Economic Misinformation

[punkbass2000]

Hi punkbass,

Hello. I was hoping you'd show up.

There was a poster on here awhile ago who would do nothing but post Mises.org posts with no follow up or original thought. Trying to talk to him was frustrating. This is why folks give you a knee jerk reaction.

Ah, that's too bad. Prejudice sucks, but you can't really blame people in this information glut.

However, that said, as the only practicing economist on these boards, that you think we start with untenable axioms is itself an untenable axiom.

A solid point, except I'm not saying it's intrinsically true, just seems to be frequently true. And I do recall a discussion with you where, it seems to me, you said that, essentially, even if a wine (or psychologist, which I believe was the other example we were using) is inferior, if the market pays twice as much for it than it is, in fact, better. It's been a few years now, though, so I've no doubt I'm misrepresenting and/or you've changed your position.

because I am happy to talk about economics as a practice but the Austrian perspective is very frustrating when taken to the extreme (normally uber-distrustful of models). I personally always have healthy skepticism when I read a paper's model and results (in fact, I've published some comments in journals refuting some paper's claimed findings) but these are not the normal paper, somewhat an outlying minority of such.

Also, there are a ton of economic disciplines. Not all economists focus on the micro or macro economy.

Lastly, the top 10 list you listed above is demonstrably false on all accounts. Cutlass did a good job rebuking.

Could you outline what you think the actual central tenets of Economics are, or should be?

 

[Cutlass]

Generally reasonable objections, though my impression is he's just stating a general understanding, where you seem to be arguing for a specific situation. His following "commandments" might be better argued in that spirit.



I'm not sure why it's "proven false", but mightn't the fact that we keep falling back into recession (and this time, one of the worst in recent memory) be evidence that we're not really getting out of it?

Recessions happen. That's simply a part of a market economy. Deficit spending and monetary policy are the differnce between recessions and depressions. An order of magnitude reduction in severity.

I do think you're taking this point out of context and/or presuming an argument which isn't necessarily being made, though that's not for me to decide.

The point is that harping on the idea that we are "over regulated" right after the absence of regulation caused the worst economic collapse in 80 years is counter productive at best.

I tend to agree, though I think the original point still serves as generally true.

Only in the abstract. Again, harping on this when the problem is the opposite is harmful.

We appear to be hiding inflation with virtual debt, somehow.

Doesn't make sense.

Perhaps, though that's really a whole other beast.

Not really. Lack of jobs is one of our primary problems. If something mitigates that, it's a good thing.

I don't think it's an objection, just a truism.


True, though I like to think better is still possible.

Overwhelmingly, what government does is try to address real problems and mitigate real harms that the rest of the world does. Sometimes it gets it wrong. Mostly it does OK. But it isn't perfect, and no one should expect it to be perfect.

I'm not sure I'm following your logic, but I would say that a better solution is to not let banks lie and create imaginary debt than to say that they should just be bailed out when they go too far.

Best is to not allow banks to cause those problems. But when that fails, the harm to innocent bystanders caused by allowing them to collapse is just far too great.

So perhaps you shouldn't prejudge them? Personally, I think value needs to be tied to something concrete unless we can move forward as a species and be considerably less dishonest as well as less greedy.

No. Gold is a proven failure. The desire for gold just underscores a failure to understand the situation. But claiming that God wants us to use gold just raises the ignorance to the point of insanity.

 

[Cutlass]

Hi punkbass,

There was a poster on here awhile ago who would do nothing but post Mises.org posts with no follow up or original thought. Trying to talk to him was frustrating. This is why folks give you a knee jerk reaction.

However, that said, as the only practicing economist on these boards, that you think we start with untenable axioms is itself an untenable axiom. I am happy to talk about economics as a practice but the Austrian perspective is very frustrating when taken to the extreme (normally uber-distrustful of models). I personally always have healthy skepticism when I read a paper's model and results (in fact, I've published some comments in journals refuting some paper's claimed findings) but these are not the normal paper, somewhat an outlying minority of such.

Also, there are a ton of economic disciplines. Not all economists focus on the micro or macro economy.

Lastly, the top 10 list you listed above is demonstrably false on all accounts. Cutlass did a good job rebuking.

Thank you.

 

[punkbass2000]

Ok, between you and JH, I'm largely willing to accept that I don't properly understand the subject. Hopefully we can move towards a better understanding. I definitely am under the impression that Canada is doing well now because our banks were more regulated, though perhaps that's just the media or the government selling itself.

Even if gold itself is failure, wouldn't the housing bubble have been impossible without banks being able to lend at 30 times (IIRC) their actual assets and the like? Is this not an intrinsic difficulty with virtual debt?

 

[Cutlass]

Ok, between you and JH, I'm largely willing to accept that I don't properly understand the subject. Hopefully we can move towards a better understanding. I definitely am under the impression that Canada is doing well now because our banks were more regulated, though perhaps that's just the media or the government selling itself.

Even if gold itself is failure, wouldn't the housing bubble have been impossible without banks being able to lend at 30 times (IIRC) their actual assets and the like? Is this not an intrinsic difficulty with virtual debt?

Yes, In Canada the better regulation of the banks, and IIRC, you didn't have the same housing bubble, is why you came out of it better than we did.


Whether a bank has a lot of money to lend, and whether they lend it wisely, are I think, subjects that you should keep separate. Now many people will tell you that having too much money to lend was certainly a strong contributing factor in the economic crisis. And that's fair enough. But, the fact that so much of that money was loaned in ways that should never have been permitted is an even bigger factor. See the difference?

 

[sophie]

I don't understand people around here. If you respond short and snappy, people criticize, and if you respond long and well-reasoned, people don't bother.

You fixed it later on in this post, but I'll give some thoughts on the makeup of this thread. I don't know about other people, but I generally don't like reading things when I come on here. I spend basically all day reading other things, and the last thing I want when I get on here is to have to sit down to read a block of text in order to participate in a discussion. Now there are some exceptions; some posters whose posts I will read regardless of length, but that's generally not true of quoted articles.

It's true that in the scheme of OPs you're going to have a tread a very fine line between short and long. Too long and everyone just stops reading; too short and no meaningful discussion can be had. Moreover, when you just post a massive quote wall with none of your own insights, there's really no discussion to be had.

My recommendation for you in future OPs, is to find an article, post a link and maybe a couple of quotations that you found interesting or best suited towards directing the discussion. Keep the blocks short and sweet though. If someone wants to read the whole article, they can just click on a provided link. Finally, most importantly, post your thoughts on the article; there had to be something in that article that intrigued you enough to go through the trouble of making a thread about it, so what was the thing? Maybe provide some questions that you'd like clarified too. Another good idea is to put down a tl;dr blurb for what the gist of the article was for people who don't want to read. Those are my recommendations.

(Yes I know I'm a hypocrite, so sue me )

 

[Gustave5436]

If you're asking that question, then why on earth are you citing the right-wing dogmatic pseudoscientific equivalent of Marx?

At least Marx put some effort into attempting to be scientific. He's basically like Freud; ridiculous by modern standards, but at least he tried. Marginal utility, by comparison, is like those "quantum mind" quacks. Says a bunch of technobabble without an ounce of actual meaning to be found.

 

[punkbass2000]

Yes, In Canada the better regulation of the banks, and IIRC, you didn't have the same housing bubble, is why you came out of it better than we did.

No bubble, no, though prices did drop a fair bit in 2008, but only to around 2005-06 levels, I believe.

Whether a bank has a lot of money to lend, and whether they lend it wisely, are I think, subjects that you should keep separate. Now many people will tell you that having too much money to lend was certainly a strong contributing factor in the economic crisis. And that's fair enough. But, the fact that so much of that money was loaned in ways that should never have been permitted is an even bigger factor. See the difference?

Yes. How regulated do you think the banks should be?

 

[punkbass2000]

You fixed it later on in this post, but I'll give some thoughts on the makeup of this thread. I don't know about other people, but I generally don't like reading things when I come on here. I spend basically all day reading other things, and the last thing I want when I get on here is to have to sit down to read a block of text in order to participate in a discussion. Now there are some exceptions; some posters whose posts I will read regardless of length, but that's generally not true of quoted articles.

It's true that in the scheme of OPs you're going to have a tread a very fine line between short and long. Too long and everyone just stops reading; too short and no meaningful discussion can be had. Moreover, when you just post a massive quote wall with none of your own insights, there's really no discussion to be had.

My recommendation for you in future OPs, is to find an article, post a link and maybe a couple of quotations that you found interesting or best suited towards directing the discussion. Keep the blocks short and sweet though. If someone wants to read the whole article, they can just click on a provided link. Finally, most importantly, post your thoughts on the article; there had to be something in that article that intrigued you enough to go through the trouble of making a thread about it, so what was the thing? Maybe provide some questions that you'd like clarified too. Another good idea is to put down a tl;dr blurb for what the gist of the article was for people who don't want to read. Those are my recommendations.

(Yes I know I'm a hypocrite, so sue me )

Worry not, I think everyone is hypocrite since it's almost impossible to completely follow one's own principles all of the time, especially since they're likely to contradict at some point and you can't necessarily expect the casual observer to know when and where which principle should supercede another. Plus people change, or don't explain themselves properly, or are misinterpreted, etc. Don't even get me started on the hypocrisy of calling people hypocrites.

But yes, thank you for the pointers. I haven't been around for a couple years and so have fallen out of the swing of things around here and become accustomed to other arenas. Personally, I don't find 30 000 characters to be all that much reading, but I know that some do (especially when concisely organized), and even I don't keep up with all the threads in this sub-forum alone.

 

[Cutlass]

Yes. How regulated do you think the banks should be?

That's actually a pretty complicated question. It isn't exactly a case of "more" or "less". It's whether the regulations are "right". And that probably changes, at least somewhat, over time.

Essentially, the amount of risk a bank should take on when making loans should be low. The standards they should follow in making loans should be defined, and held to. When a bank makes more risky loans, it should pay higher insurance costs to the regulator. Banks shouldn't be allowed to be so large that they damage the economy when they screw up. They shouldn't be so intertwined with other divisions of a parent company that non bank operations can damage the bank operations. They should be held to a rigid and predictable accounting standard, and unable to manipulate what is and is not counted as assets and liabilities.

 

[punkbass2000]

Can such standards be practically enforced? Can we really prevent collusion?

 

[Cutlass]

Canada did. Fairly well in any case. So did Australia. Why not the US?

 

[punkbass2000]

Now that is an excellent question. I can't begin to answer meaningfully as I have almost no experience with the US and its people itself. Most of what I do have is from media which I don't trust anyway and ex-pats who appear biased.

 

[Integral]

Didn't read the lead article but I'd like to offer my own comments on this.

1) You cannot spend your way out of a recession
2) You cannot regulate the economy into oblivion and expect it to function
3) You cannot tax people and businesses to the point of near slavery and expect them to keep producing
4) You cannot create an abundance of money out of thin air without making all that paper worthless
5) The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever
6) You cannot live beyond your means indefinitely
7) The economy must actually produce something others are willing to buy
8) Every government bureaucrat should keep the following motto in mind when attempting to influence the economy: “First, do no harm!”
9) Central bank-supported fractional reserve banking is an economically distorting, ethically questionable activity. In particular, no government should ever do anything to save any bank from the full consequences of a bank run, no matter what the short-term consequences.
10) Gold is God’s money.

1) Depends on the recession! Government can't do much during a supply-side recession. There are meaningful things a government can do to "spend our way out of" a demand-side recession. I can discuss this more if you'd like.

2) This is true, but there is an optimal amount of regulation and I don't know if the US is on the wrong side of it or not.

3) Sure, but again, the US is not on the wrong side of the Laffer curve. (I maintain that the US is on the left side but Europe on the right, so that the taxes-revenue relationship is *basically* flat for the relevant region)

4) True in the long run, though not in the short run. I can go into more detail if you'd like. I do specialize in monetary work.

5) Sure, but there are meaningful things a government can do. Strawman.

6) True, but is that relevant?

7) I feel like there's a smear underneath this that I don't fully understand.

8) True, fine. But that's not an excuse for inaction, it's an argument for reasoned action.

9) Wrong. I'll go into this if you'd like, but we've done it to death.

10) Wrong. I'll go into this if you'd like, but we've done it to death.

cheers,

 

[Hygro]

I find it ironic that the Austrians will criticize someone for not understanding macro economics when they don't even believe in macroeconomics.

Furthermore, punkbass, if you want start criticizing economists for picking untenable axioms for their field, the first place you can criticize is the Austrian school. After all, it's from their theories (premises, that is) on price and value that much of the mathematical, model based economics comes from. I find their anti-modeling stance bizarre, then, since it's their own logic that leads to these very models.

P.S. Amadeus wins the thread.

P.P.S. I'm not even convinced that mises.org fairly represents the Austrian school, but either way, historically speaking the Austrian school's founders were ideologically pro-elite to begin with. While they formed out of a desire to make a more scientific-based theory of political economy, their premises suspiciously favored the rich and powerful persons who were dreaming them up.

 

[Masada]

So did Australia.

Er, not quite. We've made a virtue of having big banks. I believe the 'big four' -- NAB, CBA, ANZ and WBA -- make up something like ~80%-85% of the Australian Bank Sector. CBA, the largest bank, holds ~30% of our home mortage sector, WBA has ~25%, with the other two making up the split balance on the ~85% of the home mortage sector that the Big Fourt control. Before the GFC we did have some viable competition to the Big Four in the form of Bankwest, St George, Suncorp Bank and Bendigo Bank alongside regional banks like BOQ, TIO, AMP, ACCU etc. Unfortunately, Bankwest got bought out in 2008, as did St George along with our largest mortage broker Aussie Home Loans. The acquistions of which, I still think, were contrary to the public interest. Of course, before I get all negative there are good reasons for this. The most important of which is our small relative population and the need to be able to compete on the international market when it comes to sourcing loans. If we had small banks (and the Australian historical experience supports this) we would have no end of trouble sourcing capital and in the bad times keeping it here. This is also offset to some extent by the fact that Australia does keep a fairly tight leash on the banks relatively speaking. I think there's a fair amount to be said of making sure it's tighter but that's just me speaking.

P.P.S. I'm not even convinced that mises.org fairly represents the Austrian school

It doesn't. It brings ethics, morals and God into the equation.

 

[punkbass2000]

I find their anti-modeling stance bizarre, then, since it's their own logic that leads to these very models.

I'm of the impression that it's fairly common for people to run with another's ideas in way that doesn't suit the original author.

 

[Hygro]

I'm of the impression that it's fairly common for people to run with another's ideas in way that doesn't suit the original author.

Well, the Chicago School is huge on numbers and modeling, and the Chicago School was founded basically by a bunch of Austrian economists. They took Austrian principles and showed how that logic could create all these mathematical models. I guess the Austrians, seeing the flaws (disconnect with reality--the models are flawless in a self contained disreality) in their logic once the models made them so clear, decided that modeling was the problem, not their logic.

 

[punkbass2000]

I agree that modelling is an issue, though, especially in Economics. People's goals appear fundamentally unpredictable, to me.

 

[aneeshm]

If you're asking that question, then why on earth are you citing the right-wing dogmatic pseudoscientific equivalent of Marx?

Just out of curiosity, on what do you base the accusation of 'pseudo-science'?