Is economics a sham?
What are your guys’ thoughts on this twitter thread: https://twitter.com/gorlofurdreams/status/1357262…
"Idc about "iNfLaTiOn" just print more money and dont tell anyone. 'B-b-but da pwices will go up!' So put em back down. Its all just imaginary numbers anyway."
380k likes. Is twitter onto something?
No.
Yes. She is the modern Adam Smith.
Yes, economics is a sham science as an academic discipline. You have diametrically opposed economic beliefs, theories, practices that are all "justified" by the data and the models. Economics is the exact opposite of science.
I've said it before and I'll say it again--the law of supply and demand is immutable and explains/predicts virtually all economic behavior in the real world. Because the law of supply and demand is immutable, free markets (broadly speaking) produce optimum economic outcomes. Economic theories that dismiss the law of supply and demand (e.g., communism) will inevitably fail. In this particular example presented by OP, dismissing the law of supply and demand leads one to the inevitable conclusion that you can print indefinite sums of money without it impacting prices. Not only does the immutable law dismiss this assertion, this assertion has been disproven countless times in world history. Even in America today, we can see that the proverbial printing press has led inevitably to sky-high asset prices for bonds and stocks (and even residential real estate) even during some of the worst economic times in generations.
Just like science can't tell us what the best moral approach to Covid policy is, within the broad spectrum of supply and demand and free markets, specific policies (higher/lower taxes, more/fewer regulations, supply-side/demand-side economics) can't be "scienced" by charts and graphs. For example, I believe optimizing economic growth is morally optimum because it leads to maximum prosperity and economic opportunity, but others might believe that greater equality is better than maximum prosperity. You can't "science" that out in a classroom--it's a debate of philosophy, not science. In other words, an economist asserting what the optimum economic policies are is as hollow as an epidemiologist asserting that the global economy should grind to a halt to stop the spread of a virus--neither is a call that science makes. The opinions of both are useful information to policymakers, but neither assertion is based on "science."
This is not true everywhere. It's particularly an American phenomenon. Economists as academics are fairly good at conducting good science.
The real issue is economists who work with policy makers via think tanks and industry research centers. These think tanks all have specific narratives they want to push so they conduct bad science to justify policies they want implemented. This is the exact same kind of behavior that food companies did - they fixed nutrition science to make sugar seem healthy and fat unhealthy.
Weird how in the world's leading economy bad economists are an American phenomenon. Maybe because "good" economists are BS.
If we're talking about economics from an academic perspective, I think it really depends. There are definitely economic academics acting in bad faith or simply acting with normativity, which is by definition biased. These people cannot be compared to academics in the fields of structural engineering, physical chemistry, or mathematics; which deal exclusively in fact. However, you can't discount those people who were math majors with econometrics concentrations at UChicago, did their Ph.D. in econ, and do pure applied mathematics research in economics. The problem is that these people are not the "economists" who are popular and listened to because their work, while extremely vital, is not immediately important or significant (Instead you listen to the people supporting AOC or Cruz at thinktanks). I don't give a shit what the newest big development is in structural engineering or physical chemistry is. Similarly I don't give a shit about what these people are doing right now. However, I'm sure, in hundred years time, with thousands of these researchers and scientists building upon each other, we will have developments in society due to the work they put in in the fields of economics, physical chemistry, and structural engineering.
Economic models aren't perfect predictors of human decision-making 100% of the time, but that doesn't mean they're not helpful and should be thrown out. Even natural sciences are bogus by the metric of 100% success (i.e why we haven't figured out how to make medicines to cure every disease without side effects, why 1+1 = 3 with some manipulation, etc.) Should we throw out math, biology, and chemistry as junk science too?
wait are you being serious?
Economy is doing great for some, sputtering for others. Unemployment rate could technically be considered normal. But it's who's employed that matters the most. That has been the case for decades, though. Look at LA/SF. Great, prosperous cities, high asset prices, very tragic poverty situation.
I think what the Fed is doing does hide the issue, because they're on the other side of the trade, when the other side could be workers who make less money, which would obviously come in the form of a job and potential future growth.
If the Fed simply ramps up money printing, it could lead to a spiraling economy if people become too heavily dependent on them as that side of the trade. Ideally, people will understand the importance of monetary actions being temporary and look for long-term solutions, while utilizing the Fed as a short-term boost. The Fed is only a lender, and debts have to be paid back eventually.
Technically, economics is the science of modeling human and firm behaviour and a core assumption is that market participants are logical. We are not. Behavioral economics kinda dumped all over what we learned for the past 200 years by destroying the core assumption we make.
That isn't to say economic theories aren't useful - they are in explaining why some things like wages and prices go up or down - but by and large it does a poor job in predicting anything. Statistically speaking the models that won Nobel Prizes don't have much explanatory power (rsq value) and it is known amongst academics.
If only the Weimar Republic knew this one simple trick
.
The "It's all a construct anyway" argument suggests that one economic system (in this case central planning - socialism/communism by a central authority setting prices) is on the same level as another economic system (capitalism and the law of supply/demand) simply because they are both "constructs", or theories. This fails to recognise the realities of resource allocation; giving monkeys more money but keeping the price of bananas constant leads to bananas running out. Those producing bananas won't make more because the central authority has made it unprofitable to produce more bananas at the set price and if they attempt to sell bananas at a higher price, they will probably go to a gulag/prison etc. as occurred in the USSR and other various communist states in history.
But what do I know when there are 16 year old girls on twitter getting 380k likes on twitter for advocating communism. Obviously we should let twitter likes decide the economic constructs we use in society.
Uh.... what?
Economics isn't a sham but some economists are.
There are also 3 issues even with good economics nowadays.
1) There is a big disconnect between where the smartest economists are and where the rest of the world is at. Policy makers in particular either follow sham economics or outdated economic models/theories. For example, Modern Monetary Theory espoused by people like AOC is sham economics. The way stimulus checks were handled (influx of cash without any strings attached on where that could be spent on) was really based on old school Keynesian views from the 1930s. The Keynesian school has had 80 years to advance but policymakers didn't give a flying f***.
2) Even among good economists, there is a good amount of ideological groupthink going on, which hinders the progress of the field. For example, Efficient Market Hypothesis clearly is not true but many economists just kind of accept it aa a de facto truth for some weird reason.
3) Not every economist pays enough attention to behavioral economics. For example, many economists will still assume that people "maximize their utilities" or that people are "rational". But the truth is that people "satisfice" (satisfy + suffice) rather than "optimize" because it's too costly to optimize + people are only "sometimes rational" and their rationality is bounded. Behavioral economists have done some great work figuring our how people actually make decisions and models derived from better behavioral assumptions actually tend to work.
That's my biggest problem with traditional economics. It's always "rational people do this so that's the way we should plan things", when we all know that most people are far from rational
I am not sure why you are saying EMH is not relevant. Fama's work (EMH) and Malkeil's work (random walk) while not perfect are the basis for the entire passive industry of ETFs and Index Funds, an industry which continues to see enormous levels of cash flow. You can also include Bogle's work since he the guy who created the first index fund. Their work basically leads one to the conclusion using information or analysis is a waste of time in that you are not likely going to beat a benchmark anyway. Therefore, why pay the fees for active management. Data does not lie in that most studies show that passive management performs better than active management.
Lol did you copy that off from Wikipedia? Here is an obvious rebuttal. Why are there bubbles then?
How do you explain HFs beating the market?
*Insert Paul Krugman*
social media is a sham
This statement doesn't even make sense. Economic models fail all the time. If they worked economists wouldn't be economists--they would be billionaires.
If you mean that economic models work because they can map historical data and provide estimates based on that, then you are talking about nothing more than data analysis cushioned with lofty titles.
The reality is, we have Nobel Prize winners in economics who are socialists and libertarian in economic orientation. If such diametrically opposed economic ideologies can have its adherents masterfully explain a slice of economic reality, then its usefulness as an academic discipline is approaching zero.
This should easily be voted the best comment under this thread, or at least better than the current most voted one.
Optimum economic growth under the covid-19 scene sadly means cost of thousands of lives. Just look at Trump's policy and all those stupid people who didn't believe that covid-19 is actually dangerous, went to the beach or some rooftop parties, and then died.
Full disclosure, I did not click on the link. However, based on the username in the url it looks as if you are posting a furry Twitter user's opinion. Right off the bat, I know to discard whatever comes next
LOL that’s fair. I was half-joking about my question. Usually i never bother with hot econ takes on twitter but this one blew up and was being shared by some of my friends. i lost a few brain cells while reading the comments.
Hey where are the comps you said you would spread today dude
Yo chill i’m just a freshman dude
This dumbass tweet can only exist because unemployment is high and thus inflation is low (in terms of consumer prices at least).
Once inflation actually starts happening all the dumbasses will advocate for policies to reduce inflation or at least move on to something else.
im glad that i dont use twitter
Economics is pizza https://mobile.twitter.com/JPEGNEGRO/status/1358423714048724994
everyone relax and buy some fucking bitcoin
Buy cardano (ada) too. Better than shitcoin. I’m up 140% since last month. It’s gonna fly once it’s listed on coinbase
shut the fuck up that coin sucks
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