one of the categories – Deep stuff.

    • McFlock 31.1

      Well, much of it’s my fault for forgetting the “DN in “DNFTT”.
           
      But then the post is on the validity of economics, so I don’t feel so bad about dissecting the issue in such detail. I think it’s close to a natural conclusion, though.

      • mike e 31.1.1

        well paul economic stalker whats your solution to NZ doing better economically
        Austerity
        Tax cuts for the well off.

Recent Comments

Recent Posts

  • Swiss tax agreement tightens net
    Opportunities to dodge tax are shrinking with the completion of a new tax agreement with Switzerland, Revenue Minister Stuart Nash announced today. Mr Nash and the Swiss Ambassador David Vogelsanger have today signed documents to update the double tax agreement (DTA). The previous DTA was signed in 1980. “Double tax ...
    2 weeks ago
  • Maintaining momentum for small business innovation
    Small Business Minister Stuart Nash says the report of the Small Business Council will help maintain the momentum for innovation and improvements in the sector. Mr Nash has thanked the members of the Small Business Council (SBC) who this week handed over their report, Empowering small businesses to aspire, succeed ...
    2 weeks ago
  • Seventy-eight new Police constables
    Extra Police officers are being deployed from Northland to Southland with the graduation of a new wing of recruits from the Royal New Zealand Police College. “The graduation of 78 constables today means that 1524 new constables have been deployed since the government took office,” says Police Minister Stuart Nash. ...
    3 weeks ago
  • Tax refund season ends near $600 million
    Almost $600 million has been paid into taxpayers’ bank accounts in the past two months, after the first season of automatic tax assessments. Revenue Minister Stuart Nash says the completion of this year’s tax refund season is a significant milestone. “The ability of Inland Revenue to run auto calculations for ...
    3 weeks ago