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comment by kleinbl00
kleinbl00  ·  3026 days ago  ·  link  ·    ·  parent  ·  post: Admit it: you know nothing about economics.

    Maybe you think you’re more informed and that while the general public might not have a good grasp on economics, you basically know what you’re talking about. But what if I begin to question you as to your thoughts on whether Britain is currently in a liquidity trap?

Bitch, I made it all the way through Piketty, read Reinhart and Rogoff before it was cool and can tell you why Currency Wars is a stupid book. That doesn't make me an expert on economics, but it allows me to say that the reason everyone thinks they know more economics than they do is that Economists don't know what the fuck they're talking about. So when you question me as to whether Britain is in a liquidity trap I'll say "well, that's a piece of jargon coined by economists to make you think they know something you don't when in actuality what they mean is 'does Britain have enough spending money'" which is prima facie the nonsense question it looks like.

    Why is it that we are comfortable letting experts tell us what is best when it comes to medicine but when economists are telling us something, we largely ignore it and assume that we know better?

Because economists destroyed the economy. Or are we going to blithely ignore that?





rrrrr  ·  3026 days ago  ·  link  ·  

    Bitch, I made it all the way through Piketty, read Reinhart and Rogoff before it was cool and can tell you why Currency Wars is a stupid book. That doesn't make me an expert on economics, but it allows me to say that the reason everyone thinks they know more economics than they do is that Economists don't know what the fuck they're talking about.

So you've seen enough to qualify to have an opinion on whether economists know what they're talking about. Many of us haven't, and "acknowledge that you don't know what the hell you're talking about" is pretty good advice for us. Somehow I don't think this article is aimed at the kleinbl00s of this world (all one of him). The older I get, and the longer I don't get significantly better informed about economics, the more political questions I find myself answering with "I don't know". We humans aren't exactly great at holding off on opinions until we are well enough informed, or at least holding our opinions provisionally, so I see this as a step in a healthy direction.

kleinbl00  ·  3026 days ago  ·  link  ·  

    Somehow I don't think this article is aimed at the kleinbl00s of this world (all one of him).

No, the article is intended to make you equate the mysteries of economics with mutherfucking medicine. Check it out (again):

    Why is it that we are comfortable letting experts tell us what is best when it comes to medicine but when economists are telling us something, we largely ignore it and assume that we know better?

Because medicine is an evidence-based scientific study of cause and effect while economics is a loosey-goosey empirical curve fit that gyrates through 360 degrees of thought every 50 years, that's why.

Chromatic_Jon  ·  3026 days ago  ·  link  ·  

I thinks it's telling also how distinctly askew the two fields are in terms of 'progress'. Economics (after checking wikipedia really quickly) was practiced by multiple ancient civilizations including the Mesopotamians and the Greeks. Thomas Aquinas was born in 1225 and he's apparently called by some the founder of "scientific economics". To contrast, penicillin was discovered in 1928. The germ theory of disease goes back to 1546 at the latest but more reasonably could be dated to 1808. When you compare the amount of time that people have spent thinking about these respective fields to the number of concrete answers a specialist could give to questions one might ask, there can be little doubt about who is coming from a place of knowledge and who chose to study a system of inherently irreducible complexity and would like you to believe they have the answers you seek.

qiy  ·  3024 days ago  ·  link  ·  

    No, the article is intended to make you equate the mysteries of economics with mutherfucking medicine.

Whose researchers and practitioners are nearly as confused about as economists. Both fields feature a lack of experimental verifiability that should give us perpetual pause. The fact that we can't put people or societies in a box and poke them at will to verify hypotheses does mean that economists (and often doctors and medical researchers) do no know what the fuck they are talking about.

But, the mere fact it is hard doesn't mean everyone is an equal. You can understand some things about economy or medicine through study. That's tough and a valuable result, so I agree with the author of the article that this deserves soelme respect.

qiy  ·  3024 days ago  ·  link  ·  

I have spent half a decade as an economics researcher and far longer as one in biology.

I find both fields incredibly prone to total confusion and story telling.

This does not make either one a failure. Both are capable of doing super useful stuff.

kleinbl00  ·  3024 days ago  ·  link  ·  

    Whose researchers and practitioners are nearly as confused about as economists.

This conversation can serve no further purpose.

cgod  ·  3026 days ago  ·  link  ·  

I went to school for economics.

When I asked any practical question about the economy my professors would talk about the problem for a bit. They would almost always do the "on one hand this on the other hand that" economist thing. Then they would usually tell me I should go ask some other professor who specialized in the pertinent subject if I wanted to know more.

If I then went to the specialist they would usually end up doing the two handed economist thing again and conclude that they strongly suspected things went one way or the other but that the whole question would be well served with more data and study if we wanted to understand it better.

Even professors who held strong opinions would often admit that they might be wrong and that different economic conditions could render their position on correct policy untrue.

Hearing politicians say anything about economics usually sickens me. They talk with such certainty. Ask an honest labor economist the ramifications of rasing the minimum wage you'll walk away realizing shit is tricky. Any one who says otherwise is full of shit.

Looking back I can only think of one professor who didn't preface most conversations with a phrase like ”the data suggests that..." and he was a bit of a crazy old dude.

mk  ·  3026 days ago  ·  link  ·  

He picked a poor analogy with medicine. Psychology would have been a much better comparison, or even neuroscience. In these disciplines there are things that we can talk about with a great deal of confidence, but some of the most important questions are difficult to even frame.

How do you feel about your education in economics? Worth the while? I think another reason why people love to talk about it, is because it is so fascinating. It's like social math weather.

cgod  ·  3026 days ago  ·  link  ·  

I think it's a valuable thing to study.

I think taking just micro and macro is generally bad for people. A little bit of economics gives people a simple framework upon which to hang their bias and a whole lot more unmerited confidence in that bias.

If you go a little deeper you can't avoid the fact that almost any policy position will have winners and losers. Most people can only see the benefits of the policy choice that leans toward their bias and refuse to acknowledge that it could have any downside.

I helps you really understand opportunity costs. Cost Benefit Analysis was one of the best classes I took. People bag on it as a discipline soooo fucking hard and it's often used for evil but if it's done rigorously and ethically it really can lead to better outcomes.

The psychology of economic decisions is pretty interesting. Peoples fear of loosing something being so much more powerful than their desire to gain something. The way hot button issues distort our valuation of policy choices. Stuff like spending on health vs spending on terrorism.

Game theory makes you look at the world a bit differently.

If you study the history of economics and still believe that this is the best system that could ever be you're an idiot.

I have to imagine that it enriches my understanding of the world more than any hard science would have. Biology and Physics may be interesting but I don't know that undergraduate study in either would brush up against the world as consistently as economics. Maybe philosophy or literature could be enlightening on the same level but I rarely found academic analysis of books anything but tiresome and philosophy generally pissed me off.

    He picked a poor analogy with medicine. Psychology would have been a much better comparison, or even neuroscience. In these disciplines there are things that we can talk about with a great deal of confidence

Here is the kind of thing that an extremely rigorous professor concluded a semester of study about international trade with "We can say, with a high degree of confidence, that international trade increases GDP by at least 1/2 of a percent". She was a true believer in the value of free trade and markets, Had some reservations about FDI that were way above my head. That's a semester of theory about why trade was good and when it came down to econometric truth she could confidently tease out a measly half a percent if she was only going to accept the most rigorous and ethical analysis. I found the rigor impressive even if the power of economics to foretell the future or confidently tell us anything useful about our world a little bit less than what the general public thinks it can do.

user-inactivated  ·  3026 days ago  ·  link  ·  

    I found the rigor impressive even if the power of economics to foretell the future or confidently tell us anything useful about our world a little bit less than what the general public thinks it can do.

One of my favorite statistics professors decorated his office in fortune telling memorabilia. He said it was to remind people he consulted with not to trust him too much.

kleinbl00  ·  3026 days ago  ·  link  ·  

Psychology and neuroscience can be tested on an n of greater than 1, unlike economics.

mk  ·  3025 days ago  ·  link  ·  

To test many hypotheses, sure. However, when it comes to matters of consciousness and intelligence in neuroscience, things can get sloppy and there is disagreement about what even constitutes a meaningful question, much less what is measurable. The same goes for psychology.

I'm not saying that there are perfect analogies, but are far better than making one to medicine.

But even then, It would be fabulous to hear an amateur discussion about bioprosthetic valves at a dinner party. The very premise of Glover's argument is insulting. As you mentioned, a liquidity trap is not particularly opaque idea, and the worst thing that can happen is that a few people debate over the definition of a 'liquidity trap' and walk away better for it.

Creativity  ·  3026 days ago  ·  link  ·  

    Britain is in a liquidity trap I'll say "well, that's a piece of jargon coined by economists to make you think they know something you don't when in actuality what they mean is 'does Britain have enough spending money'"

I disagree here. A liquidity trap is a situation where the monetary policy of the central bank is unable to increase GDP because more money will not result in lower interest rates, as they are already near zero.

kleinbl00  ·  3026 days ago  ·  link  ·  

Crack that down into human language:

    A liquidity trap is a situation where the monetary policy of the central bank is unable to increase GDP because more money will not result in lower interest rates, as they are already near zero.

"A situation where the monetary policy of the central bank" = Britain

"Is unable to increase GDP" = can't spend money

"because more money will not result in lower interest rates, as they are already near zero" = non sequitur

Creativity  ·  3026 days ago  ·  link  ·  

The central bank is independant from the political power.

We have to distinguish the monetary policy (central bank) from the fiscal policy (government).

If the central bank increases the money supply (how much money there is in the economy), it's not going to lower interest rates as they are already near zero, and thus it's not going to increase investments, and thus it's not going to increase GDP. That's the liquidity trap.

Britain spending money is something different, it's about the fiscal policy. It might help the country exit the liquidity trap, but it's not what the liquidity trap is fundamentally about.

kleinbl00  ·  3026 days ago  ·  link  ·  

See, you're trying to make it complex again. When people are talking about a country in a liquidity trap, they're talking about whether that country has freely flowing cash in its economy.

The US had a "liquidity trap" in 2009 for the simple reason that banks were gunshy about lending money. Cash for Clunkers was a way out of that liquidity trap that didn't involve monetary policy.

This is why people don't trust economists. There's a driving need to over-complicate things in order to obfuscate the levers of power.

Creativity  ·  3026 days ago  ·  link  ·  

    When people are talking about a country in a liquidity trap, they're talking about whether that country has freely flowing cash in its economy

Yes. But what's important is the implication : when you are in a liquidity trap, you can't use only monetary policy as a lever for growth.

On this graph (it represents the key interest rate from the FED, BCE, BoJ), you can see that the FED (in red) lowered it's interest rate after the crisis. They wanted banks to lend again and it worked. We are still in 2015 at a very low rate, and the US is currently in a liquidity trap and it has been the case for 5-6 years.

Janet Yellen (FMI's director) should announce today an increase of this key interest rate (how much the banks pays the FED to have money) : the US should step out of the liquidity trap today.

The US government used all sorts of policy to get the economy back up. Now that it seems stable, the FED is stopping the quantitative easing (a monetary policy which is not supposed to happen where you buy, among other things, private securities) and wants to increase the interest rate to be able to target the 2% inflation rate.

It's not hard to understand and I'm not trying to complicate things (but I could be clearer). But wanting to explain the whole thing in one sentence where you don't explain the difference between fiscal/monetary policy and how the key interest rate from the FED impacts the economy and could lead in what is called "liquidity trap" doesn't let you understand what a liquidity trap is and what it means for the economy.

kleinbl00  ·  3026 days ago  ·  link  ·  

If you can't explain it simply, you don't understand it well enough.

- Albert Einstein

-Look, I know that was a cheap shot. And I know that you're attempting to explain my misconception, not yours. But the fact remains: I explained a liquidity trap as "the country lacks cash flow" and you threw a graph and Janet Yellen at it. It doesn't change the fact that to the average man on the street, a liquidity trap is a lack of cash flow.

Most people don't know that the Fed isn't the government. Let's be real, though - they don't have to know that. In fact, it complicates things: try to explain how Bush's tax rebates weren't monetary policy without invoking The Beast from Jeckyll Island. Taxpayers got money as the result of a policy from the government. et voila. "Monetary policy."

And really, it's turtles all the way down with this shit. Economics is a profession where you're derisively labeled a "quant" if you understand differential equations, where Piketty bent over backwards to apologize for using algebra in a populist book. I worked for a company that worshipped EBITDA but of 8 VPs polled, 6 couldn't tell me what the fuck it was or why we used that metric instead of something, you know, defensible. Obfuscation is a fundamental tenet of economics, and the only reason it doesn't piss more people off is that economists are largely successful at it.

A liquidity trap is where the country doesn't have enough free cash flow for a gazillion different reasons that economists will attempt to explain using graphs full of acronyms, units you've never heard of and calendars that don't match the one on your desk. They do this so that you aren't tempted to ask them for an answer they can't give you.