Economists - come on, admit it, you were wrong!

[DJofSD]

Economists Need to Admit When They’re Wrong

In the popular imagination, scientists do their job by testing theories against the facts and deciding what’s right. In reality, what matters most is figuring out what’s wrong -- an endeavor in which the economics profession has been failing spectacularly.

Calling it as he sees it.

Looks spot on to me.

[Clocker]

In the popular imagination, scientists do their job by testing theories against the facts and deciding what’s right. In reality, what matters most is figuring out what’s wrong -- an endeavor in which the economics profession has been failing spectacularly.

The problem is that economics is not a science, but many economists, especially academics, insist on treating it like one. One of the big differences is that you cannot do controlled experiments in economics, like you can in a hard science like chemistry. So economists always have an excuse when something happens contrary to theory or predictions. The result should have been X, but A, B, and C happened, so the result was Y. My model was correct, but conditions changed.

The biggest sinner in this regard is NY Times economist Paul Krugman. Krugman is the world's biggest and loudest Keynesian economist. His core belief is that deficit-financed stimulus spending is the only solution to the economic stagnation of the last 5 years.

Deficit-financed stimulus spending has never worked, and Obama's stimulus program was a total flop. And Krugman always has the same excuse. Krugman's answer is always the same. The stimulus didn't work because the stimulus spending wasn't enough. It would have worked if the spending had been large enough. Most economists do the same thing.

[johnhannibalsmith]

Originally Posted by Clocker

The problem is that economics is not a science, but many economists, especially academics, insist on treating it like one. One of the big differences is that you cannot do controlled experiments in economics, like you can in a hard science like chemistry. So economists always have an excuse when something happens contrary to theory or predictions. The result should have been X, but A, B, and C happened, so the result was Y. My model was correct, but conditions changed.

...

Completely agree, which is why as much as I'd like to, I refuse to subscribe to any single economic theory as being the right one.

[Clocker]

Originally Posted by johnhannibalsmith

I refuse to subscribe to any single economic theory as being the right one.

That depends on the theory. Many theories vary only in the degree to which the economy can or should be managed by the government.

I subscribe to the theory that, as bad as it may be at times, the free market makes better economic decisions than the government. The role of the government is to provide basic services such as national defense, common infrastructure, and protect the rights of citizens. The latter includes protection from fraudulent business practices, enforcement of contracts, etc. Other than that, the role of government is to provide a stable economic environment that promotes economic growth.

[johnhannibalsmith]

Originally Posted by Clocker

.. I subscribe to the theory that, as bad as it may be at times, the free market makes better economic decisions than the government. The role of the government is to provide basic services such as national defense, common infrastructure, and protect the rights of citizens. The latter includes protection from fraudulent business practices, enforcement of contracts, etc. Other than that, the role of government is to provide a stable economic environment that promotes economic growth.

As a default position, really on nearly any subject economic or otherwise, so do I.

I'm willing to concede that government can augment or mitigate the potential failures or pain that can arise from a purely free market approach to everything in actual practice, but unfortunately, government rarely is interested in or capable of doing it effectively or as altruistically as they allege. So, in the end, less government in general becomes the better proposition. But theoretically speaking, it's still hard for me to back either horse without a little bit of hedging.

[badcompany]

Originally Posted by Clocker

The problem is that economics is not a science, but many economists, especially academics, insist on treating it like one. One of the big differences is that you cannot do controlled experiments in economics, like you can in a hard science like chemistry. So economists always have an excuse when something happens contrary to theory or predictions. The result should have been X, but A, B, and C happened, so the result was Y. My model was correct, but conditions.

In addition, they have the fallback "It would've been worse had we done nothing." It's a versatile excuse for failure, as it can't be falsified.

[Clocker]

Originally Posted by badcompany

In addition, they have the fallback "It would've been worse had we done nothing." It's a versatile excuse for failure, as it can't be falsified.

This is the core of the administration's mantra about jobs created or saved. The Obama stimulus spending saved billions and billions of jobs.

[Magister Ludi]

"The only function of economic forecasting is to make astrology look respectable." - J. K. Galbraith

[Ocala Mike]

Originally Posted by Magister Ludi

"The only function of economic forecasting is to make astrology look respectable." - J. K. Galbraith

And this:
"Economics is extremely useful as a form of employment for economists."

[RunForTheRoses]

http://en.wikipedia.org/wiki/Essays_...tive_Economics

http://www.ppge.ufrgs.br/giacomo/arq...edman-1966.pdf

[Robert Goren]

I am amazed how many people here think that doing the same things that caused recession in 2008 will get us out of it. Doing more of those things will only dig us in deeper. The supply side economics and less regulation that was popular failed the country badly in the long run despite the short time boom of 2003-7. Slow sustained that includes everybody and limits (but does not completely do away with) risk is the way to go. If we learned anything, it is that we can't let the banks gamble away the country's future. The shot at making a lot of money by gambling with the depositors is too much for some bank employees to resist. It going take us a lot longer to dig out us of the hole their greed puts us in They did long term harm to the country. Greed is included in the seven deadly sins for a reason. You can not base an economy on it. An economy needs to based on hard word and innovation to survive in the long run. That is what needs to be rewarded.

[Tom]

It is always nice to blame others. The Boogie man is your friend.

[Clocker]

Originally Posted by Robert Goren

I am amazed how many people here think that doing the same things that caused recession in 2008 will get us out of it.

Which of those thing are you referring to? The sub-prime mortgage bubble, which resulted from the policies of Clinton and Bush to encourage home ownership regardless of ability to afford a mortgage? Which was greatly exacerbated by the Democratic Congress, begining after the 2006 election, led like a cavalry charge by Barney Frank and Chris Dodd. (Both Democrats, lest we forget.)

Or perhaps you mean the easy credit binge at the hands of the Federal Reserve, when Greenspan and Bernanke kept interest rates artificially low to support asset prices?

Or perhaps you mean the federal policy of not holding bad actors accountable for their sins, instead bailing them out because they were too big to fail? Greenspan saw the danger of this, warning of what he call moral hazard, even as he encouraged it by pumping money into the economy.

My memory might be failing with age, but I don't remember anyone here recommending a return to those policies. But I do see our "leaders" in Washington slowly migrating ever closer to the same old cliff every day.

[Capper Al]

Economics used to belong to the study of political science a couple of hundred years or so ago. The arguments were not on how to maximize the economy but on how to distribute the wealth. Along came a few economist who introduced mathematical reasoning into the picture and from that point on we became bipolar and not understanding our premise for our reasoning. Is it for maximizing wealth or taking care of the population at large?

Globalization is a prime example. The math points out that in the long run free trade will maximize wealth. Meanwhile, our middle class must shrink for this to happen. Now if we could somehow say that all profits made today from globalization had to be kept in the bank until life was better for us all then they wouldn't be so quick to export our work because the rich, like us, want our money now. The interplay here is between maximizing wealth and globalization verse taking care of our own while we progress through globalization. One view is mathematical and the other is political.

[Robert Goren]

Originally Posted by Clocker

Which of those thing are you referring to? The sub-prime mortgage bubble, which resulted from the policies of Clinton and Bush to encourage home ownership regardless of ability to afford a mortgage? Which was greatly exacerbated by the Democratic Congress, begining after the 2006 election, led like a cavalry charge by Barney Frank and Chris Dodd. (Both Democrats, lest we forget.)

Or perhaps you mean the easy credit binge at the hands of the Federal Reserve, when Greenspan and Bernanke kept interest rates artificially low to support asset prices?

Or perhaps you mean the federal policy of not holding bad actors accountable for their sins, instead bailing them out because they were too big to fail? Greenspan saw the danger of this, warning of what he call moral hazard, even as he encouraged it by pumping money into the economy.

My memory might be failing with age, but I don't remember anyone here recommending a return to those policies. But I do see our "leaders" in Washington slowly migrating ever closer to the same old cliff every day.

It was the securitization of bad mortgages and credit default swaps and their trading by the banks. The Recession started with the failure of the 7th largest bank in the country and it was reveal that most if not all the large banks were nearly as bad shape. It, like most recessions, was the result of weakness in the banking system. Plain and simple. That recession never happens if the banks were in good shape. It had little to do with Washington other than Washington did not require the banks to be on a more solid foundation. Those decisions for most part were made by GWB appointed regulators. Your entitled to your opinions about the way government operates and the future consequences from those actions , but at least get the facts straight about causes of 2008 recession. You and others of your ilk have been predicting the country will fall back into recession and hyper inflation in less than a year since the recovery started in the spring of 2009. you have been wrong for three straight years. There is no reason to believe you will all of sudden be correct based on your track record and repeated proven wrong theories. You and the rest of your ilk have let your ideology get in the road of proven economic facts.