Ask an Economist #3

[Integral]

I'd imagine folks are just not bothering putting their homes upon the market. Further the 6.5% increase is a month to month, and is not seasonally compared, which is important in a cycle based industry

I think the 6.5% increase is seasonally adjusted, though it is true that most of the other data in the NAR report are not adjusted. We should also note that these are preliminary reports and are likely to be revised next month.

 

[Mowque]

What is the Austrian School of Economics? And what would the ?other? schools be?

 

[JerichoHill]

I think the 6.5% increase is seasonally adjusted, though it is true that most of the other data in the NAR report are not adjusted. We should also note that these are preliminary reports and are likely to be revised next month.

Nope. It's NAR data. Ergo, highly unreliable.

 

[Fifty]

What is the Austrian School of Economics? And what would the ?other? schools be?

mainstream economics (incl neoclassical, neokeynesian, whatever): Economics for these peeps consists in doing what are essentially PhD math problem sets. That is, complicated math problems that have no purpose beyond honing one's ability to do complicated math problems. The difference is that PhD math students use these skills to go on to do important math, whereas these economists just do the useless math exercises their whole life.

Austrian economics: We like being economists but we suck at math, so we'll do what the mainstream people do except instead of using BS math to hide our lack of knowledge, we weave narrative fallacies into a rich tapestry of crap.

Behavioral economics: Very heterodox and crazy, these people are actually interested in the way real humans behave.

Marxist economics: See the entry for "Austrian economics", except every third sentence must contain the word "class" at least once.

 

[Integral]

mainstream economics (incl neoclassical, neokeynesian, whatever): Economics for these peeps consists in doing what are essentially PhD math problem sets. That is, complicated math problems that have no purpose beyond honing one's ability to do complicated math problems. The difference is that PhD math students use these skills to go on to do important math, whereas these economists just do the useless math exercises their whole life.

You're being rather unfair to the subtle distinctions within mainstream economics. Neoclassical economists do complicated math to solve micro-problems, which then gets hopelessly muddled when they try to aggregate individuals. Neokeynesian economists do slightly less complicated math with aggregate variables, which then gets hopelessly muddled when they try to account for micro-foundations.

(And behavioral isn't heterodox, it's just too new to be in Mas-Colell's textbook.)

 

[Mowque]

yeah, this helps so much

 

[Integral]

yeah, this helps so much

Ok, here's a slightly better version.

Mainstream economics can be broken down in many ways. I'll just show one: the freshwater-saltwater divide. This was a prominent way to classify the divide back in the 1980s and early 1990s. It's fallen somewhat out of favor nowadays.

Freshwater economists generally believe that people make rational decisions, that markets tend to work, and that governments tend to fail when trying to "manage" the market. Their research platform was based on models of perfect competition and active monetary policy. Other labels: neoclassicals, (some) monetarists. Key words: "money supply", "free markets", "government failure", "policy rule". So named because the most prominent Freshwater researchers tended to be located at U Chicago, Northwestern, Rochester, Carnegie-Mellon, and Minnesota.

Saltwater economists tend to think that markets fail more often than than the freshwaters would like to admit. They tend to believe that there are persistent frictions in the economy, that markets are never as "purely competitive" as the models suggest, and that the government has a fairly large role to play in regulating markets. Their research platform was based on models of monopolistic competition, inflexible prices, and active fiscal policy. Other labels: neo-keynesians. Key words: "income distribution", "market failure". So named because most of the Saltwater researchers tended to be located at MIT, Harvard, Berkeley, and Stanford.

 

[JerichoHill]

Behavioral economics: Very heterodox and crazy, these people are actually interested in the way real humans behave.

I've worked with Stephen Ziliak, Diedre McCloskey, and Lawrence Iannaccone. All three are heterodox.

 

[Rideaway]

What about student loans? I'm back in school full time for the first time in 3 years at a university finally. I have no scholarship, but I am halfway through my Junior year and haven't drawn on any loans whatsoever until this point.

I missed the independent status on my fafsa by about 30 days. Both of my parents, who both pull in 100K a year, have both been hit extremely hard by the recession, especially my stepdad who is dealing with a failing business. They aren't able to help me a single bit, but I'm still forced to take unsubsidized loans this semester. On top of that there's no way the 5,500 is going to last me this semester, and a job will hurt the time I have to study. To add more fuel to the fire, I'm a little rusty since I haven't been in school for the past 6 months, and the quality of those classes wasn't much to brag about.

So I'm looking into loans from a private company. Are these a viable option? Or should I just suck it up and get a job and risk my GPA dropping?

 

[Theige]

So I'm looking into loans from a private company. Are these a viable option? Or should I just suck it up and get a job and risk my GPA dropping?

Students who work something like 8 - 14 hours per week get the best grades anyway

I personally work about 15 per week, just make sure to get off for finals week

 

[Mowque]

Students who work something like 8 - 14 hours per week get the best grades anyway

Pretty sure it isn't because they have jobs, lol. Just the people who typically get jobs, are often good students.

 

[Rideaway]

Students who work something like 8 - 14 hours per week get the best grades anyway

I personally work about 15 per week, just make sure to get off for finals week

the problem is I've got to cut 25-30 hours a week to get by with the base 5,500 I'm getting this semester.

Next semester I'll be eligible for pell grants and more money thanks to Obama's stimulus bill he wants to pass, but I've got to do something to get by this time around. I'd also like to get into some internships so I can actually have a resume when I get out of school, and I'm pretty sure that would pay off more than having no resume and less debt. I'm planning on moving to the DC and going for a government job, so I'm pretty confident on finding work.

It's just this whole loans thing is pretty nerve wracking to me. I just don't want to make a bad decision I'll regret later on.

 

[yesboii]

Is the Laffer Curve, and subsequently, Supply-Side Economics a valid school of economic thought?

My AP Economics teacher is incredibly biased towards the left on economic matters and bashes the Laffer Curve and "laughable" and supply-side economics as a debunked theory.

However, I'd like to get a more less-biased answer to my question. Thanks.

 

[JerichoHill]

Students who work something like 8 - 14 hours per week get the best grades anyway

I personally work about 15 per week, just make sure to get off for finals week

That is indeed true, and the main reason appears to be the effect of a regular schedule.

Is the Laffer Curve, and subsequently, Supply-Side Economics a valid school of economic thought?

The Laffer Curve is legitimate theory and can happen in reality. Whether or not it has, or to what effect, is the matter of debate. As far as Supply Side Economics, we've not seen a pure example. Reagan's tax cuts are an example, but he also presided over a huge surge in government spending, which is a Demand Side solution.

BOTH methods have effects, and sometimes one is better than the other, and vice-versa. Your teacher does your class a disservice with such dismissal.

The trouble with the Supply Side School stems from wealth concentration and who benefits from the tax cuts. And mainly, that's a problem of the tax cuts being perceived as temporary or permanent, and of course the debt plays into it.

I don't think SSE is going to be fashionable for a long time anyways, as its somewhat fringe economics now. Most economists I think are going to suggest government intervention in a market style

 

[Whomp]

Is this the first sign in actual facts that housing prices may be bottoming out?

8 months is average so now all we need to do is work on the 66% that own homes where 62% is average.

 

[Bill3000]

The Laffer Curve is legitimate theory and can happen in reality. Whether or not it has, or to what effect, is the matter of debate. As far as Supply Side Economics, we've not seen a pure example. Reagan's tax cuts are an example, but he also presided over a huge surge in government spending, which is a Demand Side solution.

BOTH methods have effects, and sometimes one is better than the other, and vice-versa. Your teacher does your class a disservice with such dismissal.

Not that much of a disservice. The Laffer curve fails basic mathematical assumptions - you can't plot government revenue and tax rates on a simple curve. (And I thought that even you would know that the Laffer curve is about government revenue, not about the economic stimulus effects of tax cuts.)

 

[JerichoHill]

I did not reference the Laffer Curve along with Supply Side. It is closely associated with supply-siders as it forms the basis of the rationale of more tax cuts = more revenue. I did not write in the previous post that the Laffer Curve had anything to do with tax cuts.

Further, the Laffer Curve does probably exist, but because psychology and our own human-ness plays a role, no one really knows where the apex is.

Let's try and do without the oblique personal insults =)

 

[SS-18 ICBM]

Regarding GDP growth rates, are there any useful benchmarks for determining whether an economy is in good or bad shape? And what do economic models say about growth (is it perpetual? Taking the very, very, very long view, will a nation's economy in 1000 years still be bigger than what it is today?

 

[Godwynn]

Regarding GDP growth rates, are there any useful benchmarks for determining whether an economy is in good or bad shape? And what do economic models say about growth (is it perpetual? Taking the very, very, very long view, will a nation's economy in 1000 years still be bigger than what it is today?

I'd be wary of total growth rates for a nation. Nations that have a declining population will have lower growth, while nations such as the United States have higher growth rates, but it has to be spread amongst more people. So while the higher population growth nation will have higher economic growth, it may have a lower economic growth per capita.

Just for good measure, I'm going to type growth one more time.

growth

 

[SS-18 ICBM]

Economic growth per capita. Never heard of that concept anywhere.