How To Fix The Economy

[Fuchs]

This is not a scientific debate, we don't have the time and resources for a prediction and waiting for it to happen.

For all else, read a peer-reviewed economic science journal.

There are thousands of relatively simple economic rules that easily meet highest empirical standards, especially under experimental or ceteris paribus conditions.

Some of them have even the robustness of natural laws, such as the observation that deficits are not sustainable or the inevitability of market failures under certain conditions. There's for example not a single known commercial unemployment insurance in the world (due to two especially severe market failures, excluding con artist endeavours).
Finally, there are even hundreds of management rules that can be proved (and were proved) with math just like math rules themselves, for example rules for optimising production under known conditions.


Economic science is a science, it's understood and defined as such. Those who doubt it can feel free to prove it, but they are powerless feeble voices against the existing definition of the meaning, sound and graphic of the word "science".
They can't argue that economic science is no science without ignoring the real-world business of ten thousands of economic researchers.

This stupid questioning whether economic science is a true science always leaves an impression about the questioner on me that's probably beyond the forum etiquette. Those people simply do not grasp social sciences, and certainly don't seem to attempt it.


Sure, some (or many) economists are no scientists at all, many have forgotten what they were taught about scientific work. There are lots of loudmouths who proclaim a lot of economic nonsense. Clueless people can see those loudmouths and make the mistake t believe that they were representative. Fact is, even natural sciences have such loudmouth (see cold fusion).
There are furthermore more economists than natural scientists in contact with a wide public audience and it's especially easy to earn good money with being a loudmouth as economist in comparison with being one as physicist.



This whole strain of the discussion is moot, and off-topic, of course. Even if economist s were not working scientifically, they would still be the best experts around for explaining "How to fix the economy".
Economics-bashing is thus futile.

[Presley Cannady]

This is not a scientific debate, we don't have the time and resources for a prediction and waiting for it to happen.

The topic is "how to fix the economy." Surely we should entertain the notion that the OP is nonsense. How do you fix something you no one knows how to fix?

For all else, read a peer-reviewed economic science journal.

As opposed to a peer-reviewed ufology or astrology journal? Peer review is but one tool for gatekeeping a body of knowledge, and not nearly the most important one.

There are thousands of relatively simple economic rules that easily meet highest empirical standards, especially under experimental or ceteris paribus conditions.

Then it should be simple to name one genuinely economic "rule" that holds under scrutiny, as opposed to listing off some rather simple observations as you do below.

Some of them have even the robustness of natural laws, such as the observation that deficits are not sustainable or the inevitability of market failures under certain conditions.

Neither one of those qualifies as testable statements. Both assert a point of divergence in the unbounded future, rendering it impossible to present evidence to the contrary gathered from past to present. The second suffers in that it doesn't even specify causation. Surely an asteroid strike would cause a market failure; is astronomy now the province of economics?

There's for example not a single known commercial unemployment insurance in the world (due to two especially severe market failures, excluding con artist endeavours).

Setting aside what is or isn't a con, surely you jest.

Finally, there are even hundreds of management rules that can be proved (and were proved) with math just like math rules themselves, for example rules for optimising production under known conditions.

Math is the formal expression of an idea. The difference between math expressing physical nonsense and physical reality are laws constraining its application. Without laws of thermodynamics, energy conditions for general relativity, or quantum inequalities, physics devolves into free for all. These laws actually produce testable results that coincide with measured reality. To date, the social sciences have produced no analogous constraints--either generally or conditionally.

Economic science is a science, it's understood and defined as such. Those who doubt it can feel free to prove it...

It's not the burden of the skeptic to "prove" economics is scientific anymore than it is the burden of any reasonable man to admit astrology absent evidence.

They can't argue that economic science is no science without ignoring the real-world business of ten thousands of economic researchers.

There are billions of men and women who work day in and day out on unscientific pursuits.

This stupid questioning whether economic science is a true science always leaves an impression about the questioner on me that's probably beyond the forum etiquette. Those people simply do not grasp social sciences, and certainly don't seem to attempt it.

Attempt what? Solving ordinary differential equations? Regression? Reducing sparse matrices? Crunching expected value and variance? These tools are used far more frequently and effectively outside of the social sciences than within. Hell, they're usually built, extended and maintained by people from the hard side of the tracks.

What I find disappointing is that economists invest so much time learning the unholy mess of gadgetry they've accumulated that little is spent determining whether or not their toolkit applies to the problems they're trying to solve. Their first hint should've been the century and a half wasted formalizing any intuition they could lay their hands on while producing not one verifiable result. Their second should've been after even the fire marshal industry started to clean up its act.

Sure, some (or many) economists are no scientists at all, many have forgotten what they were taught about scientific work. There are lots of loudmouths who proclaim a lot of economic nonsense. Clueless people can see those loudmouths and make the mistake t believe that they were representative. Fact is, even natural sciences have such loudmouth (see cold fusion).

If your point is that scientists make mistakes, then you're understating it considerably. We can't even compare the body of rejected hypotheses to those that bear fruit. The point is that science provides the tools for rejecting those hypotheses in the first place and coming to agreement on those that work.

This whole strain of the discussion is moot, and off-topic, of course. Even if economist s were not working scientifically, they would still be the best experts around for explaining "How to fix the economy".
Economics-bashing is thus futile.

I have to disagree, and I'll do so redirecting you to the question I presented at the beginning of this post. How do you fix the economy if no one knows how to fix it?

My answer is when in doubt, unleash your countrymen to research and experiment freely. Should any policy or law erected on the alchemy of social science interfere, eject it. Then wait and see.

[Fuchs]

I believe you that you have no clue how to fix the economy and you don't know who knows. I'm also confident that the latter is closely related to your cluelessness about how to identify people who know how to fix the economy, and likewise I'm confident that you have no clue about economic science.

There's no one individual who knows everything about how to fix the economy because the topic is too big and complex, but there are many (actually many thousands) who have a good clue about many of the necessary measures (especially the big ones).
Macroeconomics is too difficult and abstract for popular media, though. This leaves many people clueless about economics and allows for a huge collection about stupid ideas about economies. Financial market-oriented reporting of mass media adds to the cluelessness and confusion.


I studied economic science for several years at a West German university, focused on macroeconomics, have a degree on it and I know enough economic theories* and papers to know that this stuff is science.

I knew about how the Euro zone will run into the exact troubles of today before the € was introduced because economic scientists had worked on the necessary theories back in the early 90's (each one for every advantage or disadvantage of monetary unions), because my professors had told me about those theories and because the micro experiment of monetary union in re-unified Germany was already supporting those theories.
Meanwhile the public - including those who disparage(d) economic science - had no clue about it.

Making more use of economic science would improve policy a lot. (As of today, lawyers are more influential in policy than economists are - and it shows.)
This reaches from big things like the current crisis or monetary unions down to negotiating simple treaties (the OECD standard form for double taxation treaties is distorted by lobbyists, for example - but only economists will be able to tell you what's the problem in it).


You don't want to see economic theory as science and this keeps you from seeing it as such. I'm happy that most people in power seem to see it as a science and politicians make use of it at least when political gaming allows for it.


Feel free to live on in a fantasy world where your re-defining of the world works. That doesn't help anyone in this world.


*: There was a time when I learned one or two new theories per 90 minute lecture. Economic theories happen to explain one thing a piece.


Oh, btw, I will tell the physicists that they shall never again call Newtonian Physics "science" because they're only "simple observations", and some guy on the internet meant that this doesn't count as science. Or I won't.

[Presley Cannady]

I studied economic science for several years at a West German university, focused on macroeconomics, have a degree on it and I know enough economic theories* and papers to know that this stuff is science.

Great, then it should be easy for you to point to a single economic relation or model that produces better forecasts than flipping a coin. Doesn't have to be general; conditional is fine, too.

I knew about how the Euro zone will run into the exact troubles of today before the € was introduced because economic scientists had worked on the necessary theories back in the early 90's (each one for every advantage or disadvantage of monetary unions), because my professors had told me about those theories and because the micro experiment of monetary union in re-unified Germany was already supporting those theories.
Meanwhile the public - including those who disparage(d) economic science - had no clue about it.

At the very least, you should be able to describe the models and datasets you used so we can verify this prediction by backcast. That also would meet the challenge's criteria.

Making more use of economic science would improve policy a lot. (As of today, lawyers are more influential in policy than economists are - and it shows.)

Lawyers are pretty good because they play a game with rules of their own making. Economists don't have that luxury.

Oh, btw, I will tell the physicists that they shall never again call Newtonian Physics "science" because they're only "simple observations", and some guy on the internet meant that this doesn't count as science. Or I won't.

Feel free. Who's going to argue that mechanics isn't founded on some very simple observations defining the time, displacement and mass in a coordinate system? Once your formalism is in place, the actual science is the meaningful relations between these quantities--conservation of energy, momentum, and angular momentum and derivatives thereof.

[Fuchs]

Great, then it should be easy for you to point to a single economic relation or model that produces better forecasts than flipping a coin. Doesn't have to be general; conditional is fine, too.

Sure I can.
It's pointless, though.

I've discussed with/against people like you before. I do this only in order to keep maybe one or two readers here from falling for your nonsense.

It would be entirely pointless to provide any more examples because you wouldn't take them seriously, but discuss on and on - no matter what kind of evidence I provide.


In short: I don't take you seriously because of what you wrote so far.

[Presley Cannady]

Sure I can.
It's pointless, though.

I've discussed with/against people like you before. I do this only in order to keep maybe one or two readers here from falling for your nonsense.

Let's assume my position is nonsense. Then wouldn't the easiest means to dispense with this back and forth be to point to

It would be entirely pointless to provide any more examples...

You haven't provided one, yet. All you've offered is:
1. the unfalsifiable assertion that deficits are unsustainable on an arbitrarily long time scale.
2. a point that market failures are inevitable; trivial in that the only evidence needed to sustain it is the observation that market failures have occurred, and...
3. a demonstrably false claim that unemployment insurance is commercially sold nowhere in the world.

...because you wouldn't take them seriously, but discuss on and on - no matter what kind of evidence I provide.

I've already cornered myself pretty well for your benefit. I'll accept any relation or model in the field of economics--or the whole of social sciences, for that matter--that generates falsifiable predictions with better accuracy than flipping a fair coin. Simple, no?

[slapout9]

the Coin Toss Economic Theory......very valid concept I might add. In any Economic transaction there is always the rigged criminal element present, something that so called economic science could never grasp Link to "No Country For Old Men-Coin Toss Scene"


http://www.youtube.com/watch?v=mhXJcfczNIc

[Dayuhan]

Then it should be simple to name one genuinely economic "rule" that holds under scrutiny, as opposed to listing off some rather simple observations as you do below.

When the Navy comes into port, the price of hookers goes up.

[Fuchs]

When the Navy comes into port, the price of hookers goes up.

More generally, this would mean that higher demand means higher prices.
I didn't use this as an argument because it's in fact too complicated for a discussion in a military/security policy forum. The reason are the Giffen goods.

[Dayuhan]

More generally, this would mean that higher demand means higher prices.
I didn't use this as an argument because it's in fact too complicated for a discussion in a military/security policy forum. The reason are the Giffen goods.

Higher demand with constant supply, to pick nits. Giffen goods would be an outlier to the opposite conclusion: that increased prices reduce demand.

Most of the general rules have exceptions, but these are typically explainable and to some extent predictable.

Much of the observed erratic nature of economic science is not a consequence of deficiencies in the tools, but rather of the way the tools are applied: as with many other disciplines (notably history) if you torture the data enough they will tell you whatever you want to hear. Because the tools of economics are used as a basis for decisions that have immediate impacts on all manner of vested interests, there's a huge incentive to torture the data, something a chemist or physicist doesn't have to deal with.

One of the great challenges of democracy, whether established or emerging, is the difficulty of developing and implementing sound long-term economic policies - often incomprehensible to the electorate and unpopular in the short run - without getting thrown out of office. Any realistic plan to "fix the economy" is going to make a lot of people hate whoever implements the plan.

[Entropy]

Dayuhan,

Maybe you can explain why there is no leading theory in economics unlike, for instance, evolution or plate tectonics. There are several competing schools and none of them seem to have a lock on predictive accuracy.

[Fuchs]

Dayuhan,

Maybe you can explain why there is no leading theory in economics unlike, for instance, evolution or plate tectonics. There are several competing schools and none of them seem to have a lock on predictive accuracy.

The reason is mostly the limited data sets for econometric analysis (squeezing the value of certain variables out of data sets). Take economic crisis as an example. Major economic models (such as used in central banks) can have in excess of 2,000 variables, but they still lack the data input for crisis situations because there's not enough data to discern the values of many variables.
It's rarely possible to observe a specific variable directly because it's so difficult to set up clean experiments. Instead, economists need to use huge datasets to find the value through empirical analysis (and this requires huge datasets from similar situations).
Consequently, such models fare poorly in regard to simulation of crisis situations.

Many other times there's not so much several competing theories as several adding theories. There are about seven theories about the optimal currency area, each one about one aspect of the topic (some aspects favour bigger, others favour smaller common currency areas). An economist needs to know all or almost all of these, for missing one may lead to entirely wrong conclusions.


There's furthermore the problem that economic theory is a very wide field. Two nobel prize winners can discuss a single topic and disagree (happens actually quite often, see Krugman vs. Stieglitz). Afterwards, it's usually easy to point out why one has argued one way and the other one a different way: Their background (research on certain fields) usually leads to a bias in such discussions (the contributions from different research fields are often competing and it takes a neutral synthesis and good econometric data to find a complete picture).

[Presley Cannady]

Dayuhan,

Maybe you can explain why there is no leading theory in economics unlike, for instance, evolution or plate tectonics. There are several competing schools and none of them seem to have a lock on predictive accuracy.

You've answered your own question.

[Dayuhan]

Dayuhan,

Maybe you can explain why there is no leading theory in economics unlike, for instance, evolution or plate tectonics. There are several competing schools and none of them seem to have a lock on predictive accuracy.

Interesting question... are theories like plate tectonics or evolution considered "leading" by geologists or biologists, or are they seen as such by those outside the profession because they are accessible and (in their elementary versions) relatively comprehensible? I'm not sure why economics doesn't have one, but I'm also not sure why it should.

Certainly there's a lack of predictive accuracy in economics, but that's true of many disciplines as well, particularly when you take them past the undergrad level and apply them to real world conditions. A geologist can tell you where earthquakes are likely to occur, but not when they will occur or how severe they will be. A meteorologist can tell me roughly how many typhoons are likely to emerge from the north Pacific, and can predict a general course for any given storm, but there's a wide margin of variance and they can't tell me how much rain a given storm is going to drop or where exactly it will go. We know the weather forecast is uncertain, but we don't ignore it.

I'm not an economist by trade and I've plenty of criticisms of the trade, excessive reliance on mathematical models and excessive disregard for non-quantifiable factors being prominent among them. At the same time, I recognize that they do provide a very useful and very important set of tools... wouldn't want to approach a complicated job with only those tools, but I wouldn't want to leave them behind either.

Worshiping economists and slavishly obeying their every word would be a huge mistake. Dismissing them and ignoring everything they say would be an equally huge mistake.

A great deal of what passes for economic discourse in the popular realm is contaminated with ideology and vested interest to a point that renders it meaningless.

I wouldn't bet any money on a popular revolt happening in the US any time soon. I'd likely bet against it, were I inclined toward betting.