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To Anonymous #86920:
If it were true that the solution would be to just let entrepreneurs make the right decision then explain why bankruptcies are on the rise and why the tech market folded in 2003. The point being that the Fed throws out false signals to entrepreneurs through interest rate manipulation and when the entrepreneurs find out that their growth was based on paper rather than real savings, they go belly up. Exactly what we're seeing. It's not theory, it's real. And if I were you, I'd be paying more attention to theory ("psycho-knowledgey" as you put it).
Thank you for the excellent comment. I think I agree with most of what you say. Although I don't think these economists think they possess a priori knowledge, and that is the problem. They believe instead in empirical knowledge without an a priori basis, as you obviously know, and they would be of the Historical School of economic theory (going back to the Methodenstreit debate). I believe you know all this from your excellent comment. I don't want to bore readers who aren't into this great epistemological debate, or the ideas of Mises and Hayek, but it's fun to discuss this with someone who understands the arguments.
I also understand your pessimism about current events. While I understand that history is on the side of statism because of leaders' propensity for power despite the results of their policies, I have hope and that is why I started my blog, The Daily Capitalist. I think events like these are polarizing and, as I see it, while we seem to have lost a place at the debate table, the free market movement has gained many, many followers who can think for themselves. The growth of Austrian based economists in academia has been growing and growing. Also, it seems most of the Austrian economists got it "right" as opposed to the Keynesians and Monetarists who missed calling the crash. So, I plug away at it, trying to present my free market ideas at a "retail" level by showing the failures of Keynes and socialism through economic analysis without necessarily getting into theory. And, I can tell you, it's getting easier and easier to point out the failures, much to our misfortune.
May i coin the word psycho-knowledgey?
To whit, well informed entrepreneurs will invest their time and money when they believe they can make a profit.
Notice well-informed contretemp believe. Do not sell icecubes in Eskimo land!
Pondmaster: Ageist! Why, I am in the prime of my life. Let's just say that I've seen lots of cycles.
Happy Days: Great observation! If MBAs were thrown into the Pits before they did anything else we would be better off. Now that I think about it, what a great idea.
Also, I skirted the issue behind this post -- how do we know what we know? The real answer about economists is that they think they know an unknowable.
Econophile: excellent work.
But, the real problem is that economists believe they
possess a priori knowledge of too many variables,
leading them to believe they "know" (not think!) the unknowable. This fallacy of logic and reasoning leads
to the arrogance of their continued failures in
predictive forecasts within highly stochastic and vastly
manipulated: government actions and markets.
The ultimate problem with: economists, rating agencies,
The Fed, Treasury, Regulatory agencies, Congress,
banks, insurance companies, car companies, mortgage
GSE's and, all the other bailout recipients (and, CNBC
and Cramer) is this: there is no penalty, no consequences for failure! Few have lost their jobs because of their
past and present failures. No one has gone to jail for their actions (or lack thereof). Moral hazard has
been blown away in a land where debt and deficits no
longer matter - until they do - but that is somewhere
in the distant and "irrelevant" future.
Obama, Government and Congress have failed over and over to understand that doing nothing was, and is, the wisest choice at this late stage of "event discontinuities."
But, when you have a financial oligarchy, enmeshed
within a political kleptocracy, that is bailed out of
ALL of it's failures, at taxpayer expense and further enriched and emboldened, then you have arrived at a
fascist state. And that is a very dangerous place.
In your question, "... I skirted the issue behind this
post-- how do we know what we know?", lies the real
conundrum of this entire misbegotten mess - for all of
the above offenders I have listed - it does not matter
what they know or, we know. Why? Because "we" who do
"know" even some of what is happening, are still of such insufficient numbers with no real power, that they do
not fear us. And until they do fear us, the lies and manipulation will continue and nothing will change.
That is the point. Destroy the wealth of the nation's citizens by transferring it to the banks and the
corporations while debasing the currency until we become
My greatest fear is that "we" will not achieve a
critical mass soon enough to stop this madness before
we reach a "global bifurcation" point that leads to a
systemic collapse. (See: Humpty Dumpty & Weimar Republic)
Then, no one wins, game over.
Why do economists get it wrong? There is but one employer of most 'name' economists... The government / fed / maybe academia. You going to say anything your employer doesn't agree with... where are those black helicopters again?
"Why do economists keep getting it wrong?"
A "small" observation from being a floor trader (bonds). The more
"education...college" one had, the poorer their performance on the
floor. I am not knocking those with higher education...but on the floor
it is generally useless. They would discuss all day long how this should
move and that should move...the market, to them, had to follow a
script to satisfy their ego entrenched minds. The best thing to do
was to trade against them. When they wanted to buy...you'd sell it
to them and vice versa. Great system. The market is not logical...
one must stay in the now moment and go with the flow....not with
what you "think" it should do based upon one's "education". The ones
with MBA's and the like were great to feed off of....believe me. They
all blew out in 6 months or less. Now we get to economists. They
have their masters and PHD's....just put them in the "pit" and I'll
bust them out in short order. That piece of paper they paid dearly
for is useless on the floor and useless (for the most part) in their
analysis. I've seen it first hand. To go with the flow is just too hard
for them to deal with, I guess. Too simple...and funny thing is..is
that simple works for trading. Trying to develop mathematical models
that involve stuff I can't even pronounce right is a hopeless endeavor...they
may work for a while...but all fail in the end. All...because any
model can't anticipate "the event"...the asteroid with planet earth's
name on it. It's the way it is. Have a great weekend all!!!
I agree with the premise that most highly educated "traders" ignore what is in front of their face,and are more biased by their background. As one without a degree, I understand this too. Those without degrees generally learn the business from the bottom up, learning how the business really works by being back office, margin clerks, etc... and then trading assistants and then traders or brokers.
But I don't think this can even happen anymore with the state of financial companies. Nevertheless, rather than just trade it doesn't seem hard to divine macro trends in the economy especially if you've been around the business for 30 years.
Back to the economy, here's a girl that has nailed it. Ms. Whitney.
"OK, everyone says employment lags a recovery. Got it."
Indeed. Further, spouting that employment lags doesn't tell us the time period for that lag, nor the subsequent economic growth, or lack thereof.
In other words, even if "employment lags" is established as always being true, it doesn't really tell us anything useful.
Your even having a clue about "Joe Btfsplk" is very telling of your age . I am 54 and my father told me about Joe in the "funny papers" - Lil Abner stirp was discontinued in 1970 or so wasn't it .. ?
Good post - Both sides are good practice to view in economics
" Who’s right? "
Ask the charts.
I warned of an impending stockmarket crash back in *early 2007*
And our leaders have a tenacious talon grip on us. Of course they grip harder in Europe which is probably why they are fighting back more and losing.
Gordon Brown was supposed to lead them into the global economy scam but looks like he's getting some trouble.
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