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Why Economists Get Things Wrong

Tyler Durden's picture




 

Following today's 3-sigma miss in GDP by the greatest and goodest economists of the world, we thought David McWilliams brief 'Punk Economics' clip on "why economists get things wrong" was particularly appropriate. With Mark Zandi's "this didn't really happen" comment this morning on GDP, McWilliams starts by warning of the most dangerous of economic soothsayers - the overconfident and over-optimistic forecaster. Perhaps, he notes, the Queen was on to something when she asked (about the crisis), "why didn't you see this coming? ...and why should I listen to you now?" The key fact driving economists' inability to predict the future is a lack of understanding of the present thanks to the "complete and utter nonsense" that economists see the world as rational - which, he shows, we certainly are not. There is no economics for emotions, exuberances, impulses, or frenzies (as is all too clear currently). We simply don't learn from our mistakes and always believe this time will be different. Indeed...

 

 

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Wed, 01/30/2013 - 10:26 | 3198528 Neethgie
Neethgie's picture

There is a serious danger of listening to the guys who got it right first time round, ie the crisis , i mean if every day atleast one person wears a placard saying the end is nigh, one day they will be right.. the danger is by following the person who predicted its solution.

 

ie krugmanomics.

Wed, 01/30/2013 - 11:47 | 3198826 economics9698
economics9698's picture

This guy does not understand economics.  He is discussing the Keynesian concept of animal spirits or people are dumb cows that can be easily manipulated.  It is complete bull shit like this video.  He is blaming the victims and not the bankers who control the boom and bust through central banking and the insiders who know the game and win.

Disgusting video, not worthy of Tyler.

The reason economists get it wrong is they teach propaganda and it is their job to indoctrinate college students with economic gibberish.  They are paid propagandist.

Most do not care, they like the check, the chicks, and the leisure time.  Some are true believers.  Some wealth redistribute morons who never outgrew the Robin Hood fairy tale.  A very few, very few, actually question the dogma being taught and get it right.

JP Morgan and other elites were informed in March 1929 by Paul Warburg that the DJIA was about to bust.  How did he know this?  Because the Fed was going to bust the bubble.  The English central bank chairman Montagu Norman meet with Secretary of the Treasury Mellon and the USA Fed in February 1929 that the easy money was going to be withdrawn.  End of bubble, that was created by the Fed.

Amazing how a central bank adds to your IQ. 

So you see the reason is not animal spirits it is the central banking system that favors the top 0.01%.  If this was correctly taught in colleges and universities I bet the masses would get it right 89% of the time.  11% of the population is on drugs, alcohol, jail, or mentally ill.

I am a economist and I will tell you with 100% certainty that we are in a monetary bubble that is bursting and by the fall of 2013 all but the dullest, this guy included, will be eyes wide open at the stupidity of our leaders and bankers.

If students were taught the function and motives of a central bankers and politicians there would be absolutely no reason to get it wrong.  I would argue that if people understood economics correctly they would get it right, 70%, 80% of the time, similar to weather forecasting.

But then the con artist could not make billions, and that is the reason economics will never be taught correctly as long as the government controls education.

Tyler do not show these clown videos, they make me upset.

 

Wed, 01/30/2013 - 12:14 | 3199050 FL_Conservative
FL_Conservative's picture

Econ, I'd give you + 100 if I could.  I agree completely.  The majority of today's "economists" are propogandists at best,  Very few actually believe in, and teach about, free markets and the elements that influence it.  Its all postulation of one's political perspective and, therefore, is flawed from inception.  Add to that the fact that most people get glazed eyes when economic concepts are discussed and its easy to see why disinformation gets embraced as mainstream so easily.  I've grown totally frustrated trying to educate those I have regular contact with about the train that's bearing down on us, because they just don't want to listen, preferring instead to concern themselves with American Idiot and the Housewives of ill repute.  So, instead, I've divested myself of that self-imposed obligation and am focused on my family and those that have shown a willingness to listen.  Darwin will take care of the rest, unfortunately.

Wed, 01/30/2013 - 13:01 | 3199203 economics9698
economics9698's picture

Yep.

Wed, 01/30/2013 - 13:01 | 3199211 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

A simple change in words explains it all:  Economic science = Bank profit science

Wed, 01/30/2013 - 10:34 | 3198555 Mercury
Mercury's picture

Falkenblog has some good observations along these lines today too:

http://falkenblog.blogspot.com/2013/01/signal-and-noise-seems-better-than-it-is.html

Wed, 01/30/2013 - 10:33 | 3198557 Zer0head
Zer0head's picture

Plea for help

does anyone have a free link to the CNBS stream? I would rather watch cartoons than those assfaces at BBG

Wed, 01/30/2013 - 10:33 | 3198562 LawsofPhysics
LawsofPhysics's picture

What load of crap.  eCONomics gets it wrong because the currencies are no longer connected to anything in the real world, they are printed at will, constructed from the imagination of the moneychanger to keep the INTEREST flowing into their pockets, the currencies are backed by NOTHING and no one has any faith in those PAPER PROMISES.  Hence, the true cost for capital is being hidden and massive capital and resource mis-allocation and mal-investment is occurring around the globe.  Moreover eCONomics is not a science, it's a CON, period.  Sheesh.

Wed, 01/30/2013 - 11:11 | 3198771 mr1963
mr1963's picture

The "economists" were bought and paid for. Anyone remember there was an election?

Wed, 01/30/2013 - 11:20 | 3198816 TheCanadianAustrian
TheCanadianAustrian's picture

Why do people say "bought and paid for"? Isn't that saying the same thing twice?

Wed, 01/30/2013 - 11:24 | 3198831 mr1963
mr1963's picture

Read up on the Black Sox scandal in the 20's. The players were "bought," pretty sure they were never "paid."

Wed, 01/30/2013 - 10:35 | 3198576 Inthemix96
Inthemix96's picture

Why economists get things wrong?

Could it be these fuckers have never struck an honest days work in their entire lives and wouldnt know what real work is if it bit them on the arse?  Ten quid says most economists couldnt change a light bulb, or even boil a fucking kettle if their life depended on it.  Fucking chancers living on graft is all they are.  Wait till they have to join the real world, should be fucking damn interesting watching one of them quantify digging up potatoes.

Wed, 01/30/2013 - 10:39 | 3198600 centerline
centerline's picture

I started off studying economics at university.  Switched to engineering.  I can assure you that mainstream economics is not science, it is dogma.  And the vast majority of folks didn't have any better grasp of mathematics beyond basic algebra and entry level statistics.

The entire professional needs an overhaul or needs to relegated to the dust bin of history in favor of an alternate area of expertise.

Wed, 01/30/2013 - 10:46 | 3198637 Desert Irish
Desert Irish's picture

"I'd rather be vaguely right than precisely wrong." 

- J.M.Keynes

 

Wed, 01/30/2013 - 10:50 | 3198658 centerline
centerline's picture

Never seen that quote.  Funny.  One can learn much from being precisely wrong, but is likely to learn little from being vaguely right.  There is the problem, in a nutshell, with mainstream economics.

Wed, 01/30/2013 - 12:13 | 3199045 economics9698
economics9698's picture

Let me write the fucking book, things will change.

Wed, 01/30/2013 - 14:56 | 3199608 centerline
centerline's picture

If I had the power to do so, I most certainly would!  The salvation of the economics profession lies only with those who have the balls to challenge the mainstream.  Hate to say it, but right now is nothing short of the dark ages when it comes to economic thinking.  Makes one wonder what secrets of the universe certain powers do not want to see the light of day... lol.  Wizard behind the curtain says "fuck off."  ha ha.

Wed, 01/30/2013 - 10:49 | 3198659 insanelysane
insanelysane's picture

I might need to change my name to irrationallyrational.

Wed, 01/30/2013 - 10:57 | 3198706 buckethead
buckethead's picture

The nutshell version. well done.

Wed, 01/30/2013 - 11:13 | 3198786 waterwitch
waterwitch's picture

Guess the Keynesians got Keynes' preferred outcome then.

Wed, 01/30/2013 - 10:49 | 3198662 Inthemix96
Inthemix96's picture

Well you wont get no complaints from me centreline when they drive a stake through the hearts of the bastards in economics.

I may privately cheer it on mind.

Wed, 01/30/2013 - 11:00 | 3198704 rawdawgs
rawdawgs's picture

Everything you need to know about economics you learn in your first year. If you pay people not to work, you will get more people not working. If you pump a bunch of money into the economy(ceterus paribus) prices will go up.

 

After that it is all bullshit

Wed, 01/30/2013 - 11:05 | 3198739 Shevva
Shevva's picture

I would say they are intelligent at some level but have let their animal greed get in the way of their humanity, they are basically human scavangers living off the living corpes of the sheeple.

Wed, 01/30/2013 - 11:38 | 3198884 Umh
Umh's picture

Most of them are intelligent sheeple and teach rather than act on what they think they know.

Wed, 01/30/2013 - 10:35 | 3198577 Acet
Acet's picture

There is a whole branch of Economics called Behavioural Economics which concerns itself with how people really are.

There is some pretty interesting stuff in there backed up by actual experimental data. Unfortunatelly they're pretty much dismissed (sniffed at, even) by mainstream Economists, in part because they don't have any fancy Theory of Everything in Economics like Keynesians do.

I recommend the book "Predictably Irrational" for those interested.

 

Wed, 01/30/2013 - 10:35 | 3198583 q99x2
q99x2's picture

More control that's all that's needed. Then the economy will behave like it should. Control the numbers, the people, the nations, the commodities the markets and ... WWIII M'Fers.

Wed, 01/30/2013 - 10:42 | 3198614 centerline
centerline's picture

Yup. If the equations don't fit, force the variables to conform (and dismiss the ones the one's who don't).

Wed, 01/30/2013 - 10:36 | 3198584 Cognitive Dissonance
Cognitive Dissonance's picture

Most economists get things wrong because they are cult leaders and are locked into their dogma.

<Come my child and pray with me for Ben Bernanke.>

Wed, 01/30/2013 - 10:36 | 3198585 Sheeple Shepard
Sheeple Shepard's picture

See: How to get a Phd

                               1. Agree with everything you have been taught, wholeheartedly.

                               2. Write a thesis that agrees with everything you have been taught, wholeheartedly, whilst convicing 

                                  your superiors that you have some "new" ideas.

                               Sort of like collective self-hypnosis that costs eye watering amounts of money.

 

What could possibly go wrong?

Wed, 01/30/2013 - 10:37 | 3198586 Dr. Engali
Dr. Engali's picture

You mean human action has something to do with economic activity? Well holy shit! Who in the hell would have thought that!? Maybe the real reason economists get it wrong is because they are paid to be bullish. You can't sell stocks if the economy is projected to contract.

Wed, 01/30/2013 - 10:37 | 3198588 Fix It Again Timmy
Fix It Again Timmy's picture

It's the INTEREST... Rodger that, that's a big 10-4.....

Wed, 01/30/2013 - 10:38 | 3198594 I need more cowbell
I need more cowbell's picture

The "economists" trotted out by the MSM aren't getting anything wrong at all. They are citing their MOPE quite expertly, worthy of Oscar considerations.

Sat, 02/02/2013 - 13:07 | 3209136 e-recep
e-recep's picture

nice avatar.

Wed, 01/30/2013 - 10:42 | 3198606 world_debt_slave
world_debt_slave's picture

I agree with what I read in "Liar's Poker". Those in the know don't say, and those that don't know say."

Wed, 01/30/2013 - 10:41 | 3198613 Sockeye
Wed, 01/30/2013 - 10:42 | 3198622 Desert Irish
Desert Irish's picture

but ... but ... economists have forecasted 9 out of the last 5 recessions...

Wed, 01/30/2013 - 10:47 | 3198639 disabledvet
disabledvet's picture

Again Two hikers see the sign that says beware the Big Bad Bear. One hiker stops...takes off his boots and puts on his sneakers. The other hiker says "you can't outrun the bear." To which the first hiker responds "true...but i can outrun you now." Equities are NOT in any connected with QE...a UNSUCCESSFUL QE would see them connected...but we still live in a dollar reserve world...so while the EU is left with "a billion here, a billion there" the USA is blowing a TRILLION here and there and "things are better." I would not be surprised if tax revenues start coming in far stronger than anticipated (yet another monkey hammer to the bond bears)...America Inc. has never been run more ruthlessly than it is today. Balance sheets for everyone but the the banks are constantly getting scrubbed even cleaner in order to keep up with the equity price rises. Is this the front end of a second downturn in the economy? Hard to tell...but clearly "blaming the Keynesians" is totally wrong since it's the collapse in defense spending that has caused this print. If we get another one of these "only worse" prices really will start to correct DOWNWARD...that is clearly not good for the equity averages as "that is a price too." Of course it's all that's tied to "equity prices soaring forever" that is the problem in my view as the "Chuck Schumer downdraft" takes hold.

Wed, 01/30/2013 - 10:49 | 3198660 disabledvet
disabledvet's picture

Oh, and "hat tip to me for giving a hat tip to Lacey Hunt and his zero coupon call." That call was made in 1983 btw. And he reiterated it this year. "Stuff the world full of Uncle Gorilla paper at your own peril" Federal Government.

Wed, 01/30/2013 - 10:54 | 3198684 Frank N. Beans
Frank N. Beans's picture

mark zandi is such a tool

 

Wed, 01/30/2013 - 11:56 | 3198718 AgAu_man
AgAu_man's picture

Economics? We don't need no stinking economics!
We just need the CB merry-go-round to continue. More fiat please. More bread and shows, more wars. All are in our 'interest'. /sarc off

It is what it is SUPPOSED to be: A Circus, a Carnival. With players, consumers and profiteers. Line up, get your tickets...

Wed, 01/30/2013 - 11:01 | 3198726 FrankIvy
FrankIvy's picture

 

 

I like the guy doing the presentation.  He has put some good stuff out there.  But he doesn't mention the main reason that "economists," like the Princeton Tool, get things wrong - the truth about the economy and their personal goals are conflicted.  It's Baghdad Bob in a different setting.  No more, no less.  Occam's Razor and all that - why get into the rational/irrational dichotomy when the self-interest/truth dichotomy explains it so well?

Wed, 01/30/2013 - 11:04 | 3198735 Shizzmoney
Shizzmoney's picture

The Daily Show explains: Economists

http://t.co/DNcHSrH1

Wed, 01/30/2013 - 11:25 | 3198832 1eyedman
1eyedman's picture

when people are paid too much, they tend to think they are infaliable,  know any doctors or lawyers personally?  nice empathetic people who will consider others' opinions  /sarc

Wed, 01/30/2013 - 11:27 | 3198841 alfbell
alfbell's picture

I'd love to pull Paul Krugman's balls off.

Wed, 01/30/2013 - 11:44 | 3198922 Downtoolong
Downtoolong's picture

overconfident and over-optimistic forecaster.

Or highly sophisticated, trained, and well presented supporter of the bullshit financial sales department, aka pinstriped pirates.

Wed, 01/30/2013 - 12:08 | 3199026 Zigs
Zigs's picture

Desperate men will do desperate things in desperate times.

It's that simple and it will intensify.

Wed, 01/30/2013 - 12:19 | 3199062 nobel_house
nobel_house's picture

I tried to hire this cartoonist for something about a year ago but was told he was backlogged with work from various Soros foundations.

 

Wed, 01/30/2013 - 12:22 | 3199078 GNWT
Wed, 01/30/2013 - 12:27 | 3199098 daccord
daccord's picture

"first year econ student, for some reason everything we learn in lecture has complete disconnect from "reality"- FUN-da-mental

/sarc 

Wed, 01/30/2013 - 12:39 | 3199136 Walt D.
Walt D.'s picture

Not all economists are always wrong - Austrians seem to be good at getting things right, often employing little more than common sense. 

If you look in the archives of Mises.org you will see that they correctly predicted the dot com bubble, the housing bubble, plus all the failure of QE1, QE2, .. QEn.

Wed, 01/30/2013 - 13:17 | 3199250 Jack Burton
Jack Burton's picture

I acted with rational thought before the 2008 bust, with a little effort I was able to see it coming and get into positons that enabled me to not lose a dime during the bust. Also, I handeled the housing bust and maintained my equity position in my house as I acted knowing house prices were not based in reality.

Now, I will admit that since weathering the storm, I have not made shit for money. Why? Because I was not able to accept that the Fed would print trillions, flood the financial services sector with inlimited ZIRP billions and keep interest rates at an inflation adjusted negative forever. This was a bad mistake on my part, my rational mind should have accepted that the bankers and their bought and paid for politicians and the Fed, that they own, would do ANYTHING to preserve the elites wealth. To be rational in the year 2013, one must accept blatent money printing, markey manipulation and a campaign to screw savers at the speculators expense. The rational mind must accept the the 1% will use their power to preserve and expand their wealth and screw the fuck out of the 99%. I now accept this a rational truth and will act accordingly in my financial dealings going forward.

Wed, 01/30/2013 - 13:33 | 3199308 Sean7k
Sean7k's picture

Everything you wanted to know about Keynes, but were afraid to learn: "The Failure of the New Economics" by Hazelett

Everythng you need to know about irrational human behavior and economics : "Human Action" by Ludwig von Mises.

Everything you need to know about the science of economics: "Man, Economy and the State with Power and Markets" by Rothbard.

Everything you need to know about Classical Liberalism: "The Bastiat Collection Vols. 1&2" by Bastiat.

 

Wed, 01/30/2013 - 13:48 | 3199366 besnook
besnook's picture

irrational is just another, albeit polite, way of calling someone stupid. this fits my theory that humans are the stupidest animals ever created, especially the ones who think they were created by god.

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