Economics is pseudo-science

book smarts

1. Economic "cycles" aren't really cyclical. "Cyclical" implies well behaved and well understood, which they clearly aren't.
2 .It is based on blatantly false axioms such as "rational agents". People do not behave exactly as assumed.
3. Modern portfolio theory is wrong- it assumes Gaussian models which are false. The market is largely unpredictable. Yet "expert consultants" claim they can measure "risk"
4. The Nobel prize for economics is farcical. Economics is surrounded in jargon, false rigour and phony maths. It has scientific pretensions, but is not science. Nobel's family itself want it abolished.

So called "experts" such as Bernanke & co. merely postponed the recession, and made it worse, instead of embracing it, as recession is the "cure" to the present crisis. Bernanke himself studied the Great Depression intensely, and swore it would never happen again. And now look. I think Godel's theorem applies, those within a system can never look at the workings of the system objectively, because the attempt to do so alters the system.

Human behaviour is far more complex than economists and other social "scientists" would have us believe. What motivates our actions? Where do thoughts come from? These are philiosophical questions that I believe are so complex as to be unknowable. All that will happen is a new "school" of economics will be born, and the "experts" will think they know it all once again, and look back at this generation and laugh.

BenjAii

I don't think many economists actually claim economics is a science to be fair; it is widely recognised as one of the social sciences, more akin to sociology or anthropology.

As for "media economists" participating in the critical thinking free babble that passes for discourse in most of the mainstream media, well they are hardly alone in that.

While I agree a huge amount of discourse on economics is intellectually sub-standard (by that I mean fails to adhere to high standards of critical thinking) - you can hardly single out economists for failure in this sphere alone, it's endemic in public discourse.

asdasd

1. Economic "cycles" aren't really cyclical. "Cyclical" implies well behaved and well understood, which they clearly aren't.
2 .It is based on blatantly false axioms such as "rational agents". People do not behave exactly as assumed.
3. Modern portfolio theory is wrong- it assumes Gaussian models which are false. The market is largely unpredictable. Yet "expert consultants" claim they can measure "risk"
4. The Nobel prize for economics is farcical. Economics is surrounded in jargon, false rigour and phony maths. It has scientific pretensions, but is not science. Nobel's family itself want it abolished.

5. Cant predict recessions.
6. Has different long lasting "ideological" schools = monetarist, Keynsian, etc. which wax and wane subject to fashion. Some sciences have ideological schools when data is missing ( i.e. steady state vs big bang) but eventually one wins out.
7. Not very good at explaining depressions either, even in retrospect.
8. No real peer review, or penalty for bad economists. These are "pop" economists, seemingly.
9. Economists clearly are subject the bidding of their employer...

brianthebard

BenjAii wrote: »

I don't think many economists actually claim economics is a science to be fair

I've seen many people here refer to it as a science, but not relate it to the social sciences, which is as you say the group it belongs in. I don't think it deserves the title of science at all tbh.

asdasd

Better than Marxism though.


runs out of the thread.

brianthebard

Marxism is hardly a science.

10. It hasn't cured cancer.
11. Modern Portfolio Theory has not advanced in the slightest since the 1960's. The efficient market hypothesis, possibly the most prominent theory in financial economics, states markets should be completely predictable.
12. Theories should be judged by the accuracy of their assumptions not their predictions.
13. It uses lots of maths. I'm bad at maths, therefore economics sucks. Maths is just a way to cloud reasoning and make assumptions as vague as possible.
14. No issue has ever been settled in economics. None. Ever.
15. Economists are secretly auctioned off to big corporations. There is no system of tenure to maintain academic integrity.
16. There is no such thing as microeconomics
17. My arbitrary of definition of what a cycle is 100% accurate.

brianthebard

17. Development is muck.

leninbenjamin

brianthebard wrote: »

Marxism is hardly a science.

Marxism as originally conceived by Karl Marx is as much as a science as the classical economics, Marx was a classical economist in pretty much every sense of the definition.

The bastardized version of 'Marxism' we see bandied about today though is completely different and frequently at odds with Marx's original ideals.

Just though I'd clarify that, I hate how people whitewash over Marxism without actually knowing what it actually is from an economic sense. In fact we can probably thank Marxism for much of today's neo-classical economics. Much of the General theory ideas were 'borrowed' from Kalecki, a guy the bulk of who's ideas were heavily inspired by the works of Marx.

For those not familiar with the tale, Kalecki never published in English, hence doesn't get his fair dues, particularly within Neo-Classical circles. but quite frankly the Keynesian revolution would never have happened without his ideas.

(sidenote: a lecturer of mine who studied (i think) under Joan Robinson at one stage is adamant that Marx was all he had read when he concieved his early works, dunno how accurate that is. He also went onto say that Kalecki originally sent his papers to Keynes in the hope of getting help to publish an English translation of them, but that Keynes completely blanked him until the General Theory was published or something. All from the mouth of Robinson supposedly, take that with as many spoons of salt as you like).

asdasd

13. It uses lots of maths. I'm bad at maths, therefore economics sucks. Maths is just a way to cloud reasoning and make assumptions as vague as possible.

Im pretty ace at maths. The simple equations of economics are hardly even hard sums.

Yet economics is still bollocks. It lacks predictive power. We may as well ask an astrologer to predict the next recession.

asdasd

Marxism as originally conceived by Karl Marx is as much as a science as the classical economics, Marx was a classical economist in pretty much every sense of the definition.

What exactly? He didnt invent the labour theory of value ( which is bollocks anyway), so what actual axioms of classical economics did he contribute to?

Économiste Monétaire

asdasd wrote: »

What exactly? He didnt invent the labour theory of value ( which is bollocks anyway), so what actual axioms of classical economics did he contribute to?

There is no one labour theory of value. Marx took the classical view and believed there was a better and more efficient alternative. Marx was wrong on certain accounts, especially the paradox of rising organic composition of capital and lowering of the standards of living. His 'values' of an economy were that which is socially necessary to produce it, in an attempt to show workers where they are being exploited. Marx never intended his work, especially Capital, as a blueprint of the future.

Edit: Just because I love this piece about Marx on capitalism, I need to quote it:
"The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization. The cheap prices of commodities are the heavy artillery with which it forces the barbarians' intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

The bourgeoisie has subjected the country to the rule of the towns. It has created enormous cities, has greatly increased the urban population as compared with the rural, and has thus rescued a considerable part of the population from the idiocy of rural life."

cavedave

book smarts

I think Godel's theorem applies, those within a system can never look at the workings of the system objectively, because the attempt to do so alters the system.

That is not Gödel's Theorem IMHO. We cannot solve Schrödinger's equation for more than one particle for reasons similar to what you imply.

3. Modern portfolio theory is wrong- it assumes Gaussian models which are false.

I believe this to be true. The probabilities seem to follow power laws rather than be Gaussian.

Bernanke himself studied the Great Depression intensely, and swore it would never happen again. And now look.

Nothing like the great depression has happened again

Human behaviour is far more complex than economists and other social "scientists" would have us believe.

In many ways it is much less complex. The continued existence of actuaries seems to indicate we are on average fairly predictable. Now the market we create seems to be otherwise. Unless you say the Austrian school correctly predicted the current problems.

book smarts

cavedave wrote: »

That is not Gödel's Theorem IMHO. We cannot solve Schrödinger's equation for more than one particle for reasons similar to what you imply.

Not Godels theorem exactly, but an analogous argument.
I

cavedave wrote: »

Nothing like the great depression has happened again

Great Depression 2 hasn't happened yet, but there are parallels between our present situation and the 1920's US.

cavedave wrote: »

In many ways it is much less complex. The continued existence of actuaries seems to indicate we are on average fairly predictable. Now the market we create seems to be otherwise. Unless you say the Austrian school correctly predicted the current problems.

But actuaries cannot predict extreme events. It's easy to apply models in hindsight and claim predictablility. The future is unknowable.

cavedave

Great Depression 2 hasn't happened yet, but there are parallels between our present situation and the 1920's US.

The Panic of 1873 also has parallels.

But actuaries cannot predict extreme events. It's easy to apply models in hindsight and claim predictablility. The future is unknowable.

Predicting the future does seem much more difficult then predicting the past alright... In fairness some people did predict these events. Some even made money on it

While im throwing out links "The Economist Has No Clothes"

Flamed Diving

No less a science than astronomy, imo.

brianthebard

leninbenjamin wrote: »

Marxism as originally conceived by Karl Marx is as much as a science as the classical economics, Marx was a classical economist in pretty much every sense of the definition.

Not sure how Marx would feel about you calling him and economist? Besides, since the thread has already established that economics is a pseudo science, that makes Marxism one as well, or not a science at all.

UCD_Econ wrote: »

There is no one labour theory of value. Marx took the classical view and believed there was a better and more efficient alternative. Marx was wrong on certain accounts, especially the paradox of rising organic composition of capital and lowering of the standards of living.

Could you elaborate on this?

Edit: Just because I love this piece about Marx on capitalism, I need to quote it:
"The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization. The cheap prices of commodities are the heavy artillery with which it forces the barbarians' intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.

The bourgeoisie has subjected the country to the rule of the towns. It has created enormous cities, has greatly increased the urban population as compared with the rural, and has thus rescued a considerable part of the population from the idiocy of rural life."

What is it about this quote you like so much?

Économiste Monétaire

brianthebard wrote: »

Could you elaborate on this?

Sure. Assuming you have some knowledge of a basic input output model, and transposing it to 'Marxian values', I'll skip an example.

Marx wrote the rate of profit as S/(C+V); with S being surplus (what the capitalist receives after paying workers V), V being the variable capital used in production, and C being the constant capital used. Dividing everything by V we get: (S/V)/[(C/V)+(V/V)] = (S/V)/[(C/V) + 1]

The organic composition of capital is the ratio between C and V, C/V. He argued that this would increase over time, and that if the rate of exploitation being S/V would remain constant, the rate of profit must fall. He projected that there would be downward pressure on wages and that because the rate of profit would fall over time, eventually the capitalist system would collapse because the marginal returns for the capitalists would be lower than the cost. They would stop investing in the economy and the ability for the capitalist economy to have another 'revolution' would cease.

But, if C/V were to rise, it means that productivity must rise, leading to an increase in the standard of living which is against his idea that the standard of living would fall. For capitalists to keep the same rate of profit they would need to increase exploitation (S/V) to match the increasing capital deepening, which he was wary of. There's a fairly large amount of literature about whether he was right or wrong in his assertions; I follow the view that he was wrong, but I'm no expert on Marxian economics.

brianthebard wrote: »

What is it about this quote you like so much?

For two reasons, it shows Marx in some form of praise for capitalism, and it's a beautifully constructed piece of literature.

brianthebard

Why do you believe he was wrong? It appears to be backed up by figures of world distribution of income?

As for praise of capitalism, its a misconception that he was totally against it; like a lot of people he saw/sees development as linear. Capitalism is the last stage before socialism, therefore necessary. He often had quite good things to say about it (read his letters on India for instance) which can lead to confusion and dismissals as ethnocentric when that's not quite the case (or its not as clear cut as that). And yeah, he done wrote good.

leninbenjamin

brianthebard wrote: »

Not sure how Marx would feel about you calling him and economist?

ummm... everything I've read on the man has suggested he considered himself to be a classical economist. do you have any literature to suggest otherwise?

brianthebard wrote: »

Why do you believe he was wrong?

at the very simplistic level, he failed to take technological changes which increase productivity into account. he assumed the productivity of all workers would remain constant.

brianthebard

Read a piece tonight where he was quite disparaging of economists, but it was only a throw away insult directed at somewhere else, and I'm too tired to dig it up now...

Productivity of the workers does remain constant though? If a technological means increases production not the worker.

Thomas_S_Hunterson

Economics is an extremely soft science imo.

The mathematics used is really only to give it a semblance of credibility and should not be taken seriously.

If you look at something like risk managment. A whole industry has emerged with consultants swarming around companies claiming to be the best. At the end of the day, all it really teaches is diversification. The maths is just to make it look complicated and keep the consultants employed.

Now this isn't an attach on economics, rather an attack on usage of maths inappropriately. You should not realy be taking mathematical models seriously when you can't possibly hope to discover all the parameters.

BenjAii

Going back to the original issue.

I would be interested to hear what people think is best practice from a critical thinking point of view, in dealing with economic discussions.

As he have established it is not a science and that most of its "facts" are variable or have questions of uncertainty, how do you treat the constant element of uncertainty and yet make useful theories ? How do you compare them to others ?

I think this lies at the root of the problem of why I personally have always found so many people who present themselves as authoritative on economic issues as lacking in credibility.

If they aren't obfuscating behind a pseudo-scientific front, they are presenting what can never be more than theory, as "proof" in logically constructed arguments built on feet of clay that render them invalid.

brianthebard

Wallerstein suggests combining all the social sciences into what he calls the historical social sciences-amalgamate all the departments and see what happens. Not a perfect plan by any means, but a start.

Thomas_S_Hunterson

BenjAii wrote: »

Going back to the original issue.

I would be interested to hear what people think is best practice from a critical thinking point of view, in dealing with economic discussions.

As he have established it is not a science and that most of its "facts" are variable or have questions of uncertainty, how do you treat the constant element of uncertainty and yet make useful theories ? How do you compare them to others ?

I think this lies at the root of the problem of why I personally have always found so many people who present themselves as authoritative on economic issues as lacking in credibility.

If they aren't obfuscating behind a pseudo-scientific front, they are presenting what can never be more than theory, as "proof" in logically constructed arguments built on feet of clay that render them invalid.

I think economics should focus on the nature and direction of relationships rather than trying to build models which throw out numbers of ten 'significant' digits.

leninbenjamin

brianthebard wrote: »

Productivity of the workers does remain constant though? If a technological means increases production not the worker.

Jesus, what planet are you on?

ever hear of a little thing called the microchip? a bunch of transistors embedded in some silicon....

Sean_K wrote: »

I think economics should focus on the nature and direction of relationships rather than trying to build models which throw out numbers of ten 'significant' digits.

God no, have you ever read any of those who attempt to do just that? it's absolute horsesh*te based on their own perceptions and much less useful than the current limited state of economics.

if anything economics should look to the computer sciences to see how they attempt to deal with modelling a system of near unlimited unknowns. Physics simulation has made more strides in the last 20 years than the entire discipline of economics for the past century imo.

BenjAii

Sean_K wrote: »

I think economics should focus on the nature and direction of relationships

Well in essence, it already does that. All economic transactions imply a relationship between the parties involved.

That doesn't solve the problem I was talking about though.

Given the huge complexity of the planets economic activity, how best and to what degree can you establish "fact" with credibility and with an eye to critical thinking have discussions on theory, whilst dealing with the uncertainty and complexity.

Allowing for the additional problem, that the majority of economic arguments most people are exposed to that are presented as "fact" throughout their lifetime are usually manipulated by someone with a political axe to grind, yet another element in preventing people hearing logical arguments presented truthfully when it comes to economics.

leninbenjamin

BenjAii wrote: »

Allowing for the additional problem, that the majority of economic arguments most people are exposed to that are presented as "fact" throughout their lifetime are usually manipulated by someone with a political axe to grind, yet another element in preventing people hearing logical arguments presented truthfully when it comes to economics.

speaking of the 'facts', anyone here ever read 'Debunking Economics' by Steve Keen? bit pop-economics in parts perhaps but really is an eye opener in places at how ludacrous parts of the Neo-Classical framework is.

Économiste Monétaire

brianthebard wrote: »

Why do you believe he was wrong? It appears to be backed up by figures of world distribution of income?

As for praise of capitalism, its a misconception that he was totally against it; like a lot of people he saw/sees development as linear. Capitalism is the last stage before socialism, therefore necessary. He often had quite good things to say about it (read his letters on India for instance) which can lead to confusion and dismissals as ethnocentric when that's not quite the case (or its not as clear cut as that). And yeah, he done wrote good.

His case was based on the momentary socialist revolution in the United Kingdom (or Germany, etc). Have standards of living fallen in the developed world? Has their been an 'army of unskilled labour' (China ) in the developed world? Has there been a move towards complete monopolisation of industries? Has the rate of profit fallen? Has the capitalist system collapsed? Can one effectively measure Marxian values of an economy (didn't the Soviet Union effectively stop attempting this in the 1950s)? Has there been widespread de-skilling of labour in the economy?

I would say no to those counts. He had an inability to see the gains from an increase in productivity (technology), just like Malthus didn't fully realise that in his assertions, too. He also underestimated the problems with a planned economy.

But, I do agree his stance on capitalism is missunderstood. As it was once described to me, 'capitalism delivers the goods'. Marx simply thought there was a better, so to speak, path. He was right on his greater economic stability assumption vis-a-vis Marxian business cycle. I have read one of his letters from the New York Daily Tribune about India, it was amusing to read Marx almost in favour of imperialism

brianthebard

UCD_Econ wrote: »

His case was based on the momentary socialist revolution in the United Kingdom (or Germany, etc). Have standards of living fallen in the developed world? Has their been an 'army of unskilled labour' (China ) in the developed world? Has there been a move towards complete monopolisation of industries? Has the rate of profit fallen? Has the capitalist system collapsed? Can one effectively measure Marxian values of an economy (didn't the Soviet Union effectively stop attempting this in the 1950s)? Has there been widespread de-skilling of labour in the economy?

It doesn't make sense to measure "development" in single countries, you have to take the world economy as a whole. In which case yes standards have fallen. In the late 1970s the top 40% of the worlds population held 75%-ish of the world's income; in 1999 the top 40% held 94%-ish. When marxists talk about monopoly they include oligopoly-I can't say for sure that's what Marx had in mind, but either way the answer to your monopolisation question is generally yes. Has the capitalist system collapsed? You really want me to answer that question??? What do you mean by rate of profit exactly?

But, I do agree his stance on capitalism is missunderstood. As it was once described to me, 'capitalism delivers the goods'. Marx simply thought there was a better, so to speak, path. He was right on his greater economic stability assumption vis-a-vis Marxian business cycle. I have read one of his letters from the New York Daily Tribune about India, it was amusing to read Marx almost in favour of imperialism

According to some, imperialism is merely the highest form/state of capitalism. If you read the second letter of the two from the NYDT you'll see how he outlines how imperialism in India will give rise to revolution. If Marx is in favour of capitalism (and he must be, because he views history as stagiest) then he is in favour of imperialism. This isn't a moral issue as some would see it though, hence they become confused.

asdasd

In which case yes standards have fallen. In the late 1970s the top 40% of the worlds population held 75%-ish of the world's income; in 1999 the top 40% held 94%-ish.

Wrong. Even if the pecentages were true you wouldnt know anything about how standards of living were falling or increasing unless you know the full per-capita worrld income. World dgp is increasing at 5% y-o-y and most of it is going to China, India and other developing countries. ( China being a good example of a country that was piss poor under communism and abut 10,000% richer - per capita - under capitalism).

And even were it true that isnt what Marx claimed. he was talking about the capitalist class exploiting the proles, he has a "scientific" mechanism for this - the expropriation of surplus value ( i.e. profit). Since most people in "rich" countries are workers this cant apply.

According to some, imperialism is merely the highest form/state of capitalism.

That would be Lenin who ran an Empire for a while, ignoring the fact that Empires existed prior to capitalism. But he wasnt very bright.