Nevins: "It's Time We Stop Trusting The 'Experts'"

Authored by Adam Taggart via,

Economists are supposed to monitor and analyze the economy, warn us if risks are getting out of hand, and advise us on how to make things runs more effectively -- right?

Well, even though that's what most people expect from economists, it's not at all how they see their role, warns CFA and and behavioral economist Daniel Nevins.

Economists, he cautions, are modelers. They pursue academic lines of thought in order to make their models more perfect. They live in a universe of equations and presumptions about equilibrium states and other chimerical mathematical perfections that don't exist in real life.

In short, they are the wrong people to advise us, Nevins claims, as they have no clue how the imperfect world we live in actually works.

In his book Economics For Independent Thinkers, he argues that we need a new, more accurate and useful way of studying the economy:

However far you go back, you can find economists who had a more realistic approach to how humans actually behave, than the way that mainstreamers assume they behave in the models that the Fed uses to pick winners and losers.

You mentioned credit cycles, business environment, and behavioral economics. What I’ve done is to say, “Okay. We know that the modeling approach, the systems of equations approach doesn’t work. But instead of starting completely from scratch, what can we find in the economics literature that is maybe more realistic?”

And the interesting thing is that if you look at the work that was done, the state of the profession before the 1930s, before Keynesianism took hold, you can find a lot of work that was quite sensible.

I think where that points is towards this notion that when we think about economic volatility, there are really three things that we need to bring together:

One is the behavioral side. And we have to be realistic about the way that people really process information, the way that they truly make decisions.

The second has to do with the way businesses operate and all the challenges that businesses face to gain and retain profitability. That’s something that economists were intently focused on before Keynesianism and then it became kind of sidelined afterwards because all of these models assumed that businesses didn’t have any challenges.

If you pick apart the standard models that the Fed uses that are taught in PhD programs, they assume that business are always profitable, they always sell all of their output instantaneously, and they know exactly what their customers want, and businesses don’t struggle. So, that’s another thing we need to correct that you can find a lot of useful research if you know where to look (before Keynesianism and at the nontraditional schools that have continued in the older approaches).

And then the third thing is the credit side where mainstream economics is just so off-target, especially in their models that exclude any role for banks. Effectively, mainstream economists have made assumptions about the way money works and the way banks work that just flat do not match how they actually work in real life. That’s something that’s hugely critical to understanding economic volatility and understanding financial crises. But even regular business cycles have a lot to do with the ebbs and flows of bank lending. And banks just aren’t included in standard macroeconomic models(...)

Until you understand that the economic profession is really not doing anything like what I would say they should be doing—studying these things that go wrong, the recessions and depressions and crises—you might not realize that we shouldn’t really be relying on mainstream economists to tell us how policies should be crafted, to tell us what risks might be out there. We need a different approach. 

Click the play button below to listen to Chris' interview with Daniel Nevins (46m:19s).


lookslikecraptome stinkhammer Thu, 03/01/2018 - 19:58 Permalink

If economic models worked them John Forbes Nash would have been rich. U no. The guy who developed game theory which so many economic models have been based on. An academic can never tell you the truth about a financial situation in the real world. If they could the would be so effin rich it would be ridiculous. The "dream merchants" that want to sell retail customers the holy grail of trading are every where. They are modelers also. Very few of them trade their own systems. If u had the holy grail, why would u sell it to a competitor?????????????????????????

In reply to by stinkhammer

rf80412 lookslikecraptome Thu, 03/01/2018 - 20:25 Permalink

An academic can never tell you the truth about a financial situation in the real world. If they could the would be so effin rich it would be ridiculous.

Academics are too wonky to care.  There's a story about an ancient Greek philosopher who finally got tired of people mocking him with "If you're so smart, why aren't you rich?", so he predicted a bumper crop of olives that year - supposedly after years of mediocre harvests - bought all the olive presses at fire sale prices, and made a killing charging people and arm and a leg to use them to squeeze their mountains of perishable olives into durable oil.  Then he went back to his threadbare life of ideas.

In reply to by lookslikecraptome

Luc X. Ifer rf80412 Thu, 03/01/2018 - 21:56 Permalink

Economy is not science, basta. Economists are practically scenarists who create plausible enough scenarios meant to support TPTB agenda and for credibility they use mathematical instruments which fed with proper data and adjusted properly deliver the results matching TPTB expectations, self fullfiling prophecies indeed. I have a master in computer science and robotics, I study cognitive sciences and applied math in systems theory and modeling for over 20 years and I can tell you that, that's all what economy is - self fullfiling prophecy tweaked to fit an agenda, and that agenda is not yours, the 99% cattle.

In reply to by rf80412

striped-pad lookslikecraptome Sat, 03/03/2018 - 07:03 Permalink

If economic models worked them John Forbes Nash would have been rich.

That doesn't necessarily follow. You can have a completely reliable model of the fundamentals, but to become rich you also need to model prices accurately: that involves human psychology, which you have to be a certain type of academic economist to believe you can model with linear equations <cough>marginal propensity to consume<cough>.

I've been arguing for a few years now that balance sheets are an excellent model of the fundamentals, both at a micro and macro scale. Balance sheets can tell you when there is widespread insolvency, but they can't tell you when people are going to realise that there is widespread insolvency, or perhaps more importantly when people are going to believe that lots of other people are becoming aware that there is widespread insolvency.

Keynes was terrible at modelling the economy, but his quote: "Markets can remain irrational longer than you can remain solvent." is extremely well-observed, and very relevant here.

In reply to by lookslikecraptome

Mr_Potatohead Thu, 03/01/2018 - 19:45 Permalink

What makes somebody an expert?  Anybody who is a top-notch professional knows that there is a distribution in their profession and that a large fraction of the people are dumber than a log.  They also know that the publicity seekers and spokespeople tend to be the more superficial, less knowledgeable people.  So why should we trust the self-proclaimed and public-facing "experts" in other professions when we think the same type in our own profession is a clown? Duh!

CRM114 Thu, 03/01/2018 - 19:50 Permalink


An Ex- is a has-been, and a spurt is a drip under pressure.

Any so-called economist must demonstrate s/he has a basic understanding of, and connection with, average human nature. Without that, and the theoretical and historical expertise, they have no grounds to claim, or accept the description of, expert. I contend would be hard for any academic or political appointee to show they have any connection with the Average Joe.

The theoretical, on its own, is not even close. In fact it's dangerously wrong.

I offer my own credentials. I have successfully predicted every major crash in the last 30 years, and I have not predicted any crashes that didn't happen. I am not called an economist...but perhaps I should be.

CRM114 lulu34 Fri, 03/02/2018 - 09:00 Permalink

Don't know, mainly because there's no valid data to go off. I am d@mn sure that all Government data IS rubbish. Does not match at all what I see around me, or in any Western country where I have friends. If I could figure out what real unemployment, inflation and indebtedness were, I could probably tell you, but AFAIC there are no valid stats out there. Shadowstats has had a good guess at a few, but they are just guesses. 

At the moment, the level of individual indebtedness among people I know appears non-critical (whereas it was getting critical by 2006, which cued me to the last crash). If the Central banks manage to keep all the plates spinning, and there are no major geopolitical crises, then things could run for another 5-7 years or so. However, I am concerned that the world economy is a house of cards that's just getting higher every year, and so more likely to collapse with little or no warning. In fact, most Governments and all the MSM are desperately trying to cover up any stats that might indicate things are bad, so decreasing the chances of any warning. The key factor for me is that productivity is continuing to drop. The quality of most products and services are decreasing, ever more people are being paid to shuffle pointless paper around, and there is nowhere near enough investment in innovation, training or infrastructure, by individuals, companies or Governments. Regulation increases monthly, and all of it is counterproductive. The quality of education in particular is dropping like a lead zeppelin, and that's from first hand experience. There's also decreasing resilience, so less ability to cope when the next crisis does hit.

Triggers I'm watching for.

Collapse of banking in more than one country. Italy looks like it will go first.

Turkey triggering the breakup of NATO.

Somebody doing something stupid in Korea

Trade wars ramping up.

A major anti-immigrant pogrom in a European country.

Some major split between one or more States and the Feds in the US.

I reckon we won't get past 2025, and probably not 2021, without one of these happening and triggering a 40%+ collapse in financial markets.


That's my 2c. Would welcome any useful comments.

In reply to by lulu34

SM60 Thu, 03/01/2018 - 19:54 Permalink

[corrected; "invalidly" corrected to "validly"]

Value judgements - and all policy is ultimately a value judgement - cannot be validly inferred from economic analysis. How often are we told that such-and-such a policy "ought" to be adopted or avoided because of its effect on growth or trade or efficiency?  It is a classic Is-Ought Fallacy. 

If there were unanimous agreement that the overarching object and purpose of human existence was to maximise growth, the inference might be valid.  Failing that, one cannot make an Ought from an Is.  How does one weigh growth against equality?  Trade against democracy?  Efficiency against self-determination?

Like elites throughout history, the post-modern elite seek to weave a cloak of virtue to conceal the nakedness of their self-interest.  Like elites through history, they employ a caste of articulate theologians whose role is to craft eloquent arguments justifying the power, privilege and prestige of their patrons.

In times past such apologia might have been couched in terms of "The Will of God".  Today's economic theologians invoke a new Holy Trinity of "Growth", "Trade" and "Efficiency".

Their arguments are no less nonsensical and self-serving for the change in vocabulary.


Expat Thu, 03/01/2018 - 19:58 Permalink

Who is the asshole in the equation?  The expert or the person who blindly follows him without understanding anything about what he does?

But tossing out all expertise is simply a sign of stupidity and ignorance.  Doctors are experts.  Firefighters are experts.  Dentists are experts.  Are you going to ignore all of them?

Economists are experts in their domains but it doesn't mean their domains apply to reality.  Most of the real-world applications of economics are done by politicians with agendas.  That said, are all the expert haters here ready to let politicians blindly make policy without regard for any input at all?  Or is it that you want YOUR input.

One of the more distasteful attributes of Trumpeteers and the right is their willful ignorance, this idea that anyone with an education is a liberal cunt out to destroy America and therefore education, knowledge and thought are all bad things.  All you need is your gun and your bible...just like when Jesus was around.  LOL.

If you non-experts are so fucking smart, try running for office or offering advice to politicians.  Oh, wait.  That would mean you become experts.  Ah fuck it.  Let's just do random shit and see if it works.  Not working for Trump, but who knows?

CRM114 Expat Thu, 03/01/2018 - 21:59 Permalink

Good start. I'd agree with about the first 2 1/2 paras.

Para 4 is a straw-man argument. I have a long list of reasons as to why libtards are WRONG, primarily because I've been better educated than they have.

Para 5. Don't be facile. Your assumption is that running for office would allow one to make a difference. Any evidence for that?

As for offering advice to them, I have. The only two who listened and engaged in regular correspondence with me quit their political appointments within the year. Really. Not that I claim all the credit. Both accepted positions of Government responsibility and discovered for themselves within 6 months that they couldn't change anything significant. The system is unfixable without a massive change of heart by the average voter.


In reply to by Expat

Cabreado Thu, 03/01/2018 - 20:22 Permalink

The thing about protecting the rule of law (and hence free markets) is that you don't need to give a damn about "economists."

I suggest the author change his focus.

roddy6667 Thu, 03/01/2018 - 20:46 Permalink

Economics is not a science. It is much like psychology. It's a mix of math, science, psychology, and philosophy. It is a breeding ground for partisan politics. Everybody and his unemployed uncle Harold has an economic theory, and they all scratch for "facts" to prove they are right.

Shit luck and the mob psychology of stupid people acting in large groups is all it is.

Ever notice that NONE of them have ever predicted a recession, except the Doom & Gloom Guys who predict it day after day for decades??

venturen Thu, 03/01/2018 - 21:12 Permalink

of course they do....and the nastiest people you have ever met are bankers....using this idiots....TO MAKE A KILLING! I know guys making millions off this fraud