[HN Gopher] Unsolved problems in economics
___________________________________________________________________
Unsolved problems in economics
Author : rfreytag
Score : 138 points
Date : 2022-05-17 11:47 UTC (11 hours ago)
(HTM) web link (en.wikipedia.org)
(TXT) w3m dump (en.wikipedia.org)
| sudden_dystopia wrote:
| Shorter list would be "solved problems in economics". And how
| many economists pretend that expanding the money supply doesn't
| increase inflation?
| paulpauper wrote:
| _And how many economists pretend that expanding the money
| supply doesn't increase inflation?_
|
| Japan spent decades trying to create inflation to no avail.
| Despite trillions in spending from 2008-2020 inflation was very
| low, until finally spiking in 2021.
| kolbe wrote:
| I don't know why you're getting downvoted. When I first took
| econ, we used a book by Gregory Mankiw that featured a list of
| 10 things that Economists generally agreed upon, and the
| percentage of Economists in some survey that agreed. I think
| the most agreed upon one was "people respond to incentives."
| And the second-most was "there's a short term inverse
| relationship between interest rates and unemployment." This was
| 20 years ago, and I think we're already at the point to where
| that second statement has been rendered obsolete.
|
| So, yeah, I think I agree that all that Economists have left is
| "people respond to incentives."
| guerrilla wrote:
| Which isn't really even economics but just psychology or even
| biology...
| Hammershaft wrote:
| > And how many economists pretend that expanding the money
| supply doesn't increase inflation?
|
| A live demonstration of the Dunning-Kruger effect in action.
| The effect of change in money supply on overall inflation is
| mediated by the velocity of that money. If the money supply
| were doubled but banks & consumers sat on the cash, stowing it
| under their mattresses, then there's no inflationary pressure
| on products to be had. Conversely, if an asteroid were to
| strike us in a year, then regardless of if the money supply was
| shrinking, if people were spending their life savings in days
| then inflationary pressure would skyrocket.
| MichaelDickens wrote:
| This list [1] shows answers from the IGM Economic Experts Panel
| polls where economists agree most strongly. There are lots of
| questions where economists show a consensus or near-consensus.
| You could consider those to be solved problem.
|
| [1]
| https://github.com/Aransentin/IGMscrape/blob/master/results....
| dr_dshiv wrote:
| Modern economics seems to treat all spending as valuable; there
| is no distinction between money spent on bridges vs Netflix vs
| education. Am I wrong about that? How to know the value add of a
| fiscal policy?
| ChadNauseam wrote:
| Knowing the value add of fiscal policy, but economics does
| understand the difference between spending on bridges vs
| netflix vs education - spending on netflix only benefits
| netflix and the person doing the spending, while spending on a
| bridge benefits everyone who uses the bridge as well as
| everyone who benefits from people being able to use the bridge
| (for example businesses on one side of the bridge who benefit
| from people being able to drive from the other side and visit
| their business).
| yowlish wrote:
| In the national accounts [0] spending on bridges shows up as
| investment, while Netflix is consumption
|
| Keynes' book _General Theory_ breaks down GDP into components,
| of which consumption and investment are two
|
| Dynamic choices about consumption vs investment are at the core
| of macro models. In analysis of long term trends, the Solow
| growth model admits analysis of national savings rates. In the
| analysis of shorter term fluctuations, DSGE models explicitly
| address the household intertemporal consumption-savings
| question, seen in the Euler equation
|
| [0] https://en.m.wikipedia.org/wiki/National_accounts
| marcosdumay wrote:
| Yes, you are wrong about that.
|
| Modern economics isn't unanimous about this.
|
| Most theories will clearly distinguish a bridge from Netflix.
| And even that "valuable" word is problematic, modern economics
| thinks about events and consequences, while "valuable" is a
| subjective take on the consequences, that is outside of the
| subject (and are almost always mixed anyway).
| oa335 wrote:
| One open problem not listed, probably under the "Financial
| Economics" heading: the closed end fund premium discount puzzle,
| referenced her
| https://scholar.harvard.edu/files/shleifer/files/investorsen...
| paulpauper wrote:
| _Equity premium puzzle: The equity premium puzzle is thought to
| be one of the most important outstanding questions in
| neoclassical economics.[6] It is founded on the basis that over
| the last one hundred years or so the average real return to
| stocks in the US has been substantially higher than that of
| bonds. The puzzle lies in explaining the causes behind this
| equity premium. While there are a number of different theories
| regarding the puzzle, there still exists no definitive agreement
| on its cause.[7]_
|
| So solved in this context means consensus, not as in something
| mathematically rigorous. I think this is the problem with a lot
| of these unsolved problems. When I think of something being
| solved, it means that it absolves doubts.
|
| _Improved Black-Scholes and binomial options pricing models: The
| Black-Scholes model and the more general binomial options pricing
| models are a collection of equations that seek to model and price
| equity and call options. While the models are widely used, they
| have many significant limitations.[11] Chief among them are the
| model 's inability to account for historical market movements[12]
| and their frequent overpricing of options, with the overpricing
| increasing with the time to maturity.[13] The development of a
| model that can properly account for the pricing of call options
| on an asset with stochastic volatility is considered an open
| problem in financial economics.[citation needed]_
|
| This is already done. There are a plethora of models to account
| for everything. It's not an open problem. It's just messy
| mathematically and does not have the elegant solution like the
| Black Scholes option pricing model does.
| Der_Einzige wrote:
| Notably, there is no reference to one of the heavy-hitters:
|
| https://en.wikipedia.org/wiki/Efficient-market_hypothesis
| orthecreedence wrote:
| Missing "externalities."
| dwighttk wrote:
| What is money?
| mrfusion wrote:
| The more interesting question would be what problems has
| economics solved?
| danielmarkbruce wrote:
| If you add "Macro", then yeah, valid question.
| martincolorado wrote:
| Roth and Shapely won the 2012 Nobel Prize for theoretic work
| that helped match donors with patients in need of organ
| transplants: https://www.npr.org/sections/health-
| shots/2015/06/11/4122248...
| Mikeb85 wrote:
| Ask any bank or mega-corp who hires economists for 7 figures
| what problems they solve... Up-thread it was pointed out that
| Amazon hires many economists.
| kolbe wrote:
| I can't speak for Amazon, but in finance, employers are much
| more interested in the tools that Economists learned in the
| process of getting their degrees than they are in their
| economic forecasts.
| Mikeb85 wrote:
| Well forecasting is a small part of macroeconomics. For
| lots of traders and firms it also doesn't really matter and
| if it does, it would be only one small team of many.
|
| Most of the stuff I learned that I've used in my career is
| related to things like consumer choice, price bundling and
| profit optimization, game theory, stats and econometrics.
| snidane wrote:
| Issues in real estate and land markets stand behind the biggest
| societal problems that the human population is experiencing in
| early 21th century. There is no economical school or theory which
| covers real estate and land markets.
|
| All contemporary economic issues, including the ones mentioned in
| the article, are problems which are easy to describe, not those
| which are important to society (McNamara fallacy).
|
| Economics as a discipline describes an idealized fictional human-
| like colony on Mars, locked in a greenhouse. It doesn't even
| attempt to describe humans living on Earth, so be careful how you
| interpret it.
| colinmhayes wrote:
| > There is no economical school or theory which covers real
| estate and land markets.
|
| You forgot about Georgism
| dash2 wrote:
| >Economics as a discipline describes an idealized fictional
| human-like colony on Mars, locked in a greenhouse. It doesn't
| even attempt to describe humans living on Earth, so be careful
| how you interpret it.
|
| I'm an economist, and this is not remotely true. It's not even
| true for economic theory (international trade, environmental
| economics).
|
| Here are some economic articles about humans on earth:
|
| Case and Deaton's Deaths of Despair paper:
| https://mronline.org/wp-content/uploads/2020/07/15078.full_....
|
| Duflo and Banerjee, _Poor Economics_
|
| Easterly, _The White Man 's Burden_
|
| Autor et al's China Syndrome on the effect of trade with China:
| https://www.nber.org/system/files/working_papers/w18054/w180...
| and their subsequent papers on its effect on social outcomes
| (marriage, divorce, drug overdoses) and political extremism.
|
| The idea that economists don't study real estate markets is
| also absolutely false. Google scholar "real estate economics"
| gives about 2.5 million results. There's the Journal of Urban
| Economics. There's Glaeser's book _Triumph of the City_. Et
| cetera.
| hackernewds wrote:
| I wouldn't categorize this as the biggest, unless you consider
| the US, or even urban/emerging US markets, as encompassing the
| whole world.
| paddy_m wrote:
| There absolutely is a whole area of study of the economics of
| housing and land use.
| https://en.wikipedia.org/wiki/Real_estate_economics . In the US
| we have chosen not to implement any of the recommended
| policies. There are whole blogs dedicated to the interaction
| between economics and the built environment
| https://marketurbanism.com/
|
| My favorite novel policy for addressing land markets is the
| Land Value Tax. https://en.wikipedia.org/wiki/Land_value_tax
| mortenlwk wrote:
| A Land Value Tax of 100%, as part of Henry George's thinking,
| was the foundation of one of the oldest parties in Denmark.
| They had moderate success up until early 80's, and has been
| in government. My family was much involved in this, and I
| think it is a fine example of political influence on economic
| theory. At least here it was caught in between the classical
| political divide, as is not difficult to imagine from having
| as its primary position that "resources created by society
| should belong to society", 100% LVT and 0% tax on everything
| else. Both sides thought of them as opponents, and gradually
| georgist professors disappeared from academia
| hackernewds wrote:
| As prosperous and socialist as they might seem, Denmark
| also has the ugly determination of being #2 in the world's
| inequality index (only behind South Africa). Intentionally
| or not, the policies have had entirely the opposite effect.
| zozbot234 wrote:
| It's nonetheless very high in happiness and life
| satisfaction surveys. Socialism with Scandinavian
| characteristics (including a healthy dose of economic
| freedom and overall openness, as in Denmark) still has
| plenty of things to recommend for it.
| francisofascii wrote:
| So would it be fair to say that land use is a "solved"
| economics problem, we just chose not to implement the proper
| policies that economists generally agree on.
| jdasdf wrote:
| Most economic problems are solved problems. The problem is
| that political priorities impact the actions taken to
| "solve" or even "identify" those problems.
|
| Though in a way, that too is an economic problem...
| Mikeb85 wrote:
| > Dividend puzzle
|
| It's not a puzzle. When investors buy a stock that pays a
| dividend, they're looking mostly at yield. Dividend-yielding
| equities compete with fixed-income securities (bonds), not
| speculative equities. So dividend yielding stocks get bought up
| until the point where the yield is more or less the same as
| fixed-income securities.
|
| > Home bias in trade puzzle:
|
| It's not a mystery; most people are smart enough to know that
| when money stays in the community, everyone benefits. Even if the
| average consumer doesn't know this, enough experts do to push
| 'buy local' schemes. This is all else being equal of course.
| msoad wrote:
| Doesn't "Equity premium puzzle"[0] tells us to barrow money to
| buy equities for infinite profits?
|
| [0] https://en.wikipedia.org/wiki/Equity_premium_puzzle
| elEpHantiaSis wrote:
| I dont understand this problem.
|
| Is it saying that government bonds pay less then the free
| market and then asking why?
|
| Why should that NOT be the case? Governments don't do anything
| productive, so why should there be an equal expected return
| compared to the private sector?
|
| I dont understand this problem.
| guerrilla wrote:
| > Governments don't do anything productive
|
| I don't know what you mean by this. It seems false. All
| states produce many goods and services, primarily security,
| but many others like health care and such.
| elEpHantiaSis wrote:
| I guess I wasn't really thinking outside my bubble, but
| generally around me I don't see much of the government
| getting involved with directly producing marketable goods.
| The government may equip a police force, but it doesn't
| produce the guns or vests or cars directly, and it doesn't
| liquidate its services.
|
| I mean, in general, we don't have to government do jobs
| that would be profitable, but rather the jobs that we
| believe are necessary regardless of profit. Schools don't
| turn any monetary gains, but we believe it's necessary for
| the betterment of our children.
|
| I therefore wouldn't expect the government to be turning
| large gains back afterwords. Feels like underperformance in
| that sense should be expected.
| em500 wrote:
| The puzzle is not that the government should be as
| productive as the private sector. The first part of the
| puzzle is, given that historically equities have returned
| a lot more (5% to 8% annually, compounding in the long
| term), why is there still so much money invested in
| T-Bills (which is what makes their return low and enables
| the US gov to borrow cheaply).
|
| The classical answer is that stocks might return much
| more on average but are also much riskier / more
| volatile. Now the second part of puzzle is, that
| explanation only holds when investors in the aggregate
| are extremely risk-averse, much more so than how they are
| observed to behave in practice (such as in simple betting
| situations).
| pdm55 wrote:
| I'm presently reading, Linda Yeuh, "The Great Economists: How
| Their Ideas Can Help Us Today ". I like reading about economic
| ideas in a historical context, seeing what situations the
| economists were seeking to understand.
| hackernewds wrote:
| And some of these might never be stalled. repeat after me,
| macroeconomics is not a hard science. There is no clear mechanism
| for experiment -> observation -> inference and every single new
| treatment has no previous precedent since conditions are
| changing.
| bsedlm wrote:
| IMO, economics as a science is all about making up theories to
| 'scientifically' (but actually, just academically) justify
| whatever the ruling powers want to do.
|
| In a larger sense, academia and a big chunk of contemporary
| western "culture" is all about coming up with stories,
| narratives, explanations, mindsets (frameworks) to ignore the
| exploitation of humans as a resource for the sake of ill-defined
| (by design) notions of "the group" or "us all" when in fact the
| end result is a big hierarchical pyramid with little room at the
| top which requires lots and lots of desperate people at the
| bottom (by this point, the bottom is entire countries).
| jtolmar wrote:
| I think if you divided economists up into two groups, with A
| including all the economists with popular media platforms or
| who work in government policy, and with B including the rest,
| those stuck in academia writing papers that only other
| economists ever read, then you would find that group A fits
| your quip very nicely, and group B does not.
| engineeringwoke wrote:
| Is it somehow righteous for academics to study self-
| referential things that their offspring then go to study in
| perpetuity? For example, money holes like string theory
| haven't produced any major breakthroughs, and in fact, that
| is by design. Chipping away at the near infinite scope of the
| infinite problem is good for writing papers to get PhDs. It
| is not good for science, or human progress.
| littlestymaar wrote:
| Group B would probably be split in one bigger group that fits
| and another smaller one that doesn't.
| pydry wrote:
| This is because the money and prestige is in academically
| justify the ruling powers and economists are simply rational
| agents engaged in maximizing their personal utility.
|
| There's more money in demonstrating that raising the minimum
| wage destroys jobs than there is in demonstrating that it
| destroys profits.
| AussieWog93 wrote:
| I will never understand why ideas like this - both completely
| detached from reality and actively harmful to the people who
| espouse them - have become so popular on Reddit.
| Enginerrrd wrote:
| guerrilla wrote:
| This comment is just both a personal attack and straw man
| and doesn't address anything in the original comment or the
| topic at hand.
| Enginerrrd wrote:
| I disagree. My comment is about the phrase:
|
| >"In a larger sense, academia and a big chunk of
| contemporary western "culture" is all about coming up
| with stories, narratives, explanations, mindsets
| (frameworks) to ignore the exploitation of humans as a
| resource for the sake of ill-defined (by design) notions
| of "the group" or "us all" when in fact the end result is
| a big hierarchical pyramid with little room at the top
| which requires lots and lots of desperate people at the
| bottom"
|
| This notion that capitalism and gainful employment is all
| some fundamental exploitation of people is really common
| on Reddit. I encounter it all the time. This idea, and
| those which cluster around it, really could be quoted in
| just a slightly rephrased version out of the works of
| Marx and Engels. I noticed this sentiment started really
| picking up around 2016, and I consider it a public duty
| to temper it with the reality check that it is absolutely
| communist in nature.
|
| So... since I'm discussing a general trend on Reddit, I'm
| not sure how you considered it a personal attack. Other
| than perhaps the preconceived notion that "communism=bad"
| and therefore labeling it as such is an "attack"?
|
| I also fail to understand how this is a straw man? The
| comment above me and above that one were both already
| discussing this. Noting that the sentiment is deeply
| connected to communist ideology is I think quite
| relevant. Is it that you consider communism to be an
| easily defeatable and unrelated idea to the one I was
| discussing? Since I think they are in fact VERY related,
| I don't think the straw man applies. And since communism
| has captured the minds of many, many people over last
| century, I don't see how it's easily defeated either.
| kelseyfrog wrote:
| This comment confuses Leninism/Bolshevism with communism.
| The writer would do well to understand the nuances of
| authoritarianism across all flavors of communism before
| making generalizations from specifics.
| Enginerrrd wrote:
| I'm actually familiar with a great many of the communist
| sub-ideologies. I mentioned the Leninist Vanguard for two
| reasons: One, because it is actually a VERY common theme,
| albeit in slightly different and sometimes hidden forms
| in basically ALL versions and flavors of communism. And
| two, because I consider it to be one of the most
| accessible and honestly-defined flavors of this theme.
|
| If instead you're suggesting that Leninism/Bolshevism is
| somehow completely apart from communism, I think that's
| incredibly disingenuous.
| kelseyfrog wrote:
| Thank you. This is a great opportunity to learn how that
| theme applies to basically all versions of Orthodox
| Marxist Communism, Libertarian Marxism, Austro-Marxism,
| Left communism, Ultra-leftism, Autonomism, Western
| Marxism, Eurocommunism, Luxemburgism, Council communism,
| De Leonism, Situationism, Impossibilism, Marxist
| feminism, Marxist humanism, Primitive communism, Anarcho-
| communism, and Communist Bundism, It would seem you have
| your work cut out for you.
| guerrilla wrote:
| > I'm actually familiar with a great many of the
| communist sub-ideologies.
|
| You're really really not.
|
| > One, because it is actually a VERY common theme, albeit
| in slightly different and sometimes hidden forms in
| basically ALL versions and flavors of communism
|
| This isn't even remotely true. Not in social democracy,
| not in democratic socialism, market socialism, Titoism,
| mutualism and especially not in anarcho-communism, the
| most popular form of anarchsim globally. Half of these
| aren't even Marxist let alone "Bolshevik" or "Leninism."
|
| > If instead you're suggesting that Leninism/Bolshevism
| is somehow completely apart from communism, I think
| that's incredibly disingenuous.
|
| I think you're just really ignorant about this topic.
| HWR_14 wrote:
| There are a couple of orthogonal ideas in there, so I don't
| know what you're referring to. That economists isn't a
| science? That most economists are propagandists? That human
| societies tend to form a pyramid?
| [deleted]
| rilezg wrote:
| Could you elaborate? I'm not sure how calling an idea
| 'detached from reality and actively harmful' and then vaguely
| referencing a different social media platform contributes
| anything.
| Workaccount2 wrote:
| greenie_beans wrote:
| this is hackernews
| bryanlarsen wrote:
| This criticism is usually applied to MMT. MMT says that in
| times of inflation you should raise taxes. Nobody is doing
| that.
| RobertoG wrote:
| That's not what MMT says. It says that excessive spending in
| the economy can create inflation. A possible way to
| compensate (not the only one) is to raise taxes.
|
| But it doesn't say that the only cause of inflation is
| excessive spending. That idea is a monetarist fantasy, who
| are able to keep saying that even in the middle of a
| pandemic, with a logistic collapse, an energy crisis and a
| major war. Still, they think that everything will be OK
| raising interest rates and taxes.
|
| Totally crazy. I'm curious to see what they will say if we
| see something a lot worse, deflation, in the next years.
| neilwilson wrote:
| "This criticism is usually applied to MMT. MMT says that in
| times of inflation you should raise taxes. Nobody is doing
| that."
|
| Except that it doesn't say that.
|
| The basics of MMT analysis is that put forward by Warren
| Mosler in Argentina recently. [0]
|
| - Floating exchange rate
|
| - 0% interest rates and no further issuance of public debt
|
| - a guaranteed job for all at a fixed living wage
|
| Taxes are very much secondary in MMT analysis. The
| stabilisation comes from government refraining from giving
| people free money for doing nothing, which is what paying
| interest on debt and reserves represents.
|
| "As Mosler tirelessly repeated in his expositions, the price
| level of an economy, and therefore its level of inflation,
| can only be explained by the price that the State is willing
| to pay for the goods and services it needs to supply itself.
| This especially concerns the price of labour reflected in
| wages, since the origin of all goods and services is socially
| embodied human labour. "
|
| [0]: https://gimms.org.uk/2022/05/16/journey-to-the-heart-of-
| arge...
| bryanlarsen wrote:
| That's Mosler's MMT, there are other MMT proposals which
| are closer to the path taken by the administration.
| Kelton's for example.
| codelorado wrote:
| There is a kernel of truth in there, I'll give you that. It is
| hard to extract social sciences from the zeitgeist.
|
| But let's call a spade a spade: this is just another iteration
| of Marxist epistemological ideas. For Marx, the division
| between the proletariat and the bourgeoisie was much deeper
| than exploitation. Bourgeois had their own unsound systems of
| intertwined knowledge built to benefit their position in
| society.
|
| Not to be flippant, but that's how forced re-education was
| morally justified by socialist regimes of the 20th century.
| sleepdreamy wrote:
| I mean...sort of? You're right about everything...but the way
| you portray it is..not so black and white. Life is quite
| nuanced.
| ypeterholmes wrote:
| Life is certainly nuanced, but complexity is more often
| leveraged to justify corruption than it is the cause of
| failure.
| BurningFrog wrote:
| To me, this kind of thought is mostly equivalent to
| creationists who say Evolution "is just a theory". When
| scientific findings contradict our strongly held beliefs, we
| often choose our beliefs.
|
| That said, it's important to separate Microeconomics and
| Macroeconomics.
|
| Microeconomics is a solid Hard Science which has helped us
| understand many important things. Macroeconomics, OTOH, is a
| very difficult field, in part because the object under study is
| aware of the findings, and adjusts to it.
| __del__ wrote:
| do scientific findings contradict the notion that we are
| using economic theory to "ignore the exploitation of humans
| as a resource for the sake of ill-defined (by design) notions
| of 'the group' or 'us all?'"
| qcumberqr wrote:
| Microeconomics is scientific... in theory!
| rilezg wrote:
| I hard disagree. Economics (of any flavor) is as soft as any
| other social science. The field of economics can be a useful
| lens to help one understand the world and human behavior, but
| it relies too much on human behavior to be consistently
| testable in the same way as 'Hard Science'.
| adamhp wrote:
| > it relies too much on human behavior to be consistently
| testable
|
| Are psychology or sociology hard science?
| lupire wrote:
| Obviously not.
| kolbe wrote:
| I think the term "hard science" is squishy enough to where
| you both can argue in good faith, but have a different
| definition in-mind.
|
| I agree that Econ doesn't quite have the hardness of say
| Physics, but insofar as you can characterize physics as the
| development of models that can meaningfully explain reality
| within reasonable error bounds and feasible energy usage,
| then Microeconomics sometimes does do this as well.
| geysersam wrote:
| Microeconomics is math. But science requires _something more_
| than math. A theory motivating why a certain mathematical
| structure should manifest in reality and describe our
| observations. In the case of economics such a theory would be
| something like "people are rational actor optimizing _some
| quantity_ ". This is however *highly* controversial and many
| of the predictions such a theory makes contradicts
| observation.
| BurningFrog wrote:
| I'm not an Economist, but my impression is that the
| predictions of microeconomics have vast practical
| applications and the cases where they fail are few, but of
| course they get a lot of attention, just like happens in
| Physics or any science.
|
| To be less jargon-y, microeconomics is sometimes called
| "price theory", and in its basic form models prices as
| depending on supply and demand.
| littlestymaar wrote:
| Microeconomics study the interaction of marginal costs
| with the demand curve, too bad that in real life marginal
| cost is undefined (and the demand curve doesn't exist in
| a vacuum).
| pixl97 wrote:
| "People are rational actors at optimizing quantity X,
| unless they are made aware of what quantity X is".
|
| Economics seems to break under Goodhart's Law.
| floathub wrote:
| At the risk of some meta-irony, important to point out
| that Goodhart was an economist.
| rmellow wrote:
| "God was very harsh with economists, as in Economics, the
| atom thinks, speaks and reacts" - Delfim Netto, Brazilian
| economist.
| [deleted]
| littlestymaar wrote:
| > Microeconomics is a solid Hard Science
|
| And what's you opinion on astrology?
|
| FYI microeconomics is the most controversial part of
| economics. Doing advanced math on abismally poor world models
| doesn't make a hard science, especially when none od your
| results are falsifiable...
| m12k wrote:
| The problem is that economics as a field spans from sociology
| and mass-psychology (almost impossible reason about, fully
| quantify or prove anything in a scientific manner) to
| mathematics (easy to reason about, model and publish results -
| but at the risk of not actually modeling the real world). The
| incentives of the academic world nudges researchers toward the
| math side of the field, but the risk in that is that the field
| becomes disconnected from reality.
| ur-whale wrote:
| > the risk in that is that the field becomes disconnected
| from reality
|
| it's not a risk, it's a measurable fact.
| slothtrop wrote:
| What's the measure?
| guerrilla wrote:
| The fact that it doesn't make predictions any more
| reliably than astrology.
| _just7_ wrote:
| That's about as accurate as saying Medicine doesn't make
| any more reliable predictions than astrology
| guerrilla wrote:
| That's about as accurate as saying "nuh-uh."
| initplus wrote:
| Economists cannot predict exactly when market crashes
| will occur. Is volcanology not a real science because
| volcanologists cannot predict the moment a volcano will
| erupt?
|
| In both cases scientific study can help us determine when
| the risk is higher or lower, and can tell us definitively
| when one does occur. But no field that studies stochastic
| processes like markets or volcanic activity can make 100%
| certainty predictions years in advance.
|
| These fields are all dealing with probabilities, asking
| for a yes or no answer is missing the point.
| ur-whale wrote:
| >The fact that it doesn't make predictions any more
| reliably than astrology.
|
| yup.
|
| Physics: apply force F to projectile of mass M and know
| in advance where and when it'll land modulo a tiny error
| margin.
|
| Economics: raise the interest rates by X%, wait unknown
| amount of time Y, observe state of the system after time
| Y, formulate complex theory as to why action led to
| "cause", go write a paper about it. Get wined and dined
| by policy makers who see great benefit in your
| "explanation".
|
| The phenomenon is not new BTW, oracle, druids and shamans
| have occupied that ecological niche for as long as there
| has been tribes and leaders needing to justify their
| actions to the masses.
|
| They just changed their names in the 20th century to
| sound more respectable.
| slothtrop wrote:
| Were it reduced to "predictions". It isn't. And people
| take for granted a lot of popular concepts borne of the
| study as though it was always known. E.g. the
| relationship between interest rates & exchange rates,
| supply and demand, etc.
| guerrilla wrote:
| Any "science" that can't reliably make reliably make
| predictions isn't a science. That's the litmus test.
| slothtrop wrote:
| You've just eliminated all social sciences, by your
| metric of "reliably".
|
| edit: your take-away from this should be that you're mis-
| defining science.
|
| edit2: you all forgot that medical and nutritional
| science has a reproducibility crisis, it's no less
| "science" for it. Add to the fact, the notion that
| nothing is reproducible in Economics is false. See for
| example: https://www.caltech.edu/about/news/famous-
| economics-experime... ,
| https://www.science.org/doi/10.1126/science.aaf0918
| guerrilla wrote:
| Absolutely.
|
| > edit: your take-away from this should be that you're
| mis-defining science.
|
| No thanks.
| ur-whale wrote:
| > You've just eliminated all social sciences
|
| Because they're indeed not sciences.
|
| They call themselves that to attract funding.
|
| Predictive power and reproducibility are defining
| characteristics of sciences.
|
| Social "sciences" have neither and therefore aren't
| sciences.
| slothtrop wrote:
| reproducibility has improved over time as well -
| https://pubs.aeaweb.org/doi/pdfplus/10.1257/jel.20171350
| initplus wrote:
| Volcanologists cannot exactly predict when a volcano will
| erupt. Seismologists cannot exactly predict when an
| earthquake will happen. Both can only offer uncertain
| probabilities. But these are definitely both sciences.
| guerrilla wrote:
| They don't have to predict everything, especially things
| that aren't predictable.
| dotopotoro wrote:
| What kind of precision of prediction is required?
| Economics predict some things. For example if you print
| exceedingly a lot moneys, inflation will happen.
|
| At the same time, physicists have problem telling precise
| location and momentum of the atom (at the same time;
| precisely).
|
| (footnote: I love physics more than economics, but world
| is not perfect and sciences are not perfect. Except for
| math maybe https://xkcd.com/435 . Perfection and
| usefulness are not the same)
| greenglass wrote:
| Can you point me to any good quantitative research on
| astrology? Steelman style treatment, preferably. I
| haven't actually looked into astrology with much
| seriousness. I worry that I might be like one of those
| people who dismiss economics because of envy or some
| other weird psychological mechanism. It sounds like you
| might have some information to share?
| [deleted]
| goodpoint wrote:
| > sociology and mass-psychology (almost impossible reason
| about, fully quantify or prove anything in a scientific
| manner)
|
| On the contrary, sociology is way more scientific than
| economics in building probabilistic models of social
| behaviors. Such models are quantitative and testable.
|
| Economics is opinion based by design.
| bobcostas55 wrote:
| This is complete nonsense, economics is by far the
| strongest social science field in terms of empirical
| methodology. Pretty much all the modern causal inference
| methods were developed in econometrics. Try taking a look
| at the big econ journals (like Journal of Political
| Economy, American Economic Review, or Journal of Finance)
| and I assure you you won't find anything resembling
| arbitrary "opinions".
| rilezg wrote:
| Economics may be the most elaborate in manipulating
| mediocre data to support a hypothesis, but it is
| important to remember how incredibly easy it is to be
| wrong or mislead others when using data and complex
| statistical methods.
| qcumberqr wrote:
| Some would beg to differ
| https://larspsyll.wordpress.com/2021/04/06/econometrics-
| a-cr...
| goodpoint wrote:
| There is a simple method to disprove your wild claims
| that comes from system theory.
|
| Regardless of the field, be it economics, cookery or
| mechanical engineering, you can ask a pool of experts:
|
| - How can I solve problem X? What will happen if I do
| nothing?
|
| - How confident are you that the solution will be
| effective or the prediction will be accurate?
|
| The problem X is the input and then you compare
| predictions and real outputs.
|
| There is abundant literature on the effectiveness of
| economical models and the ability to make prediction and
| the outcomes are clear:
|
| - Economists systematically overestimate their ability to
| make predictions
|
| - There is not even a single economical theory.
| Economists have different schools of thought that are
| incompatible with each other (!)
|
| There are countless examples of economists failing to
| predict the future or having wildly different opinions.
| slothtrop wrote:
| > There is not even a single economical theory
|
| This applies to all social science.
|
| > There are countless examples of economists failing to
| predict the future or having wildly different opinions.
|
| This applies to all social science.
| goodpoint wrote:
| That's a sweeping generalization, but ignoring that and
| assuming it's true: so what?
| slothtrop wrote:
| Your argument on sociology hinges on that not being true.
| pixl97 wrote:
| Right, can science accurately model the 3 body problem?
| Or turbulent flows in fluids?
|
| I guess science is a failure then, better give it up.
| dotopotoro wrote:
| Nice example.
|
| Economics almost by definition can not make good
| predictions wanted by the public, because as soon you
| figure out precise model "a" of the economy, the economy
| takes the model "a" into account and mutates to model
| "b".
| stevenwoo wrote:
| Have you read Kim Stanley Robinson? This could be a paraphrase
| of "Anyway that's a large part of what economics is - people
| arbitrarily, or as a matter of taste, assigning numerical
| values to non-numerical things. And then pretending that they
| haven't just made the numbers up, which they have. Economics is
| like astrology in that sense, except that economics serves to
| justify the current power structure, and so it has a lot of
| fervent believers among the powerful." from Red Mars.
| ramblenode wrote:
| > IMO, economics as a science is all about making up theories
| to 'scientifically' (but actually, just academically) justify
| whatever the ruling powers want to do.
|
| I see this with macroeconomics, but economics is still a fairly
| broad field. Microeconomics has the spherical cow problem but
| econometrics has many useful applications, as does game theory.
|
| A piece of evidence to your point is who quant firms hire: a
| lot more physics and math PhDs than economists. You would think
| someone who studies the science of the economy would be good at
| making money, but the real economy doesn't seem to care as much
| about those theories.
| guerrilla wrote:
| Yeah, I think it's mostly that, but also as I just commented in
| another thread:
|
| > economics is a psuedoscience like all social sciences and
| astrology. They've predicted absolutely nothing of value. It's
| just people studying these things prior to them becoming
| scientific, like people did with alchemy and whatnot before
| chemistry.
| Aunche wrote:
| This is absurd. Economists devote their lives to academics,
| just to serve their former colleagues who are thousands of
| times richer than them? If you actually paid attention to real
| policy and the sort of policies economists actually want, you'd
| notice a huge disconnect.
| ramblenode wrote:
| I don't think the possible irrationality of the situation
| refutes OP's point. Historically there are plenty of people
| happy to serve more powerful people for a small slice of
| privilege, especially when that privilege is backed by
| ideology or religion. Why were sharecroppers fighting the
| Confederacy's war? Why do employees feel loyalty toward their
| company for the free snacks? People's motivations are not
| economically rational.
| Kranar wrote:
| This is absurd. Naturopaths devote their lives to health and
| medicine, just to serve their former colleagues who are
| hundreds of times richer than them? If you actually paid
| attention to _real_ policy and the sort of practices
| naturopaths actually want, you 'd notice a huge disconnect.
|
| ...
|
| A lot of people practice things that they feel genuine and
| sincere about and they can even build entire institutions
| around those practices... doesn't mean anything if what
| they're doing doesn't have a measurably positive impact and
| there doesn't need to be any malice involved whatsoever. If
| anything, the people I know who believe in homeopathy are
| among the nicest and most honest people who deeply care about
| health, and yet... they are still full of crap.
| Aunche wrote:
| OP is accusing economists of being pawns of the ruling
| class, which indicates a severe lack of understanding of
| the field. If your argument against naturopathy is a
| conspiracy theory about how naturopaths serving the wishes
| of the elite rather than scientific studies that debunk it,
| you also deserve to be ridiculed.
| Kranar wrote:
| You're suggesting that there is some coordinated and
| intentional scheme by the ruling class to use economists
| as a way to serve them, my whole point is that there need
| not be any such conspiracy or intentional malice for this
| to occur by any party.
|
| It could simply be an emergent phenomenon where
| economists whose opinions align with the ruling class get
| more exposure and more prestigious appointments than
| those whose opinions disagree with them, or even worse
| disparage them.
|
| I am reminded of a TV news reporter/presenter who took
| offense to the idea presented to them that they are
| spreading political propaganda in service of the elites
| and flippantly asked something along the lines "Do you
| think I am self-censoring myself in service to the elite
| class, like I'm just a pawn taking a paycheck to say
| whatever the elite want me to say?" and the response to
| that question was "You most likely believe everything you
| say and are honest about your position, but if believed
| something different you wouldn't be sitting where you
| are."
| Aunche wrote:
| >You're suggesting that there is some coordinated and
| intentional scheme by the ruling class to use economists
| as a way to serve them
|
| I wasn't suggesting that. OP did. Nothing I said suggests
| that economics is an incorruptible field. The problem is
| that a disproportionate demand for economists comes from
| people with an agenda. We all know that lobbying exists.
| When politicians get most of their knowledge about
| economics from these lobbyists rather than from less
| biased sources, of course it will seem like the field is
| more broken than it actually is.
| captainbland wrote:
| I think there is a potential issue with funding/sponsorship
| bias leaking into the consensus of the field, as there is
| with any field. It's just that economics has ramifications
| for very core government policy in a way that most other
| fields don't.
|
| I agree that economists as individuals are working
| competently and in earnest, it's just that certain economists
| will find it harder to get funding than others and that could
| manifest as bias with potentially wide reaching implications.
| HWR_14 wrote:
| There is definitely a subset of economists who are hacks who
| advocate positions because they want to help some group and
| not because they think they are true, just as there were
| doctors who said smoking was fine.
| bena wrote:
| The problem with economics is that every problem becomes a
| wicked problem. You just can't test your theories in a
| controlled manner. And everything has confounding factors.
| ur-whale wrote:
| > The problem with economics is that every problem becomes a
| wicked problem. You just can't test your theories in a
| controlled manner. And everything has confounding factors.
|
| Or, to put it simply: economics is not a scientific
| discipline for any generally accepted definition of the term.
| tomrod wrote:
| Esther Duflo won the Nobel prize for implementations of
| randomized controlled trials in a very non-wicked way.
| Experimental economics is a mature and active field.
| bena wrote:
| "Wicked" doesn't mean bad, it means there are inherent
| difficulties in testing and implementation.
|
| The Nobel Memorial Prize for Economics is what it is. Both
| Hayek and Friedman both won it, even though they have very
| different ideas about how the economy should be run. As did
| Paul Krugman. Yet I've seen no one mention his Nobel prize
| when it comes time to criticize him.
|
| Even looking at what her study that won her the Nobel
| showed:
|
| "Banerjee, Duflo and their co-authors concluded that
| students appeared to learn nothing from additional days at
| school. Neither did spending on textbooks seem to boost
| learning, even though the schools in Kenya lacked many
| essential inputs. Moreover, in the Indian context Banerjee
| and Duflo intended to study, many children appeared to
| learn little: in results from field tests in the city of
| Vadodara fewer than one in five third-grade students could
| correctly answer first-grade curriculum math test
| questions."
|
| You can only get those results by implementing the
| solution. You can only know it doesn't work by trying it
| and seeing it doesn't work. That's part of what makes the
| problem wicked.
|
| And unlike one of the people who responded who wanted to
| use my statement as support for saying economics is not a
| "real science". What it really means, is that this shit is
| hard because it is incredibly hard to conduct experiments
| in ways that don't irreparably harm some group.
| guerrilla wrote:
| Yeah, exactly, so it's not science at all and is of no value
| other than for what the OP said.
| [deleted]
| Enginerrrd wrote:
| This type of thinking is exactly what led to mass starvation in
| the Soviet economy.
|
| It turns out, markets are really good at figuring a LOT of that
| out. Planned economies are probably computationally infeasible
| even with vastly simplifying assumptions.
| [deleted]
| confidantlake wrote:
| There was mass starvation in Russia under the Czars too.
| stevenally wrote:
| Markets existed long before "Economics".
|
| The Soviets had economists too. They just had different
| dodgey theories.
| q-big wrote:
| > This type of thinking is exactly what led to mass
| starvation in the Soviet economy.
|
| In this case, the problem was _indeed_ that Soviet
| "scientists" - as bsedlm postulates - "were making up
| theories to 'scientifically' (but actually, just
| academically) justify whatever the ruling powers want to do"
| - in this case lysenkoism:
|
| > https://en.wikipedia.org/wiki/Lysenkoism
| brodouevencode wrote:
| Tangent here: how do arbitrary, mass decisions differ when
| they are done independently versus when they are done in the
| open? Looking at this from the perspective of 'mob rule'
| which frequently makes very bad decisions.
| Enginerrrd wrote:
| Because markets are actually making a LOT of different
| decisions with incredible granularity and specificity
| across time and many other metrics. This is essentially
| computationally infeasible to do in a centralized way even
| if you make many simplifying assumptions.
|
| It can go wrong of course! But there essentially is no
| alternative that is even close to working.
| dash2 wrote:
| When I see comments like this I just want to ask: could you do
| us a favour and name and explain a single economic theory?
|
| Let's start with the basics. In economics, what is "utility"?
| lupire wrote:
| Can you define utility? It's an unsolved problem in
| economics.
| LudwigNagasena wrote:
| What? It isn't even a problem in economics.
| carapace wrote:
| I'm not the person you're responding to, but I hold the
| opinion that economics isn't a science, that it's akin to
| numerology, and that it's social role is that of modern-day
| court astrologers.
|
| > In economics, what is "utility"?
|
| First result (using https://andisearch.com/ ):
|
| https://www.investopedia.com/terms/u/utility.asp
|
| > Utility is a term in economics that refers to the total
| satisfaction received from consuming a good or service.
| Economic theories based on rational choice usually assume
| that consumers will strive to maximize their utility. The
| economic utility of a good or service is important to
| understand, because it directly influences the demand, and
| therefore price, of that good or service. In practice, a
| consumer's utility is impossible to measure and quantify.
| However, some economists believe that they can indirectly
| estimate what is the utility for an economic good or service
| by employing various models.
|
| Circular definition, "impossible to measure", "indirectly
| estimate", "various models"...
|
| Sounds like mumbo-jumbo with math to me.
|
| "Utility" isn't a scalar value, or a vector, or even a
| matrix. It's got to be a higher-order tensor or some even
| more exotic mathematical object, eh?
|
| > I remember my friend Johnny von Neumann used to say, "With
| four parameters I can fit an elephant, and with five I can
| make him wiggle his trunk."
|
| ~Fermi
| dash2 wrote:
| So to sum up, you don't know what utility is, you've looked
| it up on _investopedia_ , and on the basis of a web page,
| and your own entirely mistaken imagination of what the
| maths might be, you're gonna pontificate? I think you're
| proving my point!
| carapace wrote:
| > you don't know what utility is
|
| I don't think anyone does.
|
| > you've looked it up on investopedia, and on the basis
| of a web page
|
| Is that definition wrong? Can you provide a better
| definition or link?
|
| > your own entirely mistaken imagination of what the
| maths might be
|
| But I do know what math is, eh? And I know how to use it
| to do things like design electronic circuits that work
| "like it says on the tin". Do economists have anything
| like Ohm's law? Can you describe the math? Does it makes
| predictions? How can it make predictions when there are
| no empirical ways to measure e.g. the "utility"?
| dash2 wrote:
| Sure. Utility is a way of representing preferences. A
| utility function goes from the choice set X to the real
| number line. A preference relation, in turn, is a binary
| relation on X satisfying completeness and transitivity.
| Utility function u represents preference relation >> if
| and only if u(x) > u(y) iff x >> y.
|
| Yes, utility makes predictions, because preference
| relations make predictions. See the Weak Axiom of
| Revealed Preference and its cousins. If I see you
| choosing oranges over apples, and then the price of
| apples falls and you still choose oranges, we have
| learned that you strictly preferred oranges at the old
| price. More generally, some patterns of choices are
| rationalizable by a preference ordering. Others aren't.
| So a claim about someone's preference ordering has
| empirical content. (It sounds as if you imagine measuring
| utility as something that might need a brain scanner. We
| haven't thought that way since about World War II.)
|
| This is all Econ 101 (at a bit higher level than a first
| year undergrad). I don't expect you to know it. I _do_
| expect you to know it if you intend to pontificate about
| it. Similarly, I know nothing about Ohm 's Law, and for
| this reason, I avoid making broad pronouncements about
| the invalidity of all of physics. I find this basic
| commitment to intellectual humility helpful.
| carapace wrote:
| First, thanks for putting your math where your mouth is,
| but I'm sorry to admit that I just hear "spherical cow in
| a vacuum" in what you describe. I mean it, I really do
| appreciate you trying, but what you're describing sounds
| ridiculous to me.
|
| Sorry for relying on investopedia again but, uh:
|
| > Weak Axiom of Revealed Preference (WARP): This axiom
| states that given incomes and prices, if one product or
| service is purchased instead of another, then, as
| consumers, we will always make the same choice. The weak
| axiom also states that if we buy one particular product,
| then we will never buy a different product or brand
| unless it is cheaper, offers increased convenience, or is
| of better quality (i.e. unless it provides more
| benefits). As consumers, we will buy what we prefer and
| our choices will be consistent, so suggests the weak
| axiom.
|
| https://www.investopedia.com/terms/r/revealed-
| preference.asp
|
| The word "axiom" is inappropriate here. This isn't
| science, it's a "just so" story. It's cereal box
| psychology. It's an attempt to dress up in big kids'
| clothes and I've got no respect for it.
|
| > It sounds as if you imagine measuring utility as
| something that might need a brain scanner. We haven't
| thought that way since about World War II.
|
| That's a shame, disdaining the source of real data. Of
| course brain scanners weren't that good back then, eh?
| But you don't need them. Pupil dilation, changes in pulse
| and respiration, capillary response, there are all sorts
| of signals that let you see "inside" the brain w/o fancy
| technology.
|
| > I do expect you to know it if you intend to pontificate
| about it.
|
| First, I'm not pontificating, I'm decrying. Second, I
| don't need to know details about the nature of the BS, I
| can tell from the smell alone. Economics is in the same
| epistemological boat as Numerology and Astrology. Just as
| I don't need to study those in depth to know they're BS,
| I don't need to know much about economics to see that
| it's barren and, frankly, ridiculous.
|
| > I know nothing about Ohm's Law
|
| You might want to learn. Not only would learning
| electrical engineering give you a great working example
| of how to use math to reason about real world phenomenon,
| and unlike economics you can actually use it reliably to
| build useful devices.
|
| > I find this basic commitment to intellectual humility
| helpful.
|
| It would have been most welcome and helpful a couple of
| comments ago.
|
| - - - -
|
| See, the thing about Ohm's law is you don't have to take
| my word for it, or anyone's, not even Ohm's. You can
| build the circuit, apply the meter, and measure it for
| yourself. Humility or arrogance doesn't enter into it.
|
| The problem isn't that economists want to study the
| economy and are doing it badly, the problem is that they
| want to be treated as if they are physicists, and we want
| to treat them that way because of politics and
| psychology. And even that's isn't a problem until we make
| mistakes and our blind following of the not-physicists'
| "science" prevents us from stopping or fixing the errors.
| Next thing you know, the Aral Sea is gone!
|
| https://en.wikipedia.org/wiki/Aral_Sea
| engineeringwoke wrote:
| I studied economics. Everything except basic micro is
| nonsense. Intermediate micro is just calculus with silly
| variables. All the macro we studied was based on like
| fifty years of data, that of course showed the amazing
| power of economic theory, that everything compounds
| forever! Wow, what incredible achievements us humans have
| made. Pat on the back for us!
| jackcosgrove wrote:
| Looking at problems like the Backus-Kehoe-Kydland puzzle and the
| PPP Puzzle I see a reliance on the concept of shocks. If these
| shocks are treated as exogenous factors, that's a bit
| disappointing. Hopefully one day economics can be advanced enough
| to do away with the concept of exogeneity barring sunlight and
| asteroids.
| huitzitziltzin wrote:
| Actual economics professor here.
|
| This is a partial list. Any specialist in any subfield of the
| discipline could list a large set of open problems. Nearly all
| have broader significance.
|
| In my own specialty (industrial organization) unsolved problems
| which would be of interest to readers here include optimal
| regulation of platforms and two-sided markets. Theory and
| empirics are difficult, so regulators are to some extent fumbling
| in the dark a bit. It is not at all clear how to regulate (for
| example) Amazon's offering its own versions of products sold on
| its marketplace OR what the right tariff Apple should charge for
| access to the App Store is.
|
| Extremely confident claims that such behavior is permissible or
| should be forbidden are likely unsupported by any careful
| analysis one way or the other.
| lisper wrote:
| Out of curiosity, how does one even begin to address such a
| question? Because it seems to me that the answer turns entirely
| on your choice of a quality metric, which is entirely
| subjective. If you are a consumer, you would come up with one
| answer, and if you are a shareholder you would come up with a
| different one. On what principled basis could one possibly
| resolve this?
| huitzitziltzin wrote:
| Theory and data.
|
| Both are hard, especially in the cases I listed.
|
| With a good theory of (e.g.) platforms, you could likely
| identify a few different fundamental forces which may push in
| different directions. Hypothetical example: force X would
| benefit the platform at the expense of sellers, force Y would
| benefit the sellers at the expense of the platform. A priori
| it may not be possible in theory to put a magnitude on those
| effects: there may be nothing that would say "we can show
| that X > Y in every case."
|
| This is where you need data. (This part is especially hard
| for platform markets!) You would need data on the platform
| side AND on the consumer side AND on the supplier side. You
| write down a model of (generally) consumer demand, supplier
| response and platform behavior (at least - probably taking a
| somewhat simplified approach to at least one of those sets of
| agents). With your estimates, you would try to answer the "Is
| X > Y?" question posed above.
|
| You can also simulate the impacts of counterfactual policies,
| among other things.
| lisper wrote:
| Thanks!
| rvba wrote:
| The "fair" way to do it is allocation of costs per value of
| sales AND zero access to data by market owner.
|
| So everyone pays the same charge for IT costs AND market does
| not have an unfair advantage.
| tomrod wrote:
| Not the OP. Designing a policy for minimization of dead
| weight loss in the economy (typically centered around
| consumer surplus), with preferential properties including
| time stability, enforceability, and fairness across
| implementees.
| lisper wrote:
| But "dead weight", "fairness", and the desirability of time
| stability (weighed against other considerations) are all
| judgement calls.
| colinmhayes wrote:
| Deadweight loss is not a judgement call, it's an actual
| calculable amount, effectively the loss of productivity
| due to the tax.
| https://en.wikipedia.org/wiki/Deadweight_loss
| lisper wrote:
| The first sentence in the article is: "Deadweight loss
| ... is a measure of lost economic efficiency when the
| socially optimal quantity of a good or a service is not
| produced."
|
| But there is no link for "socially optimal", and the
| phrase appears nowhere else in the article, so this
| definition is incomplete at best and vacuous at worst
| because its meaning turns entirely on the meaning of
| "socially optimal" but I can't think of any reasonable
| way to define it that is not a judgement call.
| colinmhayes wrote:
| You are right, wikipedia is not a great source for
| economics. I just reached for it first because it's
| generally decent for most things. You can find a great
| definition in https://bankicollege.ac.in/wp-
| content/uploads/2020/12/Princi... but simply it's
| difference between the surplus before and after an
| intervention. Obviously minimizing deadweight loss isn't
| our end goal, it's just one measure we can use to compare
| interventions.
| Hermitian909 wrote:
| While not an economist, I've read enough economic papers
| that I actually agree with Wikipedia's definition. You
| can "plug-in" values to your dead weight loss calculation
| depending on judgement calls. For example, do you
| consider the fact that the carbon footprint of an object
| is ignored a subsidy? If so, your dead weight loss
| calculation changes. Suddenly you're trying to discount
| cash flow against the future cost of carbon removal and
| things are _very_ complicated.
| arethuza wrote:
| Maybe its just the way things are described on Wikipedia,
| but isn't there an almost complete lack of citing any
| experiments or empirical evidence on that page?
| kelseyfrog wrote:
| Wikipedia is a very difficult way to learn economics. In
| many ways it's like trying to learn mathematics or
| physics from an encyclopedia. The encyclopedic approach
| is - pedagogically speaking - sub-optimal.
| arethuza wrote:
| But if I look at the page for "friction" it has tables of
| actual values and many references to practical
| experiments?
|
| NB I was just comparing the writing style of that page
| (which seemed a bit odd to me) with other examples.
|
| https://en.wikipedia.org/wiki/Friction
| colinmhayes wrote:
| I'm not sure what you mean. Deadweight loss is
| tautological. Maybe you're asking for evidence that taxes
| distort markets? If you accept that as true it's easy to
| see that deadweight loss is just the difference in
| surplus before and after the tax. Every econ paper on tax
| policy will try to measure the deadweight loss of the
| intervention.
| arethuza wrote:
| I guess I just find it weird to have a page on Wikipedia
| about a quantity with no mention of what that quantity
| has ever been measured to be?
| Frost1x wrote:
| So in this context, how does one calculate what's
| "socially optimal?"
|
| The problem I have with much of economic theory is that
| it tries to tie things back to what's beneficial or not
| to societies and tries to do so through a very thick
| utilitarian lens. There's often a heavy amount of fairly
| sophisticated math, statistics, and modeling parading as
| certainty when the fact is, there's a very high amount of
| uncertainty in many assumptions and in variety of
| economic theories that are just hand-waved away. It's not
| to say the problems economists face are simple, they're
| actually incredibly challenging and I think it's good
| economist continue to push for a better understanding of
| these systems.
|
| My gripe arises when economists masquerade or imply
| current theory with certainty when in many cases, as if
| it were a mature science. It simply isn't and far too
| many use the appearance of certainty hidden in complexity
| of theory as certainty to push a biased personal agenda
| or perspective. When you overload terms like efficiency,
| efficiency in what context? Efficient for whom and
| through what perspective of the world? Very clear
| definitions need to be made so I don't question the
| motives of the attempt of quantification and can look at
| flaws and oversights that may exist in such metrics.
|
| Most economic theory lacks real empirical evidence
| because it's just to difficult to play the experiments
| and interplay of micro, meso, and macroscale systems at a
| global scale without actually running the experiment
| (changing policies).
| pixl97 wrote:
| Eh, it's difficult to blame economists, or any other type
| of scientist here. They all deal with improbability and
| uncertainty.
|
| It's the politicians and voting public that are the
| problem.
|
| It's easy to get massive numbers of people to vote for
| you by giving out is completely wrong as long as you're
| extremely confident in your presentation of it. It's easy
| for these political winners to drive the economic systems
| to collapse while increasing authoritarianism by said
| false confidence. People want to vote uncertainty away,
| authoritarianism is one way of doing that.
| marcosdumay wrote:
| If you go look at the theories, you will find that
| economics uses a lot of those overloaded terms, but they
| have perfectly reasonable objective meanings for them
| that are different from the popular subjective meaning.
| lisper wrote:
| OK, but it doesn't help to answer a question posed by a
| layman using overloaded terms of art without defining
| them, or at least providing references, or at least
| _pointing out_ that the words you are using do not mean
| what they mean in common usage.
|
| So where do I find these definitions? Because I am still
| highly skeptical that they can be defined in ways that do
| not conceal hidden judgement calls.
| vkou wrote:
| If we applied that same standard when talking about
| programming here, we would never get past talking eli5
| semantics and definitions.
|
| You can be skeptical, but the cure for that skepticism is
| something more akin to taking an undergrad course, or
| two.
| tomrod wrote:
| No, they really aren't.
|
| - Lacking time stability means no one tomorrow has any
| incentive to stick to the policy, and means the policy is
| unlikely to succeed in its objectives.
|
| - Deadweight is lost efficiency
|
| - The only arguable one is "fairness", and to clarify I
| blunted the term to avoid the nuance of explaining Pareto
| optimality. But sure, we can also consider egalitarianism
| and other moral frameworks.
| ttfkam wrote:
| Many industries got rid of deadweight only to find during
| the pandemic they and their industry had lost resilience
| when circumstances changed (which they always do).
|
| See: CPUs and GPUs in 2020-2021, baby formula in 2022,
| etc.
|
| It can absolutely be a judgment call.
| wbsss4412 wrote:
| Deadweight loss refers to a net reduction in
| consumer+producer surplus within the economy.
|
| It has nothing to do with the everyday meaning of the
| term "deadweight".
| ttfkam wrote:
| TIL
| colinmhayes wrote:
| deadweight loss has a specific meaning in economics.
| ttfkam wrote:
| TIL
| lisper wrote:
| > - Lacking time stability means no one tomorrow has any
| incentive to stick to the policy, and means the policy is
| unlikely to succeed in its objectives.
|
| That's true, but time stability means that a bad policy
| is going to be maintained even in the face of evidence
| that it is bad. Deciding which is worse is, as I said, a
| judgement call.
|
| > Deadweight is lost efficiency
|
| The flip side of increased efficiency is decreased
| resilience. Without unused capacity (i.e. inefficiency)
| the slightest contingency will send the entire system
| into chaos. How much inefficiency you want to maintain as
| a hedge against contingencies is a judgement call.
| Different people have different risk postures.
|
| > Pareto optimality
|
| I think it's safe to assume that people on HN understand
| Pareto optimality (or are capable of looking it up). Do
| you really think that Pareto optimality is synonymous
| with "fairness"?
|
| > we can also consider egalitarianism and other moral
| frameworks.
|
| Of course we can consider these things. But that doesn't
| answer my question, which is _how_ do we address them in
| a _principled_ way that doesn 't degenerate into a
| political dispute?
| SnowHill9902 wrote:
| You say "optimal" and "right" nonchalantly. Under what ethical
| framework are you trying to solve these "problems"?
| lol1lol wrote:
| What would be a good place for a beginner to start working on a
| problem related to IO economics of platforms?
|
| I've studied MITx Microeconomics course. It appears undergrad
| level Micro course, and a background in machine learning and
| software engineering.
| huitzitziltzin wrote:
| It's a hard field b/c there is not that much introductory /
| accessible material.
|
| There is a recent book by Belleflamme and Peitz, which should
| some day be followed up by a second volume about regulation.
|
| There is also a recent survey of the empirics by Marc Rysman
| and two coauthors.
| fallingfrog wrote:
| I have a couple questions, from the point of view as an
| outsider, I see there being three big problems with economics
| at least the way it is popularly understood:
|
| 1) many of the assumptions in economics are culturally specific
|
| 2) many of the models in economics, while self consistent and
| plausible, have not been adequately tested with real world data
|
| 3) economic models don't seem to take constraints into account
| leading to absurd results like infinite growth
|
| Within the field, are any of those three seen as important
| problems? Thank you
| huitzitziltzin wrote:
| >1) many of the assumptions in economics are culturally
| specific
|
| Which ones and maybe I can comment. I don't think this is
| true.
|
| > 2) many of the models in economics, while self consistent
| and plausible, have not been adequately tested with real
| world data
|
| This is everything that we do. The entire field is all about
| data and has been for probably 30 years (more actually, but
| we can point to an improvement in our own standards in the
| mid-1980's).
|
| > 3) economic models don't seem to take constraints into
| account leading to absurd results like infinite growth
|
| A very basic definition of economics in undergrad classes is
| "the theory of optimizing behavior subject to constraints" so
| constraints are very much our bread and butter.
|
| Separately I don't think most (or any) macro economists (or
| growth guys) would say "yeah my model gives _great_
| predictions for what the situation will be 1,000 years in the
| future ". Even 50 years in the future is pushing it.
|
| >> at least the way it is popularly understood
|
| This may be your problem. The understanding of the field you
| find from commenters on this website is a million miles from
| what it is really about.
| UmbertoNoEco wrote:
| ben_w wrote:
| > It is not at all clear how to regulate (for example) Amazon's
| offering its own versions of products sold on its marketplace
|
| I'm glad people like you are at least thinking about it. I have
| no insights (different degree), but I was wondering about that
| exact thing a few months ago.
| rfreytag wrote:
| I posted the Wikipedia article hoping you and others like you
| would fill out what is an obviously incomplete list.
| Der_Einzige wrote:
| If you mean filling it out _on wikipedia_ they will have
| little to no hope unless they are accepted by the wikipedia
| editorial politiburo.
| daanlo wrote:
| This is weird. I have made edits with a new account on
| articles and they were accepted. Not very significant
| articles, maybe.
| paulpauper wrote:
| It's the same thing with stack overflow/exchange, in which
| good questions and answers not uncommonly get downvoted and
| or removed. I think there is an epidemic of petty academic
| tyrants. These are people who are objectively quite smart
| but maybe not as accomplished as they wished or hoped so
| they take out their frustrations on others in the only way
| they can have control in a world in which they are
| otherwise irrelevant and powerless. Universities , graduate
| departments churn out so many students relative to the
| supply of good paying jobs annually that not everyone will
| be able to achieve their idealization of career success.
| What I do know: the TED talk stuff will not work on these
| people.
| gzer0 wrote:
| I have tried adding edits, many that I thought would have
| been beneficial as being part of that particular industry /
| having intimate knowledge of a topic; only to be rejected by
| some moderator that could not bother to understand the topic.
|
| It's infuriating. I've stopped trying to contribute.
| zeruch wrote:
| "It's infuriating. I've stopped trying to contribute."
|
| You aren't the only one (albeit in my case, for more
| mundane/esoteric topics)
| paulpauper wrote:
| _I have tried adding edits, many that I thought would have
| been beneficial as being part of that particular industry /
| having intimate knowledge of a topic; only to be rejected
| by some moderator that could not bother to understand the
| topic._
|
| yup this is a common problem with Wikipedia.
| moralestapia wrote:
| >This is a list of some of the major unsolved problems,
| puzzles, or questions in economics.
|
| The opening line.
| lupire wrote:
| I suspect that "Solved Problems in Economics" would be a
| shorter list.
| greggsy wrote:
| A lot of these seem like systems thinking problems, rather than
| pure economics. Tackling it across multiple perspectives might
| not even result in a satisfactory answer for any party, but it
| can _improve_ the situation.
| tomrod wrote:
| Now I'm inordinately curious how many other economics PhDs and
| professors visit here, between your comment and Amazon's hiring
| under Pat Bajari.
| jriot wrote:
| Finished my masters in economics. Went on to do my PhD in
| economics but dropped by the end of the first semester.
| Realized it was going to be too much with a young family at
| the time.
| em500 wrote:
| PhD economics/econometrics, ex-research economist, turned
| machine learning engineer. In my personal experience the
| mathiness in both fields are comparable, but pay-to-effort
| ratio was much better in machine learning.
| gmac wrote:
| One additional data point: I'm approximately an associate
| professor of economics in North American terms. Also curious
| how many of us there are here. As it happens, one of my
| colleagues was recently hired by Amazon (quite nearly
| appending an extra zero to their salary in the process).
| bachmeier wrote:
| Amazon is the second largest employer of economists, behind
| only the Fed: https://www.cnn.com/2019/03/13/tech/amazon-
| economists/index....
|
| I've talked to several big names that have told me about
| megaoffers from Amazon. (They probably don't care if people
| know, since they told me, but I'm not going to name them.)
| lukas099 wrote:
| What does an Amazon economist do?
| huitzitziltzin wrote:
| They hire in three buckets:
|
| - Time series forecasting.
|
| - Reduced-form causal inference
|
| - Structural, especially what is called "structural IO".
|
| Among the questions people in the last category will
| answer are: how should we price this product? How should
| we decide which new markets to enter?
| pkofod wrote:
| Econ PhD here! Also IO.
| huitzitziltzin wrote:
| Please chime in if you think anything that I said is wrong.
| bachmeier wrote:
| Quite a few, but the benefit of participating in discussions
| about economics on HN is less than the opportunity cost. As
| economics is heavily computational, HN is as natural a fit
| for an economics PhD as a CS PhD.
| dash2 wrote:
| Checking in. I did my PhD in polisci, but invaded.
| maxwell wrote:
| https://twitter.com/_scaryh/status/804647101149966336
| Leader2light wrote:
| jdasdf wrote:
| Most of these aren't really unsolved problems though, many have
| clear explanations, or are simply based on false assumptions
| (like the dividend puzzle).
|
| Sure, some of them are difficult to have clear empirical answers
| and quantification of the effect impact due to huge amounts of
| confounding variables, but that doesn't mean the explanation
| isn't clear and obvious.
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