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Economics Is Dead, And It Is Being Killed Again
Submitted by Per Bylund via The Mises Institute,
Economics is dead, and economists killed it.
What we have seen over the course of the last eighty years is a systematic dismantling of the contribution of economics to our understanding of the social world. Whatever the cause, modern economics is now not much more than formal modeling using mathematics dressed up in economics-sounding lingo. In this sense, economics is dead as a science, assuming it was ever alive. Economics in mathematical form cannot fulfill its promises and neither the scientific literature nor advanced education in the subject provide insights that are applicable to or useful in everyday life, business, or policy.
But apparently what is dead can be killed again. This, at least, appears to be the goal of the present tide of leftist critics who demand that economics be restructured from the bottom up. Why? The real reason is unlikely to be anything but the common leftist fear of what the science of economics reveals about the economy and the world. As often claimed by ideologues on the left, the science of economics “is ideology.” This is evident, we are supposed to believe, when we consult “scientific Marxism.”
The stated reason in the contemporary discussion is different, however. We need to restructure (if not do away with) economics because, we are told, it has failed. Why? Because economics could not predict the financial crisis of 2008.
These critics of economics will never let a crisis go to waste, and not only do they believe that the most recent crisis should be used to prove the Marxist dogma about the inherent contradictions in the market, but it can also be used as an ostensible reason to rethink the whole science of economics. Indeed, it is general knowledge that economists didn’t foresee the crisis, and their prescriptions to solve it quite obviously haven’t worked, either.
You have to applaud the anti-economics left for this rhetorical masterpiece. They have struggled for decades to sink the ship of economics, the generally acclaimed science that has firmly stood in the way of their anti-market and egalitarian policies, hindered the growth of big government, and raised obstacles to enact everything else that is beautiful to the anti-economics left. The financial crisis is exactly the excuse the Left has been waiting for. It is a slam dunk: government grows, Keynesianism is revived, and economics is made the culprit for all our troubles.
We see this now in education, as students demand to be taught (and professors demand permission to teach) a more “relevant” economics. Relevance, apparently, is achieved by diluting economics with a lot of the worst kinds of sociology, post modernism, and carefully structured discourse aimed to liberate us from our neoliberal bias. And, it turns out, we must also teach Keynesian ideas about how government must save the market economy.
We see this same agenda at academic research conferences, where it is now rather common to hear voices (or, as is my own experience, keynote talks) claiming that “it is time” for another paradigm: post-economics. The reason is always that economics “has failed.”
If this weren’t so serious, it would be amusing that the failure of Keynesian macro-economics (whether it is formally Keynes’s theory or post-Keynesian, new Keynesian, neo-Keynesian, monetarist, etc.) is taken as an excuse to do away with sound micro-economic theory to be replaced with Keynesian and other anti-market ideas. But it is not amusing. If most of the discussions heard are to be believed, the failures of central planning is a reason for central planning, just like socialism is a reason for socialism. The success of the market, on the other hand, is not a reason for the market.
It should not be a surprise that economics has finally become irrelevant after decades of uncalled-for mathematizing and formal modeling based on outrageous assumptions. This perverse kind of pseudo-economic analysis had it coming, really. One cannot calculate maxima for the social world; it is, as Mises showed almost a century ago, impossible. If mathematical economics is finally dead, then that is above all else an improvement.
But the death of mathematical economics should not mean economics is to be rejected. It should mean a return to proper and sound economic analysis — the state of the science prior to the “contributions” of Keynes, Samuelson, and that bunch. Mathematical economics is a failure, but economics proper is still the queen of the social sciences. And for good reason: she relies on irrefutable axioms about the real world, from which logically stringent and rigorous conclusions are derived. The object of study is the messy and sometimes ambiguous social world, but this does not require that the science is also messy and ambiguous. On the contrary, economics is unparalleled in its ability to provide proper and illuminating understanding of how the economy works. It is neither messy nor ambiguous. It brings clarity to the processes that make out the market.
This is the reason why the Left hates all that is economics. Because it points out that creating a better world through central planning, money-printing, and political manipulation is indeed impossible. The market is neither perfect nor efficient, but it is better than any available alternative. In fact, the unhampered market is the only positive-sum means available for human society. The market is indeed the only way of progress; all else is a step backward.
But the market is also uncontrollable and seems, at least to the non-economist, both unpredictable and unintuitive. This is why the Left hates it — and why the Right despises it.
The Left knows full well that they cannot beat proper economics; their ideology will always fail when put up against economic science. But they can beat mathematical economics, since it follows in the tradition of Lange-Lerner market socialism and is fundamentally flawed. They finally have. And they are using this as an excuse to kill economics again. Let’s hope for the sake of humanity that they will fail in their undertaking.
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My book exposes all the fraud I found - please consider a thorough reading and review, Tyler.
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This is a field fraught with double talk and two faced actors, fraud and deception.
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I can send you a free download token, Tyler.
I'm writing what will be a best seller, no doubt!
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Where can I pre order?
Send $50 USPS money order payable to Headbanger Publications, PO Box 6969, Las Vegas, NV, 89169
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Well it does get kinda hot there
But not that bad.
Comedy gold right there! Typical Mises Institute fallacy of digging up old Karl Marx and use him as a whipping boy. Marx was a 19th Century economist who passed away in 1883. He was alive during the agrarian age and the very infantile stages of the industrial revolution. This was 30 years before Ford and the rise of Detroit. Marx didn't see the atomic age, space age, nor today's information and automation age.
The problem with economists is that they keep thinking with an agrarian age or industrial age mindset. The days of 90% of the workforce in agriculture are over. The days of 100,000 workers at the Rogue River plant are over. Today we have "startups" in Silicon Valley with one employee with one laptop and one phone and one rented office space valued at billions of dollars on the stock exchange because HFT bots buy and sell to each other back and forth way over valuing the company. The A.I. is only as good as the flawed inputs put into it using old outdated metrics. Price discovery is broken. the Fed has to use bailouts, QE and ZIRP as bailing wire and chewing gum to keep an antique system chugging along enough for boomers to enjoy what's left of their unsustainable retirement programs at the expense of their progeny.
Yes. i'm one of those "leftists" (tongue in cheek) that argues that economics needs to be re-thought of from total scratch and built from the ground up. Bringing up tired old philosophers from the 18th and 19th centuries isn't going to cut it in an age of blogging, 3d printers, genetic modification, geoengineering, nanotech, cognitive sciences, automation, artificial intelligence, and eCommerce just the name a tiny few of the emerging technologies.
The division of labor which was the main argument of the 19th and early 20th Century "left" that is decried in this piece, is a dead issue due to offshoring of the 1990s and eventual automation. Offshoring will be the "gold ol days" because the third world can't even afford sweatshop labor any more due to the cost effectiveness and quality control of robotics. If labor is no longer an input to make the economic system flowing then we have no choice but to start from the "bottom up".
How will consumers "earn" "currency" if there are no moar jawbs left? Who will "buy" the products and services offered by Artificial Intelligence and machinery? Welfare and bailouts are today's current temporary band-aid answer to these questions, but those answers are unsustainable too. Of course economics needs to be restructured from the "bottom up".
You seem to miss the most important point of the article, and then suggest that new technologies, systems and processes cannot be understood in economic terms. Weird.
I had a similarly frustrating exchange recently on a Canadian forum, with someone who I suspect had vested interests (e.g., a compromised academic). The main misunderstanding seems to center around the definition of what constitutes an "efficient market." In your third paragraph above, you list several things that an efficient-market theorist would point to as the essence of anti-market manipulation, corruption and capital misallocation, but my Canadian "lefty" frowns on such classification as a "value judgement," apparently disregarding the observation in a kind of vague ad hominem fashion, as though value judgements don't belong. Well, market participants make value judgements all the time. What is price supposed to be, if not an expression of perceived value, all else being equal? I submit that the trouble with most "lefty" economics is that it tries to rationalise the domination of markets by participants who are psychopaths. In a moral, "free" and "fair" environment, the colossal misallocation and manipulation and corruption that we see today would be impossible. Yesterday's con man was restricted to little scams like Snake Oil. Modern psychopaths can hijack whole exchanges and market segments. And what is fractional reserve banking, if not the biggest pathological con in history?
Economics needs to be removed from academic disciplinary isolation, and given a strong dose of morality. If free and fair markets are to be restored, psychopaths must be removed from positions of control. The alternative is a progressively more dysfunctional and destructive global plantation, for a while at least, until it folds in on itself and leaves scorched earth.
Political Ponerology: A Science on the Nature of Evil Adjusted for Political Purposes
Economics was never, and likely never will be, a science.
Economics, Social Science, psychology, climate science, cultural anthropology, ... have all become tools of the state.
Economics, like so many academic disciplines, has merely succombed to the dictates of power, and as Ike warned in his a MIC speech, we should beware the rise of a government-academic-research complex as well. And it is here. Global Warming research. Agiriculture and nutrition research. Any and all social sciences. Corrupt for the most part.
But it'll be different this time because they are better, faster, smarter Marxists, unlike all those other Marxists who were mere amateurs....
As long as professors get good salaries and benefits to teach economics to students, the study of economics will never die.
Teach or Brainwash?. Most Amerikans are brainwashed to think. Must be the inbreeding
Actual teaching is passe and if you disagree they'll have camps to "re-educate" you...
atlas,
Downloaded a copy. Great work! "Only one in a million can see it?" Classic.
"We know now that Government by organized money is just as dangerous as Government by organized mob." -FDR
Government is dangerous.
Government is dangerous.
The world financial collapse resumes here in 4 hours, live, free. Be there, before they halt trading and close the exchanges:
http://www.investing.com/indices/us-30-futures-advanced-chart
You can see an earlier indicator in 2 hours in the fx markets. It's like watching the movie trailer previews at the theater before the main feature starts... only difference is, at the end of this movie, the idiots in the theater won't be clapping.
Economics?!? Ha don't get me started on economics. That's just bankers trying to convince everyone else that they are somehow relevant as opposed to being -- oh let's say -- parasitic.
Science ? Roflol.
I can't be the only person who has a problem with this raving lunatic demanding we join his crazy cargo cult with some amazing and superior form of pure logic that does not have to comport with the laws of mathematics.
The problem is not with Math or Mathematical Economics, the problem is the marriage of incomplete math and faulty logic.
The way you defeat it is with better math and better logic.
Myron Scholes may understand pure mathematics in a vacuum or financial economics in an ivory tower), but he doesn't know shit about real world risk or markets, yet the lemmings see fit to award him accolades and follow the poor application of his mathematical knowledge into- not one, but two, financial crises.
".........the marriage of Incomplete Math and Faulty Logic......"
Indeed.
Unifying principles and logic in economics like the rule of law never dies!...
Greed is simply stronger and always has been...Until it isn't!...
Economics did fail catastrophically in 2008.
It failed so catastrophically that we know it was under-lying fundamental assumptions that are wrong.
It does need to be rebuilt from the bottom up.
Complex mathematical models built on incorrect assumptions output garbage.
The very nature of money has been hidden and economists think banks are intermediaries when they create money out of nothing.
They are the source of money and they create it through debt.
They think money itself is just a medium of exchange and do not include it's nature and the nature of debt in their models.
Start again boys and girls,
Why don't YOU tell us what money is. If you know.
Money is the exchange of goods and labour for each other not crazy fiat.
Wrong farmboy, money comes from the palm of your hand, and then it is transfered into a book, from there green pieces of paper are used by the wicked to compete and go insane over, that's what money is.
The Bank of England came clean last year:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
Economics did fail catastrophically in 2008.
It failed so catastrophically that we know it was under-lying fundamental assumptions that are wrong.
It does need to be rebuilt from the bottom up.
Complex mathematical models built on incorrect assumptions output garbage.
The very nature of money has been hidden and economists think banks are intermediaries when they create money out of nothing.
They are the source of money and they create it through debt.
They think money itself is just a medium of exchange and do not include it's nature and the nature of debt in their models.
Start again boys and girls.
When you include money and its true nature you see the trickle up of Capitalism.
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
The last thing the Right want is this truth exposed.
In 2008 a particular axiom, that you can separate risk from value, failed utterly.
But saying that economics failed would be to suggest all axioms failed, no model can work, not barter nor gold nor nuthin. Seems a little extreme to me.
The 2008 axiom that you can trust banksters failed, but that was hardly news.
There is a fundamental flaw in modern economic thinking and I have told you what it is.
Well, this is one fundamental flaw, there may be others.
Perhaps this fundamental flaw was designed in by those that pay economists?
There is a flaw for unins, and a flaw for weins, and they AINT the same flaw.
"If the true nature of money and debt are taken into account it will show there is no trickle down" I am a bilionaire and I want low taxes, current economic thinking is just fine.
If they care about their reputation at all, economists should be telling Krugman to STFU about his ill-informed opinions on government debt.
How can we STFU, when we are in the middle of a gvt default silly
and in other news..I finally got approved to comment,albeit for just one day..cause we all know time is nigh...howdy,y'all
"Economics Is Dead, And It Is Being Killed Again"
Nonsense. That's like saying physics is dead because it can't currently explain some phenomenon. Ridiculous.
It is not that economics is "dead," but that plunder is running rampant, and economics explains production and trade, not plunder.
Zion is a scheme, not an ethnicity.
"It is not that economics is "dead," but that plunder is running rampant, and economics explains production and trade, not plunder."
I think that is the answer in a nutshell.
Economics has much in common with Religion but very little with Science. It's absurdly pretentious to attach either 'Scientific' or 'Science' to Economics or Social. There is nothing scientific about either subject. That's why it's so easy for charlatans like Greenspan, Bernanke, Yellen, Krugman, et. al., to do so much harm. That's why it's so easy for Socialists, Communists, Marxists, Central Planners, PhD's, et. al., to spew pseudo-scientific, pretentious, highly-educated gibberish. It's because Economics is not scientifically testable, hence it's only refutable by pointing at collapsed real-world implementations after its adherents literally destroy the lives and livelihoods of hundreds of millions of very real people. Unfortunately, it's adherents exhibit great faith in the Economics Religion even amidst its most spectacular failures.
We need Bane!
Better to say Economics is like History; the more you accurately understand the better you can predict the future.
...Cowards die many times before their death, the valiant only taste of death but once...Shakespeare, Julius Caesar.
So if we apply that principle to "economists" you have the reply right there : a bunch of cowards as they die a thousand times; true weather vanes that "blow" with the wind suffering a thousand cuts during each storm !
The problem is that power does not belong to the economist shaman until the Oligarchs lose "it"; aka we go into crisis.
Then we call the Shaman and ask him to "repair" it by "doing whatever it takes".
Von Mises and gold effigy of his patriarchal erect member! What a symbol of a past barbarous relic.
I prefer the valiant who lose theirs' as it is in flesh and blood. But thats cos I'm an "idealist" who knows reality gets to us all. Death. Just like it gets to all human constructs which are never made of "gold", and its chimera to think otherwise as they are condemned to change as thus be human nature and the pendulum of its primal urges.
I guess a gold relic is something that is of no use but an awesome relic of "when we were kings"...intemporel.
hahaha, Von Mises and "when the economists were kings" (like Krugman today!)
To tell you the truth I think Von Mises is jealous (his ghost and his sons' ghosts) that they never won a Nobel !
The bonfire of vanities.
Stick to your gold relic Von Mises, it'll last longer than a Nobel.
There is no left or right. We are all people and we all hate bankers and whatever they do. WWIII the war to end banking and bankers.
Calling something economics doesn't make it econmics. Economists did forcast the 2008 crisis. I am one who did and I am not alone. There is no money in being right. Economists normally get paid for lying on behalf of their employers, This is especially bad in the Federal Reserve system and government agencies. For governmet to make an economic forcast it is an imposibility because goverrments only make political decisions and all forcasts reflect positions helpful to politically powerful citizens. I believe I am the only economist who has never treated QE as a anything other than political initiateve. As a political inititive, it has been very succesful at protecting and advancing the wealth of the 1%. That is all it ever had a chance of doing and now we are seeing the negative consequences to the rest of the counrty.
James Quillian, Common Sense Economics, quillian.net
That's completely untrue. Economics is stronger than ever as a science. Saying "Economics is dead, and economists killed it." sounds like sour grapes, that reality isn't meeting someone's ideological preconceptions. It's like creation scientists saying evolutionist destroyed science because it doesn't fit their beliefs. Economics is a science and if people don't like where it goes then too bad. There probably isn't a political belief systme or set of values that isn't somehow threatened by science. If youre beliefs trump science it doesn't reflect very well on your IQ. Mises and Keynes don't even appear in modern economics except as part of its historical development. No one takes Austrian ecoonomics seriously in Academia because it's wrong. No one accepts Keynes ideas about interest rates and employment because they've been proven wrong. Oddly enough, the economists most frequently discussed in internet blogs are Keynes and Mises, a sad sign of the level of discussion. When it comes to politics and economics everybody is an expert, the worst thing anyone could be in that situation is a real expert.
It's not fucking science. You must be an academic judging by your statement about Austrian economics having no traction in the Ivy League world. That's music to our ears and a compliment since "Academia" is the last holdout of hard core communists in this country. And fuck you for your assertion that those of us who stopped buying into this bullshit have low IQs. We're smart enough to know a stupid troll when we see one.
Yep, Economics is a Social Science along with Psychology.
I had a beer a few weeks back with an old friend, a psychology Professor with a keen interest in economics. He lamented the fact that so many eonomists seem to have completely deluded themselves into thinking that Economics is somehow independent of Psychology when, in fact, it is nothing more than a subset of psychology: the choices of individuals and groups in a specific economic context.
It leads to economists building ridiculous models based on PROVEN WRONG assumptions about human behaviour.
Quite telling that a Psychologist can win the "Economics Nobel" for proving that humans aren't actually rational at all, but economists continue to cling to models that assume humans are indeed rational and nobody gets fired: https://en.wikipedia.org/wiki/Daniel_Kahneman
The reality of so much of Economics is that it's nothing more than politics in disguise, which gets ugly when it's used to obfuscate a particularly obnoxious moral/ethical framework. These Miseans make the point so very clearly for me and I'll have nothing to do with them. They are Anti-Science, praxeologists.
https://en.wikipedia.org/wiki/Praxeology = nutjobs, the lot of them.
The trouble with economists is that they think it is a science. Yes it is a social science like Psychology only here the madhouse is run by the inmates.
To say that "economics" has failed, based on what passes for the current definition by the vast majority, is the same as saying that "capitalism" has failed, based on its current definition by the vast majority. "Capitalism" has actually been merchantilism evolving toward full blown fascism for over two centuries in the land currently known as "the USA". Likewise, every school of economics has been completely discredited by the last century of events, with only one exception, Austrian Economics. Because it clearly identifies the harm that all central governments do to the economy and society, teaching it in institutions of "higher education" is virtually forbidden by the criminal gang writ large which calls itself USA, and its minion state governments.
If you're one of the multitudes of victims of public "education" about economics that have been taught nothing but lies and misinformation on the topic, check out https://mises.org/austrian-economics
After you learn a bit of real economics, and consider the full impact of the almost certain death of the US dollar and the subsequent collapse of all the supply chains it is used for as a medium of exchange (food, energy, water, sanitation, etc...), then you'll much better understand your prepper friends.
The most important thing for people to understand when the collapse happens will be the following:
All of the pain that society will experience will be caused by what the parasitic criminals who called themselves "government" did to weaken society by consuming its capital, replacing commodity backed (non-government) money with illegitimate debt backed counterfeit "money", and making most of the fools in "the USA" dependent upon payments of this "money" which was either stolen or illegitimately borrowed. The massive societal pain soon to wash across "the USA" will NOT be because of the loss of those parasitic criminals who called themselves government. In order to "secure these rights" of "life, liberty and the persuit of happiness", no "governnment" beyond the most local level is needed, and will only violate "these rights" when given the opportunity to exist in a centralized form.
If enough people can learn, understand and teach these basic facts, then we can prevent the return of the massive government parasite and all the destruction that it would again do to society. Without the central government parasite, mankind will be able to experience prosperity and happiness beyond anything that the vast majority today can even imagine.
Hope you get prepared to survive what's coming at you, so that we may have the opportunity to do business on the other side, with no involvement by any third party parasites.
Unfortunately, historically, there is always a third party. And democracy always ends in tyranny of the dictatorial kind.
Actually, there have been long periods of history when government had no involvement in people's lives. For example, Ireland for about 1000 years. A good portion of the "dark ages", as government education refers to those several centuries following the fall of the Roman empire, which actually were quite free with quite a bit of advancement in the human condition. After the evil USSA empire collapses in a morally and finacially bankrupt heap, I look forward to another great "dark age" of freedom.
Who needs a dictator when they already have democracy, aka the tyranny of the majority. Tyranny is tryanny, whether it be at the hands of many or only one. The real problem is the existance of centralized government and the political machines (democratic or whatever) that spring up to take advantage of the opportunity to legally plunder wealth and grab power on a large scale.
Mises has been a little too left/right lately. But its true that "economists" is not a monolithic term. What passes for an economist in finance is not the same thing as the social scientists who used to be called economists. Then they were called "classical economists" after the Neo-Keynsians dominated everyone and rewrote all the definitions.
These days real economists bear the pejorative label "Austrian". The rest (who think of themselves as mainstream) are nothing more than apologists for the fascist feudal state.
I understand and appreciate Austrian Economics
I want central government parasites to be allowed to weaken and destroy society
(yes, its a poll)
That's called a False Dilemma: http://rationalwiki.org/wiki/False_dilemma
I don't want Central Govt imbeciles to screw everything up. I also don't want Austrian-School imbeciles to screw everything up.
Austrian School says you should be left alone to do as you will, so long as you don't violate others' natural rights by harming their person, property or interactions. Violations are to be dealt with by the victims with the assistance of arbitration and proportional enforcement in whatever form is the local custom and personal preference. There's a lot less there to screw up than with any other societal option.
The time is approaching when you won't be able to find anyone who admits to having been an enonomist because of the ones hanging from the make-shift gibbets.
The fight is not about economics, the fight is about whether humans should be producers, or whether some humans should be predators and others prey (producers).
PERIOD.
So-called "economics" is simply the consequences of the first choice... where humans are producers, and all predators who harm or threaten humans are exterminated (whether they are human or otherwise).
2nd Nobel Prize for Krugie when?
Science...lol
Hang on, you got some seer crystals laying around too?
Nature sides with the hidden flaw.