Yoram Bauman translates the basic principles of economics.
I am skeptical of economics – if the science had any predictive power, wouldn’t economists be rich and rule the world? I asked an economist about that, once, and he said that they just call their mistakes “market failures” – i.e.: The Market and its invisible hand was not able to make the decision the economists thought it should. Well, I have seen software engineers blame the compiler for their bugs, which is basically never the case. Blaming The Market though, isn’t that just a shorthand for “people are not as smart as economists, unfortunately”?
This is another example of the “baffle them with a torrent of silly BS” style of presenting.
Totally cool CEO says governments need to punish workers with unemployment to make them less arrogant
When people talk about the “invisible hand” and it knowing everything, and thus making the best outcome, I can’t help thinking “How do people not recognize this as the hallmark of a religion?” I think this may be why certain conservative religions in the US get so bound up with laissez-faire capitalism; they seem like the same thing to them.
Here in the UK we have some people who are utterly convinced of their greatness and worship(ped) the markets. Five of them wrote a little book called Britannia Unchained calling for less regulation and worker protection in order to have a booming economy based on the sweat shops of the far east.
Unfortunately one author, Liz Truss became Prime Minister and appointed another, Kwasi Kwarteng, as her Chancellor of the Exchequer. They came up with a “mini-budget” that they refused to run by the Office for Budget Responsibility. Their budget was to boost the market and make Britain this unchained economic powerhouse.
The budget crashed the economy, costing the UK billions and forcing the Bank of England to intervene to shore up pension funds.
Truss became the shortest serving Prime Minister in UK history*, but before she was forced from office just over six weeks from taking the job she’d had to sack Kwarteng.
According to Truss her beloved markets were wrong and she and Kwarteng were right. Stupid markets.
* I recall there was another, shorter lived PM, but he died; a much better excuse for quitting the role in record time.
I think your blunt characterisation of economists may be part of the problem.
Spamblocked again. Then speedblocked when attempting to say so.
Well, after years of studying economics, and I’m not an economist, I’ve come to the conclusion that economics is best put into the category of Applied Psychology.
There are no economic laws which are found in nature. There are economic theories which claim to be based on the laws of nature, but a close look at them reveals so many exceptions that those claims are spurious, more a matter of faith than fact.
All economics is a social construct. Economics is the study of the aggregate wants and needs of a society. Once the basic needs are fulfilled, everything else is wants. Thorsten Veblen probably had the best intuitive understanding of economics; all of the work of Henry George, Keynes, and Galbraith, built structures atop of Ricardo, Mills, and Veblen. The laws of economics rely on historical trends of aggregate social behavior, and are not useful in predicting future aggregate social behavior.
Asking why economists are not rich is akin to asking why psychologists do not control the minds of others.
@6 flex
Veblen is the best. The Theory of the Leisure Class should be mandatory reading to get a degree in anything. It explains so much. And besides, its free (as are many of his other works) on Project Gutenberg.
@flex, 6:
I disagree – it’s closer to asking why psychologists aren’t happy.
There’s no mechanism, even in principle, to control the minds of others. There IS a mechanism, if psychologists are to be believed, to manipulate one’s own mind into happiness – changing the thing you control.
Economists claim to understand the flow of money around the financial system. Their only control over that system is where they put their own money, and it’s reasonable to ask what their vaunted knowledge is worth if their own investments are less than successful.
What about those economists who claim that it is impossible to design an optimal investment strategy, or even to reliably outperform the market over the long term? Surely their failure to get rich should be a point in their favour?
There’s also an issue of scale here – if macroeconomics is like trying to understand the aggregate behaviour of a volume of gas in a pressure vessel, investing is like trying to predict the path of an individual molecule. To fail at one does not necessarily invalidate the other.
@ sonofrojblake, #8,
Your analogy is better than mine. I admit that I struggled with it a bit and settled with something I was not entirely satisfied with.
I was also going to give one of my excessively long posts about how economists really have too much knowledge to invest in ways which out-perform the market. Economists know where the money flows and invest in the areas which meet their highest gain for lowest risk. The people who take high-risks are the ones who get the highest gain, if their gamble pays off. The vast majority of people taking a high-risk position lose their money. But those few who make money are lauded for their market savvy even though it was probably just luck (or possibly insider knowledge or market manipulation). Economists know this, and so while they never get rich from investments, they rarely lose everything either.
Of course, there are ways to make a lot of money in the market with little risk. But economists are usually excluded from the micro-transaction game, or the insider trading game. Any economist which does get involved in those activities is not using their knowledge of economics.
Finally, what Dunc says @9 is absolutely true.
Don’t get me wrong. I think economists and economic theories are valuable and add a great deal to our understanding of both how the world operates and how to make changes to improve (or destroy) the world. But it is essentially a study of culture and mass psychology, so it is not, and probably will never be, as accurate as, say, astronomy.
@Marcus:
I actually have run into one case where a bug was the result of a C compiler failure. Avocet C compiler for the 8051; the second generation of 8051 processors had 256 bytes of RAM on board (first generation only had 128) and the upper 128 were ‘underneath’ some special purpose registers. Direct memory accesses went to the registers; indirect memory accesses went to the RAM. So it was perfect for stack, since that’s always indirect accesses. Except that if an array was allocated on the stack, any access to the array caused the C compiler to generate code which somehow ended up doing a direct access instead. So it worked if the stack was in the lower 128 bytes of RAM, but not the upper 128 bytes. That was not a fun thing to track down. (Nor was the case that interrupt handling on the 8051 didn’t save a particular special register by default, and that register was used for half of the result during a multiply operation. Which meant that doing a multiply in an interrupt routine could mess up the results of any other multiply in the code.)
@flex:
‘Applied Psychology’ is definitely a good description. (While I’d never used it for economics in general, I’ve commented to friends before that watching auctions in operation was always a fun example of applied psychology.)
The other annoying thing about this is the ones who get the highest ABSOLUTE gain are the ones who have pots of money to start with.
If I’ve got £100 to invest, well, OK then, I’m going low risk and I might make £5. Or I might go high risk and make £30. Or I might go silly and if I’m VERY LUCKY make £200, or £2,000. I still can’t buy even a fairly crappy car, even for the stupidly high risk return I get.
But if I’ve got £100 MILLION to invest… well sure, I’ll put a million of it in the high risk, and another million of it in the “silly”… and I’ve made a couple of billion if I’m lucky. And even if I’m unlucky, I’ve still got the £134 million…
(I’m reminded of a fictionalised scene in the movie “The Big Short”, where two characters Geller and Shipley take their £30 million to some investment bank to try to get them to take it for some deal or other, and rather than getting to have the meeting they think they have an appointment for, they’re met in the lobby by an intern who informs them that they’re short of the amount they’d need to even talk about the investment they’re wanting. When they ask “short by how much?”, the intern responds “one billion, nine hundred and seventy million dollars”, and shows them the door. )