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View Diary: WHY WE’RE SCREWED (232 comments)

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  •  Science of economics (1+ / 0-)
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    left of center

    I suppose the larger question is, to what extent is economics like physics, and to what extent is it an ideologically constructed view of markets. If the latter is the case, then discussion remains confined to those who agree with each other, and there will only be things called socialist economics, liberal economics, conservative economics, but no such thing as "plain" economics and, in reality, literally nothing to discuss. IMO, that point of view needs a great deal of rethinking.

    On the specifics, if you read my posts, you should have seen that I did say who the losers would be—pretty much everyone. As I wrote, I presume that following my (unpalatable) suggestions would "accelerate foreclosures, decimate pensions, and throw the overall economy into a tailspin." It will be entirely awful. But what we have now is, as I believe, already disaster, merely a slow-moving one. I move that we pull the plug on a moribund economy in order to (somewhat like Iceland, I suppose) get the nastiest bits out of the way sooner rather than later.

    I am unconvinced that there is any way at this late date to provide a "soft landing." Is that right or just? Of course not. However, in my opinion, barring exceedingly unlikely events (e.g., the advent of world government and the abolition of private property) it is the inescapable consequence (and I mean that literally) of a great many really bad decisions over many years at every level of society. And no matter how desirable it might be to remove money from politics, even if enacted yesterday, such legislation would not change one whit our situation today.

    •  Have no clue what you're talking about concerning (0+ / 0-)

      Iceland.  And I live in Iceland.

    •  Economics is very ideological. So is sociology, (1+ / 0-)
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      left of center

      polisci, anthropology and every other social science. Examine the history of these discplines. And economics has become not a way of studying human behavior, but rather as a tool for policy makers. Free market ideology dictates a certain policy path, Marxism another policy path. Economics, no matter how much certain economists would like to believe otherwise, is not a hard science.

      Krugman and Stigletz both denounce the state of modern economic thinking as being too tied to the free market ideology. And very few economists have been as accurate as these two in forecasting the disaster we find ourselves in. Examine the role of the Black Scholes financial model on past disasters, like Long Term Capital Management. Lets face it, many economists suck at their jobs.

      •  If it's all ideology (0+ / 0-)

        there is no one who knows anything—which means that Krugman and Stigletz have to be ideologues as well. Too bad—ideologues are people who recast the facts to suit their beliefs.

        I don't really know what they forecast when, but I know for sure that the relatively conservative magazine, one that advocates for free markets and free trade, The Economist, spent most of a decade discussing the potential for disaster in derivatives trading among the unwary, the housing bubble, and why what goes up must come down. So if Krugman, Stigletz, and the Economist can get to similar conclusions, it suggests that there might actually be something called a general study of economics whose truths are independent of dissimilar ideologies. Here's hoping

        •  Well truth is not always objective in the social (0+ / 0-)

          sciences. There is a big difference between reading a thermometer and reading a statistical survey of human activity. And even physics has an understanding that not everything is observable. The best model we have in physics is blindingly complex and uncertain.

          There are a number of ways to study economics. One of them, a relatively new field, is to study the behavior of what people actually do. This is referred to as behavioral economics. It studies people's economic behavior with the understanding the people do not always make rational decisions.

          Market economics on the other hand studies market behavior. And assumes that humans make rational economic decisions. This describes most economists. And most economists work for banks, investment houses, government, think tanks, etc. They are not involved in academic research.

          Most social scientists work from a theoretical alignment that matches what they believe about the world. If you are interested in academia you have one perspective. If you are interested in making money you have another perspective.

          Many mathematically talented engineering, economics, and physics graduates in the eighties until quite recently went to work for investment houses and hedge funds. They were interested in making some money. And for a while it worked. But they were in great part responsible for the collapse of the financial market. Look up Black Scholes and LTCM fro a good example of what theories can do tp a market place.

          The first thing you learn in Anthropology 101 is that you have prejudices, you will never completely lose them, and you have to constantly question your prejudice as you do research. The same lessons are taught in most sociology and social psychology courses. It is called observer bias and can taint your results, Economics has the same problems but is often less inclined to recognize them.

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