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The Stinging Critique of a Worker Bee
A little
while back, a Fed Economist by the name of Kartik Athreya, wrote a piece urging
the public to only listen to economists who have PhDs from top level
universities when searching for economic insights. Regarding other sources of
macro-economic analysis, specifically bloggers, Mr. Athreya writes, “it is exceedingly unlikely that these
authors have anything interesting to say about economic policy.”
Obviously
this paper was a lot of fun for me to read. So I thought I’d present some
thoughts on Mr. Athreya and the group of “experts” he represents.
For
starters, Mr. Athreya introduces himself as the following:
The
relevant fact is that I work as a rank-and-file PhD economist operating within
a central banking system. I have contributed no earth shaking ideas to
Economics and work fundamentally as a worker bee chipping away with known tools
at portions of larger problems.
Now, the
primary thrust of Mr. Athreya’s arguments is that one needs to have taken some
form of graduate work on economics to provide any commentary on the subject
that is “meaningful.”
Seeing as
this is essentially a “leave the difficult stuff to us experts,” argument, I
want to start with the self-description of the “expert” writing it. I wonder,
when reading Mr. Athreya’s self-description, if worker bees do in fact “chip away” at things?
I realize
that bees make honey and build hives… but chip away? What do they chip away
with? “Known tools”? Do bees use
tools? Which ones are these? And what “portions
of larger problems” do bees “chip
away” at? Building hives? Making honey? How do you produce honey by "chipping away"?
More to the
point, what on earth is Mr. Athreya talking about?
We’re not
even past page one of his “us experts are the only ones who know what they’re
talking about,” diatribe and already it’s not even clear that he has a firm
grasp on how to use basic metaphors. And he is meant to represent the sort of
people us ordinary folk should listen to when it comes to explaining things that
are “very complicated”?
I also
wonder if Mr. Athreya, when making his somewhat self-deprecating introduction,
was aware that most “worker bees” are in fact sterile females? Moreover, did he
intend, by using the “worker bee” metaphor, to imply that the Central Banking
System is in fact a metaphoric “hive” of which Fed Chairman Ben Bernanke is the
“queen”?
I’ve written
some pretty critical words regarding Chairman Bernanke and his policies, but
implying that he is a large female whose only role is to sit around laying eggs
all day is too rough even for my taste. A charlatan and a fool? Certainly. But
a insect whose sole purpose is to lay eggs? That’s a bit much.
Of course, I
am making an intensive examination of Mr. Athreya’s choice of words. However,
if Mr. Athreya wishes to write a paper elevating himself and those of his
profession as the only ones qualified to discuss difficult topics such as
macro-economics, I would assume he would be intelligent enough to make a cogent
metaphor (I am, of course, assuming Mr. Athreya was not aware of the
implications of his “worker bee” self-description… for all I know he may in
fact want us to believe he and his ilk are sterile females working for a
queen).
However, in
the interest of taste and decorum, let’s set aside my analysis of Mr. Athreya’s
creative language and focus on the brunt of his intellectual argument. Rather
than analyzing his entire essay, I thought it best to summate his points in a
few bullets:
1.
Macro-economics is very hard
2.
Only those with at least some advanced PhD-level
coursework can comment on macroeconomics knowledgably
3.
Everyone who pretends they understand
macroeconomics without having pursued said coursework is doing the world a
disservice and misleading the general public
Mr. Athreya
then goes on step further and points out that while many bloggers focus on the
Financial Crisis, they fail to provide a similar amount of commentary regarding
two other major crisis, specifically the earthquake in Haiti and the Tsunami in
East Asia.
He writes:
I
find the comparison between the response of writers to the financial crisis and
the silence that followed two cataclysmic events in another sphere of human
life telling. These are, of course, the Tsunami in East Asia, and the recent
earthquake in Haiti. These two events collectively took the lives of
approximately half a million people, and disrupted many more. Each of these
events alone, and certainly when combined, had larger consequences for human
well-being than a crisis whose most palpable effect has been to lower
employment to a rate that, at worst, still employs fully 85% of the total
workforce of most developed nations.
I chose this
passage because it shows, in clear terms, just how self-righteous and clueless
economists like Mr. Athreya are. To be clear, I do not think ALL economists are
clueless. Moreover, I do not think all economists AT the Federal Reserve are
dolts. It is quite clear from several of the papers published by folks at the
Fed that some of them understand exactly what is going on and that they are as
fed up as the rest of us.
So, if you
have a PhD in Economics or work for the Fed, do not think that the following is
necessarily directed at you. It is, instead, directed at those Economists who,
like Mr. Athreya, believe they are somehow smarter than the rest of us, when in
fact the vast majority of them missed the biggest Financial Crisis in 80+ years
all the while promoting theories and policies that have done severe damage to
American savers, the value of the US Dollar, and American living standards.
Over the
last 40 years, Americans has seen a dramatic decline in incomes, living
standards, and generalized quality of life while their savings and wealth were
transferred to Asia, OPEC, and Wall Street.
Indeed, when
you adjust for inflation using the Bureau of Labor Statistics OWN data, REAL
incomes have declined some 40%+ from 1972 to today (weekly earnings of $143 in
1972 are worth $746 in 2010 dollars… compare that to the ACTUAL weekly earnings
of $355 today).
Between 1970
and December 2009, the US Dollar lost 81% of its purchasing power courtesy, at
least partially, of the Federal Reserve and the economists who decide policy
there. This, combined with the drop in weekly earnings, is why, in the ‘70s,
only one parent worked and families got by whereas today both parents typically
work and are struggling to make ends meet.
In plain
terms, the Fed’s policies eviscerated the middle class while funneling their
money into Asia (per capita income in China doubled twice from 1978 to 1987 and
again from 1987 to 1996), OPEC, and Wall Street (the financial industry’s
profits as a percentage of total S&P 500 profits rose form 10% to 31% from
1970 to 2003).
In 1979, the
top 10% of income earners in the US took in 67% of all capital income (income
from stocks, bonds and the like). By 2006, this group was snagging over 80% of
all capital income. Talk about concentration of wealth in the hands of the few!
Economists
like Mr. Athreya and their “very
precisely articulated model(s)” are indirectly if not directly responsible
for this happening. Their work was used to back up policies that were in fact
horrible for the American people and their living standards. In plain terms,
they dressed up a bunch of theories that were complete and utter CACA all the
while claiming these theories were facts. And all 300+ million of us in the US
have suffered because of it.
Mr. Athreya
decries the fact that bloggers focus on the Financial Crisis instead of the
earthquake in Haiti or Tsunami in South East Asia. He implies that this focus
indicates bloggers are in some way not concerned with the welfare of others.
Unfortunately
for his arguments, neither the earthquake nor the Tsunami were man-made
catastrophes. The Financial Crisis, in contrast, WAS man-made (actually IS,
since it’s still going).
Moreover,
the risks of the Tsunami and the earthquake were not well known to the experts
well in advance (a handful of studies warned about a potential earthquake in
the Caribbean, but the Tsunami came “out of left field” so to speak).
In contrast,
as early as 1998, soon to be chairperson of the Commodity Futures Trading
Commission (CFTC), Brooksley Born, approached Alan Greenspan, Bob Rubin, and
Larry Summers (the three heads of economic policy) about derivatives. She said
she thought derivatives should be reined in and regulated because they were
getting too out of control. The response from Greenspan and company was that if
she pushed for regulation that the market would implode.
So, the
Economists and experts knew a full ten years in advance what the risks were in
the financial system. And they did NOTHING to rein them in.
Finally,
neither the Tsunami nor the earthquake resulted in the Federal Reserve
channeling TRILLIONS of taxpayer dollars into the corrupt bank oligarchs’
coffers, often times paying 100 cents on the Dollar for worthless assets that
are now poisoning the Fed’s balance sheet and assuring that the very issues
plaguing Europe will one day hit the US.
The
Financial Crisis DID all of this and more.
In no way
shape or form am I belittling those who were killed or continue to suffer from
the earthquake in Haiti or Tsunami in East Asia. My primary point is that both
of those incidents were natural catastrophes that could not have been
prevented. The Financial Crisis, which wiped out $50 trillion in wealth and has
resulted in millions losing their jobs, COULD have been prevented.
And yet,
consumers are supposed to listen to the guys whose entire careers are meant to
focus on forecasting economic events when less than one percent of them
forecast the Crisis (despite those at the top of the economist food chain
knowing a full decade in advance of the risks in the financial system)?
Truly, Mr.
Athreya and his ilk are “chipping away…
at larger problems.” However, those problems are not economic models or
unemployment, they are the following:
1. That ANYONE listens to
economists like Mr. Athreya
2. That the US Dollar still has a
value greater than toilet paper
However, do
not be alarmed, I am sure that as long as the Fed keeps publishing this kind of
nonsense while funneling taxpayer money into the Wall Street banks, both of
these problems will soon be fixed… permanently.
When that
happens, we can all toast Mr. Athreya and his ilk with $100 beers and take comfort
that the experts knew what they were doing all along.
Good
Investing!
Graham
Summers
PS. For other scathing critiques of the Fed and its policies, as well as some hard-hitting insights on the REAL reasons the market moves as it does, join me at www.gainspainscapital.com
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Very nice piece, hitting well the aimpoints.
I'd like to add two points:
#1 I am firmly convinced the Dismal Science & MBA corps are filled with people who really dont fully understand the mathematics they attempt to employ. Case point "very precisely articulated model(s)" and what was not quoted from the article "So much of my 1st year homework involved writing down tedious definitions of internally consistent outcomes."
+ Both these point to a problem within the educational system and specifically the Dismal Science, which btw by true scientific standards has proven no law of economics. In the first sentance we encounter the word "precise" used to explain economic models. Precision has to do with repeatability; a weapon is precise if all the rounds fall in a nice grouping, this in no way explains the ACCURACY of the weapon. This seems a "subtle" distinction to those who are not well educated in critical thought, but it is not. This is something that should IMMEDIATELY jump out to a PhD in a field which applies mathematics. Especially a PhD of the caliber Mr. Athreya likes to think himself to be. The second sentance, regarding definitions is illustrative also because ephasises a two truths; one of which Mr. Athreya captured. The one missed deals with what mathematics really is, it's a LANGUAGE. A precise language, not accurate, precise. The accuracy of mathematics comes via the formula, litterally, through which mathematics speaks. And here's the rub, if a formula, or model, does not contain all the significant variables involved in a question, accounted for accurately, it fails to be accurate. If one groups enough of precise but innacurate formulas and applies them to an actual economic situation and is backed by enough capital the belief can skew the natural economic movements enough to appear to be naturally correct; e.g. dollar cost averaging and EMT. This is precisely what happened with the financial activities that lead to the recent crisis. The mechanisms that allowed the skew to grow large enough are many; but they can be reduced to two groups: moral/ethical decay in the public and government, i.e. unethical behavior in the housing sector - all aspects, financial/banking and non-financial/banking; and professional and public ignorance of the economic situation. The latter is where I believe Mr. Athreya falls.
#2 The removal of the study of Philosophy, yes Philosophy, from basic undergraduate education has had a profoundly damaging impact on Western society. The effect is two fold: first the discursive intellect, i.e. the ability to think well and rationally, has been greatly diminished; second the Public Square conversations regarding society and economics, e.g. blogs, sound like a high-school classroom in which the students re-hash settled questions and ignorant ideas. Why? Because the education system has failed society by not educating its students on prior Public Square debates. So society, like a teenager who cant remember last week, repeatedly asks questions appropriate for a teenager but not an adult. Think "if you're not a liberal when you're young you have no heart, if you're not a conservative when you're an adult you have no brain". Well, society by throwing out Philosophy, which is really nothing more than the history of the development of the collective human mind, has effectively created a collective "short-term memory" medical condition.... Which begs the obvious questions, if "progressives" were truly interested in progressing society they would be actively fighting for the history of Philosophy to be taught in high-school and undergraduate institutions. Unless of course they believe their ideas and agenda would be rejected.
And this brings us back Mr. Athreya's central proposition, just listen to me.
AMDG
Knight
In spite of his contradictions, convenient loss-of-memory, and other obfuscating public statements, Mr. Bernanke is no fool, and charlatan is too kind of a label. His actions demonstrate a thief and coward orchestrating a confidence scam.
"If the extravagance and bad management of the government do not ruin the country, that of its citizens never will"
I think Adam Smith said that but I'm too lazy to look it up.
The scary thing is these people actually think they are smarter than the rest of us and deserve to be in charge.
The REALLY scary part is... they are in charge.
So, Let me get this straight, you need an economics PHD to understand this basic simple equation:
Land + Labor = Wealth
and if you turn Wealth back into the left hand side of the equation you get:
Land + Labor + Capital = More Wealth
We should have listened to Henry George who had not a PHD. It's the PHD's that got us into this mess.
Is this babu completely incapable of rational thought? If he wants to read blogs on earthquakes and tsunamis I am sure there are plenty to chose from. But these are not specifically economic issues.
In case he didn't notice the blogs contain very few references to the economy being saved by rainbow colored unicorns crapping Skittles.
You have to go to the orthodox economists for that.
What an asswipe.
Ben as the Queen Bee spewing out eggs?
Oh come on, now.
Queen Bennieatrice and his Nuff Nuff Lint Lads spews out Zero Ccoupon Perpetuals, funding the PPT agents Manipulatory Illusion Show in of the equity and gold markets whilst polishing his Magical Post Neo-Keynesian Bankrupt Econo-theory Policy Stick with Lawurenzo the Hut and TimmahTwoHands.
Nope, only eggs is the one the middle class can't afford anymore. And we ain't seen nothin', yet. Just wait for that Unexpected moment when "V" as in MV=PT skyrockets, while all the free reserves ever created since the dawn of mankind remain in the banking system. Gonna make Volcker's Saturday Night Massacre look like a childs storybook.
Whata fine mess, Ollie.
Autodidacts not allowed in this dojo
You are too kind, Graham. Athreya deserves to be eviscerated and hung by his own entrails, metaphorically speaking, for spewing out such drivel. I will bow to a sadhu but never to this self important clown.
Another antidote to Athreya's nonsense.
The Great Mortification:
Economists’ Responses to the Crisis of 2007–(and counting)
Philip Mirowski
"Leading active members of today’s economics profession…have formed
themselves into a kind of Politburo for correct economic thinking. As a
general rule—as one might generally expect from a gentleman’s club—
this has placed them on the wrong side of every important policy issue,
and not just recently but for decades. They predict disaster where none
occurs. They deny the possibility of events that then happen.… They
oppose the most basic, decent and sensible reforms, while offering placebos
instead. They are always surprised when something untoward
(like a recession) actually occurs. And when finally they sense that some
position cannot be sustained, they do not reexamine their ideas. They
do not consider the possibility of a flaw in logic or theory. Rather, they
simply change the subject. No one loses face, in this club, for having
been wrong."
"For professional economists…were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation—a discrepancy which the
ordinary man has not failed to observe, with the result of his growing
unwillingness to accord to economists that measure of respect which he
gives to other groups of scientists…"
http://www.scribd.com/doc/34837811/The-Great-Mortification-Economists-re...
"But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"
The Challenge of Central Banking in a Democratic Society", 5 December 1996 American Enterprise Institute Dinner.
The same 18-year Fed Chair funded the post 9-11 irrational exuberance. He declared with a straight face derivatives stablised a plateau of permananet prosperity. Then, egg all over his face, he declared with a grin the US free-market ideology that he and others championed for decades is flawed; he had "found a flaw ... in the model that I perceived is the critical functioning structure that defines how the world works".He said he was shocked at the banks' inability to self-regulate....
He said the current crisis had "turned out to be much broader than anything that I could have imagined".... He admitted he had also been "partially" wrong in opposing the regulation of derivatives in recent years. Guess that made everything A-OK, Hunkie dory, Jim dandy, Just fine and Peachy keen as millions of Americans lost their livelihoods, cars and homes. Where is the prison sentence for violating the Constitution and robbing the taxpayers? http://en.wikipedia.org/wiki/Irrational_exuberance An expert is a man who tells you a simple thing in a confused way in such a fashion as to make you think the confusion is your own fault. ~William Castle
I'd say the corollary to your comment is that the longer one stays in the economics field the stupider one gets. Let that be a lesson -- ah, never mind.
If I have any say in the matter there will be Colony Collapse Disorder for all those 'worker bees'. Or else I could let loose some varroa mites at my local fed. Now that would be poetic justice.
Fuck. I graduated in a B.S in Economics. I guess that means I should keep my opinions to myself unless I decide to waste another $100K to learn failed Keynesian Economics and get brainwashed like my little friends.
Actually, the services of these professional obfuscators aren't really needed any more. Americans have shown themselves willing to put up with far more egregious lying and abuse than the mere destruction of the economics profession. As someone said about Ron Paul, he's trying to sell freedom and truth to people who don't want it.
While I could have done without the extended analysis of Arthreya's bee analogy, the rest of the piece is Very well written. Kudos!
Though discrediting the fed at this point is kinda like dynamite fishing.
I agree with your view. Beating Mr. Athreya with a baseball bat until bloody about some stupid bee analogy was rather on the same plane as the bee analogy. Look, let's face it, Mr. Athreya has gotten way too much mention for his clueless paper. I'd love to move on.
And let's not forget Ben "The Stanky" Bernanke has consistently gotten things wrong. A lot of good having a PhD is when you are never right about the one thing you are supposed to be.
http://www.youtube.com/watch?v=9QpD64GUoXw
Well just goes to show why things are in such a mess.Not rocket science is it really ..............
"Math is hard."
-Barbie
I'm no savant but I figured out exponents at the age of 12. 8th grade I think. The creation of money via the fractional reserve method is obviously unsustainable, and junior high student can figure this out.
Here's the deal though: It's not supposed to be sustainable. It's how TBTB transfer ownership the world's commodities to themselves, at our expense. The job of economists is to obfuscate this simple fact because once the plebes are on to the con the jig is up. They don't want us to know TPTB DOES IT ON PURPOSE.
http://www.enterprisecorruption.com
TPTB's minions, the "economists," have been left sans pants because they didn't expect the plebes to rip into them for their platitudes. After all the con has worked like a charm for centuries, why not now? Did they not adequately dumb us down? Or is it the fault of the internet? Rats!
What's interesting to me is that since 2006/2007 I've watched two bankster factions going at it for the Ring to Rule Them All: A hereditary Gold Power vs. Wannabe-Usurpers. It's a gang war: They're still brawling and my popcorn has gone cold. Honestly I don't know which side to root for, because they both suck, and there are double and triple agents working at cross purposes to one another so perhaps 'tis best to not pick sides.
Me: Long metals, US Treasuries - cause I don't know who's gonna win yet - and dry beans.
+Bazillion
One of the Best Posts Ever