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How Did Economists Get It So Wrong?
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deprogram
Bubble Watcher
Joined: Thu Feb 07, 2008 4:28 pm
Posts: 37
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 How Did Economists Get It So Wrong? I found this to be a must read. I should be getting work done, but this is MUCH more interesting. How Did Economists Get It So Wrong? - NYTimes.comMuch of this may be boring to those formally schooled in economics, but I'm not, and I'm liking the insight I'm getting from this concisely presented hindsight. So to speak.
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| Fri Sep 04, 2009 1:23 pm |
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biliruben
Bubble Banter Boss
Joined: Sun Feb 18, 2007 4:31 pm
Posts: 575
Location: Lake City
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Re: How Did Economists Get It So Wrong? I think you'll find this bit of unpleasant truth unwelcome to the hoard of neo-classicists and Austrian-schoolers who shamble about these parts.
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| Wed Sep 09, 2009 7:06 am |
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deprogram
Bubble Watcher
Joined: Thu Feb 07, 2008 4:28 pm
Posts: 37
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Re: How Did Economists Get It So Wrong? biliruben wrote: I think you'll find this bit of unpleasant truth unwelcome to the hoard of neo-classicists and Austrian-schoolers who shamble about these parts. Really? I thought it was all old-fashioned, classical gold, guns and steel fiscal conservatives around here. <scratches head> Well, I'm seeing a lot of irrational actors in the market right now. They just don't realize they're acting irrationally. I'm no fiscal conservative, but I do realize that buying now is taking a huge bet. Actually, the stakes have been rising since the mid 90s, but economic bubble theory isn't taught in primary school. It should be.
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| Wed Sep 09, 2009 1:04 pm |
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rose-colored-coolaid
Bubble Banter Boss
Joined: Mon Jun 18, 2007 10:26 am
Posts: 1978
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Re: How Did Economists Get It So Wrong? deprogram wrote: Actually, the stakes have been rising since the mid 90s, but economic bubble theory isn't taught in primary school. I am not an economist, but is there an actual economic bubble theory? Like the kind of theory that might have a rigorous curriculum associated with it? I'd love to see it if it exists. I imagine the theory would need some updating after this last decade.
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| Thu Sep 10, 2009 11:52 am |
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jon
Bubble Bloviator
Joined: Mon Oct 01, 2007 10:13 am
Posts: 267
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Re: How Did Economists Get It So Wrong? Quote: I am not an economist, but is there an actual economic bubble theory?
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| Thu Sep 10, 2009 4:00 pm |
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lamont
Bubble Bloviator
Joined: Wed Nov 28, 2007 9:02 am
Posts: 213
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Re: How Did Economists Get It So Wrong? rose-colored-coolaid wrote: deprogram wrote: Actually, the stakes have been rising since the mid 90s, but economic bubble theory isn't taught in primary school. I am not an economist, but is there an actual economic bubble theory? Like the kind of theory that might have a rigorous curriculum associated with it? I'd love to see it if it exists. I imagine the theory would need some updating after this last decade.
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| Fri Sep 11, 2009 8:00 am |
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lamont
Bubble Bloviator
Joined: Wed Nov 28, 2007 9:02 am
Posts: 213
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Re: How Did Economists Get It So Wrong? http://arxiv.org/abs/physics/0506027Quote: We analyze the quarterly average sale prices of new houses sold in the USA as a whole, in the northeast, midwest, south, and west of the USA, in each of the 50 states and the District of Columbia of the USA, to determine whether they have grown faster-than-exponential which we take as the diagnostic of a bubble. We find that 22 states (mostly Northeast and West) exhibit clear-cut signatures of a fast growing bubble. From the analysis of the S&P 500 Home Index, we conclude that the turning point of the bubble will probably occur around mid-2006.
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| Fri Sep 11, 2009 8:04 am |
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deprogram
Bubble Watcher
Joined: Thu Feb 07, 2008 4:28 pm
Posts: 37
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Re: How Did Economists Get It So Wrong? rose-colored-coolaid wrote: deprogram wrote: Actually, the stakes have been rising since the mid 90s, but economic bubble theory isn't taught in primary school. I am not an economist, but is there an actual economic bubble theory? Like the kind of theory that might have a rigorous curriculum associated with it? I'd love to see it if it exists. I imagine the theory would need some updating after this last decade. I'm not either, but I find it hard to believe that even the most basic Econ curriculum wouldn't touch on speculative bubbles. There's plenty of theory out there, and a great number of classic examples. http://en.wikipedia.org/wiki/Economic_bubbleI think that physics and economics are both sorely neglected subjects in the public schools of this country. Incredibly important, vital topics that are just too 'hard' (and I don't mean difficult) for many people's liking. Tough! Deal with it. Science in general is just neglected in our public schools. Why? We churn out four lawyers for every engineer, and wonder why we are faltering, why our car companies can't compete on the world stage... it wasn't always this way. America used to be a shining light of ingenuity, with the best public schools in the world. Now we are falling through the international rankings like a stone. I truly believe that in order to compete on the world stage, America needs to solve it's education problem. Forcing everyone to drop 120k on a four-year college (which spends the first year just teaching it's students what they should have learned in high school) isn't realistic or sustainable.
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| Fri Sep 11, 2009 8:31 am |
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Dave0
Bubble Blatherer
Joined: Thu Jun 14, 2007 4:15 pm
Posts: 66
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Re: How Did Economists Get It So Wrong? rose-colored-coolaid wrote: deprogram wrote: Actually, the stakes have been rising since the mid 90s, but economic bubble theory isn't taught in primary school. I am not an economist, but is there an actual economic bubble theory? Like the kind of theory that might have a rigorous curriculum associated with it? I'd love to see it if it exists. I imagine the theory would need some updating after this last decade. I got a B.A. in economics with a focus on international trade and we didn't really talk about bubbles at all (and I was taking the courses just after the dot com crash!). My courses were mostly all about long-established qualitative economic theories, not much in new developments. I hear that a B.S. would have involved a lot more calculations of hard numbers, so maybe that degree touches on it. Or bubbles might be something taught at the Masters level.
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| Fri Sep 11, 2009 9:50 am |
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Dave0
Bubble Blatherer
Joined: Thu Jun 14, 2007 4:15 pm
Posts: 66
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Re: How Did Economists Get It So Wrong? deprogram wrote: rose-colored-coolaid wrote: deprogram wrote: Actually, the stakes have been rising since the mid 90s, but economic bubble theory isn't taught in primary school. I am not an economist, but is there an actual economic bubble theory? Like the kind of theory that might have a rigorous curriculum associated with it? I'd love to see it if it exists. I imagine the theory would need some updating after this last decade. I'm not either, but I find it hard to believe that even the most basic Econ curriculum wouldn't touch on speculative bubbles. There's plenty of theory out there, and a great number of classic examples. http://en.wikipedia.org/wiki/Economic_bubbleI think that physics and economics are both sorely neglected subjects in the public schools of this country. Incredibly important, vital topics that are just too 'hard' (and I don't mean difficult) for many people's liking. Tough! Deal with it. Science in general is just neglected in our public schools. Why? We churn out four lawyers for every engineer, and wonder why we are faltering, why our car companies can't compete on the world stage... it wasn't always this way. America used to be a shining light of ingenuity, with the best public schools in the world. Now we are falling through the international rankings like a stone. I truly believe that in order to compete on the world stage, America needs to solve it's education problem. Forcing everyone to drop 120k on a four-year college (which spends the first year just teaching it's students what they should have learned in high school) isn't realistic or sustainable. I agree that America is facing a large education problem, but I think the root of that problem is a lack of money. We have no money to spend on education and are already in a huge amount of debt from so many years of federal budget deficits. The money to fix the education problem simply isn't there. This is a bit off-topic, but I think before we can fix the education problem (and every other similar problem facing this country) we need to find a way to fix the trade imbalance. We've had years and years of spending more on imports than we do taking money in from exports, and thus slowly using up our country's wealth to sustain the lifestyle we're used to. We need to turn that around, so more money is coming in than going out. Only then can we afford the education and healthcare and other government services we've come to expect in this country. There are only two ways to fix this trade imbalance. Work harder to sell our goods and services to people outside this country and/or stop buying so much stuff from outside this country.
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| Fri Sep 11, 2009 9:56 am |
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Markor
Bubble Banter Boss
Joined: Sun Jun 17, 2007 11:04 pm
Posts: 621
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Re: How Did Economists Get It So Wrong? deprogram wrote: Science in general is just neglected in our public schools. Why? I'll be discouraging my kid from becoming a scientist of any type. Seems they have soul-sapping jobs (e.g. improving artificial flavoring) and/or deal with egotists every day. There's heavy competition for the few good positions. They have to continuously write papers that rarely get read. I want my kid to have a job that requires intelligence, but that doesn't have to mean scientist or lawyer. Dave0 wrote: There are only two ways to fix this trade imbalance. Work harder to sell our goods and services to people outside this country and/or stop buying so much stuff from outside this country. That would need to be a bunch of individual decisions, right? If we become like China, where students are immersed in science so they can create more products to make the rich there richer, it probably wouldn't be worth living in the US anymore. Better to have a lower standard of living in terms of material goods. Especially since most of the stuff people buy is unnecessary junk.
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| Fri Sep 11, 2009 10:52 am |
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Markor
Bubble Banter Boss
Joined: Sun Jun 17, 2007 11:04 pm
Posts: 621
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Re: How Did Economists Get It So Wrong? The solution to fixing our boom-to-bust economy seems obvious: more socialism. Works well enough for fire protection, police, libraries, etc. The French are retiring on schedule despite the global downturn (their national pension fund is doing fine). Lots of countries are figuring this stuff out, no need to look to Communist countries for the answer. First we need to fix our conservatism/dummy problem, which is not just an education problem, it's also a cultural/religious problem. (Shunning works best, I think--let Republicans be ostracized like smokers are.) I don't want my kid to work harder/smarter to survive, when greater cooperation and less capitalism works far better. More socialism also helps the (greater) overpopulation problem somewhat, since socialist economies are not so dependent on population growth.
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| Fri Sep 11, 2009 11:47 am |
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jon
Bubble Bloviator
Joined: Mon Oct 01, 2007 10:13 am
Posts: 267
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Re: How Did Economists Get It So Wrong? Quote: I don't want my kid to work harder/smarter to survive, when greater cooperation and less capitalism works far better. We are in complete agreement that if your priority is to retire on a government pension, without having to work hard, produce results, or enjoy the material benefits which those brings, that socialism would be just fine for you. The wonderful world of labor control of industry awaits you in Detroit.
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| Fri Sep 11, 2009 1:26 pm |
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Markor
Bubble Banter Boss
Joined: Sun Jun 17, 2007 11:04 pm
Posts: 621
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Re: How Did Economists Get It So Wrong? jon wrote: We are in complete agreement that if your priority is to retire on a government pension, without having to work hard, produce results, or enjoy the material benefits which those brings, that socialism would be just fine for you. There's a fallacy implied here, which is that you can't have material benefits without working hard. You can, when the economy is not geared toward making the rich richer at the expense of everyone else. Many socialist countries have figured that out. The gov't pension can be fueled solely by each worker's contributions (i.e. it's your money only).
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| Fri Sep 11, 2009 7:07 pm |
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jon
Bubble Bloviator
Joined: Mon Oct 01, 2007 10:13 am
Posts: 267
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Re: How Did Economists Get It So Wrong? Quote: There's a fallacy implied here, which is that you can't have material benefits without working hard. You can, when the economy is not geared toward making the rich richer at the expense of everyone else. There is a very small amount of duplicated effort when two companies make competing products, but the fruit of that competition far outweighs the cost, which is why companies often pay for competing efforts even among their own employees, as well as of course the government paying for competing designs on military projects. So I assume you are talking about how somehow a large fraction of your personal output is directed to some other person who is getting rich at your expense. That does happen in some cases, but fortunately thanks to capitalism and our freedom, you can go somewhere else to work. The problem is that in socialism, there is no where else to go. A large portion of your income goes via taxes to people who do not want to work, or who spend their time lobbying for special benefits from the government. Even worse than that, is that because there is little reward for hard work and innovation, the total output of the country falls and there is less total products and services to go around, regardless of how they are distributed. That's why socialism failed in Russia and China, and will eventually fail everywhere else also.
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| Sat Sep 12, 2009 11:49 am |
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