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View Full Version : Economics Why Keynesian Economics is not scientific or empirical!


BucEyedPea
03-29-2009, 04:08 PM
By a physicist, Benjamin Richards
Science is as Science Does (http://www.chiefsplanet.com/BB/newthread.php?do=newthread&f=30)

I have a bone to pick with Keynesian economists. It is not that they are overseeing the systematic destruction of our economy, although I do object to that. It is not that they are widely trumpeting the necessity of the plunder of the American people on behalf of big bankers, although I do disapprove of such doings. I will even leave aside for today their willful destruction of the so-called "money" that I am forced, against my will, to use.

The quarrel I have with them today is that, in all their nefarious schemes, they insist on claiming for themselves the mantle of "empirical science." I have a deep personal affection for "empirical science," and so I beg to be allowed to speak a word or two in its defense.




Austrian economists deny that economics is an empirical science, that is, one whose theories can only be known to be true by experimental verification. [LOL] Economics is a science in the same sense that mathematics and logic are sciences. Its claims are based on logical deduction from indisputable axioms, and may be illustrated historically, but never verified or falsified experimentally. In the same way, we do not ask for experimental verification that a straight line is the shortest distance between two points on a two-dimensional plane.

The Austrian economists have not fallen victim to the invasion of logical positivism that has wrought so much havoc in our intellectual landscape.
And so they [positivists/Keynesians] devised a rigid criterion of knowledge: you cannot know anything you cannot empirically verify.

Economics is a science in the same sense that mathematics and logic are sciences.

[I]In an empirical science, if we are to retain any criteria at all, we must at least agree to abandon theories that routinely fail in their predictions. This is a small thing I ask of the Keynesians, if they wish to stand in the ranks of empirical scientists. So let us consider the record.

Many adherents of the Austrian School predicted some of its details, such as the bursting of the housing bubble: Gary North, Bill Bonner, Peter Schiff, and Frank Shostak, just to name a few.

But what about the Keynesians?

How did their theories fare in predicting what most economists now agree is the greatest financial disaster since at least the Great Depression? One would think that an empirical theory worth its salt could have predicted a crisis of such epic proportions — if it could predict anything at all. Nouriel Roubini was the lone exception, and he was only given coverage because he represented a contrary opinion, a curiosity.

Austrian economists said a hurricane was coming. They didn't know precisely when, but it was coming, and it was a big one. Keynesians denied its existence.

Austrian economists don't claim to be doing empirical science. Keynesians do. [I]What is ironic to me as an empirical scientist, is that it is the Austrians who get their predictions right, while Keynesians seem to have been caught like deer in the headlights.

This pattern is nothing new to the current crisis. It was Ludwig von Mises who predicted the Great Depression, while Irving Fisher, still highly revered by the Keynesians, proceeded to lose his fortune.

Time after weary time, it is the mainstream and Keynesian economists (who ridicule and ignore Austrian economics as unscientific) whose predictions are utterly refuted by the events of history. Yet they continue to propound their eternal nonsense and use government coercion to force their bankrupt ideology on everyone else. As Paul Feyerabend said, "I have no objection to incompetence but I do object when incompetence is accompanied by boredom and self-righteousness."

What I mean to insist on here is that Keynesian economists, who claim to be empirical scientists, ought to abandon their theory. The entire history of civilization stands as a monumental falsification of it. Or please, at the very least, stop degrading the good name of empirical science with such rubbish.

Austrian economists do not dispute that economics is a science; it is just that they understand it to be a logical science, the science of human action.

****

He mentions these empirical experts who didn't see the the hurricane, denied the hurricane, caused the hurricane are the ones claiming to fix it and with smug righteousness at that. We're really screwed!

banyon
03-29-2009, 04:23 PM
Either he or you, in the thread title appear to not understand the term empirical. I would guess that's you since the author seems to limit his comments to science and not attack the concept of why it would be empricial knowledge.

And no, obviously social sciences aren't the same as the physical sciences when it comes to laboratory methodology. That's a pretty obvious conclusion from just understanding the terminology.

He seems to put a lot of stock into Mises et al having made predictions. If I'm wrong you can point it out, but don't the Miseans always predict doom and gloom and collapse? Weren't they bound to be right, like a stopped clock at least a couple of times? When was the last time they predicted an economic boom? Have they ever? Ultimately, that's not very useful as a predictive model.

BTW, there's no working link, though I assume this is from some pimpled kid who just got his science degree furiously blogging at the Mises or Lew Rockwell sites.

KC native
03-29-2009, 04:27 PM
This would be funny if it weren't so sad. Not once does he prove how Keynesian economics isn't empirical. He just points to the fact that like a broken clock even the Austrians are right twice a day.

BucEyedPea
03-29-2009, 04:28 PM
This would be funny if it weren't so sad. Not once does he prove how Keynesian economics isn't empirical. He just points to the fact that like a broken clock even the Austrians are right twice a day.

You didn't read it all. Keynesians haven't a good track record in prediction. You got nuthin!

eazyb81
03-29-2009, 04:35 PM
Why peanuts are neither peas nor nuts. Discuss.

KC native
03-29-2009, 04:37 PM
You didn't read it all. Keynesians haven't a good track record in prediction.

No one does. Predictions should be taken with a grain of salt. Again Barry Ritholz is a much better writer than I am so I will let him explain it.

Why Economists Missed the Crises
Email this post Print this post
By Barry Ritholtz - January 5th, 2009, 7:00AM

Why did Economists, as a group, miss the warning signs of housing, credit and market crisis?

I don’t mean individuals — several professional Economists got it right; Academics like Nouriel Roubini of NYU and Robert Shiller of Yale, as well as a few Wall Streeters, such as David Rosenberg of Merrill Lynch and Paul Kasriel of Northern Trust. Too many bloggers to name also got it right. Meanwhile, the vast majority of professional economists, strategists and analysts — the “Herd” — totally missed it.

One explanation comes from Dean Baker, who channels Keynes, and says “incentives in the economics profession, just as in finance, strongly encourage a lack of original thinking.” (That’s a variation of Keynes: “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally“). Paul Krugman wondered if it was a fear of going “against bubble denier Alan Greenspan.”

I find all these explanations wanting — and quite frankly, too generous by half.

My explanation is there were systemic failures in economics as a discipline, at least as it is employed in the real world. Note that these are not theoretical critiques (i.e., Keynesians versus Monetarists), but rather, these are broader inquiries as to why so many working economists were so utterly clueless about all of the red flags for so long. The inherent biases of working on Wall Street go along to explain why those economists were so awful — but I have less of an explanation as to why so many academic economists were so blind. Perhaps it is the profession itself.

As far as Central Bankers were concerned, they too missed the warning signs — but there were several notable exceptions to this to, including the Bank of England’s concerns about a credit crunch and a collapse in asset prices.

Ideas? I have a few. Here are my top 10 indictments as to why professional economists missed the crises until it was too late:

1. An inherent upward bias is built into ALL Wall Street research — including economic research;

2. Ideological rigidity prevented creative thinking;

3. Non-critical acceptance of official data from BEA, BLS, Commerce led to only a passing familiarity with reality;

4. Institutional rejection of negative analyses remains endemic;

5. Traditional (non-behavioral) economic analysis seems to have difficulty with human irrationality;

6. Political Bias; (Right wing during GOP Presidencies; Left Wing during DEM Presidencies);

7. Corporate bias — Stock option compensation — skewed views too optimistic;

8. “Timing” is very different from Analysis;

9. Factoring in excessive leverage and liquidity is exceedingly difficult from a traditional economic perspective (Derivatives especially);

10. Herding instinct is powerful;

Economics as a discipline does not seem to be particularly introspective. In my opinion, the sooner the profession develops some self doubt, recognizes its own failings and shortcomings, the faster they will be able to recognize the failing constructs of the profession and fix them. The Efficient Market Hypothesis, homo economicus, the deification of markets, all need an open public review and a good thrashing.

There were many professions that did not distinguish themselves in the lead up to the housing boom and bust, financial bust, the credit crisis, and the recession. Economics is near the very top of that list.

My main qualms with most economic schools of thought is the efficient market hypothesis, the "rational" person assumptions, and ceteris paribus.

BucEyedPea
03-29-2009, 04:44 PM
Keynes developed his theories in the Ivory Towers of a university and was from a privileged background. He never ran a business or had any real world hands on experience with real world based economics. It's theory designed for entitlement mentalities. So they can have things without producing and exchanging for them.

KC native
03-29-2009, 04:46 PM
Keynes developed his theories in the Ivory Towers of a university and was from a privileged background. He never ran a business or had any real world hands on experience with real world based economics. It's theory designed for entitlement mentalities. So they can have things without producing and exchanging for them.

So, now that you can't prove/debunk anything that I've asked you to prove/debunk, you're back to your ivory towers slam and entitlement slams? You're such a worthy debate opponent :rolleyes:

banyon
03-29-2009, 04:48 PM
Keynes developed his theories in the Ivory Towers of a university and was from a privileged background. He never ran a business or had any real world hands on experience with real world based economics. It's theory designed for entitlement mentalities. So they can have things without producing and exchanging for them.

Weren't you just railing against ad hominem attacks in the other thread?

Is there any consistency even hour to hour, or is it just whatever it takes to defend the theory?

And no, as KC Native pointed out, there's nothing "entitlement" about the General Theory, it's pretty focused on spending during recessions and reducing spending during expansions so as to minimize market fluctuations in favor of steady (if unspectactular) growth. So it pretty explicitly calls for sacrifice in times of prosperity.

BucEyedPea
03-29-2009, 05:06 PM
I was talking about personal ad hominem on posters. It's okay to cite public or historic figures backgrounds especially when it's relevant to how they got their ideas.
( Like Marx lving off others most of his life.) It most certainly is entitlement mentality because printing excessive money makes people think they're richer than they are which leads them to overspend. Cheap easy credit and we'll bail ya' out instead of paying the piper.

It also promotes the idea that we're all entitled to more without working or producing for it and endless booms that always go bust. Ya' know part of the worker's paradise
idea. Just print money. Afterall, what did Keynes say? "We owe it to ourselves." Not a very ethical paradigm. That's entitlement mentality.

banyon
03-29-2009, 05:08 PM
I was talking about on posters. It's okay to cite public or historic figures backgrounds especially when it's relevant to how they got their ideas.

I see. Somehow the internet makes it magically not a fallacy when you put it that way.

BucEyedPea
03-29-2009, 05:10 PM
Did you say something?

banyon
03-29-2009, 05:11 PM
Did you say something?

Speaking of fallacious argument strategies...

Jenson71
03-29-2009, 05:17 PM
Empirical science: My mall sure is busy today.

Non-empirical science: "Let Z be the aggregate supply price of the output from employing N men, the relationship between Z and N being written Z = φ(N), which can be called the aggregate supply function. Similarly, let D be the proceeds which entrepreneurs expect to receive from the employment of N men, the relationship between D and N being written D = f(N), which can be called the aggregate demand function.

Now if for a given value of N the expected proceeds are greater than the aggregate supply price, i.e. if D is greater than Z, there will be an incentive to entrepreneurs to increase employment beyond N and, if necessary, to raise costs by competing with one another for the factors of production, up to the value of N for which Z has become equal to D. Thus the volume of employment is given by the point of intersection between the aggregate demand function and the aggregate supply function; for it is at this point that the entrepreneurs’ expectation of profits will be maximised. The value of D at the point of the aggregate demand function, where it is intersected by the aggregate supply function, will be called the effective demand. Since this is the substance of the General Theory of Employment, which it will be our object to expound, the succeeding chapters will be largely occupied with examining the various factors upon which these two functions depend."

Keynes developed his theories in the Ivory Towers of a university and was from a privileged background. He never ran a business or had any real world hands on experience with real world based economics.

Ludwig von Mises was what? Owner of the little shop on the corner?

BucEyedPea
03-29-2009, 05:24 PM
Empirical science: My mall sure is busy today.
Backed up with stats on retail activity, and reported on CNN even.
You do know that the word means what can be observed right?

There's no such thing as aggregate demand. Markets are fragmented....more than ever these days.

Please explain to me, how you can mathematically measure how individuals value what they value in a marketplace? I'm waiting.

Please answer my example of what 10 men would do if handed $500 extra dollars each. Empiricize that with a controlled experiment. Clue: It can't be done. It's a fallacy.

BucEyedPea
03-29-2009, 05:28 PM
Ludwig von Mises was what? Owner of the little shop on the corner?

He wasn't salaried by any university.

He was a former leftist interventionist and saw what the implementation of socialism did in Europe. He fled the Nazis.

KC native
03-29-2009, 05:33 PM
Backed up with stats on retail activity, and reported on CNN even.
You do know that the word means what can be observed right?

There's no such thing as aggregate demand. Markets are fragmented....more than ever these days.

Please explain to me, how you can mathematically measure how individuals value what they value in a marketplace? I'm waiting.

Please answer my example of what 10 men would do if handed $500 extra dollars each. Empiricize that with a controlled experiment. Clue: It can't be done. It's a fallacy.

You're conflating predictions with measurement.

If you want to see what people value wait until they spend their money and then you will see. Guess what! We already do that and it's reflected in the Commerce Dept reports.

Second, there is such a thing as aggregate demand. It's simply everyone's individual demand curves added all to together and then SHAZAM you have an aggregate demand curve.

Finally, your little point about CNN has already been debunked by the same report that you are saying reinforces your argument. It says that the increase was due to higher prices so REAL spending was actually down.

Jenson71
03-29-2009, 05:34 PM
Never, or while at NYU, where he seems to have been propped up by a New York advertising firm?

KC native
03-29-2009, 05:34 PM
He wasn't salaried by any university.

He was a former leftist interventionist and saw what the implementation of socialism did in Europe. He fled the Nazis.

So, how did he put food on his table?

Edit: Nevermind I looked it up and saw Jenson's post. Nice try at obsfucation though. He wasn't officially paid by the university however he was very much a part of the Ivory Tower community you so consistently deride. Why am I not suprised?

BucEyedPea
03-29-2009, 05:36 PM
Never, or while at NYU, where he seems to have been propped up by a New York advertising firm?

Huh? Link? Anyhow, what's wrong with being propped up by a NY Ad firm? It was Madison Ave that got us out of the Great Depression.
They create demand for products. Not that most in the ad world know who he is. Then govt spending cut down drastically. Not the war or the g-r-e-at R-o-o-s-e--v-e-l-t.

KC native
03-29-2009, 05:39 PM
Huh? Link? Anyhow, what's wrong with being propped up by a NY Ad firm? It was Madison Ave that got us out of the Great Depression.
Not that most in the Ad world know who he is. Then govt spending cut down drastically. Not the war or the g-r-e-at R-o-o-s-e--v-e-l-t.

http://en.wikipedia.org/wiki/Ludwig_von_Mises

There he became a visiting professor at New York University, from 1945 until his retirement in 1969, though he was not salaried by the university. Instead, he earned his living from funding by businessmen such as Lawrence Fertig.

Jenson71
03-29-2009, 05:40 PM
I just find it interesting that a person who works in a university, whose sole purpose should be at discovering truths, is said by you to be in an Ivory Tower, whereas the person who is provided for by private advertising firms is thought to be clean of all biases.

The Ivory Tower argument is pure fallacy.

banyon
03-29-2009, 05:42 PM
Ludwig von Mises was what? Owner of the little shop on the corner?

No, he was the spawn of a railroad tycoon, which is much better than some stinky old professor.

*edit* except that he was a stinky old professor too.

BucEyedPea
03-29-2009, 05:42 PM
I just find it interesting that a person who works in a university, whose sole purpose should be at discovering truths, is said by you to be in an Ivory Tower, whereas the person who is provided for by private advertising firms is thought to be clean of all biases.

Yeah, well I didn't say that exactly either. Ivory Tower means no real world experience. Mises experienced European socialism.

I don't know where you get the idea that a university's sole purpose is discovering truth. That can be done outside of one too. Both should be done.

KC native
03-29-2009, 05:48 PM
Yeah, well I didn't say that exactly either. Ivory Tower means no real world experience. Mises experienced European socialism.

I don't know where you get the idea that a university's sole purpose is discovering truth. That can be done outside of one too. Both should be done.

Spin, spin, spin, spin away. How many times have you been backed into a corner today? ROFL

BucEyedPea
03-29-2009, 05:53 PM
You're not in the scientific camp. You're in the manipulation camp: of currency and of data.

NewChief
03-29-2009, 05:54 PM
Ouch, this thread is just brutal. Makes me glad I've never been an economic hobbyist.

banyon
03-29-2009, 05:55 PM
Yeah, well I didn't say that exactly either. Ivory Tower means no real world experience. Mises experienced European socialism.

I don't know where you get the idea that a university's sole purpose is discovering truth. That can be done outside of one too. Both should be done.

What job was it that Mises had that wasn't in academia?

BucEyedPea
03-29-2009, 06:02 PM
It's being inundated with requests and letters by people saying they've converted once they heard their complete position. Wonder why it had been buried for so long.

http://www.google.com/trends/viz?q=austrian+economics&graph=weekly_img&sa=N

Amnorix
03-29-2009, 07:51 PM
Keynes developed his theories in the Ivory Towers of a university and was from a privileged background. He never ran a business or had any real world hands on experience with real world based economics. It's theory designed for entitlement mentalities. So they can have things without producing and exchanging for them.


Ah, so Mises was born poor? errr...no.

Mises ran a business? errr....no

Mises had extensive real world experiences outside academia? actually....no.

You REALLY need to work on your methods of argument.

http://en.wikipedia.org/wiki/Ludwig_von_Mises

EDIT to note that I was beaten to the punch on these facts already.

Amnorix
03-29-2009, 07:53 PM
He wasn't salaried by any university.

He was a former leftist interventionist and saw what the implementation of socialism did in Europe. He fled the Nazis.

BECAUSE HE WAS FRACKING JEWISH!! Any Jew with money or sense fled the Nazis, regardless of their thoughts on economic systems.

Jenson71
03-29-2009, 07:58 PM
LMAO

BucEyedPea
03-30-2009, 08:17 AM
Deflation to a Keynesian is like holy water to the devil.....ahhhhhhh eeeeeek

***SPRAYER
03-30-2009, 08:55 AM
Newsflash, March 20, 2009: The Congressional Budget Office today forecast a U.S. budget deficit of $1.8 trillion for this year.

For many Americans, including some Democrats, there’s tremendous frustration over President Obama’s economic policies. Worse, they know that a huge portion of the public and media so adore Obama that they will not question anything he says or does, even as he pursues a course that previous presidents—including Democrats like Bill Clinton—would never have considered. Add to this the horrendous failure of our educational system—a failure to teach market economics—and we have a major challenge on our hands.

How do we communicate the depths of the nation’s fiscal depravity? How do we simply—very, very simply—explain the mindboggling generational debt being produced right now by President Obama and the Democratic Congress?

Communicating this is crucial because Obama and the Congress, along with their supporters and media, are trying to blame this calamity on George W. Bush. Logically, of course, that is impossible. Politically, it will likely be accomplished—unless we can communicate the reality.

Since we live in a world of sound-bites, here’s how to present the argument in two basic lines:

President Bush, yes, spent money like a drunken sailor, and left the nation with a record $400-billion deficit. President Obama, however, is spending far more money than Bush, with a record $1.8-trillion deficit projected for his first year.

Period. Repeat that statement. Repeat it to those who don’t understand, or don’t wish to understand. Repeat it until you’re blue in the face. Make the person on the receiving end recite the numbers: $400 billion vs. $1.8 trillion.

Anyone can understand that math. From there, you can elaborate, if you desire, explaining how Obama’s deficit is a direct result of spending programs, like the $800-billion “stimulus,” like the $400-billion package that followed, and so on. The subsequent prolonged economic slowdown will pad the deficit more. The tax increases imposed to cut the deficit will further cripple the economy, ballooning the deficit and wider debt. The damage still to come from printing obscene amounts of new money will be inflationary and make all this yet worse.

Those are things that should be pointed out when trying to explain what Obama and the Congressional leadership have done in merely eight weeks.

And it cannot be emphasized enough that no president in American history—certainly not George W. Bush—has spent this much money in such a short period. These are the same politicians demonizing the private sector for fiscal irresponsibility. In fact, AIG is a paragon of parsimony compared to the politicians currently running America.

Make those arguments, too. But stick to the script:

President Bush, yes, spent money like a drunken sailor, and left the nation with a record $400-billion deficit. President Obama, however, is spending far more money than Bush, with a record $1.8-trillion deficit projected for his first year.

An American public that has not been taught basic economics—and that includes journalists—is not ready for theories from the Monetarists, from Friedman, from the Austrian School, from Hayek and Mises. When Lawrence Summers cites John Maynard Keynes as his model for what Obama is doing, it falls on deaf ears. The vast majority of our college graduates, not to mention politicians, have no idea of the core differences between Marx’s Communist Manifesto and Adam Smith’s The Wealth of Nations. (For the recent Intercollegiate Studies Institute survey on economic and civic literacy, click here.)

We cannot suddenly, over the next four years, make up for decades of failed education in how successful economies function.

Please, I don’t mean to be condescending. My point is to acknowledge these extremely troubling—and destructive—realities, so we can figure out how to respond.

I’d like to share a closing illustration: I heard a caller on a talk-radio show screaming that George W. Bush was responsible for these deficits. The host calmly asked the caller if he knew the amount of the deficit that Bush left behind. The caller tried to dodge the question—he clearly didn’t know the answer. The host pushed. Finally, the caller yelled: “Yes, Bush left a deficit of $2 billion!”

The caller figured he had picked an obscenely high figure. Hardly. If President Bush had left a deficit of $2 billion, he would be hailed for his fiscal management. That amount is so small that there would be a consensus that Bush had, in effect, left a balanced budget—like what he had inherited from his Democratic predecessor.

No, caller. Believe it or not, Bush did far worse—way beyond what you can imagine at the height of your outrage. And guess what? Obama’s deficit in eight weeks, not eight years, is projected to be more than four times worse. Forget $2 billion—how about nearly $2 trillion?

One more time:

President Bush, yes, spent money like a drunken sailor, and left the nation with a record $400-billion deficit. President Obama, however, is spending far more money than Bush, with a record $1.8-trillion deficit projected for his first year.

It isn’t rocket science. It is truth—a frightening truth. It is a crying shame. And America’s citizens desperately need to understand it so they can stop electing—and excusing—this kind of insanity.

http://yidwithlid.blogspot.com/2009/03/how-to-explain-obama-deficit-to-bush.html

Chief Henry
03-30-2009, 10:18 AM
Newsflash, March 20, 2009: The Congressional Budget Office today forecast a U.S. budget deficit of $1.8 trillion for this year.

For many Americans, including some Democrats, there’s tremendous frustration over President Obama’s economic policies. Worse, they know that a huge portion of the public and media so adore Obama that they will not question anything he says or does, even as he pursues a course that previous presidents—including Democrats like Bill Clinton—would never have considered. Add to this the horrendous failure of our educational system—a failure to teach market economics—and we have a major challenge on our hands.

How do we communicate the depths of the nation’s fiscal depravity? How do we simply—very, very simply—explain the mindboggling generational debt being produced right now by President Obama and the Democratic Congress?

Communicating this is crucial because Obama and the Congress, along with their supporters and media, are trying to blame this calamity on George W. Bush. Logically, of course, that is impossible. Politically, it will likely be accomplished—unless we can communicate the reality.

Since we live in a world of sound-bites, here’s how to present the argument in two basic lines:

President Bush, yes, spent money like a drunken sailor, and left the nation with a record $400-billion deficit. President Obama, however, is spending far more money than Bush, with a record $1.8-trillion deficit projected for his first year.

Period. Repeat that statement. Repeat it to those who don’t understand, or don’t wish to understand. Repeat it until you’re blue in the face. Make the person on the receiving end recite the numbers: $400 billion vs. $1.8 trillion.

Anyone can understand that math. From there, you can elaborate, if you desire, explaining how Obama’s deficit is a direct result of spending programs, like the $800-billion “stimulus,” like the $400-billion package that followed, and so on. The subsequent prolonged economic slowdown will pad the deficit more. The tax increases imposed to cut the deficit will further cripple the economy, ballooning the deficit and wider debt. The damage still to come from printing obscene amounts of new money will be inflationary and make all this yet worse.

Those are things that should be pointed out when trying to explain what Obama and the Congressional leadership have done in merely eight weeks.

And it cannot be emphasized enough that no president in American history—certainly not George W. Bush—has spent this much money in such a short period. These are the same politicians demonizing the private sector for fiscal irresponsibility. In fact, AIG is a paragon of parsimony compared to the politicians currently running America.

Make those arguments, too. But stick to the script:

President Bush, yes, spent money like a drunken sailor, and left the nation with a record $400-billion deficit. President Obama, however, is spending far more money than Bush, with a record $1.8-trillion deficit projected for his first year.

An American public that has not been taught basic economics—and that includes journalists—is not ready for theories from the Monetarists, from Friedman, from the Austrian School, from Hayek and Mises. When Lawrence Summers cites John Maynard Keynes as his model for what Obama is doing, it falls on deaf ears. The vast majority of our college graduates, not to mention politicians, have no idea of the core differences between Marx’s Communist Manifesto and Adam Smith’s The Wealth of Nations. (For the recent Intercollegiate Studies Institute survey on economic and civic literacy, click here.)

We cannot suddenly, over the next four years, make up for decades of failed education in how successful economies function.

Please, I don’t mean to be condescending. My point is to acknowledge these extremely troubling—and destructive—realities, so we can figure out how to respond.

I’d like to share a closing illustration: I heard a caller on a talk-radio show screaming that George W. Bush was responsible for these deficits. The host calmly asked the caller if he knew the amount of the deficit that Bush left behind. The caller tried to dodge the question—he clearly didn’t know the answer. The host pushed. Finally, the caller yelled: “Yes, Bush left a deficit of $2 billion!”

The caller figured he had picked an obscenely high figure. Hardly. If President Bush had left a deficit of $2 billion, he would be hailed for his fiscal management. That amount is so small that there would be a consensus that Bush had, in effect, left a balanced budget—like what he had inherited from his Democratic predecessor.

No, caller. Believe it or not, Bush did far worse—way beyond what you can imagine at the height of your outrage. And guess what? Obama’s deficit in eight weeks, not eight years, is projected to be more than four times worse. Forget $2 billion—how about nearly $2 trillion?

One more time:

President Bush, yes, spent money like a drunken sailor, and left the nation with a record $400-billion deficit. President Obama, however, is spending far more money than Bush, with a record $1.8-trillion deficit projected for his first year.

It isn’t rocket science. It is truth—a frightening truth. It is a crying shame. And America’s citizens desperately need to understand it so they can stop electing—and excusing—this kind of insanity.

http://yidwithlid.blogspot.com/2009/03/how-to-explain-obama-deficit-to-bush.html



But Bush lied and people died - One other thing, Bush Sucks :rolleyes:

Adept Havelock
03-30-2009, 07:28 PM
BECAUSE HE WAS FRACKING JEWISH!! Any Jew with money or sense fled the Nazis, regardless of their thoughts on economic systems.

There is no C in "Frakking". ;)

bdeg
03-30-2009, 07:50 PM
No one does. Predictions should be taken with a grain of salt. Again Barry Ritholz is a much better writer than I am so I will let him explain it.



My main qualms with most economic schools of thought is the efficient market hypothesis, the "rational" person assumptions, and ceteris paribus.

These are all things used to "dumb down" (except the efficient market hypothesis which for some reason ignores externalities) economics to make them teachable. The only way you can equate it into #'s is to assume people are making intelligent decisions, but that isn't always the case, which is where marketing comes into play more. But economics is based the assumption that there are enough people making the intelligent decision to sway the average to the correct price/quantity/whatever.

BucEyedPea
03-30-2009, 09:23 PM
Amnorix, Mises wrote critically about the socialism in Europe at that time too. Including the National Socialism of the Nazi's.

BucEyedPea
03-30-2009, 09:29 PM
These are all things used to "dumb down" (except the efficient market hypothesis which for some reason ignores externalities) economics to make them teachable. The only way you can equate it into #'s is to assume people are making intelligent decisions, but that isn't always the case, which is where marketing comes into play more. But economics is based the assumption that there are enough people making the intelligent decision to sway the average to the correct price/quantity/whatever.

No it's based on individuals each doing their own valuing... satisfying their own needs, wants. AS argues there is no "correct" price. You're operating on the flawed idea of aggregates, like everyone operates with one giant Spock mind-meld. That's a collectivist mind-set.

AS school tackles the externalities challenge too, using logic. And as far as dumbing anything down, it's intellectual shysters who make economics more complicated so the average person can't figure out what's going on. Very elitist pov. Afterall, the origin of the subject comes from the mistress of the household managing her household. Pretty simple for the most part. AS have faithfully predicted the booms and busts. Their record is much better on that account than the Keynesian school of economics which was formulated by a self-avowed socialist to be the destruction of capitalism.

bdeg
03-30-2009, 09:45 PM
Ideally, sure. I was trying to relate economics to common America. Something I admit not all economists do.

You can't blame economics for being complicated. If you didn't take economics courses, trying to understand some of the terminology is the same thing as trying to read a differential equations book without taking calc.

Who/what is this AS? I skimmed the thread.

KC native
03-30-2009, 10:19 PM
Ideally, sure. I was trying to relate economics to common America. Something I admit not all economists do.

You can't blame economics for being complicated. If you didn't take economics courses, trying to understand some of the terminology is the same thing as trying to read a differential equations book without taking calc.

Who/what is this AS? I skimmed the thread.

Austrian "School" aka idiot gold bugs. Their economic model is invalidated by two major points. First off they assume that the gold supply is elastic (so growth isn't limited to what can be pulled out of the the ground and that the price doesn't go up when it is mined and the amount in the ground is reduced). Second, all of their theories depend on the rational consumer assumption. They're also very math averse meaning they use no mathematical models to justify their arguments. They rely on logic (as in the debate/lawyer sense) to make their economic cases.

BucEyedPea
05-17-2009, 08:50 AM
Ideally, sure. I was trying to relate economics to common America. Something I admit not all economists do.
This is exactly what the Austrian School does. The word economics comes from the mistress of the household managing her income and expenditures and it need not be complicated. Not it's basic principles anyway. The elitists want it that way so no one can figure it out but many people do just fine managing their own economics ( unless the Keynesians are distorting pricing signals that lead to misreading them).

You can't blame economics for being complicated. Nope, it isn't that complicated. You've been snookered.

Who/what is this AS? I skimmed the thread.
Go to mises.org
If your past education in economics has filled you with too many fallacies it will be difficult for you to accept this school. That and not being in business yourself or self-employed. (Those guys have first hand experience with many of their points) Employees,bureaucrats, students and academics usually don't.

KC native
05-17-2009, 10:23 AM
This is exactly what the Austrian School does. The word economics comes from the mistress of the household managing her income and expenditures and it need not be complicated. Not it's basic principles anyway. The elitists want it that way so no one can figure it out but many people do just fine managing their own economics ( unless the Keynesians are distorting pricing signals that lead to misreading them).

Nope, it isn't that complicated. You've been snookered.


Go to mises.org
If your past education in economics has filled you with too many fallacies it will be difficult for you to accept this school. That and not being in business yourself or self-employed. (Those guys have first hand experience with many of their points) Employees,bureaucrats, students and academics usually don't.

ROFL You may be stupid when it comes to economics but I will give it to you for being so dedicated to Austrian nonsense.

BucEyedPea
05-17-2009, 11:42 AM
Did I hear a thud?

KC native
05-17-2009, 12:42 PM
Did I hear a thud?

Yea it was that marble brain of yours finally falling out of your ear.

JohnnyV13
05-17-2009, 06:39 PM
I don't understand how a so called scientist can fail to see the inherent contradiction in Misean premises.

To begin, you must understand that the distinction between "empirical" and "non-empirical" sciences is something of a misnomer as it has been presented here. ALL sciences are based on empiricism. A branch of science can become "non-empirical" only when its core premises are so well known, that further experimentation with them is purely redundant.

Furthermore, for a branch of science to be "non empirical", its core theory must explain all phenomena which fall within its purview. For example, we cannot call "gravity" a non-empirical science, because we cannot explain einstienian astro-physics and sub atomic motion in the same model. (Within our current theories, to explain sub atomic particle motion, we have to presume that mass holds no attraction at the sub atomic level. Hence we have einstienian conepts of curved space, space/time and singularities entirely independent from quantum mechanics).

Mises claims economics is "non-empirical" yet also claims that individuals make irrational economic decisions. For these assertions to be true, Mises would have to have such clear understanding of human economic behavior that every "irrational" choice made by a human actor must both be predictable, and explained by one unified theory.

Consequently, Miseans would have to not only predict all the choices consumers will make when faced with an economic decision, Misean theory would also have to acurrately predict the percentage of individuals who would make each decision.

BucEyedPea
05-17-2009, 07:14 PM
Mises claims economics is "non-empirical" yet also claims that individuals make irrational economic decisions.
Can you please show something where he says that?
He says irrational decisions are made because of the distortion in the pricing signals due to monetarization. Other than that he says players in a market largely act in their self interest.

For these assertions to be true, Mises would have to have such clear understanding of human economic behavior that every "irrational" choice made by a human actor must both be predictable, and explained by one unified theory.
Most Keynesians haven't even begun to grasp what Mises says on this let alone understand it. He doesn't make any claim to define what is "rational" or "irrational" for each person's choices in a free market. It's not a mathematical model because a mathematical model is insufficient to address human action. But that doesn't mean it's devoid of all math either. Nor make it non empirical.
People are NOT rats in a maze.

Mises doesn't believe in a unified theory for choices of the players in the market.

What the article addresses, is like any laboratory experiment if the results don't appear you abandon your theory. The Keynesians refuse to do that.

Consequently, Miseans would have to not only predict all the choices consumers will make when faced with an economic decision, it would also have to acurrately predict the percentage of individuals who would make each decision.
No, that's just it. You can't accurately predict human action. Some yes. That's what you're saying. That's not what Mises says. That is why Keynesian is part of command and control economics or managing an economy. Miseans say you never know what you would have had without this management. You can't predict what some maverick may dream up on the market for a product that changes our lives. An example of this is a Bill Gates and a Steve Jobs appearing and every other inventor/entrepreneur before them. Don't forget the mini-computer industry said that the PC would never happen. Yet it did...and it changed our lives. No one saw it coming though.

Keynesians are unable to grasp the Austrian School until they have their earlier economic fallacies corrected....including that Keynesianism is empirical and scientific. It's not. If it were it would have been abandoned a long time ago. Witness what we're in today. Classic Keynesian results.


Have you actually ever read the guy at some length?

BucEyedPea
05-17-2009, 07:59 PM
What empiricism can't tell us, and Rationalism can (http://mises.org/story/1999)

banyon
05-17-2009, 10:13 PM
What empiricism can't tell us, and Rationalism can (http://mises.org/story/1999)

Wow I knew that ideology was a mile wide and an inch deep, but I had no idea the guy was a philosophical plagiarist too.

The nerve of that guy ripping off Descartes as some original theory of his.

In any event, if you think that this link is somehow responsive to JohnnyV13's question about the inability to convert these "rationalist" insights into explanations about human economic behavior, then you still didn't understand the question. That link is about a meta-epistemology, not its application to a theory that can explain human behavior.

What you're supposed to be talking about at this point is the "praxeology" nonsense, where Mises can mystically generate a posteriori conclusions from solely a priori knowledge, a feat that neither Descartes, Hume, Locke, nor Kant could manage, nor anyone else in the history of the universe who actually understands what those terms mean.

Also, though your link states "what rationalism can tell us" it is also noteworthy that the article doesn't get to the point of tellng us anything it can tell us.

JohnnyV13
05-18-2009, 03:48 AM
Buck,

The Mises site, and Mises entire approach claim economics as a "non-empirical" science. Just look at your own initial exerpt in this thread where the writer claims that Miseans do not dispute that economics is a science; its just that its a logical science, the science of human action.

For a science to use a "logical" or deductive method, the core premises must be so well known that further empirical study is useless and futile. In the article you linked as the response to me, the writer talks about how you couldn't make progress in geometry if you were always trying to empirically confirm the basic geometric relationships of a circle.

Certainly, that example is true in geometry, because we thoroughly know and understand the geometric relationships of a circle. I do not believe we have similar knowledge of ANY aspect of human behavior. Hence, deductions from premises regarding human behavior cannot be called a scientific approach.

What you have is philosophy.

Garcia Bronco
05-18-2009, 04:58 PM
There are only 4 sciences. Everything else is a subset of these 4 and the 4 build on each other:

Physics, Chemistry, Biology and Psychology. Math isn't a science. It's a toool and a point of reference. Economics sure as hell isn't a science.

BucEyedPea
05-18-2009, 06:12 PM
There are only 4 sciences. Everything else is a subset of these 4 and the 4 build on each other:

Physics, Chemistry, Biology and Psychology. Math isn't a science. It's a toool and a point of reference. Economics sure as hell isn't a science.

Good Point. I just thought the article, being written by a physicist but who also was a supporter of the Austrian Economic school, could clearly see how Keynesianism did use the scientific method to be considered empirical or a science.

I would say though, Garcia Bronco, that life can be a laboratory of sorts. History is a laboratory of life in a way because we can see what has worked and what hasn't at least it terms of ideas and their consequences.