[HN Gopher] What to read to understand how economists think
___________________________________________________________________
What to read to understand how economists think
Author : helsinkiandrew
Score : 148 points
Date : 2022-08-27 12:57 UTC (10 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| paulpauper wrote:
| Regarding Freakonomics:
|
| _Some of the studies discussed in it have been called into
| question. But the overall lesson is a useful one: incentives
| matter._
|
| This seems inherently contradictory. How can we draw lessons or
| inferences if the data is wrong or not what it purports to be?
| gtvwill wrote:
| Lol it's because most folks mistake economics for a science
| when it's actually just a grouping of mostly wrong hypothesis.
| They'll believe any shit their fed.
| kwhitefoot wrote:
| > Economics has a reputation as a dry, heartless subject, full of
| boring equations.
|
| Not if you have any training in a hard science: then you think of
| economics as something largely devoid of equations and made up of
| lots of ad-hoc regression analysis and hand waving. This might
| not be the fault of the economists but of the difficulty of the
| subject matter of course. But economists really should learn to
| accompany their predictions with error bars as every
| undergraduate physicist must.
| nequo wrote:
| > But economists really should learn to accompany their
| predictions with error bars
|
| Virtually all published papers in economics that use regression
| analysis which you mention include "error bars." The discipline
| calls these standard errors and confidence intervals. If a
| paper is non-parametrically estimating functions rather than
| single parameters, they might also report confidence bands.[1]
|
| Standard errors may be calculated analytically (resting mostly
| on asymptotic theory) or numerically (using a bootstrap
| estimator for them). There is a large literature on the
| appropriate standard errors for various contexts, with
| clustered errors being mainstream in applications.[2][3] These
| are taken seriously in peer review, and published papers come
| with long lists of robustness checks which turn papers into
| book-length publications when you include the appendices.
|
| [1] https://cattaneo.princeton.edu/papers/Cattaneo-Crump-
| Farrell... is one example.
|
| [2] See https://economics.mit.edu/files/13927 for a recent
| discussion.
|
| [3] See
| https://gregoryeady.com/ResearchMethodsCourse/assets/reading...
| for bootstrap-based methods.
| kwhitefoot wrote:
| I stand corrected. Thank you.
| Gimpei wrote:
| Before you lay into an entire academic discipline, it would
| help to understand it a little better. Fine if you're just
| bagging on DSGE models, since they really are garbage (although
| I would argue that it is because of all the equations
| involved). But the vast majority of economics is concerned with
| causal analysis where there are no predictions. And everybody
| reports standard errors and has for decades.
| imtringued wrote:
| Economists have "hard science" models but those are empirically
| unreliable.
|
| Honestly the boring answer is that e.g. liquidity is the
| ability to change your mind instantly, which also means that
| any prediction can become invalid at any given moment.
|
| If you want to increase predictability, you would have to
| encourage people to make decisions as soon as possible and
| stick with those decisions for as long as possible.
| erdos4d wrote:
| This. The subject is definitely not the rigorous science that
| its practitioners would like you to believe. They mostly just
| fit some sort of regression model and analyze it, but rarely is
| there any serious work to demonstrate that reality actually
| obeys the model. I understand that proving the real world
| actually conforms to theory is very hard, but that is what
| makes science what it is, and why science is really hard.
| nequo wrote:
| Out of curiosity, could you give a few examples of published
| papers that uncritically reported regression estimates?
| erdos4d wrote:
| No I don't want to read through that crap anymore, I had
| enough in grad school helping econ friends. What I'm
| talking about is that they always make a bunch of
| simplifying assumptions about the world and then fit their
| model and analyze. But what they almost never do is
| seriously justify the assumptions. One popular paper is to
| do "Assuming the world follows theory X, we propose this
| tweaked version of model Y from paper Z and show how it
| better predicts this dataset of 600 points from the world
| bank." I knew numerous people in grad school who played
| that game. There is no way the tiny little dataset they had
| could justify any of this, but that's what publishes in
| econ. And if you ask them about this, they will tell you
| that they only had this tiny little dataset because that's
| all that is publicly available and so on. That's fair, but
| also gives them a huge dodge to hide behind. That's what I
| saw of the field and I came away thinking that it stank.
| fezfight wrote:
| As a mechanical engineer (not a hard science), economics has
| always looked more like history than science. As in, you can
| build models to show what happened, but not what will happen.
|
| Edit: I think Ive had my mind changed enough in this thread to
| edit this. It's obviously a very deep subject and I've been
| convinced it has predictive qualities. I definitely dont think
| of dry equations though, more like psychology, and politics.
| But I'm looking forward to learning about it and possibly
| having my mind changed yet further.
| ChadNauseam wrote:
| Econ is great at predicting the future. Let's say your uncle
| tells you about his new stock trading strategy that's
| guaranteed to make him 10% returns per month. Will he be rich
| two years from now? Econ's efficient market hypothesis
| predicts he will not.
|
| Or let's say the president of Japan announces a plan to beat
| deflation once and for all. He says that next year, he'll
| fire their central bankers and hires the ones from Venezuela,
| give them a 100% annual inflation target, and promise them
| millions of USD in bonuses if they meet or exceed that
| target.
|
| Even though this plan is going into effect next year, what
| will you see the next day? (Assuming people believe the
| president is serious.) Econ predicts you will start seeing
| inflation immediately. And we see effects like these all the
| time when looking at how the actions of central bankers
| effects the economy - if Powell says he's going to change
| interest rates, there's a reaction in the markets when he
| makes the announcement and not one when he makes the actual
| change.
| tsimionescu wrote:
| These are not predictions, they are assumptions. The
| difference being they are in no way quantifiable. Econ has
| lots of equations, but it can't actually predict anything
| beyond some broad directions like you show, and even those
| are sometimes wrong.
|
| There was even a story (no idea if true, so maybe of
| limited relevance...) of a reverse bank run happening in
| Japan, with people rushing to deposit money to save a
| failing bank.
| fezfight wrote:
| So a bit of psychology in there, eh? Pretty neat field, if
| you ask me.
| thfuran wrote:
| >Let's say your uncle tells you about his new stock trading
| strategy that's guaranteed to make him 10% returns per
| month. Will he be rich two years from now?
|
| That depends on whether the stock he bought was GME.
| colinmhayes wrote:
| There's a big difference between micro and macro. Macro is
| basically predictions as you say because in the end it's
| largely underpinned by market expectations which are not
| always rational. Micro on the other hand looks at the choices
| of individuals, which are by definition at least somewhat
| rational. Individuals will always make the choice that they
| believe will maximize their utility, so the whole thing is
| really just equations whose derivative you set equal to 0 in
| order to maximize/minimize.
| JumpCrisscross wrote:
| > _which are by definition at least somewhat rational_
|
| Or can be demonstrably arbitraged to take advantage of the
| irrationality in a tangible, quantifiable and repeatable
| way. Put-call parity, substitution, _et cetera_.
| influxmoment wrote:
| "error bars" are only relevant if you have a reliable model and
| theory. Economists buying into their own models of humans is
| the problem
| neverrroot wrote:
| The economist acts as a pretty good contrarian indicator. What
| would really help is look at some of the bigs, compare them with
| each other, follow them over time, see who was right and who
| wasn't, and come too your own conclusion. Bonus: chat or follow
| some old school, based interest rates traders, see what they have
| to say. Compare them to economists. Then look into the Eurodollar
| system, and be prepared for a shock.
| boppo1 wrote:
| >chat or follow some old school, based interest rates traders
|
| How do you find someone like this?
|
| >look into the Eurodollar system
|
| Suggestions for a first foray? Too much financial conspiracy
| stuff out there.
| nullnein wrote:
| Made an account only to suggest checking out Perry Mehrling's
| work. He has a Coursera course for free which will change the
| way you look at economics entirely.
|
| I've studied economics and political economy for years and
| never seemed to be able to tansfer the micro/macro models to
| the real world. Perry's work doesn't have to be transferred
| b/c they come from the world of banking in the first place.
|
| Perry is best consumed in lectures. Here one on Eurodollar
| [1].
|
| [1]: https://m.youtube.com/watch?v=tUi-xTmOCUE
| immigrantheart wrote:
| Isn't this the same as whether a fund manager can do well in
| one year and bad in another? I.e just randomness?
| t_mann wrote:
| > Ignore the fact that Friedman was ultra-libertarian.
|
| Strongly disagree. Imho, the core of economists' (especially
| macroeconomists like Friedman) thinking is what they _think_ or
| _feel_ the world should be like. Anything, the math, the smart
| reasoning about cost-benefit analysis, trade-offs, equilibria,...
| takes a backseat to ideology. It 's what separates them from the
| natural sciences, from which they borrowed many formalisms
| (mainly 19th century flavours), and the reason why they have
| 'schools' of thought (essentially different formalisms preferred
| by different groups because they result in recommendations that
| suit their ideologies).
|
| In full fairness, I see a few exceptions to that rule, mainly in
| subdisciplines that economics shares with other disciplines, eg
| game theory (CS, math), statistics and some areas of finance
| (which are essentially physics/math).
| albertop wrote:
| How to Think about the Economy: A Primer [0] - is a great
| starting point.
|
| [0] - https://mises.org/library/how-think-about-economy-primer
| neilv wrote:
| I went there to see how economists think... and they showed me a
| big tracking consent form that doesn't label the toggle buttons
| for whether I'm opting-in or opting-out.
| dtgriscom wrote:
| Back in the early '80s I took course in regulation from one of
| the leading experts in railway regulation. She was great, and the
| main idea I took away from it is "don't regulate if the market
| will naturally fix itself." So, the big question when deciding
| whether some issue needs to be controlled through regulation is
| whether the market will function well without regulation. (In
| most of the examples she gave, it would.)
| pessimizer wrote:
| > the big question when deciding whether some issue needs to be
| controlled through regulation is whether the market will
| function well without regulation.
|
| All markets are regulated. Markets are defined by their
| regulation. You're talking about the calculation one should do
| when deciding when some market needs to be _more or
| differently_ regulated.
| senttoschool wrote:
| This is taught in any Economics 101 class in college.
|
| Government regulation = market inefficiency
| andrekandre wrote:
| > Government regulation = market inefficiency
|
| there are many causes of inefficiency, such as too many
| middlemen, monopolies, oligopolies, cartels etc...
| culi wrote:
| Who was she?
| pupperino wrote:
| Most disciplines evolved in the last 40 years (looking at you
| psychiatry), but economics has changed rather drastically.
| Methods for testing theory back then were Bad. Like, really
| bad. Ed Leamer's 1983 paper on this
| (http://www.econ.ucla.edu/workingpapers/wp239.pdf) is a good
| read if you want the details. Beginning in the late 80s, there
| was a movement toward study design and credible identification.
| Software like Stata (and nowadays there's R, julia and python)
| started lowering the costs of doing data-intensive work. The
| 90s and 00s are full of really interesting papers pushing the
| frontier on what could be done do gather evidence of causality:
| Angrist and Lavy in 1999 using Maimonedes Rules and RDDs to
| estimate class-size effects, Hoxby 2000 using rivers and county
| borders as exogenous variation on public school competition,
| Acemoglu, Johnson & Robinson 2001 using colonizer death rates
| to estimate long-term effects of colonization. The discipline
| has evolved and so has our understanding of minimum wages
| (https://academic.oup.com/qje/article/134/3/1405/5484905), gun
| violence (https://www.nber.org/papers/w23510) and nation-
| building (https://scholar.harvard.edu/files/dell/files/paper_co
| mbined....). Pretty sure Railway Economics has changed too.
| lock-the-spock wrote:
| That misses about 95% of reality. To mention just one key
| factor: without government intervention you end up usually with
| a monopoly or oligopoly.
|
| Not to mention safety standards, labour protection, quality and
| warranty, ...
|
| Without regulations and often intervention all goes to pieces.
|
| to directly counter your argument: no railroad ever developed
| without government intervention and at least funding,
| guarantees and land grants.
| Bloating wrote:
| natural monopolies are short-term, unless propped up by
| government
|
| being propped up includes excessive copyright protections
|
| At one time, Walmart and Microsoft were considered by some to
| be "natural monopolies".
| rufus_foreman wrote:
| >> At one time, Walmart and Microsoft were considered by
| some to be "natural monopolies".
|
| Natural monopoly:
|
| "A natural monopoly is a monopoly in an industry in which
| high infrastructural costs and other barriers to entry
| relative to the size of the market give the largest
| supplier in an industry, often the first supplier in a
| market, an overwhelming advantage over potential
| competitors"
|
| Newspaper headline, 1962:
|
| "Can Tiny Wal-Mart Survive Against the Big Guys?"
|
| Obviously, by Betteridge's law of headlines, Wal-Mart does
| not exist. Which is correct, since it is Walmart now.
|
| (The Big Guys were Woolco, Kmart and Target. There are 21
| Kmarts left in the US. I have no idea what Woolco was. Oh
| OK, looked it up, Woolworths.)
| xyzzyz wrote:
| You seem to have noticed the part where the parent comment
| says "don't regulate", but missed the part where it says "if
| the market will naturally fix itself". Please, read it again,
| so that you can respond to what it actually says, instead of
| what your imagined version of it says.
| darksaints wrote:
| You could just as easily say that government causes 95% of
| monopolies. Regulatory compliance is almost universally a
| fixed cost to a business, and large fixed cost structures are
| the defining characteristic of a natural monopoly market.
| That's also the reason why small public IPOs disappeared
| after Sarbox...small corporations can't handle the cost of
| regulatory compliance.
|
| Regulation can prevent monopolies, but it can just as easily
| enable them. And lack of regulation can allow monopolies to
| form, but they can also allow markets to commoditize. Quality
| of regulation will always matter more than quantity.
| rufus_foreman wrote:
| Unless you are claiming that there are no issues that don't
| need government regulations, I don't see how your argument
| contradicts the parent post.
| kylevedder wrote:
| >without government intervention you end up usually with a
| monopoly or oligopoly.
|
| I would love to hear your explanation of how government
| intervention is the only thing preventing a monopoly or
| oligopoly of plumbers, electricians, pet groomers, or halal
| carts.
| baq wrote:
| no explanation needed, just look at medieval history where
| guilds had de facto monopolies on certain services or
| manufacturing and if you wanted to be independent... tough
| luck.
| JumpCrisscross wrote:
| > _where guilds had de facto monopolies on certain
| services or manufacturing and if you wanted to be
| independent... tough luck_
|
| This conflates too many historical threads to support the
| hypothesis. The guild era was one where most countries
| required official consent to start a business of any
| kind. That's how the guilds enforced their monopoly.
| seibelj wrote:
| Can you name an example of a monopoly that has developed in
| the last 50 years that didn't occur because of crony
| capitalism?
| simonh wrote:
| It very much depends what we agree monopoly means. Did
| Microsoft Windows have a monopoly on consumer desktop
| operating systems? Arguably Apple only survived because
| Microsoft bailed them out in 1997 to avoid being accused of
| having a monopoly. Does Google have a monopoly on search?
|
| Tech naturally tends towards monopolies because almost
| everyone benefits from using the same tech as everyone else
| they know. The same messaging system, the same operating
| system running the same applications that use the same file
| formats.
|
| As for crony capitalism as a source of monopolies, sure of
| course that can happen, but if we look away from capitalism
| basically the only other alternative anyone has come up
| with is pure unadulterated cronyism. Communism, socialism,
| they all end up being pure cronyist monopoly systems. At
| least with capitalism you have an outside chance of getting
| away from that.
| baq wrote:
| > 50 years
|
| The three main U.S. antitrust statutes are the Sherman Act
| of 1890, the Clayton Act of 1914, and the Federal Trade
| Commission Act of 1914.
|
| so yeah, you won't find many, because the regulation works.
| nautilius wrote:
| lock-the-spock explicitly writes about _reality_ , and
| within the real system we have, monopolies develop.
| nickff wrote:
| The problem is that it's difficult to distinguish whether
| the government caused the oligopoly, or is mitigating its
| (often deleterious) impacts.
| avgcorrection wrote:
| And if the market doesn't manage to regulate something just put
| those things in the Externalities bin.
| Animats wrote:
| Ah, that was pre-deregulation in the US. Now we know what
| happens with de-regulation. At first, there are lots of new
| entrants in the industry. Gradually, the new entrants go bust
| or consolidate. The industry reduces to an unregulated
| oligopoly with four or less major players.
|
| Examples:
|
| - Wireline telephony. (AT&T, Verizon)
|
| - Cellular telephony. (AT&T, Verizon, T-Mobile)
|
| - Cable TV (Comcast, Charter, AT&T).
|
| - Banks. (Bank of America, Citigroup, Chase, and maybe Wells
| Fargo)
|
| - Package delivery (FedEx and UPS, plus USPS).
|
| - Airlines (United, American, Southwest, and Delta)
|
| Price competition seems to disappear at 3 or less direct
| competitors, from an EU study.
| userabchn wrote:
| A corporate tax rate that increases with revenue would
| naturally disincentivize such monopolies/oligopolies (by
| making it easier for small companies to compete against them)
| without requiring the government micromanagement of deciding
| what is and what isn't a monopoly.
| [deleted]
| omreaderhn wrote:
| These are some of the most regulated industries in the US.
| darksaints wrote:
| However, the brewing and trucking industries have done the
| exact opposite. Maybe your model is broken.
|
| De-regulation is a misnomer, and using it as a pejorative
| shows ignorance as to how regulation really works. Quality
| will always matter way more than quantity.
| Animats wrote:
| Brewing:
|
| * Anheuser-Busch InBev - 45% of US beer market
|
| * MillerCoors - 25% of US beer market
|
| Trucking:
|
| The big ones are FedEx and UPS, who of course dominate
| small package delivery.
|
| For big loads, the big players are XPO Logistics and J. B.
| Hunt. Everybody else is considerably smaller. Full-
| truckload shipping has distance cost and is simpler than
| package delivery, so the network effects are not as strong
| and there's room for local and regional players.
|
| [1] https://blog.bizvibe.com/blog/largest-trucking-
| companies
| darksaints wrote:
| That isn't monopolization. There are over 8000 active
| microbreweries in the US, and they haven't been put out
| of business by Anheuser Busch. In fact, Anheuser Busch
| has been scared of their growth for decades now. In 1979,
| when the wave of beer de-regulation started, there were
| only 90 breweries in the entire US.
|
| There are almost 1M independent public-carrier trucking
| companies in the US. There are some 300,000 independent
| owner operators.
|
| Your model is broken. De-regulation doesn't inevitably
| cause monopolization, there is something else that does
| that. In fact, you already alluded to it: network
| effects. Along with high fixed costs (which overly
| aggressive regulation _contributes to_ ), they're one of
| the defining features of a natural monopoly.
| As_You_Wish wrote:
| Correct.
|
| Which is why breaking apart companies that form monopolies is
| so important. Break up Facebook. Break up Amazon. Break up
| the Warner Bros Discovery merger that just happened (why was
| that allowed in the first place?).
|
| Monopolies are the one major failing of capitalism. Busting
| up monopolies is an important function of government.
| Unfortunately, all our congress is now bribed (they _call_ it
| lobbying and PACs) and work for the monopolies or
| oligopolies. So that 's how Warner Bros Discovery has
| happened to create this huge news and media organization. In
| any merger, I like to see who the new CEOs are and get a
| sense of them. David Zaslav is the new CEO. If you haven't
| seen David Zaslav, the new CEO, speak, here is a little video
| of him good little speech:
| https://www.youtube.com/watch?v=0i0v5GVZ30o
|
| Because our US congress is being bribed, a main solution to
| monopolies is term limits. About 90-95% of representatives
| are re-elected to Congress year after year. And about 80-85%
| of the Senate. For example, Diane Feinstein has been a
| California Senator for 30 years, and I am almost convinced
| that they have put an android in her and there's just a thin
| coating of her skin over it. Why is this happening...why
| don't we have term limits?
|
| Maybe 6 years for both, then the politician is OUT.
| [deleted]
| rufus_foreman wrote:
| >> Banks. (Bank of America, Citigroup, Chase, and maybe Wells
| Fargo)
|
| This one is a pretty bad example. If I want to avoid
| Spectrum, I don't get cable. If I want to avoid FedEx and
| UPS, I don't get to order things online.
|
| If I wan't to avoid Bank of America, Citigroup, Chase, and
| Wells Fargo (which I do, particularly that last one), I bank
| at a credit union.
|
| But yeah, it's fun to imagine what it would be like to live
| in a world where any company with more than 4% market share
| gets broken up as a monopoly.
| classified wrote:
| ... and the internet overlords, like Google and Facebook.
| Animats wrote:
| Those were never regulated. Industries where the network
| effect is so strong it leads to monopoly used to be rare.
| In the early days of antitrust, only railroads, street
| cars, gas, and electric companies had extremely strong
| network effects. Competition didn't work. So those
| industries were regulated into common carriers or regulated
| utilities.
|
| Today far more industries have strong network effects. But
| that's another topic.
| ianai wrote:
| You really want 100s of competitors. If they're running
| advertisements they're exploiting market power.
| jcampbell1 wrote:
| The EU is different than the US. The EU has country club
| culture of old families that stay off each other's turf. That
| used to be the case in the US where airlines split routes,
| and the cable business is still a mess. Steve Jobs tried to
| pull that shit with programmer salaries. Frankly I have
| little issue with US monopolies as many you list only make a
| 10% margin. I'd rather pay T-Mobile $27 than the $30 I
| currently pay, but I am not all that upset about it. An
| Epipen is $600. That is due to the FDA only approving 1
| device with $0.10 worth of epinephrine, when the EU has 6
| choices all less than $100. Bad government policy can screw
| us. It would be really nice if the US government relaxed the
| regulations on a drug invented in 1910 combined with a
| spring.
|
| I'm not disagreeing with you but I just feel like I am as
| likely to get screwed by regulatory capture as natural
| monopolies. Wild west entrepreneurial capitalism is a decent
| antidote to crony capitalism which thrives with regulation.
|
| MBS, Putin, Biden, Trump, Xi all want power over industry,
| media, and education. I question how much I want a savior
| empowered by the law and a duty to save us from monopolies
| and tycoons. Elon Musk seems to be creating a monopoly on
| space access and he is high on the scale of douchbag, but he
| is unlikely to make my life worse. Even if he controls space.
|
| From a monopolistic standpoint, you have to laugh at Zuck
| getting a Fuck from Chinese TicTok. It may not be good, but
| he isn't cronies with Mr. Zhang.
|
| It is also worth acknowledging that most of the audience here
| has benefited directly or indirectly from the obscene profit
| margins that the US tech scene has created. Complaining about
| monopolies is biting the hand that feeds. Ignore any
| negativity as the choir here gets the rich milk of profit
| margins which have historically only ever been created by
| monopolies.
|
| What makes me laugh is that the US military and US fracking
| means we Americans get the good life and high programmer
| salaries because US tech is immune while Europeans hang their
| laundry outside.
| antegamisou wrote:
| Also look into Capital: A Critique of Political Economy
|
| https://www.amazon.com/Capital-Critique-Political-Economy-Vo...
| unmole wrote:
| Hot take: _Capital_ is not about economics. Reading it will in
| no way help you understand how economists think.
| nilaykumar wrote:
| A cursory look at the table of contents of Volume 1 turns up
| various topics such as:
|
| - the length and regulation of the working day for factory
| workers
|
| - the division of labor
|
| - the economic impacts of increasing automation/mechanization
|
| - wages (the factor payments for labor)
|
| These are all topics that I think reasonably fall under the
| umbrella of economics. Certainly Capital is not a book on
| positive economics. It is, throughout, quite normative, and
| expressly interested in the combination of politics and
| economy.
|
| Reading Capital may not help you understand how modern
| mainstream economists think, but it will definitely get you
| thinking about the same kinds of problems that they deal
| with. For example: how regulations might be used to enforce a
| 40 hour work week. Of course, capitalism has quite outgrown
| Marx's mid-19th century conception of it. It's an old book.
| But I find it difficult to understand how a book critiquing
| the work of the first economists is not a text about
| economics.
| interpenetrate wrote:
| Reading the first chapter alone (in particular the section on
| commodity fetishism) will tell you all you need to know about
| how economists think, because it tells you _why_ economists
| think. This is a domain of inquiry that is necessary for any
| science, but that the economists since Marx have ran from for
| reasons Marx exposed in Capital itself. Notice that the OP
| article doesn 't even try to justify its categories. How do
| economists think? Marx responds very simply: ideologically,
| dogmatically.
| imtringued wrote:
| Sorry but it actually is about economics and it is a pretty
| good description of capitalism but he makes some glaring
| errors about money by assuming that it is just a medium of
| exchange. Making such a grave error means that his proposed
| solutions to end capitalism are doomed to end in failure.
| interpenetrate wrote:
| Marx identifies 5 functions of money in the 3rd chapter of
| Capital Vol 1 called "Money," not to mention the expanded
| treatment of money by Capital Vol 3.
|
| https://www.marxists.org/archive/marx/works/1867-c1/ch03.ht
| m
|
| It's unclear what you think Marx said on "how" to end
| capitalism and how this relates directly to his theory of
| money.
| fennecfoxen wrote:
| To expand on this (and hopefully not mangle your original
| idea), the key feature that makes a capitalist economy
| efficient is the use of a price mechanism to distribute the
| hard problems of decision-making to people who are
| reasonably well-informed and well-incentivized to make good
| decisions. These decisions will benefit society as a whole
| when (A) property rights exist and are enforced, (B) there
| are low barriers to entry, (C) transaction costs are low.
|
| _(There will be failures otherwise. Pollution ends up
| under A, monopolies under B, and a whole host of modern
| stupidities ends up under C -- e.g. just for instance, no
| one at a minimum wage job is going to afford a lawyer to
| negotiate their employment contract: transaction costs are
| too high; the bigcorp employer, by contrast, only has to
| draw up the contract once. Instant structural unfairness
| follows.)_
|
| Orchestrating both information and incentives like this is
| _really really hard_. It 's hard enough at a mid-sized
| project at a mid-sized company, where management spends
| hours and hours hammering on the idea of "alignment". At
| the scale of the global economy it's utterly intractable.
| ClumsyPilot wrote:
| it appears that yout descruption equally applies to
| ancient rome - property rights were neforced, including
| on people. Price mechanism was used.
|
| Was ancient Rome capitalist?
| mushbino wrote:
| You could say the same thing about every other economist at
| the time or even much more recent ones. Things change and
| evolve.
| mushbino wrote:
| Economics is mostly political economy. It's based on ideology
| more than anything moral or actually scientific.
| Neoliberalism has been the dominant theory since
| Keynesianism. It's been an abject failure, but nobody has
| come up with anything to replace it yet.
| unmole wrote:
| > Economics is mostly political economy.
|
| I'm sorry, what? Look at the curriculum for any economics
| degree, look at the winners of the Sveriges Riksbank Prize.
| How much political economy do you see there?
|
| > based on ideology
|
| Krugman and Manikw are on the opposite ends of the
| ideological divide. But the economics textbooks that they
| each wrote will not contradict the other.
| boppo1 wrote:
| How is neoliberalism different from keynesianism? Who was
| the big neoliberal writer/ what is neoliberalism's "general
| theory of interest"
| Bakary wrote:
| Could you please expand on this?
| fennecfoxen wrote:
| Not original poster, but
|
| Economics is about making decisions when your decisions
| have trade-offs because you have limited resources.
| Everything has a price, but the prices aren't always
| measured in a nice money-based price tag for your
| convenience, they're ultimately measured by the next-best
| alternatives. Decisions and policies don't just have
| consequences, they have second-order effects and third-
| order effects and you need to chase those down too, because
| excluding anything makes you understand the costs wrong
| (e.g. add highway lanes to relieve congestion -> now there
| is more traffic, because of "induced demand", not sure that
| was a good idea -> but why was there even induced demand?
| where are those trips coming from and what was the cost of
| the previous configuration? is this a housing-policy thing
| now??). You also learn to worry a lot about how decisions
| are actually made by self-interested decision-makers,
| rather than by abstractions-seeking-the-greater-good, and
| you examine what the decision-makers' incentives are....
|
| Whereas a work like Das Kapital tells you very little about
| how to think this way. It's not intended to; it's more
| about the relative influence of various actors within a
| political-economic system, while raising tough questions
| about the meaning of private property.
| imtringued wrote:
| >Economics is about making decisions when your decisions
| have trade-offs because you have limited resources.
|
| But land isn't limited in the sense that there isn't
| enough of it for everyone, there is a fixed quantity of
| land on this planet but more than enough for everyone.
| Somehow some people got this absurd theory in their head
| that once there is abundance there is no need for
| economic allocation mechanisms. This completely ignores
| that even if there is enough land for everyone, a single
| person may have more land fenced off than he needs for
| himself, meaning that someone else ends up with less land
| than he needs for himself. Despite abundance of land you
| still need to allocate it properly and you still need
| economics to do that but economists shrug and do nothing.
| Artificial scarcity is the new normal.
|
| Since all producable goods tend toward market saturation
| you will have this problem in more and more sectors in
| the economy as your country gets wealthier. In fact the
| problem isn't poverty, the wealthier we gets the worse
| things get.
|
| Why is that the case? Why does the economy fail to allow
| abundance to happen? Why did economists put on a brain
| cage that tells them that scarcity is absolute and that
| if something isn't scarce it should be made scarce?
|
| Reality is quite boring. Assume that there is a floor on
| capital yields meaning the income share in labor can
| never reach 100%.
|
| Since economic activity gets siphoned off into the
| pockets of the owners of capital aka the rich get richer
| and they don't spend their wealth back into the economy,
| the rest of the economy must shrink. A game of musical
| chairs starts. There must be a loser and people will do
| absolutely everything to not end up as the loser. To
| prevent the non rich economy from shrinking and
| shriveling into nothing, we must keep up this farce of
| endless economic growth so that living standards don't
| get worse.
| XorNot wrote:
| > But land isn't limited in the sense that there isn't
| enough of it for everyone, there is a fixed quantity of
| land on this planet but
|
| You have assigned an economic value system and denied
| doing it - that someone can have "enough" land and
| someone else does not have "enough". By who's pricing
| model and oops - guess we're back to plain old economics.
| unmole wrote:
| > But land isn't limited in the sense that there isn't
| enough of it for everyone,
|
| 1. How much land is _enough_ for someone?
|
| 2. Is land fungible?
|
| > economists shrug and do nothing
|
| What exactly do you want economists to do here?
| Redistribute land?
|
| > if something isn't scarce it should be made scarce?
|
| Which economist is advocating for this?
| ClumsyPilot wrote:
| we create scarsity of purpose with NFTs
| culi wrote:
| Well you labeled it a "hot take" so that at least shows you
| understand how absurd this take seems on its face. So what's
| the part I'm missing? Why is this a good take?
| colinmhayes wrote:
| Marx was a political scientist, not an economist. He
| thought about how greed effects decision making and power
| corrupts. He was interested in a political revolution
| because he believed capitalist systems are unable to solve
| market failures. Economics is generally less interested in
| the politics of how to implement solutions and more
| interested in what the optimal solutions are.
| nilaykumar wrote:
| Note: Capital is available to read for free here:
| https://www.marxists.org/archive/marx/works/1867-c1/
|
| The beginning of Capital is quite dense (establishing the basic
| definitions of a study often is, and Marx's dialectical
| approach takes some getting used to if, like me, you never
| could understand Hegel) so I would recommend reading it along
| with David Harvey's lectures available on Youtube. However, the
| book does open up from there and becomes very much more
| concrete: working day lengths in the factory, increasing
| automation of industry, transition from feudalism by
| expropriation of land from farmers, ...
|
| It is of course important to understand the works that Marx was
| critiquing or building on. Smith's Wealth of Nations, for
| example, is available for free from Standard Ebooks
| (https://standardebooks.org/ebooks/adam-smith/the-wealth-
| of-n...). This translation is very readable so I encourage you
| to take a look.
| PheonixPharts wrote:
| As a fairly big (philosophical) Marxist, it's important to
| recognize that Marx is much like the Bayesian Statistics of
| economics.
|
| For me personally, it was Marx that first made _sense_ when I
| read it, very much like Bayesian statistics first made sense to
| me where I found Frequentist stats very confusing.
|
| That said it shares the same problem: If you learn Bayesian
| statistics the Summer before Stats 101 in college, it will
| likely hurt your performance in that class. Likewise, while
| Marx makes a lot of sense, understanding Marx will mean you
| have an even more difficult time communicating with
| mainstream/orthodox economists.
|
| However from a Marxist perspective this is no accident. One of,
| if not the most, important ideas coming out of Marx is the idea
| of _ideology_. The idea is that even our most basic thinking
| and views about the world are formed around the idea of
| maintaining existing social relations in favor of the ruling
| class.
|
| An example of this (my own) is the way that Christianity in
| Medieval Europe quickly evolved into a belief system where the
| natural order involves an all mighty ruler that must not be
| questioned. The idea that the natural order of things involves
| a strict monarchistic hierarchy was fundamental to the Medieval
| European world view. Clearly this is a beneficial world view if
| you are a ruling monarch. You still see the impact of this
| today in the way we tell stories about princesses who, even
| when their identity is either unknown or hidden, are innately
| superior to other around them, or in other narratives where
| justice is satisfied only when the "true king" sits on the
| throne.
|
| Orthodox economics, from a Marxist perspective, is referred to
| as _bourgeois_ economics. That is, at a fundamental
| intellectual level, orthodox economics exists to reaffirm a
| capitalist worldview, in a similar way to medieval theology
| evolves to support monarchistic rule. An example of this is the
| way that the role of labor in the creation of value is fairly
| hidden, the economic inputs and outputs are all framed in a way
| to distract from the very idea that the worker creates value.
|
| Another good example of the difference is the "business cycle"
| vs Marx's crisis theory. In orthodox economics the business
| cycle is a borderline supernatural process that we just accept
| as "how things go". For Marx periodic market crises are because
| Capitialism is filled with unresolvable internal contradictions
| (one example is the incentive for Capitialist to maximize the
| exploitation of the worker while simultaneously depending on
| that worker for the creation of surplus value). Marx spends a
| good chunk of Capital vol III developing this idea. For Marx
| the big concern is that deep contradictions in the foundations
| in the logic of Capitialism will ultimately lead to it's
| collapse.
|
| So while I do recommend nearly everyone read Marx, it will
| likely hurt, not help, you understand mainstream economic
| theories.
| Wolfbeta wrote:
| > So while I do recommend nearly everyone read Marx, it will
| likely hurt, not help, you understand mainstream economic
| theories.
|
| Solved by reading Atlas Shrugged in the interim.
| notahacker wrote:
| Kapital is extremely interesting from the point of view of
| understanding Marx's very singular view of the world, but
| doesn't tell you much about how modern economists think about
| modern economies even from a contrasting perspective since
| neither existed at the time of writing...
| VictorPath wrote:
| For modern topics, read the Monthly Review (
| https://monthlyreview.org ).
|
| This article on the 2008 financial crisis has lots of
| interesting references to government data. Then you can see
| if you reach the same conclusions as the authors.
|
| https://monthlyreview.org/2008/12/01/financial-implosion-
| and...
| fleetwoodsnack wrote:
| "Modern economists" aren't really a thing, at least in the
| sense that a consensus or collective understanding of
| economics is shared by a group denominated as such.
|
| There is vigorous disagreement in the field regarding just
| about everything. The title of the underlying article may
| more appropriately be, "Popular Economics for Non-Academics."
| notahacker wrote:
| There is vigorous disagreement in the field regarding just
| about everything, but some of the few things they agree on
| (and the key fault lines for what they disagree on) didn't
| exist at the time Kapital was written.
| boppo1 wrote:
| What are the few things they agree on?
| mamonster wrote:
| Subjectivism vs Labour theory of value is a pretty easy
| one.
| notahacker wrote:
| Most of Econ 101, as a sibling comment notes, from basic
| approaches (definitions, deductive reasoning from models
| using algebra, testing of models with data) to detail
| (marginalism, "new consensus" macro modelling).
|
| Macroeconomics and econometrics are two major subfields
| which literally didn't exist in Marx's day: economists
| may disagree significantly on conclusions and somewhat
| less significantly on certain assumptions models make,
| but they're focusing on the same variables (interest
| rates matter and fiscal policy somewhat matters,
| inflation is a thing which can be reduced, boosting
| employment and staving of recessions is more difficult)
| and doing similar maths.
| unmole wrote:
| Krugman and Manikw are ideological adversaries. They both
| wrote Macroeconomics textbooks which fully agree with
| each other.
| UmbertoNoEco wrote:
| krugman and mankiw are adversaries in the sense one
| prefers the current world neoliberal order designed for
| the benefit of the us to be led by democrats and the
| other prefers it to be led by republicans
|
| to the average citizen of the world they are
| indistinguishable
| yevpats wrote:
| Milton Friedman - Money and Inflation -
| https://www.youtube.com/watch?v=B_nGEj8wIP0
|
| I think is under rated talk which explains complex stuff in
| layman terms.
| zasdffaa wrote:
| From my non-economics perspective, they seem to have a genius for
| ignoring externalities (CO2 anyone?), that, and anything they
| don't want to consider. I can't have any trust in a
| model/framework that can pick and choose so freely.
| colinmhayes wrote:
| Economists talk constantly about implementing policy that
| neutralizes externalities. Carbon tax and LVT are among the
| most cited policies they want to implement. Economists don't
| write the laws though, and people generally aren't interested
| in paying their externalities so it doesn't happen.
| Bakary wrote:
| Another suggestion in the same vein is _Why Nations Fail: The
| Origins of Power, Prosperity, and Poverty_
| marban wrote:
| Classic: How The Economic Machine Works by Ray Dalio
| https://www.youtube.com/watch?v=PHe0bXAIuk0
| golemotron wrote:
| Any first year Calculus textbook.
| itsthemmrvax wrote:
| Why do we care what economists think?
| erdos4d wrote:
| Its a very political field and whichever little clique gets the
| ear of the decision makers that year determines what policies
| get enacted. I'll grant you that this doesn't matter in
| practical terms, because we all know that the policies will
| benefit the rich, not us, but at least you can get a better
| understanding of how you'll be robbed.
| marcosdumay wrote:
| I'm not sure decision makers listen to economists.
| bombcar wrote:
| They listen to the economists providing justification for
| what they already wanted to do.
| erdos4d wrote:
| They listen to the ones they find useful. I guarantee you
| "trickle down" wasn't Bush's idea, an econ man put those
| words in his head, and it was to provide academic
| justification for giving the rich a big wealth transfer
| from the working class.
| Aunche wrote:
| This is needlessly antagonistic towards economists. The
| majority of them are boring academics. The others are
| employed by the rich to whisper into the ears of politicians
| as you describe. This is precisely why it's important to
| learn economics: so you can vote for economically literate
| politicians who are be better resistant to lobbyists' BS and
| vote against politicians who are clearly trying to favor
| special interest groups.
| leed25d wrote:
| https://www.goodreads.com/author/list/23458.John_Kenneth_Gal...
| treeman79 wrote:
| Hard to get better then Basic Economics by Thomas Sowell.
|
| https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...
| mbg721 wrote:
| Once the 1970s happened and Keynes was accepted, the Revolution
| was over, wasn't it? My macroeconomics courses in the 2000s
| basically said, "Yeah, stagflation happened. How bout that," and
| went back to the G plus E plus I whatever.
| alfiedotwtf wrote:
| > Keynes was accepted
|
| Yes, but for how long.
| mbg721 wrote:
| Until you can get a bullet in your head for questioning him,
| like always.
| culi wrote:
| What are you saying? You know what replaced Keynesian
| economics in the 70s? Monetarism in the vein of Milton
| Friedman
|
| The same Milton Friedman that, along with the rest of the
| Chicago Boys, guided the policies of Augusto Pinochet.
| Generally regarded as one of the most brutal dictators
| South America has ever faced...
| colinmhayes wrote:
| Pinochet's economic policies were regarded as extremely
| successful, basically his turn around of the economy is
| what allowed him to be so brutal to his political
| enemies. Unfortunate, but it's hard for me to say the
| chicago boys actions in Chile can be regarded as failure.
| notahacker wrote:
| What allowed him to be so brutal to his political enemies
| is that he commanded the army. The economic reforms came
| after the coup d'etat and suppression of the opposition
| not before. And they were far from smooth sailing:
| ironically Friedman coined the idea of a "Miracle of
| Chile" in an article at the beginning of 1982, shortly
| before Chile was plunged into a deep recession.
|
| Either way, the comment further upthread ranting about
| Keynes was weird considering that Keynesianism really
| didn't involve shooting people, and whilst the
| ideologically opposed Chicago School policy didn't
| either, it was famously most faithfully implemented by a
| military junta Friedman himself had plenty of time for.
| kgwgk wrote:
| andrekandre wrote:
| > You know who became vegetarian because of his concern
| for animal suffering? Hitler
|
| citation please (like, with non-hearsay evidence)
| kgwgk wrote:
| cjbgkagh wrote:
| It is a brave soul who gets in the way of massive
| government spending.
| culi wrote:
| Do you mean "and Keynes was over"? Keynesian economics got big
| in the 30s and was killed by the stagflation of the 1970s
| culi wrote:
| Not sure why this is being downvoted. This is just well-
| estatblished history. Keynesian economics came out of the
| Great Depression of the 1930s and was the leading economic
| theory until stagflation posed a major theoretical challenge
| for it and monetarism took over instead
| notahacker wrote:
| Strictly speaking it depends what you consider to be
| "Keynesian" economics (But yeah, your comment was a lot
| more accurate than the one it was replying to)
|
| Stagflation killed the Phillips-curve "Keynesianism" which
| emerged after Keynes' death as wasn't actually in the
| _General Theory_ : the idea that inflation was inversely
| proportional to unemployment so you could get rid of the
| latter if you had enough of the former. It didn't kill off
| the more generally useful idea of macroeconomic modelling
| or the assumption government policy could mitigate
| recessions. . Similarly, strict monetarism (the idea that
| the government could easily stabilise things by ensuring
| the money supply was at a certain level) didn't survive the
| realisation the banking system made the money supply flex
| and so the result was interest rates and other monetary
| aggregates bouncing around all over the place , but the
| basic idea that controlling inflation was possible and a
| priority for central banks persisted once governments
| switched to fixing interest rates instead.
| sideshowb wrote:
| Yeah that was a problem with Keynes, sure. Don't mention
| the oil crisis
| Consultant32452 wrote:
| The most important thing to know about the field of economics
| is the only people who get funding are the people who tell the
| public that the government should do whatever it was the
| government wanted to do.
|
| Example: you won't get funding if you go around saying there's
| no such thing as a labor shortage in a market economy, even
| though this is entry level economics. Why would that tank your
| career? Because big business has paid the government to pull
| the right levers to suppress your wages. The solution to a
| labor shortage is higher wages, but that can't be the
| government's response to their donors. Technically you can say
| the truth, but you better not be very loud about it.
| qeternity wrote:
| > in a market economy
|
| > to suppress your wages
|
| Can't really tell where you're going with this. The solution
| to a labor shortage _is_ higher wages. You seem to be
| suggesting that it should be an increase in minimum wage.
|
| In a market economy, you absolutely wouldn't need this if you
| had a labor shortage...the market would resolve on its own.
| But we don't have that. We have an economy where millions are
| paid by the govt to do nothing. This then becomes what
| employers are competing with.
| [deleted]
| folli wrote:
| I don't completely understand.
|
| Wouldn't that just mean that the employers need to compete
| with the government, i.e. raise wages? So than the market
| should resolve this on its own as well?
| makomk wrote:
| "you won't get funding if you go around saying there's no
| such thing as a labor shortage in a market economy, even
| though this is entry level economic"
|
| The Economics 101 answer is clearly wrong or at least
| incomplete in this case. Think about it this way: if people's
| wages increase in real terms by definition this means they
| can buy more with their wages. Producing stuff requires,
| amongst other things, workers. Suppose we're in a situation
| like the current one where unemployment is low and businesses
| across all sectors cannot find enough workers to keep up with
| consumer demand. What happens if they all try and solve this
| by increasing wages across the board? Well, their workers
| have more money to spend so this increases consumer demand
| even more - and remember, the problem we were trying to solve
| was that this was already too high compared to supply. What
| it doesn't do much for is the supply of workers, since
| there's not some big pool of potential workers who could be
| working but aren't. It's not going to encourage people to
| work longer hours either since when would they have time to
| spend the money? Basically, it makes the whole problem worse,
| and that's why the Fed and central banks around the world are
| freaking out right now.
| tsimionescu wrote:
| Your analysis is also very simplistic.
|
| A labor shortage is potentially an opportunity for the
| economy to re-rorient itself and for wealth to be
| redistributed. Companies producing goods that are more in
| demand will afford higher wages, while companies that
| produce less in-demand goods will not, and can ramp-down
| their production or go bankrupt.
|
| To take an extreme hypothetical - let's say there was a
| massive shortage of food workers. As the price of food
| increases, so would the wages for food workers, until they
| will start pulling people from other industries, which can
| no longer offer competitive salaries. This could lead to
| something like ad-tech eventually start losing low-level
| workers to agri-business.
|
| Essentially, the mistake in your argument is to assume that
| demand is high and inflexible around the board. In reality,
| certain industries have higher demand than others, and many
| workers can change industry, even in the short term, if
| incentives are high enough.
|
| However, companies used to cheap labor and high margins are
| not willing to give up their profits and reduce their
| margins, so they are begging the state to find a way to
| force people to keep working for them for nothing.
| makomk wrote:
| I'm pretty sure your example just demonstrates the point
| that I was making originally though. Assume there is a
| massive shortage of food workers, food prices increase
| and the food industry starts pulling people from other
| industries like ad-tech which can no longer offer
| competitive salaries. This implies an aggregate shift in
| spending from discretionary consumer purchases (which are
| what fund ad-tech and the advertising industry) to food.
| In other words, people have on average become poorer:
| they have to spend a larger proportion of their money on
| essentials like food and have less left over for other
| stuff. Which is, of course, just another way of saying
| that people's wages have shrunk in real inflation-
| adjusted terms.
|
| (It's not like the other stuff can jost become cheaper in
| order to make up for it either - remember, all the other
| industries are suffering the same underlying cost
| pressures as the food companies and losing the
| competition for workers with them because there's no
| longer enough people willing to pay the increased prices
| they'd have to charge.)
| pydry wrote:
| This is how the idea that raising the minimum wage would
| cause unemployment came to be and how the fact that (up to a
| fairly high point) it simply eats profits got suppressed.
| Bloating wrote:
| 70's stagflation _UNaccepted_ Keynes
| mattacular wrote:
| Hard pass
| bpierre wrote:
| https://archive.ph/EeAXV
| amelius wrote:
| Is anyone keeping track of how often economists are right versus
| wrong?
| carapace wrote:
| There's really no point. If there are any successful economists
| other than Jim Simons they keep real quiet.
|
| As anonporridge points out in a sib comment (
| https://news.ycombinator.com/item?id=32620572 ) economies are
| too dynamic for a naive economics to work.
| amelius wrote:
| There's something to it. But I don't believe the "type 2"
| dynamics point: if it were the case, then surely there must
| be some fixed-point you can reach if you take into account
| that your predictions become public.
| carapace wrote:
| > there must be some fixed-point you can reach if you take
| into account that your predictions become public.
|
| Yes, in a few different ways I think. You have to make
| predictions or, equivalently, employ strategies that do not
| depend on secrecy.
|
| E.g. "evolutionarily stable strategy" (ESS). A strategy
| that does well in the presence of copies of itself (and
| mutants.) https://en.wikipedia.org/wiki/Evolutionarily_stab
| le_strategy
|
| Any business that does not depend on secrecy could be
| considered an example. (There's an old hippie business book
| "Honest Business: A Superior Strategy for Starting and
| Managing Your Own Business" by Salli Rasberry and Michael
| Phillips
| https://en.wikipedia.org/wiki/Michael_Phillips_(consultant)
| "a founder of the Briarpatch Network. As a banker in 1967
| he organized Mastercard.")
|
| You can e.g. buy a fax machine and encourage other people
| to get them too. The classic network effect: "the
| phenomenon by which the value or utility a user derives
| from a good or service depends on the number of users of
| compatible products. Network effects are typically
| positive, resulting in a given user deriving more value
| from a product as more users join the same network"
| https://en.wikipedia.org/wiki/Network_effect
| Banana699 wrote:
| The closest thing that I know of is Philip Tetlock, he made a
| 20-year-long experiment where he asked a variety of "experts"
| about political events like the fall of the Berlin Wall, and
| recorded the results.
| peteradio wrote:
| The thing about making a prediction is that you don't really
| have much control over your experiment. I would bet that most
| rigorous predictions end up invalidated by some stated or
| obviously implied caveat.
| sieste wrote:
| Among the few econ books I read I most enjoyed Modern Principles
| of Economics[1] by Tyler Cowen.
|
| https://www.goodreads.com/book/show/6659172-modern-principle...
| bannedbybros wrote:
| cf141q5325 wrote:
| When it comes to understanding how the economy (especially
| inflation) works i really like the NPR article about how Brazil
| fixed their inflation. It boils down to inflation being inflation
| expectation.
|
| tldr: They invented a new theoretical currency. All prices were
| each month listed in the actual price in the old currency and the
| price in the new currency (that didnt exist yet). And each month
| the new currency was redefined so that stuff still cost the same
| in the theoretical currency. They did this for a few months till
| they declared inflation fixed and creating the new currency that
| had "proofed" its stability the previous months. And Abrakadabra,
| people believed and inflation was fixed through the introduction
| of the Brazil Real. Obvious when you think about it, its not
| called fiat currency for nothing.
|
| >Say, for example, that milk costs 1 URV. On a given day, 1 URV
| might be worth 10 cruzeiros. A month later, milk would still cost
| 1 URV. But that 1 URV might be worth 20 cruzeiros.
|
| >The idea was that people would start thinking in URVs -- and
| stop expecting prices to always go up.
|
| https://text.npr.org/130329523
| aristus wrote:
| There are only two hard problems in economics: cash
| invalidation an naming things.
| glofish wrote:
| TIL, thanks for the fun read, quite enlightening
| marcosdumay wrote:
| That narrative is highly misleading.
|
| Yes, that happened. But the government also did take the
| finances under control, restructured (literal "changed the
| structure of", not defaulted) its debits, added controls to the
| banking system, restructured the banks, pegged the currency to
| the dollar, made a campaign of price transparency, and a lot of
| other things.
| arexxbifs wrote:
| They also, among other things, raised interest rates and
| taxes, severely cut public expenditure, legally enforced
| balanced budgets and cut tariffs by half. It was a pretty
| thorough plan.
| bombcar wrote:
| "Pegged the currency to the dollar" is probably doing a lot
| of heavy lifting here.
| marcosdumay wrote:
| It's really not. The Brazilian economy is very isolated,
| and was more so at the time.
|
| I believe its impact was similar to the campaigns about
| price transparency. And lower than anything else on my
| list.
| cf141q5325 wrote:
| >But the government also did take the finances under control,
| restructured (literal "changed the structure of", not
| defaulted) its debits, added controls to the banking system,
| restructured the banks, pegged the currency to the dollar,
| made a campaign of price transparency, and a lot of other
| things.
|
| And how much of what you just listed worked the exact same
| way as the new currency trick, through being a frame to
| influence public perception? Thats the important perspective
| i took away from it, that i was thinking about economics
| wrong. In the end the way it works is through crafting
| stories to get the market participants to believe certain
| things. Because that is all the economy is, people and their
| behavior. And if you want to influence behavior, you have to
| influence how people think.
| marcosdumay wrote:
| The educative campaign was also about people's mind. The
| others were very real changes and most people didn't even
| know they were happening.
|
| If you go into your sibling that continued my list, all of
| his items are real, and only the balanced budget was even
| communicated broadly.
|
| Yes, psychological factors are important for an economy,
| but they aren't singularly important. They are not even
| merely more important than the other kinds.
| [deleted]
| fithisux wrote:
| Question: What to read to understand how economists think.
| Answer: Mein Kampf, just replace Jews with Humans (superset of
| the Jews).
| hairofadog wrote:
| One problem I have with economics books is that they tend to end
| with either "and therefore, government spending is bad" or "and
| therefore, government spending is good".
|
| What I'm really after are non-ideological macroeconomics books
| that will help a layperson have a better sense of where the
| economy is headed so I can invest better, not books that would
| help me make better decisions if I were running a country, which
| I'm not.
| rr808 wrote:
| I think investing and economics isn't that well correlated. You
| need some idea of monetary and fiscal policy but as you say
| economics tends to get political quick.
|
| https://www.youtube.com/c/RealVisionFinance is pretty good for
| anything that has the boss Raoul Pal, most other talking heads
| aren't that great.
| gjvc wrote:
| Choose your heroes carefully. Raoul Pal lost his mind (and
| the respect of many) when he became a cryptocurrency shill.
| rr808 wrote:
| Agreed avoid his crypto stuff. I'm just trying to think of
| a popular person to talk about markets and economy that
| isn't a bedroom expert like most of them.
| gjvc wrote:
| There are plenty of professional asset managers with a
| public profile / content.
| rr808 wrote:
| Most of them are boring or technical or not that good. I
| love Hugh Hendry but he's repeating himself all the time
| now. If you have someone you like I'm interested.
| unmole wrote:
| > One problem I have with economics books is that they tend to
| end with either "and therefore, government spending is bad" or
| "and therefore, government spending is good".
|
| Which economics book ends that way? I'm genuinely curious.
| colinmhayes wrote:
| Anything associated with MMT.
| ur-whale wrote:
| > What I'm really after are non-ideological macroeconomics
| books
|
| Not possible by definition.
|
| Economics is about explaining things after the fact, and
| incapable of prediction.
|
| Therefore, it's all ideology (rock fell on my head, must have
| offended god of rocks, only logical explanation).
| anonporridge wrote:
| > Economics is about explaining things after the fact, and
| incapable of prediction.
|
| I would expand on this a bit.
|
| The problem with economics is that it's the study of a type 2
| chaotic system, where predictions about the system themselves
| feedback into the system and change the outcome. Contrasted
| with a type 1 chaotic system, like weather, where predictions
| are extremely difficult but can be made without affecting the
| outcome. Economics is chaotic because conscious actors are
| extremely unpredictable and change their behavior based on
| new information.
|
| This is something you have to bear in mind whenever you hear
| an economist or government official make a prediction. The
| very act of making the prediction public often becomes a self
| defeating prophecy, because masses of people and money make
| changes to their future behavior based on the prediction.
| Also called the Prophet's Dilemma,
| https://en.wikipedia.org/wiki/Self-defeating_prophecy. A
| close relative of the Preparedness Paradox,
| https://en.wikipedia.org/wiki/Preparedness_paradox
|
| This is why some of the best predictions are never made
| public. The best traders don't sell you their strategy.
| Because as soon as their prediction mechanism becomes too
| public, it gets absorbed into the system and arbitraged away
| to worthlessness. That's also why you always must take what
| government officials say with a grain of salt. They're often
| not telling you what they really think is going to happen.
| They're telling you what they think is going to motivate the
| population to behave in the most productive way given the
| current environment.
|
| Making economic predictions is a grand game of "I know that
| you know that I know that you know". It's a game of mass
| manipulation rather than a technical pursuit of simple
| measurement.
|
| It's an art, not a science.
| ur-whale wrote:
| > study of a type 2 chaotic system
|
| The reason it's chaotic is not just because predictions
| about it feed back into it. It is _also_ a weather-type
| chaotic system.
|
| > It's an art, not a science.
|
| That may well be.
|
| However, he question that really matters is : is it useful
| at all?
|
| As demonstrated time and again, this whole legend about
| hidden winning strategies may very well be utter and
| complete BS:
|
| https://www.investopedia.com/articles/investing/030916/buff
| e...
| Gibbon1 wrote:
| It has aspects of weather like behavior. Plus climate
| behavior in that chaotic systems can jump from one
| semistable pattern to another. And then point events.
|
| A virus jumps from bats to humans. Some dictator decides
| for his own internal reasons to start a war. The pace of
| technology isn't predictable or even possible to predict.
|
| Referring to something above. Economics would be a lot
| better if it focused on historical happenings and stopped
| trying to pretend it's a hard science like physics.
| lottin wrote:
| > Economics is about explaining things after the fact, and
| incapable of prediction. > > Therefore, it's all ideology
|
| Can you give us an example of a macro or microeconomic model
| that is incapable of prediction and it's (therefore?) all
| ideology?
|
| I can't think of none off the top of my head.
| mistrial9 wrote:
| unlike physics, and somewhat unlike chemistry, there is no
| direct causal relationship, instead it is systems of
| systems with new, unpredictable events entering into most
| of the them constantly. The time window for a prediction is
| also crucial, because the same set of decisions and rules
| in one era have different results in another era.
| Economists preside over this cacophony with a lot of
| measurements and news items. Occasionally something really
| worthy comes out, but the daily arguing and posturing is
| quite a turkey show, IMHO. Thomas Piketty got a prize
| recently.
| JumpCrisscross wrote:
| > _give us an example of a macro or microeconomic model
| that is incapable of prediction and it 's (therefore?) all
| ideology?_
|
| Generally, the more a theory talks about how the past
| actually happened the more it's ideology than falsifiable
| science.
|
| Take Marxism. It's largely a history of class struggles.
| There are testable bits, _e.g._ the labor theory of value
| (which is wrong). But most of it is unfalsifiable. Similar
| to the barter-then-money origin of money story, which
| offers zero predictive value while also being
| archaeologically unsupported.
| Ilverin wrote:
| Even finance experts like Matt Levine use index funds. Unless
| you are mega rich and have connections, you almost certainly
| have no advantage against the many people who work 100 hours a
| week trying (and often failing) to beat the market.
| anonporridge wrote:
| This. Imagine the arrogance necessary to believe that you can
| understand economics, finance, geopolitics, and the vast
| arrays of industries and competing companies well enough by
| studying as a hobby in your spare time to get better returns
| than professional investors who literally spend their entire
| careers trying to beat the market, and fail on average.
|
| Just VTSAX and chill.
| merely-unlikely wrote:
| You're correct but I'd like to point at that professional
| investors don't understand all of that either. They spend
| their careers focused on little niches in which they can
| find an advantage. So it's less, what are the mysteries of
| the economic universe, and more, why does the West Texas
| Intermediate futures curve differ from the Brent curve and
| how can I profit from the spread?
|
| That and the goal of many (most?) professional investors is
| not to beat the market. For some they just need to have
| higher returns than cost of funding and anything positive
| is accretive. Others sell fund investors on things like low
| market correlation. Or others have more specific goals like
| hedging future fuel prices for an airline.
|
| Point being, individual investors have completely different
| goals from most professional investors and as you point
| out, "VTSAX and chill" is the way.
| tomatocracy wrote:
| For many professional investors (and certainly for a
| large class of asset management firms), the big incentive
| is to accumulate more AUM. Returns can be a strong
| marketing tool to do that, but they're not the only one.
| XorNot wrote:
| People do beat the market, but the thing is if you can beat
| the market then you don't need to accept public money - you
| become a private trading firm and trade with your own money
| and keep all the profits.
|
| That's the issue: successful firms which beat the market
| don't keep doing it on behalf of other people for very long.
| bombcar wrote:
| The "active funds don't beat index funds" studies showed
| they actually _do_ - before expenses. After expenses the
| net return was lower.
| nly wrote:
| If that's the case why bother taking external money?
|
| Answer: because they make more money from the fees than
| they do by "beating the market"
|
| The truth is if you beat the market by pure luck _once_
| you can market your shit fund and lure in thousands more
| investors for decades.
| bombcar wrote:
| Because the goal isn't to "beat the market" (most beat by
| a very small amount) - the goal is to make money selling
| their "services".
| sbf501 wrote:
| "The Armchair Economist", Steven Landsburg
|
| https://en.wikipedia.org/wiki/The_Armchair_Economist
|
| Extremely approachable book with fantastic examples explaining
| somewhat complex concepts.
| kkfx wrote:
| John Maynard Keynes and Rosa Luxemburg writing about capitalism
| to understand the current economic situation AND why most
| "mainstream" economists keep a certain direction.
| openfuture wrote:
| This article couldn't be further from the truth! All you need to
| read is this comment.
|
| Economists don't think, they feast. Mostly on the blood of the
| innocents but sometimes also on the bounties of nature or,
| rarely, on the delusions of idealists. Therefore what you must do
| is to learn how to feast, this is easier said than done since you
| cannot feast alone (unless you are the blessed one).
|
| Nonsense such as "the economist" must be guarded against with
| thick sarcasm, maybe even borderline surrealism, this way you can
| shock your sense of discrimination into the configuration
| required to believe in the local tax authority. Which is a
| requirement for attending their feasts and learning the basics of
| economics.
| jrm4 wrote:
| Economics is .. mostly just _not good_ as a discipline. Micro can
| be pretty useful to individuals, but Macro is literally no better
| than astrology, and perhaps worse because people have a better
| sense of astrology 's limitations.
|
| It's important to study economics primarily not because "it's
| good at predicting things," but more to understand how most
| everything is made up and then people use economics to back into
| ideas.
|
| Roughly, the problem is not just "All models are wrong, and some
| are useful," but additionally that "many models are harmful and
| unchecked."
| rufus_foreman wrote:
| >> Macro is literally no better than astrology,
|
| Macroeconomics:
|
| "Macroeconomics is a branch of economics that studies how an
| overall economy--the market or other systems that operate on a
| large scale--behaves"
|
| Astrology:
|
| "The divination of the supposed influences of the stars and
| planets on human affairs and terrestrial events by their
| positions and aspects"
|
| Astrology is irredeemable. If current macroeconomics is no
| better than astrology, that is an opportunity.
|
| >> Micro can be pretty useful to individuals
|
| This is the crazy part. Micro relies on assumptions that just
| aren't true. Micro is much closer to astrology than macro. If
| you build an extensive mathematical framework on top of
| assumptions that are not just false, but sort of crazy, you've
| got nothing.
| JumpCrisscross wrote:
| > _Micro relies on assumptions that just aren 't true_
|
| I'm going to assume this refers to the rational actor
| assumption? If so, it's like Econ 102 that this is an Econ
| 101 simplifying assumption, similar to our ignorance of
| friction and turbulence in Physics 101.
| JumpCrisscross wrote:
| > _Macro is literally no better than astrology_
|
| Pop economics is notoriously bad. But if the popular version of
| a science were its judgement, physics and climatology fare
| little better.
|
| Concepts like unemployment, production and risk premiums were
| macroeconomic inventions. Would you prefer nobody thought or
| talked about credit crises, the relationship between mortgage
| rates and housing prices or business cycles? Because before
| 19th-century macroeconomic theorizing, concepts like inflation
| were colloquial [1].
|
| [1] https://en.wikipedia.org/wiki/Inflation#Classical_economics
| Aunche wrote:
| Macroeconomics _does_ work though. Central banks do a pretty
| good job of tuning the knobs that steer GDP or inflation
| towards the direction where they want it to go. You just have
| to recognize that these aren 't and can't replace structural
| reform.
| Phil_Latio wrote:
| > Micro can be pretty useful to individuals, but Macro is
| literally no better than astrology
|
| Macro brought a whole new dimension to the economic thought.
| Example: Due to leaving out the macro dimension when deciding
| the fate for Greece in the eurocrisis, they forced them to
| lower the income of all people by 20% or something. Because the
| neoliberal labour market theory (micro) assumes the labour
| market functions like a normal market. They assumed the lower
| wages would be subsidized by higher employment (lower price of
| goods = higher demand). The opposite was the case. Unemployment
| increased drastically. And it's very simple to understand why.
| The income is cut by 20% -> the demand is automatically cut by
| 20% -> companies don't have incentive to employ new people ->
| instead they let people go despite the low wages so they can
| maximize their profits. This chain of events does not exist in
| micro.
|
| Another fundamental aspect is savings and debt. People don't
| realize, that every new savings in an economy have a debt
| counterpart in the same amount. So to say for example: "the
| government has to decrease it's debt" means nothing without
| explaining who should make less savings / more debt in return.
| This accounting logic can be used in cases like Germany with
| their export surplus: If everyone in Germany is saving (private
| households, companies and government), then who is the debt
| counterpart? The foreign countries. Then one should ask whether
| such a sitution is sustainable, were one country always saves
| while all it's trade partners always have to make debt.
| Obviously not. Micro economists would find ways to put a
| "everything perfect" stamp on Germany though. Because they are
| stuck on a micro level.
| t_mann wrote:
| Fyi, modern macroeconomics is essentially a flavour of
| microeconomics. They call it microfoundations for macro. They
| share all the important formalisms like general equilibrium.
| Macro is just where the inadequacies of that formalism are
| most evident because it gets the most attention outside
| academia.
| greatpostman wrote:
| Think? Economics doesn't work. A small minority of all the theory
| developed has any relevance to the real world
| NeutralForest wrote:
| Talking about Economics on HN, what could go wrong
| napoleon_thepig wrote:
| Brace yourselves for people commenting with a lot of confidence
| in what they're saying, but without actually having read
| anything about the topic.
| NeutralForest wrote:
| Yeah the average take on this thread is abysmally bad.
| LiberationUnion wrote:
| wikitopian wrote:
| Economics should be thought about like sports, with the
| corporations as athletes, countries as teams, regulators as
| referees, and citizens as owners.
|
| If you don't keep it competitive and rewarding for the athletes,
| there's no money for the owners of the franchises to share.
|
| Moralizing either in favor of the owners (socialist demagoguery)
| or the players (capitalISM) ends up harming the game.
| vouaobrasil wrote:
| Not sure what the article said since it's locked, but I recommend
| Steven Landsburg's "The Armchair Economist". It's one of my
| favourite books of all time.
| BMc2020 wrote:
| _The Wrecking Crew_ by Thomas Frank is good for the lay public.
|
| Much denser is _The Road from Mont Pelerin_ by Philip Mirowski.
| unmole wrote:
| I really don't understand the appeal of _The Worldly
| Philosophers_. Maybe it 's just me but I found the explanations
| of the ideas of each _philosopher_ to be rather muddled.
| santiagobasulto wrote:
| I read The Worldly Philosophers a long time ago (I was young)
| and I loved it. I remember really liking the narrative and the
| historical background.
| abecedarius wrote:
| I found it stimulating in high school (compared to most social-
| studies stuff). But from recently sampling it in the library: I
| don't think it mentioned the marginal revolution at _all_. E.g.
| Alfred Marshall did get a couple pages, but only as some kind
| of Victorian eminence who made some technical contributions not
| worth explaining.
|
| (https://en.wikipedia.org/wiki/Alfred_Marshall#Theoretical_co..
| . for what I wish the book had told me.)
| alecco wrote:
| Freakonomics?! It's a clickbait book. Wild headling-grabbing
| claims, bogus data, and dubious methods. It's like saying to
| learn investing you should watch Jim Cramer's Mad Money.
|
| https://en.wikipedia.org/wiki/Freakonomics#Criticism
| transportgo wrote:
| The article states: "Some of the studies discussed in it have
| been called into question. But the overall lesson is a useful
| one: incentives matter. "
| marcosdumay wrote:
| You know, there are plenty of undergrad and graduation level
| textbooks, whose goal is exactly that article's title.
|
| Nothing wrong with specialized, focused studies on one subject or
| another, and popular press. But they won't do what the title
| says.
| intrestingstuff wrote:
| hirundo wrote:
| I can't read the fine article. I've read from economists that the
| key essay to answer this is "What is Seen and What is Not Seen"
| by Frederic Bastiat (1840). That introduces the parable of the
| broken window. Its arguments are reprised in Economics in One
| Lesson by Henry Hazlitt (1946). Are either mentioned in the
| article?
|
| You can't steelman classical economics without groking these.
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