Inside Job - Are economists part of the problem

fred252

watched this documentary about the financial crisis yesterday and the section on accountability suggested that economists, specifically academic economists in the states with high paying consulting roles in the financial services industry, were a big part of the problem.

one of the suggested culprits was Glenn Hubbard, dean of Columbia Business School. it refers to a paper he co-authored in 2004;

http://jobfunctions.bnet.com/abstract.aspx?docid=156182&promo=100511&tag=bn-left

which praises securitization and the rise of credit derivatives (particularly credit default swaps), saying that they have increased economic growth, reduced systemic risks, and reduced both the size and duration of recessions.

the documentary hints he may have received payments from goldman sachs for this and other work. either way it seems ethically poor that many payments to economists and the conflicts of interest they generate are rarely disclosed.

some other economists were targeted in this section. Frederic Mishkin and Richard Portes were commisioned by the Icelandic Chamber of Commerce to write papers on the state of the icelandic ecomony. both wrote glowing reviews and got paid handsomely. it also pointed out how Mishkin's C.V.'s reference to the report changed from “Financial Stability in Iceland.” to “Financial Instability in Iceland.” he really was stitched up.

the scary thing for me is that if these guys are the heads of renowned academic institutions then what sort of phd economists are they producing?? presumably ones that are unlikely to upset the apple cart with theories contrary to the current short term targets of the financial big guns. if this is the case it seems the conflict of interest begins in the universities... in the u.s. at least

Amhran Nua

Noted economist Brian Lucey has been rowing back his contributions to the Irish Economy blog lately after he attracted some flak for having released an "all is well little people" report on the propery market and the economy back in 2006. I believe the term "mercenary" was mentioned numerous times, winceworthy stuff.

Another well known economist, Constantin Gurdgiev, went completely contrary to his Libertarian roots and posturings with that hat-in-hand-to-the-taxpayers-because-I-bought-a-mortgage-I-couldn't-afford stunt going under the title "an economic good news story", along with numerous other signatories, losing any credibility he might have had in the process.

It's hard to know who to believe these days. Better figure it out for yourself!

hinault

I always had my doubts about Dan McLoughlin at BOI:D

Bullseye1

hinault wrote: »

I always had my doubts about Dan McLoughlin at BOI:D

The guy was on every week or so saying everything was okay and that we would have a soft landing.:rolleyes:

hinault

Bullseye1 wrote: »

The guy was on every week or so saying everything was okay and that we would have a soft landing.:rolleyes:

It was Comical Ali stuff.

Bullseye1

How can their senior economist have gotten it so badly wrong. Jez.

acer1000

hinault wrote: »

I always had my doubts about Dan McLoughlin at BOI:D

FFS, Does anybody else think that guy looks like a criminal? No fancy accent could make up for his looks. Not the look of a guy, you could trust.

andrew

Saying it was an inside job implies that these economists knew at the time that what they were writing was wrong. I think in some cases it might be less sinister, in that they genuinely thought that they were correct at the time. However, as this RTE clip shows, in Ireland at least the government were given a fair warning by economists, but just ignored it.

https://www.youtube.com/watch?v=THWbrFy5NWM

edit: Watching this again, the stuff Mary Harney is quoted as saying at the end is truely cringeworthy, from an economic perspective.

silverharp

Francis Ruance of the ERSI in Jan 08 , she couldnt tell that the titanic had hit an iceberg, even though by looking at the US there had been an implosion of subprime by then. Maybe if economists had economic history as an essential part of their work they might get somewhere, otherwise their macro views can only cause confusion and only work if there are no fat tails.


10th January 2008

http://www.daft.ie/report/frances-ruane

Interest rates and job prospects hold key to buyer confidence
What of the prospects for 2008 and beyond? To the extent that the recent changes in stamp duty are seen as reducing uncertainty, they should lead to increased confidence. Economic growth rates will be lower than in previous years but not low relative to the rest of the EU, and taken with the growth in the population seeking housing should have a positive effect on demand. The labour market is forecast to show slowly in 2008, with both incomes and employment rising but at a much slower rate than in recent years. On the other side, threats of increases in the ECB rate have not gone away, and this will lead buyers to be cautious. Furthermore, buyers may be affected by the credit tightening as banks seek to strengthen their loan portfolios. In terms of market prices and volumes, the behaviour of builders and developers in releasing stocks for sale will also be important in certain parts of the market. The ESRI's Winter Quarterly Economic Commentary anticipates that house prices will stabilise during 2008. While many factors influencing the housing market remain positive, it is the level of confidence felt by consumers feel over the course of the year that will be crucial in determining the final outcome.

later12

It's quite incorrect to simply suggest that 'economists are part of the problem'. An economist's advice is only as influential as the receiving party allows it to be. The receiving party should always be mindful of the fact that economics, especially macroeconomics, is rarely an exact science, and that great dissemblance of opinion is rather frequent.

A good economist is always in doubt, always conflicted; he never pretends to know all of the answers. He can only hope to test his models with empirical or experimental data and advance it on that basis, aware that aberrations can occur.
For example, many theories that have been put forward rest on the assumption that people will make rational choices. When there is a bifurcation in a population's mentality, and logic goes one way and the people go another way, then how might this be accounted for? You cannot judge the irrational by the rational.

All that I can see in this thread is the manifestation of this. it isn't quite fair to say that economists are part of the problem, but certainly, only listening to one side of a logical debate, or putting all of your eggs in one economics basket, is a huge part.

fred252

later10 wrote: »

It's quite incorrect to simply suggest that 'economists are part of the problem'. An economist's advice is only as influential as the receiving party allows it to be. The receiving party should always be mindful of the fact that economics, especially macroeconomics, is rarely an exact science, and that great dissemblance of opinion is rather frequent.

A good economist is always in doubt, always conflicted; he never pretends to know all of the answers. He can only hope to test his models with empirical or experimental data and advance it on that basis, aware that aberrations can occur.
For example, many theories that have been put forward rest on the assumption that people will make rational choices. When there is a bifurcation in a population's mentality, and logic goes one way and the people go another way, then how might this be accounted for? You cannot judge the irrational by the rational.

All that I can see in this thread is the manifestation of this. it isn't quite fair to say that economists are part of the problem, but certainly, only listening to one side of a logical debate, or putting all of your eggs in one economics basket, is a huge part.

thanks but can you more specifically address the points raised in the documentary as decribed above?

i find it rather disturbing that guys like those are in such influential positions when it comes to teaching the "discipline", for want of a better word.

hinault

later10 wrote: »

It's quite incorrect to simply suggest that 'economists are part of the problem'. An economist's advice is only as influential as the receiving party allows it to be. The receiving party should always be mindful of the fact that economics, especially macroeconomics, is rarely an exact science, and that great dissemblance of opinion is rather frequent.

A good economist is always in doubt, always conflicted; he never pretends to know all of the answers. He can only hope to test his models with empirical or experimental data and advance it on that basis, aware that aberrations can occur.
For example, many theories that have been put forward rest on the assumption that people will make rational choices. When there is a bifurcation in a population's mentality, and logic goes one way and the people go another way, then how might this be accounted for? You cannot judge the irrational by the rational.

All that I can see in this thread is the manifestation of this. it isn't quite fair to say that economists are part of the problem, but certainly, only listening to one side of a logical debate, or putting all of your eggs in one economics basket, is a huge part.

Given that these economists had access to empirical data, unlike most of the citizens of this country, this makes their culpability all the more compelling.

later12

fred252 wrote: »

thanks but can you more specifically address the points raised in the documentary as decribed above?

i find it rather disturbing that guys like those are in such influential positions when it comes to teaching the "discipline", for want of a better word.

Well this is why, in economic research, refereeing of work is carried out by peer review in order to establish its repute. The reviewers will establish the reliability of the methodology employed by the researchers in question and examine any theoretical underpinning of the work, to ensure it is not ideologically driven or motivated by bias.

The article you linked to is not really a scholarly paper; it was commissioned and published by Goldman Sachs, co-authored with a GS Cheif Economist. So hopefully anybody reading it is aware to take all of that into account, and understand that it must be suspected of carrying an acute bias.

Your issue, understandably, seems to arise in light of the fact this this guy is the Dean of Columbia Business School. I would suspect that this 'conflict of interest' question would arise much more frequently in the US than in western Europe, given our tendency to focus heavily on state support for research than private industry and our relative transparency in disclosure. As the research industry develops, particularly in Ireland, this may become more of an issue.

At the end of the day, however, it is up to individual universities and business schools, and their boards, to ensure that their academic staff are executing their duties without displaying favour to particular methodologies or models for personal gain.

later12

hinault wrote: »

Given that these economists had access to empirical data, unlike most of the citizens of this country, this makes their culpability all the more compelling.

I'm not sure what empirical data you are referring to that was not publicly available? And like I said, this data can generally only be used to construct or test individual models, one can rarely predict an aberration or departures from logical behaviour.

fred252

later10 wrote: »

Well this is why, in economic research, refereeing of work is carried out by peer review in order to establish its repute. The reviewers will establish the reliability of the methodology employed by the researchers in question and examine any theoretical underpinning of the work, to ensure it is not ideologically driven or motivated by bias.

The article you linked to is not really a scholarly paper; it was commissioned and published by Goldman Sachs, co-authored with a GS Cheif Economist. So hopefully anybody reading it is aware to take all of that into account, and understand that it must be suspected of carrying an acute bias.

Your issue, understandably, seems to arise in light of the fact this this guy is the Dean of Columbia Business School. I would suspect that this 'conflict of interest' question would arise much more frequently in the US than in western Europe, given our tendency to focus heavily on state support for research than private industry and our relative transparency in disclosure. As the research industry develops, particularly in Ireland, this may become more of an issue.

At the end of the day, however, it is up to individual universities and business schools, and their boards, to ensure that their academic staff are executing their duties without displaying favour to particular methodologies or models for personal gain.

so those types of papers are aimed at investors? and presumably these investors don't establish the reliability of the methodology employed by the researchers in question or examine any theoretical underpinning of the work?

tayto lover

hinault wrote: »

Given that these economists had access to empirical data, unlike most of the citizens of this country, this makes their culpability all the more compelling.

How many of them were sacked for getting it all wrong ? Would i be right in saying none ? How many of them are still in the same roles ?

hinault

later10 wrote: »

I'm not sure what empirical data you are referring to that was not publicly available? And like I said, this data can generally only be used to construct or test individual models, one can rarely predict an aberration or departures from logical behaviour.

What I am suggesting is that even with access to empirical data, many Irish economists were still insisting that everything was kosher during "the boom".

later12

hinault wrote: »

What I am suggesting is that even with access to empirical data, many Irish economists were still insisting that everything was kosher during "the boom".

I presume you mean 'some' empirical data. Perhaps if they had access to the banks, which were then in private ownership and in many respects 'none of our business', the situation would have been different. You can only ever work with the information before you.

later12

fred252 wrote: »

so those types of papers are aimed at investors?

Those commissioned and printed by Goldman Sachs? yes.

and presumably these investors don't establish the reliability of the methodology employed by the researchers in question or examine any theoretical underpinning of the work?

Economist or not, anybody with some basic common sense knows how to discern between factual research and advertising. And most people also know enough to be aware that sound research should always be backed up, where possible, by more than one academic paper.

The thing is that private business, thankfully, does not operate based on academic thought! There is a reason why private enterprise makes more money than academic institutions.

hinault

later10 wrote: »

I presume you mean 'some' empirical data. Perhaps if they had access to the banks, which were then in private ownership and in many respects 'none of our business', the situation would have been different. You can only ever work with the information before you.

I agree with you that you can only work with the data which is available to you.

However, I still contend that many economists failed to rock the boat.
For example, the increase in the levels of public expenditure between 2000 and 2007.
Few economists tested the issue of why total government expenditure had doubled during this period.
That's just one example.

CrackisWhack

In relation to Irish Economists

I remember between 2005 -2007 discussing things with friends(mostly recent graduates) and talking about how we couldn't even afford to rent in Dublin and that something had to give, none of us were economists.

The facts were there:

-We took in a large amount of immigrants(lots of construction workers)
-Built houses like there was no tomorrow(In the main part to rent to construction workers)
-Once we reached a surplus(along with effects of global recession) The work dried up, huge losses in property tax aswell as PAYE etc.

I can't believe that wasn't forseen by these "experts". It wasn't sustainable.

later12

Of course it was predicted, what wasn't foreseen was the instability of the banking sector and the wider crisis as aggravating effects. It was thought to have been much more resilient than it turned out to be. Almost everybody presumed that the banking sector would withstand the shock.

Ireland entered the perfect storm of having a property bubble, an unstable banking system, and an international credit (and wider financial) crisis. The first was foreseen, although the rate and magnitude of its decline was hard to assess; the latter two were highly, highly difficult to assess. I don't know if you and your friends managed to assess those.

hinault

later10 wrote: »

Of course it was predicted,

Predicted by who?

I remember McWilliams in 2004/5 making the case that if we're not careful Ireland will end up with a property crash.
I can't rcall many other economists supporting that view.

I do remember several Irish economists suggesting that everything was fine.
And even when circumstances began to change they were still insisting on soft landings.

Delusional stuff.

CrackisWhack

later10 wrote: »

Of course it was predicted, what wasn't foreseen was the instability of the banking sector and the wider crisis as aggravating effects. It was thought to have been much more resilient than it turned out to be. Almost everybody presumed that the banking sector would withstand the shock.

Ireland entered the perfect storm of having a property bubble, an unstable banking system, and an international credit (and wider financial) crisis. The first was foreseen, although the rate and magnitude of its decline was hard to assess; the latter two were highly, highly difficult to assess. I don't know if you and your friends managed to assess those.

No we didn't assess those, as I said we were certainly no economists, but it was clear to see it wasn't sustainable. Obviously the banks shouldn't have been giving out 100% mortgages on these houses or loans to developers for housing estates in the middle of nowhere.

Also the planning authority should be strung up for granting licenses for many of theses estates.

Alot of people got very rich out of this though, but even more have suffered. I can't help but feel as if our situation here has been overcomplicated by politicians, bankers and developers to save a few red faces, because to me it seems like a more simple one.

Just my opinion though.

later12

hinault wrote: »

Predicted by who?

Many economists predicted the property bubble would end. In fact I can't think of any who maintained the opposite. However, what was highly difficult to establish was the state of the banks, their response, and the co-incidence that a world wide credit catastrophe would occur simultaneously. I have yet to be shown any evidence as to how the popularly disliked 'soft landing' was impossible in the absence of an unstable banking system (as per the regulator's reports, which had to be taken on face value) and the absence of worldwide crisis.

hinault

later10 wrote: »

Many economists predicted the property bubble would end.

I'll ask you again, who predicted this?

I said earlier, McWilliams is the only one I can recall from 2004/5 period who called the property bubble.
I remember it because he cited the example of north east USA and it's property bubble in the late 1980's and the fallout which resulted from that bubble.

later10 wrote: »

I have yet to be shown any evidence as to how the popularly disliked 'soft landing' was impossible in the absence of an unstable banking system (as per the regulator's reports, which had to be taken on face value) and the absence of worldwide crisis.

:D:D

I bought my house in 1992 for €62k. In 2006, my neighbours house which is exactly the same as mine sold for €690k.
I let you do the maths.:rolleyes:

later12

hinault wrote: »

I'll ask you again, who predicted this?

Come now,
http://www.rte.ie/news/2004/0421/housing-business.html
http://www.thepost.ie/archives/2005/1009/we-are-on-our-own-if-the-bubble-bursts-8640.html
I'm not google, this is well established.

What is not established is that things would go so badly as they did - that the banks were far less stable that the regulator was saying, than credit agencies said, and that a worldwide credit crunch would arise simultaneously with our bubble bursting. This was nor known, difficult to assess, and if it had not been the case, our situation would be much less serious - you cannot really be arguing against that?

hinault

later10 wrote: »

Come now,
http://www.rte.ie/news/2004/0421/housing-business.html
http://www.thepost.ie/archives/2005/1009/we-are-on-our-own-if-the-bubble-bursts-8640.html
I'm not google, this is well established.

You linked one report from the IMF:o
The other link is Alan Ahearne, so credit where it's due.

My point was that many Irish economists failed to raise the issue of the stability of Irelands economy.
The likes of Jim Power, Dan McLoughlin and Austin Hughes were telling us everything was kosher.

later10 wrote: »

What is not established is that things would go so badly as they did - that the banks were far less stable that the regulator was saying, than credit agencies said, and that a worldwide credit crunch would arise simultaneously with our bubble bursting. This was nor known, difficult to assess, and if it had not been the case, our situation would be much less serious - you cannot really be arguing against that?

Our problems have been a result of our own incompetence, illegality and sheer
recklessness.
And groupthink.

You suggested that Irish economists had access to empirical data.
I suggested even with access to this data, Irish economists ignored the doubling of Irish government expenditure, the unlimited issuance of credit by Irish lending institutions etc.

later12

hinault wrote: »

You linked one report from the IMF:o

Eh, so?

My point was that many Irish economists failed to raise the issue of the stability of Irelands economy.

No it wasn't. You asked me who predicted the property bubble existed or could burst. I pointed to two examples, others would include George Lee, Morgan Kelly, and Karl Whelan.

The problem is that what they did not foresee - and in my opinion, could not have realistically been able to assess - was the fundamental stability of the banks outside of what the regulator was reporting. Nor could they have definitively predicted the onset of the global credit crunch. Ireland entered a perfect storm, things got worse than had been anticipated. Like I said, you can only work with the data before you. Simple.

Our problems have been a result of our own incompetence, illegality and sheer
recklessness.
And groupthink.

Illegality?

You suggested that Irish economists had access to empirical data.
I suggested even with access to this data, Irish economists ignored the doubling of Irish government expenditure, the unlimited issuance of credit by Irish lending institutions etc.

Without knowing that a credit crunch was coming, and that this would aggravate the Irish economy's decline, without being able to disprove the regulator's reports, what would you have had them do?

hinault

later10 wrote: »

Eh, so?
No it wasn't. You asked me who predicted the property bubble existed or could burst. I pointed to two examples, others would include George Lee, Morgan Kelly, and Karl Whelan.

You cited two links.
One link was from the IMF:D and the other link was from Alan Ahearn.

I asked you to show me instances of IRISH economists who called the property bubble during "the boom".
I can only recall McWilliams doing so in 2004/5, as stated earlier.

In fairness to Morgan Kelly he did call the bubble later.

later10 wrote: »

Eh, so?
The problem is that what they did not foresee - and in my opinion, could not have realistically been able to assess - was the fundamental stability of the banks outside of what the regulator was reporting. Nor could they have definitively predicted the onset of the global credit crunch. Ireland entered a perfect storm, things got worse than had been anticipated. Like I said, you can only work with the data before you. Simple.

That's bull****.

For the umpteenth time, you said that several Irish economists predicted the property bubble.
I contended that they didn't.
I suggested that even with access to empirical data, many Irish economists not only failed to call the property bubble, they continued to say that everything was kosher even when the bubble started to implode!

On the wider issue of the economy, the same economists who buried their heads in the sand refused to test the basis of why government expenditure doubled between 2000-2007, why land prices were increasing expotentially, why credit was being issued at exorbitant rates...................
Few, if any, Irish economists questioned what was happening here.

later12

hinault wrote: »

You cited two links.
One link was from the IMF:D

What's with the emoticons?

and the other link was from Alan Ahearn.

I asked you to show me instances of IRISH economists who called the property bubble during "the boom".
I can only recall McWilliams doing so in 2004/5, as stated earlier.

In fairness to Morgan Kelly he did call the bubble later.

Sorry, I've provided you with at least two other names as well as Alan Ahearne and the IMF, I can't help it if you choose to ignore this information. Nor do I see the particular relevance of the economist being of an Irish nationality, but whatever floats your boat.

That's bull****.

For the umpteenth time, you said that several Irish economists predicted the property bubble.
I contended that they didn't.

Then you're wrong. Sorry, read previous posts above.

Rockshamrover

Economists were part of the problem because people "Assumed" these guys knew what they were talking about. Lots of people acted on their advise "assuming" that their years of training and experience was used in making and arriving at their conclusions about the state of the economy at the time.

They were paid handsome salaries for their "expertise", and still are.

The fact that so many of them got it so wrong and are still in their jobs is, to say the least, worrying.

fred252

later10 wrote: »

What's with the emoticons?

Sorry, I've provided you with at least two other names as well as Alan Ahearne and the IMF, I can't help it if you choose to ignore this information. Nor do I see the particular relevance of the economist being of an Irish nationality, but whatever floats your boat.
Then you're wrong. Sorry, read previous posts above.

i assume he's more referring to the relative ratio of those who didn't foresee the impending doom versus those who did. probably something like 99:1. of course there are examples either side but its the lobsided ratio thats the issue.

you're correct nationality is not so important, although you'd hope irish economists would have a better handle on the irish economy than ones not based in ireland.

hinault

later10 wrote: »

Sorry, I've provided you with at least two other names as well as Alan Ahearne and the IMF, I can't help it if you choose to ignore this information.

Once again.
You claimed that many economists predicted the property bubble.
I disputed this and I stated that even though many IRISH economists had access to empirical data they failed to call it.

I asked you to tell me which Irish economists predicted the Irish property bubble and you posted the following reply showing a report from the IMF and a report from Alan Ahearn.

later10 wrote: »

Come now,
http://www.rte.ie/news/2004/0421/housing-business.html
http://www.thepost.ie/archives/2005/1009/we-are-on-our-own-if-the-bubble-bursts-8640.html
I'm not google, this is well established.

Many Irish economists failed to call the property bubble. As they failed to question why/how land prices were rising inexorably, why/how government expenditure doubled between 2000-2007, why/how thousands of houses/apartments were being built and why/how credit was being issued at an exorbitant rate.

later10 wrote: »

Nor do I see the particular relevance of the economist being of an Irish nationality, but whatever floats your boat.
Then you're wrong. Sorry, read previous posts above.

Clearly you don't see the relevance of Irish economists failing to give accurate
assessment of the Irish economy and the Irish property bubble.:D

You stated that Irish economists predicted the property bubble. They didn't. Many of them were cheerleaders for "the boom".
In that regard Irish economists were/are part of the Irish economic problem.

later12

... youre right.

macannrb

it was also the dublin media's fault! It twas them that done it

southsiderosie

later10 wrote: »

A good economist is always in doubt, always conflicted; he never pretends to know all of the answers. He can only hope to test his models with empirical or experimental data and advance it on that basis, aware that aberrations can occur.

later10 wrote: »

Well this is why, in economic research, refereeing of work is carried out by peer review in order to establish its repute. The reviewers will establish the reliability of the methodology employed by the researchers in question and examine any theoretical underpinning of the work, to ensure it is not ideologically driven or motivated by bias.

later10 wrote: »

And most people also know enough to be aware that sound research should always be backed up, where possible, by more than one academic paper.

This is not how academic economists operate though, especially those that get the ears of powerful people in government. People stake their careers on taking a very specific ideological position and methodological approach to certain problems. The most bruising seminars and workshops within social science will be in the econ department; people like Summers, Sachs, Rodrik, Friedman and Krugman (an admittedly extreme example) did not make their names by being shrinking violets. And peer review is no guarantee against bias, as some methodological approaches are seen as more "credible" than others.

There is a lot of group think in academia, in part because professors tend to take on students who adopt a similar approach and world view, go forth into the world, and perpetuate the cycle all over again. It also reflects the fact that economists are human, and there are not a lot of people that can break out of existing methods and models in order to see a problem or phenomenon in a different light; there are very few Kuhnian paradigm shifts (in any field, not just economics). Which is perhaps why it was an medieval economic historian (Morgan Kelly) rather than a more 'mainstream' economist who was so alarmed by what he saw going on in 2006.

later12

Can I ask you to be more specific in relation to the three posts you're quoting there? I admit the first one is difficult to prove, although I'm not attempting to prove it, merely saying that this, in my opinion, is a mark of the reliable economist.

However, peer review and reference to varieties of academic research are pretty bog standard standards. They are how academic economists operate, of course they are; it is even how first year economics students flunking semester one operate.

Of course paradigm shift is an issue, I'm just not sure how it is related.

southsiderosie

later10 wrote: »

Can I ask you to be more specific in relation to the three posts you're quoting there? I admit the first one is difficult to prove, although I'm not attempting to prove it, merely saying that this, in my opinion, is a mark of the reliable economist.

However, peer review and reference to varieties of academic research are pretty bog standard standards. They are how academic economists operate, of course they are; it is even how first year economics students flunking semester one operate.

Of course paradigm shift is an issue, I'm just not sure how it is related.

I think as a practical matter, the "reliable" economist is the one whose work supports whatever point a politician or minister is trying to make!

Peer review is run by humans, who are subject to bias. You are far more likely to be reviewed favorably if you do not undermine current orthodoxy. You are also more likely to be favorably reviewed by using certain methodological approaches over others. This is further reinforced by the fact that certain journals reward/reject certain kinds of papers. Certainly some fads come and go, but peer review is neither a totally clean nor an infallible process.

As for paradigms, to put things in slightly different terms, a macroeconomist might have come to a very different conclusion about Ireland in 2006 than an economic historian who studied boom and bust cycles (such as Kindleberger) or an economic sociologist who studies relationships and networks between political and economic elites. This is why I raise the issue of paradigm-shifts: most academics are prisoners of the norms within their particular sub-fields, so barring a major crisis they aren't necessarily going to pick up on outlier situations. I wouldn't necessarily put individuals at fault for this - it's more an institutional problem - but is also why I am a fan of inter-disciplinary research. Unfortunately, most universities (and tenure committees) don't reward this kind of approach, so many academics end up insulated from different perspectives and viewpoints that could give them better leverage on real world problems.

later12

southsiderosie wrote: »

Peer review is run by humans, who are subject to bias. You are far more likely to be reviewed favorably if you do not undermine current orthodoxy.

True. Yet the object of peer review can be realised simply by assessing methodology employed over the course of the assignment, basic statistical requirements, and so on. Much of this is objective work. It is only one line of defence, one should hope that the party referencing, studying or utilising this research at a later stage will use their own logical and intellectual faculties as another line of defence in establishing a paper's credibility. Nobody would suggest that peer review is, in itself, infallible.

This is further reinforced by the fact that certain journals reward/reject certain kinds of papers.

The same is true of everything in life. I expect to read different approaches to analysis in the Journal of Development Economics as I expect to read in the American Jour. of Agricultural Economics on similar issues. I expect to read different articles in the Sunday Times magazine as I expect to read in a trashy lads mag. There will always be a slant. The reader, or the student, has to recognise this from the outset.

This is why I raise the issue of paradigm-shifts: most academics are prisoners of the norms within their particular sub-fields, so barring a major crisis they aren't necessarily going to pick up on outlier situations. I wouldn't necessarily put individuals at fault for this - it's more an institutional problem - but is also why I am a fan of inter-disciplinary research.

Hmm I am not convinced, economics is such a wide field in itself that it is indeed highly collaborative on an internal basis, and on an external basis, particularly with fields such as with management, finance or mathematics.

andrew

hinault wrote: »

You stated that Irish economists predicted the property bubble. They didn't. Many of them were cheerleaders for "the boom".
In that regard Irish economists were/are part of the Irish economic problem.

See the video I posted on the first page of this thread. The ESRI saw it coming. Gave their advice, as was their remit. The advice was ignored.

K-9

andrew wrote: »

See the video I posted on the first page of this thread. The ESRI saw it coming. Gave their advice, as was their remit. The advice was ignored.

The Irish Central Bank repeatedly warned about lending standards as well from as far back 1998. They didn't do much about it, but they did issue warnings!

johnnyskeleton

Amhran Nua wrote: »

Noted economist Brian Lucey has been rowing back his contributions to the Irish Economy blog lately after he attracted some flak for having released an "all is well little people" report on the propery market and the economy back in 2006. I believe the term "mercenary" was mentioned numerous times, winceworthy stuff.

Another well known economist, Constantin Gurdgiev, went completely contrary to his Libertarian roots and posturings with that hat-in-hand-to-the-taxpayers-because-I-bought-a-mortgage-I-couldn't-afford stunt going under the title "an economic good news story", along with numerous other signatories, losing any credibility he might have had in the process.

It's hard to know who to believe these days. Better figure it out for yourself!

Both were involved in the mortgage bailout fiasco. The criticism on thepropertypin cut to the quick with Lucey, causing him to post on his twitter:

To all the gibbering loons on the pin, for which I HAD some respect, we aren't motivated to the oped in the times from personal gain. Geddit

And I didn't agree with university pensions being taken over neither. So pin-loons, back to the issue: mortgage overhang. Ffs...why bother

http://www.thepropertypin.com/viewtopic.php?f=19&t=34132

What was annoying about that policy, that was pushed by a number of high profile economists, is that they tried to pretend that a mortgage bailout was not just beneficial to individual mortgage holders, but that it was somehow beneficial to the economy as a whole. They really didn't like being questioned about this utterly dubious assertion.

To answer the OP, there is always a need for economists. But there is also a need to recall that we should never follow any economist blindly.

Boskowski

I think one problem with this is that it's only an exact science up to a certain point. Markets and macro economy are a bit like the weather a lot of chaos theory involved and therefore most of what you read on this is more opinion than fact.
Which means you can really say whatever you like as long as it's not having any attachments to anything with the word 'social' in it. 'Social' is soooo 20th century. The 21st century is 'liberal' of course - which one mustn't confuse with freedom. The only freedom we have in the 21st century is to partake in the rat race to the bottom.

At the end of the day they're all praying to the same god anyway.

Mr. Loverman

The only economists I listen to are Peter Schiff, Marc Faber, Jim Rickards, Matt Taibbi and to an extent David McWilliams and Max Keiser.

They are the only ones who have any common sense and can smell bull**** when they see it.

Keynesian economists are a joke. Austrian all the way IMO...

southsiderosie

Mr. Loverman wrote: »

The only economists I listen to are Peter Schiff, Marc Faber, Jim Rickards, Matt Taibbi and to an extent David McWilliams and Max Keiser.

They are the only ones who have any common sense and can smell bull**** when they see it.

Keynesian economists are a joke. Austrian all the way IMO...

Since when is Matt Taibbi an economist? He's a polemicist that writes about economics these days.

Mr. Loverman

southsiderosie wrote: »

Since when is Matt Taibbi an economist? He's a polemicist that writes about economics these days.

Define economist. The guy reports (accurately) on economic issues. He's a million times more competent than the average economist in Ireland.

fred252

Mr. Loverman wrote: »

Define economist. The guy reports (accurately) on economic issues. He's a million times more competent than the average economist in Ireland.

there's a good riposte to Taibbi's article on TALF and the Wall Street wives here;

http://blogs.wsj.com/deals/2011/04/15/matt-taibbis-fact-souffle/

Mr. Loverman

fred252 wrote: »

there's a good riposte to Taibbi's article on TALF and the Wall Street wives here;

http://blogs.wsj.com/deals/2011/04/15/matt-taibbis-fact-souffle/

Sorry, that's a terrible riposte. How does it refute Taibbi's claims?

andrew

Mr. Loverman wrote: »

Define economist. The guy reports (accurately) on economic issues. He's a million times more competent than the average economist in Ireland.

Someone with a Phd. in economics who has had an article published in an economic journal and currently works in economics, or someone with a masters in economics who currently works as an economist. So That rules out Taibbi, McWilliams, Schiff, Keiser. Being an economic commentator, or working in finance, does not make you an economist.

fred252

Mr. Loverman wrote: »

Sorry, that's a terrible riposte. How does it refute Taibbi's claims?

it doesn't refute his claims. it questions what the point of his article actually is and also his agenda.