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View Diary: Nobel Prize for Economics = neo-liberal swinefest UPDATED (197 comments)

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  •  In what way is economics a legitimate science? (5+ / 0-)

    When compared to one of the hard sciences like biology,  chemistry or physics?  None of the hypotheses or theories are testable in the real world and the models fall apart with the flimsiest of empirical evidence.  If you can provide a real world example disproving this, please enlighten us. Economics ignores real world physical limits, can add but not subtract since it nearly always ignores negative externalities, and clings to a world view where certain actors in the economy are dismissed because to include them discredits the preconceived notion. Case in point - austerity and neo liberal trickle down economics.  It is warped by the worldview of those who benefit from its myopic tunnel vision.

    Trickle Down Economics 101: They get the golden parachute, we get the golden shower.

    by NoMoreLies on Thu Oct 17, 2013 at 06:05:57 AM PDT

    [ Parent ]

    •  yeah, just like climate science. (2+ / 0-)
      Recommended by:
      MGross, duhban

      ... Or evolutionary biology.

      Science you don't like is never real science.

    •  Economics is a science (3+ / 0-)
      Recommended by:
      NoMoreLies, J M F, duhban

      This statement is overbroad.

      Externalities are covered in most intro textbooks and well understood throughout the field. Macro economics is a mess, but there are still many useful areas of research ongoing.  (Think about Paul Krugman's nobel-prize winning work on international trade, or Larry Diamond's nobel-winning work on unemployment, or Christina Romer's work on economic history or Alan Blinder's and George Akerlof's work on new Kensyian models)

      As for your point about Austerity economics, the vast majority of economic research has discredited the idea under most circumstances (see the replication of Rogoff and Reinheart's debt paper, and pushback on Alesina's doctrine of expansionary austerity -- which is how any science is supposed to work, some one puts up a theory, tests it and gets results. Then others try to replicate it and if they can't they question it) Just because policy makers embrace bad economics, doesn't mean that all (or most) economists do bad science.

      For a good introduction to econ (as a science!) that a lay person can understand, try Krugman's "Peddling Prosperity" or "The Incidental Economist"

    •  Or also read Elinor Ostrom (5+ / 0-)

      She's a political scientist who did a lot of economics and thought through a variety of economic assumptions, game theory and organizational models to classify, develop and observe different ways to organize society to respond to common pool resource problems (one form of externality). Some of those ways involve private property rights, but the point is that her work expands beyond that to see how non classical liberal (or neo-liberal) arrangements can align incentives appropriately to maximize use of a fishery or forest while not depleting it.

      Try reading her "Governing the Commons," which is the foundation of the work that got her the Nobel in economics several years ago.

    •  You seem to be believing the neoliberal economists (2+ / 0-)
      Recommended by:
      duhban, Selphinea

      that they are the only economists.

      There are economists that generate hypotheses and theories that are testable in the real world. They are, of course, utility theoretic economists, and so ignored by neoliberal economists, but they do exist.

      There are economic approaches that do not ignore real world physical limits, there are economic approaches that do not ignore negative externalities.

      Austerity and neoliberal trickle down economics only indict those pseudo-science approaches to economics that fall for that claptrap.

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      by BruceMcF on Thu Oct 17, 2013 at 01:36:28 PM PDT

      [ Parent ]

    •  Try trading options on a large scale without (0+ / 0-)

      using Black Scholes.  Come back and lets discuss whether or not economics is science after you lose a few million dollars.

      Actually, the stories about the options markets in the mid-70s after Black and Scholes published their first paper are pretty interesting.

      At the beginning, virtually all the traders laughed at the idea that you could price options without betting on the direction of the underlying stock and ignored it, but a few people understood the theory and were able to get the backing to trade based on it.

      Over time it became a major cultural divide - the quants vs. the old time traders who swore that they could time the market and buy calls when stocks were going up and puts when they were going down.

      Pretty soon the old time traders were put out to pasture or became managers and the quants ran the show.

      Within a few years all options trading except for retail investors was based on Black Scholes.

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