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Budget Topline

March 17, 2017 1 comment

from Peter Radford

We all ought calm down about the Trump budget. Presidential budgets never, ever, get put into practice. They are simply exercises in politics. They simply give us insight into presidential goals.

In Trump’s case there is nothing that we didn’t already know. He wants to slash domestic programs, especially those niggling ones that offend his far right fans, and pile on the offensive weaponry for the Pentagon.

As I said: no big surprise.

Here’s a very short synopsis of the bigger items:

  1. The Environmental Protection Agency takes a really big hit — a 31% cut in spending. Many of its key programs would simply be axed. They range from any and all research into climate change to the very popular Energy Star program that rates energy using products and so gives consumers insight into their probable energy bills. Ironically one program that might survive is the greenhouse emissions monitoring program which is a mandate by Congress so getting rid of it would imply legislation unlikely to pass. So the EPA might still monitor greenhouse gases. It just would n’t be able to do anything about them.
  2. The Energy Department gets hammered too with an almost 18% cut. The biggest target at DOE is its research programs designed to help accelerate the country’s move from a carbon based energy supply to alternative sources. Right wingers have constantly complained about the DOE dabbling in applied rather than pure early stage research. Evidently Trump agrees.
  3. The State Department also gets a beating, especially anything to do with climate change. The cuts don’t indicate that the US is quitting the Paris climate agreement of 2015, but it sure looks as if that is in the cards. The cuts also include anything to do with UN based climate initiatives. Indeed the UN is a heavy target with the US contribution to peace keeping in the cross hairs. State is having its “soft power” capacity severely trimmed. These are the kinds of programs both the hard right and Russia particularly dislike. They are programs that allow the US to project a softer, gentler image to the world and are meant to take the edge off the militaristic image all those wars project. Apparently Trump doesn’t care about the US image. His generals do: they love soft power because it makes their lives easier out in the war zones.
  4. NASA gets its climate watching programs axed or drastically cut.
  5. The National Oceanic and Atmospheric Administration is likewise gutted.

Read more…

The scorekeeper speaks

March 14, 2017 6 comments

from Peter Radford

The Congressional Budget Office is the latest victim of the intensity of Washington politics. The CBO is the organization we rely on to “score” legislation so that Congress and the White House know roughly what impact their policies will have on the country. As you can imagine being the CBO during times such as these when alternative facts have become the primary way of explaining things is perilous. Worse: being the CBO when one party wants to cram through some legislation  that is already known to be a doozy is more than perilous.

So it is with Trumpcare.

Up until today we were just guessing at how awful the Republican healthcare reform plan is. Now we know. The CBO issued its report today. There isn’t much to say other than this:  Read more…

RyanCare! Or is it TrumpCare?

March 7, 2017 1 comment

from Peter Radford

Well, the wait is over. We now know what the Republican health care plan looks like. It’s early days and the inevitable compromises will have to be made, but the Republican seven year crusade is reaching its climax.

Or not.

The problem is this: as we have discussed many times, any credible health care plan needs a number of key features. Three stand out:

  1. You need to ensure the biggest insurance pool you can. In an ideal world this pool would be the entire population of the country. In the US it will be smaller because local ideologies militate against “social” solutions and thus we are prevented from seeking maximum efficiency. Obamacare sought to do this through the so-called “mandate” which penalized people who failed to get insurance coverage.
  2. You need to regulate the private insurers to prevent them from discriminating against high risk customers. Obamacare did this by forcing insurance companies to cover people with “pre-existing” conditions, and by limiting the premiums charged to such people.
  3. Then you need some form of subsidy so that low wage people can afford to buy insurance. Obamacare did this by providing subsidies and by imposing taxes to cover the cost. The subsidies were linked to income and to the cost of insurance to make them strongly effective.

The success of Obamacare was that it achieved its biggest goal: it vastly expanded coverage, with around 20 million people newly insured at a rough cost of 0.6% of GDP. That cost, in the context of the goal, is low.

So now we have RyanCare.

How does it differ?   Read more…

Healthcare continued …

March 1, 2017 10 comments

from Peter Radford

Nothing could possibly give us more insight into the ineptitude and unpreparedness of Trump for high office than his comment yesterday:

It’s an unbelievably complex subject. Nobody knew health care could be so complicated.”

Really?

Everyone knew. Everyone.

Except for Trump who has blithely been assuming that his bully-boy attitude could translate easily from his real estate business into the White House. He, like a lot of others in recent years, reacted to the gridlock in Washington by arguing we needed a bold business like period of “action” to solve our national issues. We did not need anymore “talk”. All talk and no action is a criticism Trump levels glibly at anyone who appears to want to reflect before doing or saying anything.

So it is with health care.

During the presidential campaign Trump promised the earth. According to his many statements on the topic no one was going to lose coverage, prices would fall, people could keep their own doctors, and all this would delivered by a private rather than public mechanism. He said he was going to eliminate the dreaded mandate aspect of the Affordable Care Act [aka Obamacare]. This was the crucial part of the three legged stool approach in the ACA that lowered average insurance premium costs. Unfortunately it raised them for healthy people and lowered them for the sick, and it was the subsequent uprising amongst the healthy that so motivated the Republicans. This was, of course, over and above their ideological objection to anything smacking of governmental intrusion into the purity of the free market.   Read more…

Economics is a waste of time

February 15, 2017 22 comments

from Peter Radford

There I said it.

There comes a point when we all have to stop banging our heads against the wall and just step back. Why, we ask in such moments, are we wasting our time? The wall is immoveable. It is indifferent to our efforts. It is solid. It has the appearance of permanence. It just won’t shift.

So walk away.

Do something else.

In the case of economics go and study the economy instead.

Too many people are wasting far too much time talking about economists as if they study the economy. They don’t. They really and truly don’t. They live in a post-fact world. Indeed before it became fashionable to toss that phrase around — Trump and his regime pretty much define “post-fact” — economists had been steadfastly denying fact, ignoring reality, and living in a wonderland of their own creation.

Economists study economics. And economics is not the economy. It is a self-contained set of ideas, models, theories, mathematical intricacies, and axioms, that are designed to provide exciting intellectual sport for those so inclined to busy themselves with such activity. It is carefully constructed to look as if it touches reality. It still contains words that make it look as if it relates to reality. Economists intone cogently about real-world topics. And economists fill all the key policy positions that relate to steering, regulating, and measuring the economy.

But that’s all illusion.   Read more…

Not Friedman!

February 10, 2017 13 comments

from Peter Radford

While I was checking the inner debates the Republicans are having about health care I came across this quote [in an article written by Tierney Sneed in TPM] from Representative David Brat, an extreme right winger:

“When it comes to how much you want to park in the HSAs for providing catastrophic care, that, when it comes, to the safety net, we have to find the Milton Friedman way of doing that,” Brat said. “The Price bill would do tax credits. I am not a fan of those because it keeps the federal government in the center of that.”

My heart sank.

Milton Friedman? Really.

His version of economics is simply an ideology cloaked in clever language. And it is profoundly anti-democratic.

Friedman’s stalwart libertarianism led him to develop an economics that started, unscientifically, with a built-in bias against communal action. This meant that anything the government did was, a priori, damaging to the magic that Friedman was desperate to ascribe to the workings of something he, and most economists, call markets.

Markets, you see, are wonderlands that always and inevitably lead to efficient outcomes. And it is no good any starry eyed liberal tinkering with those outcomes. They are magically correct. By correct we mean that they cannot be improved upon. Economists have this vice like attachment to certain core beliefs. One of those is that, if left unfettered, markets will zero in on an allocation of stuff that can never be improved, especially by meddlesome governments. Read more…

Risk Adjusted Work

February 2, 2017 4 comments

from Peter Radford

One of the greatest shifts in our economy over the past few decades has been the steady rise of what we call contingent workers. These are people who make their livings on a part-time or contractual basis and have no full-time job. In the US the increase in contingent workers accounted for all the increase in jobs between 2005 and 2015. Whilst  there was an increase in full-time jobs during that period that increase was more than offset by a simultaneous elimination of other full-time jobs. There are many different measures of this part-time or contingent workforce because the government has not collected reliable data for over a decade, but all those private and academic efforts at measurement concur: contingent workers are now a very large and rapidly growing part of the national workforce.

Before we all lament this trend let us remind ourselves of some history. Prior to industrialization most people worked as a contingent worker. They supplemented their incomes from a variety of work, they were partly self-sufficient, they were largely based in agricultural activities, and they survived generally minimally above the barest subsistence levels. Those were the days of Malthusian economics: short burst of higher wages led to population growth, which stressed the food supply and thus brought on starvation which then reduced the population and restored the possibility of higher wages. Most economies existed in this kind of slow meandering and scarcely improving condition for centuries. Life was, to borrow Hobbes’s infamous phrase “nasty, brutish, and short”

We then broke free from this.

Why?   Read more…

Economy Base Level

January 30, 2017 8 comments

from Peter Radford

We are, no doubt, about to be barraged by a torrent of alternative facts concerning the economy and economic growth under our new leader. So let’s get a few facts on the table in order to set a base level for future reference. Let’s start with growth during the past six presidencies:

So, no, Obama was not the disaster Trump and the Republicans are trying to paint him as. The economy during Obama’s term outperformed that of his predecessor. This includes the enormous difficulty of digging out of the Great Recession without much help from Congress. Average growth through all that last six presidencies is around 2.8% a year, so boosting it to, and then maintaining it at, the 4.0% promised by Trump will take some extraordinary efforts, not to mention a defiance of history and is thus unlikely to occur.   Read more…

The Beginning

January 26, 2017 8 comments

from Peter Radford

Already the Trump regime is taking shape. Or, rather, I ought say the agenda is taking shape since the cabinet that is supposed to be overseeing things is well behind schedule in arriving on station.

First things first.

Trump raised to cost of applying for a mortgage for low income people. He undid a recent reduction in the fees charged by the FHA. That reduction had been put in place because the FHA has a large surplus and wanted to pass along that prosperity to homeowners. Apparently Trump thinks that FHA mortgages should be more expensive. This is an attack on low income voters that is pure Republican thinking and not at all populist. Republicans hate the FHA. They always have. They don’t believe in any help for low income people other than charity.

Next: Trump signed an order calling for the abolition of Obamacare. This is meaningless since undoing Obamacare will take a long time. What the order could do, however, is to throw the insurance market into a bit of a mess and thus drive up premiums for everyone as insurance companies scramble to figure out how to ditch 20 million customers.

Third: Trump begins his attack on free trade by getting the US out of the Trans Pacific Partnership [TPP] and calling for the renegotiation of NAFTA. He also has made dark comments about imposing tariffs on imports. None of this will have a great deal of impact because the exchange rate ought offset most of it. TPP was a rotten deal because it was mainly, from the US point of view, a pro-big business boondoggle. It was first proposed during the Bush administration, and was opposed by many leaders on the left. Good riddance. Re-negotiating NAFTA will be much more tricky and probably will have little effect. Most of the shifts in employment, which seems to be Trump’s motivation, will not change because automation is making them anachronisms.   Read more…

Healthcare Chaos

January 20, 2017 3 comments

from Peter Radford

Here we are one day before the ascension of Trump to the White House and already the policy chaos has begun. To be fair to Trump this particular chaos is not necessarily of his own doing entirely. The Republicans in Congress are also responsible. So hell bent are they in expunging all things Obama from the record that they have charged into the valley of death known as health care reform. Or, in this case, un-reform.

Having spent vast amounts of hours and taxpayer money in pointless votes to eliminate the Affordable Health Care act, and its eradication having become a totem of party loyalty, the Republicans jumped for joy when they finally gained enough control of Congress to make this wish come true. This is the moment their extremists have been waiting for.

And it’s terrifying the entire party except for those so clueless that they imagine getting rid of Obamacare is easy.

The source of this terror is the realization that they are now responsible for the consequences of their quixotic crusade. They will be accountable. It was all well and good to tilt at windmills when everyone knew that their efforts would be foiled, but now the public is looking at them as the legislative power. What happens over the next few years in our health care marketplace is entirely the doing of the Republican party.   Read more…

Trump and Economics

January 17, 2017 15 comments

from Peter Radford

I don’t want to spend much time on Trump and his version of economics primarily because I am not sure what it is. Nor, I think, does he.

One thing worth mentioning is that there is an unprecedented disconnect between the economics profession and the incoming President. Just about every economist I know says that Trump will be bad for the economy, and that the best we can hope for is that his notoriously poor attention span will prevent him from doing much.

For a much more detailed discussion of this disconnect go and read Justin Wolfers article in the New York Times.

What intrigues me is that this near complete separation between the economics profession, of all political persuasions, and the incoming administration is in stark contrast to that between Trump and both Wall Street and small business owners.

Is this because Wall Street and small business has a better handle on the economy? Or is it because they are deluded and are thus in for an ugly surprise?

There’s a part of me that would argue that Wall Street and small business are better informed than economists are about the economy. This opinion is based on my continued amazement at the extraordinarily strange convolutions that economics puts itself through in order to “prove” its various propositions. They are, frankly, absurd. So much so that any conclusions economists draw from their mathematics ought be taken with bucket loads of salt. Economists are steadfastly incapable and unwilling to amend their ideas and are still stuck in major reconsideration mode after the real world repudiation of their confidence and theories that the Great Recession represented. Suffice to say that were I a politician trying to steer the ship of state through these turbulent times, the last place I would look for economic advice is to a profession that still — despite the evidence — builds its theories on the quicksands of rationality, perfect information and so on.   Read more…

Putney Debates and The Trump Adminstration

January 13, 2017 1 comment

from Peter Radford

Here’s a well known quote:

“For really I think that the poorest he that is in England hath a life to live, as the greatest he; and therefore truly, sir, I think it’s clear, that every man that is to live under a government ought first by his own consent to put himself under that government … and I do think that the poorest man in England is not bound in a strict sense to that government that he hath not had a voice to put himself under.”

Thus spoke Colonel Rainsborough at Putney in 1647.

This is an early instance of the rise of the modern liberal view of government. Rainsborough lost the argument with Cromwell and Ireton because the issue of property ownership intruded into the debate. That issue revolved around the question of the likelihood that those who owned no property would infringe on the rights of those who did, were the former allowed to participate in their own governance. So even at this formative moment in modern constitutional development the possibility that a liberal stance could evolve down two parallel tracks was clear.

Liberalism was subject to division at its inception.

One track, the one that dominated early on and which echoes strongly to this day, argues that for a person to have a voice in their own government they ought to have an overt stake in society. And the most obvious and material such stake is the ownership of property.   Read more…

Tectonics and Growth

January 10, 2017 37 comments

from Peter Radford

My wife is reading Kahneman’s “Thinking Fast and Slow”, somewhere in which he relates his reaction when he first came across the bedrock of mainstream economics: rational microeconomic behavior. I must admit I had a very similar reaction. The description of human behavior that underpins modern economics is so bizarre that my first thought was that it must be some form of Monty Pythonesque satire. Surely, I thought, this is a joke and in a few pages all will be revealed. But no. Economics really is built on a foundation that to outside eyes is not just odd, but what appears to be a deliberate spoof.

What is even more strange, and those of you who listen to economists and take them seriously  please suspend your sense of humor at this point, is that this total perversion of humanity is then taken as the essential starting point for all subsequent theorizing. Economists are all brought up nowadays to repeat the mantra that all “good” theorizing about the economy at higher levels — what economists call macroeconomic theory — has to be based on a foundation of theorizing at a lower level — what economists call microeconomics. So in the literature and in conversation it is common to come across the phrase that some higher level idea is based upon “micro foundations”.

Except that foundation is exactly what Kahneman and others laugh at.

You would too if you spent any time at all thinking about it.

Which brings me to another point: economics is full of these oddities that anyone outside the profession would dismiss a priori as some form of ludicrous joke.  Read more…

The Market Turn

January 4, 2017 4 comments

from Peter Radford

I am going to be writing an extensive review of Avner Offer and Gabriel Söderberg’s excellent book: “The Nobel Factor” in the near future. Meanwhile allow me to share a a couple of early comments because they bear heavily on how we all approach the Trump administration.

Offer and Söderberg clarify the circumstances behind the shift in economics that occurred in the late 1970’s and came into full effect in the subsequent decades. Their  focus is heavily on how the Nobel Prize in economics has reinforced that shift and how the very origins of the prize were steeped in political bias on the part of the Swedish Central Bank, which was involved at the time in a guerrilla war against the then prevailing (in Sweden) economics of social democracy.

This history is, perhaps, the clearest indication of the inherent anti-democractic intentions of modern economics.

Democratically aware economics and the more commonly quoted mainstream or neoclassical economics have very different attitudes towards the mitigation of lifetime risks that we all experience.

In a socially democratic world such risks are borne by the community via the redistribution of wealth, taxation, and the establishment of government provided safety-net programs of various sorts. In the world of modern economics the libertarian approach dominates: people provide their own risk mitigation through the purchase of private insurance. In this latter world the government plays no role. Indeed, any attempt on the part of government to play a positive role is regarded as, by definition, an attack on the ability of so-called free markets to produce maximal social welfare.  Read more…

A New Year — Happy or Not

January 2, 2017 1 comment

from Peter Radford

I am not going to become involved in endless analysis of Trump’s presidency. I think we ought let it speak for itself.

Nor am I going to waste space critiquing the huge contribution that academic economics has made to Trump’s rise to power. I think the anti-democratic nature of mainstream economics is both palpable and speaks for itself too. Economics is largely a libertarian discipline and sneers at anything remotely involving “we the people” unless it can re-package us as some sort of mystical marketplace. In which case we all are perfect. It’s only when we vote that we, apparently, become venal, self-serving, irrational, and riddled with error.

Nor am I going to re-litigate the Clinton campaign, it was so lamentable in its total misunderstanding of the state of the nation that it deserves legendary status as an all time bust. Then again we ought to have been warned: Clinton was rejected in 2008 for very similar reasons. Quite why the Democratic Party powers-that-be allowed themselves to be fooled by her combination of incompetence and neoliberal nonsense is beyond me.

With that out of the way: we enter a new year of remarkable uncertainty. Trump is an extraordinarily weak man, he is prone to gaffes, he has no clue about economics, his foreign policy is already disrupting alliances and making the world less safe, and he will undoubtedly be at odds with the Republicans in Congress before long. My guess is that they realize how easily he can be maneuvered by the simplest of flattery and they are thus salivating at the chance to ram through their anti-social attack on workers, the safety net, and all things vaguely Obama as soon as things start up again later this month.

I would like to be able to say that Obama left the economy in reasonable shape, but the scar of inequality prevents me from being able to. The enormous gulf that has opened up in society, with one part able to trumpet opportunity, wealth, and optimism, and the much larger part facing decline, stagnation, pessimism, and decreasing healthiness is the legacy of the entire Reagan/Clinton/Bush/Obama era. It is a blot on our own sense of achievement. It is a blight that the next few decades will have to both endure and attempt to eliminate.   Read more…

Why Trump Won?

December 8, 2016 14 comments

“the surge in inequality and the stagnation of wages”

from Peter Radford

I listened last night to Matt Dickinson from Middlebury college give a talk about the recent election. This is my synopsis:

  1. The election did not represent much of a change in voter patterns. Trump’s victory was based more on a tweak rather than a reconstruction of the voting patterns of the 2012 election. So this was not a revolutionary moment, marking, instead, a logical further step in a longer term trend. That trend was the steady shift of lesser educated white voters in old industrial areas towards the Republican party. Looking at the 2016 result we see this trend manifested in the very small margins of victory for Trump in states such as Michigan, Pennsylvania, Wisconsin, and Ohio. The entire election outcome hinged on about two hundred thousand votes in those states. The immense dissatisfaction with the economy within those few states was sufficient to put Trump into the White House.
  2. Conversely, the Democrats failed to stitch together a repeat of Obama’s winning formula. This is particularly true of the combination of the black and Hispanic vote. Prior to election day there had been heady talk of a surge in Hispanic voters whose activity was thought to be a counter-punch to Trump’s repeated criticism of illegal immigration, his advocacy of mass deportation, and the construction of a wall to keep illegal immigrants out. This surge turns out not to have been a factor. Instead a sizable portion of the Hispanic vote — which did rise slightly over 2012 — went to Trump, partially, as it turns out, because many legalized Hispanic voters resented their illegal brethren as much, if not more, than their white compatriots. As for the black vote: it remains a Democratic monolith, but was not as enthused, naturally, over Clinton as it was for Obama. The diminution in the black vote alone can account for Clinton’s loss in a couple of the rust belt states.
  3. Incredibly the Clinton campaign completely misread the national mood: it utterly failed to pick up on the devastation that neoliberal economics has produced in the ranks of ordinary families. Indeed, in stark contrast to Trump’s relentless economic populism, Clinton scarcely mentioned the economy at all. She mentioned the economy or jobs less frequently than any other post-war candidate. Instead she focused on whet she presumed to be Trump’s disqualifying personality traits. Unfortunately for her voters were prepared to accept Trump’s boorishness in exchange for his advocacy of economic change. In particular his attacks on free trade, which translate into economic fairness in the minds of displaced workers, were enough to motivate many more of them to vote than had before.
  4. The thought that the polls “missed” the result is wrong at the national level, where the outcome is almost exactly what most polls predicted, but is correct at the local level where there were too few polls to pick up the trends, especially in the rust belt.
  5. The non-poll based predictions of political science, based as they were on macro trends such as GDP and income changes, were startlingly accurate. This was a predictable result if we had simply focused on the economy and the resentment against the incumbency.
  6. The Democrats have declined sharply as a national force in the past decade. The loss of power is very sharp at all levels of government. They are now clearly in need of renewal. Yet their leadership remains eerily familiar.
  7. Lastly, with respect to the Democrats and renewal: if they focus on the loss to Trump as one of a consequence of bigotry, misogyny, or other rejections of progressive thinking they are doomed to miss the point. This was a result that hinged on economic misery and the perception of lost opportunity. This latter issue being paramount: voters did not simply vent about their own condition, which in many cases has begun to recover, what they resented the most is the thought that the constancy of improvement is gone and that further generations will live diminished lives compared with their own.

Read more…

James Meade Redux

November 12, 2016 37 comments

from Peter Radford

Well, that was fun. A rebellion has swept away the establishment. I never thought I would say that the rebellion would be manifested within the GOP and that the establishment would be within the Democrats, but that’s what we just witnessed. We on the left must accept that whatever we were saying just didn’t resonate with enough people. The Democrat’s obsession with identity politics that allowed it to ignore the consequences of its embrace of neoliberal economics has led to its separation from its foundational support. The GOP is not the party of the working class, far from it, but its dysfunction and rupture in recent years has allowed it to be co-opted by a demagogue who saw a route to power by using its base to vault himself to the top. Both parties bear equal blame for the morass and malaise. Both parties need reconstructing. Else the rebellion will continue.

For those of you of a left-of-center bent let me quote from James Meade’s wonderful little book “The Intelligent Radical’s Guide to Economic Policy”. It dates from 1975, but still has relevance as we think about how to ditch neoliberalism:

“The intelligent radical is at heart an incurable egalitarian and is appalled by the gross inequalities she observes in modern society. But she desires to cope with them by methods which are compatible with maintenance of a free and efficient system.”

That was written, of course, before inequality really exploded as neoliberalism took hold.   Read more…

Can we move on?

October 18, 2016 7 comments

from Peter Radford

Really.

I am hardly alone in ranting on about economics, but it never changes. How can it? The intellectual honesty required to make the sort of shift needed to recapture the discipline’s honor simply doesn’t exist. Its practitioners are too deeply embedded and ingrained. Its students are too intimidated by the burden of its closed social pressures.

Nowhere is there a leader willing to take on the mantle of righting the ship. So it continues to wallow low in the water, not sinking but adrift. It has become an aimless enterprise being more and more revealed as nothing but a combination of artless technique and ideological objective.

When we think of economics nowadays we think of applied mathematics. Applied to certain problems, in certain ways, within certain boundaries, and only against certain data.

Economics has become a small minded sub-discipline designed to produce analysis of small issues or problems that can be contained within the massive restrictions of the subject’s edifice.  Read more…

Blind leading the blind

October 14, 2016 3 comments

from Peter Radford

A few days ago David Ruccio posted an article titled “Crash and Learn” on the state of economics education. I want to elaborate a little further, although my usual skepticism on this subject does bridle a tad at the concept of economics education. Is that the same as “military intelligence”?

Anyway, in that article is this quote:

In Manchester, Diane Coyle also defends the basic methodology of economics. She says there is confusion among critics between microeconomics, the study of the behaviour of individuals and firms, and macroeconomics, the study of whole economies. Macroeconomics, she admits, “is broken”. But microeconomics is both robust and often verifiable with real-world data. What, she asks, can heterodox economists contribute to typical concerns of microeconomics, such as discovering the right mix of policy incentives to discourage obesity?

Therein, as someone once said, lies the tale.

Macroeconomics is “broken”. I quite agree. It’s nice to see an august member of the trade admitting that snake oil is snake oil no matter how clever the mathematics looks. Not that I blame the math. You can’t make something silly into something smart simply by expressing it in the formal language of math. If the root is rotten so is the formal outcome.

But that part I like more is that she goes on to laud the robust nature of microeconomics.

Wrong.

Micro, if anything, is worse than macro. It is so utterly disconnected from reality that it is incapable of anything other than talking about itself. Which it does loudly and proudly.   Read more…

The Market and Nobels

October 12, 2016 5 comments

from Peter Radford

As I awake from my self-imposed slumber and re-survey the state of economics:

Nothing has changed.

This is predictable, and, I submit, is the most predictable phenomenon within the ambit of the discipline. Economics is in disrepute, and its current elite are determined to keep it there.

The latest ersatz Nobel prize went to a couple of guys who theorize a lot about contracts. This is the kind of work that now dominates much of economics. Tinkering with mathematics, incentives, and other aspects of minutiae whilst steadfastly turning away from the rapidly approaching storms that threaten the lives of real people outside the tenured redoubts professors hide within.

I have come to think that economics itself is one of the greatest impediments to returning us all to a prosperous and sustainable path. It is one of those moribund institutions that festers away living in a long-ago past, secure in what little it knows, and terrified of what it might not know.

I don’t think people realize just how historical contingent economic is. It was invented in the aftermath of the onset of industrialization, it was an afterthought as a growing chorus of politically motivated observers sought to identify a body of thought to be deployed to defend modernization and to attack the old order.

That old order was the entire system of life built around the stability of an agricultural economy in which land was paramount, aristocrats carved out precious freedoms from the older-still order of monarchs and autocrats, and, by and large, regular people lived as many generations of their ancestors had. The entire social and political structure can be encapsulated in the word: tradition.    Read more…