Fwd: An economist who speaks sense - see attached article

[Trevor Watkins]

An excellent article, unambiguous and clear. Unusual for an economist.

Trevor Watkins - Base Software
bas...@gmail.com 083 44 11 721 - 042 293 1405 - (fax)0866 532 363
PO Box 3302, Jeffreys Bay, 6330

[Gareth Brickman]

Excellent interview. Thanks for sharing it, Trevor!

Garth, I'm sure you'll be very interested in it.

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[Leon Louw (gmail)]

You're being unfair to economists, Trevor.  Surveys find that there's a high level of consensus amongst economists on most issues.  The impression that there are muddled economists arises mainly because media present "both sides", which leaves the impression that nutters like Krugman and Stiglitz are representative.

 

As for clarity, most economics I've read are as clear as intellectuals get, eg Freakonomics and dozens of other books/articles.  

 

Economics should be distinguished from econometrics and mathematical economics, which, in turn, differ fundamentally from each other.  The two of them are also typically quite clear, provided one is into quantification or mathematics.

 

Although, having written that, I should add that what econometricians write tends to be clear, provided you make allowances for their curious methodology and assumptions.  Outside their logic bubble, much of it garbage.  

 

There are many examples.  Take the way they calculate GDP.  That's their way of saying how much wealthier (or poorer) we are.  Mainstream econometrics (as opposed to what comes from our guys) is what gets Krugman spouting such absurdities "seriously" (his word) as the need to spend as if as if we’re expecting an alien invasion -- that's his crypto-intellectual version of digging and filling trenches to create wealth.  It also gets muddle-headed commentators saying superstorm Sandy, wars and other horrid stuff that goes bump in the night, "stimulate" growth.  

No, that’s not a typo; it’s really what they say.  Such sophistry entails variations of the old broken window fallacy, which vary in form, not substance.  Likewise beneficiation babble.

 

It goes like this: when you build a house it's added to the GDP.  That it's you, not the rest of us, who has the house doesn’t occur to econometricians, but that's another matter.  Collectivism and macro-economic aggregates presume what's yours is ours.  I like that.  You being richer somehow makes us richer, and the main responsibility of econometricians is to keep telling us that.  

 

Anyhow, when your house gets blown away by three little piggies or a tornado, you'd expect econometricians to deduct it from the GDP, but they don't.  In fact, they add it in again when rebuilt.  They create the illusion that the country is a house richer whereas it's a house poorer.  You have to give them credit for looking on the bright side when the pawpaw hits the air conditioner.  

 

There's also the seen and unseen; we see the rebuilt house, but not what else there would have been had resources not been diverted.  In case you're thinking econometricians are remiss, take back your naughty thoughts.  It's simply and obviously completely impossible to know or even speculate how else the resources would have been deployed.  Would there have been more tooth picks, jumbo jets, wrestling matches, game drives, promiscuity, moon landings, radio channels, tweets, widgets, woblets, wangles, globifers or waggloplets?  Or lunches.  Since no one has the slightest idea, it's best to ignore alternatives and look only at what we have, which is a new house.  To point out that there's no such thing as a free lunch is mean and nasty and spoils the fun of the numbers game.

We don't really have a new house, of course -- we have the same number we had before -- but, with all this building going on, it's unreasonable to ask econometricians to say nothing happened, nor to expect them to sow doom and gloom by saying we're a house poorer when there's a new house for all to see.  No one would believe them anyway, and they'd lose credibility.  Nor can we ask them to muse about what might have been, nor (as micro-economists do) to say it's your house.  It's more congenial, after all, to say we're all in this together, and to prove it with impressive numbers and acronyms.

 

Another example of econobabble is international trade.  Everyone knows that if you get more than you give, you have a surplus.  Yet econometricians call precisely the same thing when it happens internationally a "deficit".  Getting more than you give for them is being worse-off.  Yes, I know that's weird, so I’ll explain how they perform the smoke-and-mirrors illusion in a moment. 

 

Meanwhile, ordinary folk also know -- or would were they to think about it -- that all voluntary exchanges add value; they leave all parties wealthier.  Otherwise they wouldn't trade.  That’s obvious.  Well, not really.  Accountants aren't quite so cheerful, so they don't see a perpetual positive sum game.  For them everyone's goofy because they go to all the effort (transaction cost) of trading at the end of which all their books balance to the nearest cent, which means all transactions are always in precise equilibrium and therefore a complete waste of time.  

 

If you think that's weird, you ain't seen nothing  yet.  Enter econometricians.  They're really amazing; they add all the participants’ pluses, and all the accountants' zeros, and, as if by magic, they declare a deficit.    

 

How do they achieve this astounding feat?  Unlike everyone who trades, and all accountants, econometricians attach zero value to what's traded.  That's right, for them, what people do (internationally at least) is pass money around in a kind of global parlour game during which econometricians take occasional snapshots.  At the end of fiscal years, or quarters, or whatever, if everyone collectively in country A paid more to people in country B than they got from them, it's called a "deficit".  Admit it, you can't argue with that.  Country B gained money at the expense of country A.  

 

Since no one questions the assumption that international trade is a money-circulating parlour game, no one blows the whistle of the surplus-deficit illusion.  Anyway, econometricians are really clever, so no one dares argue with them even if the nation’s experience isn't theirs.  We assume clever people would never do something so manifestly nuts as to ignore why people pass money around.

 

In their defence, econometricians have to do what they do, you see, because if they don't, like accountants, they'd keep reporting zero balances, and they’d be boring and/or unemployed.  Instead, they've create elaborate schools of thought, and win Nobel prizes, and churn out complex theories about how countries can get more money than they give, whereas everyone else wants to know how to get more stuff than they give; how to get more for their money rather than how to get more money per se. 

 

So, Trevor, be fair, and give credit where credit is due.  On reflection, don’t give credit; you might create a debt crisis.  I'll explain that too if anyone (a) reads this far and (b) wants to know how econometricians turn lots of individual debts into "national" debt.  There is, of course, no such thing, but unless we assume there is, we'd have no need for pseudo-intellectual mumbo-jumbo about national debt?  Just forget it all, Trevor, and enjoy the clear congenial economist who pleased you ... and me ... thereby increasing the GNH.  That's econometrese for gross national happiness.

ciao

Leon 

[Janette]

Enjoyed your piece Leon J

And by the way I often wonder if Americans ever read the story of the Three Little Pigs.

Can anyone tell me why they build their houses planks? Surely if your house is in an area that might be hit by a tornado or such, you would want to build it sturdily with bricks. There must be some technical reason why wood is preferred. If it was only for the initial economic reasons then surely the insurance premiums would be higher for wooden houses than they would be for brick house. Does anyone have any information on this.

“. . . Anyhow, when your house gets blown away by three little piggies or a tornado, you'd expect . . .”

[Gareth Brickman]

The expansion of the private security industry adds to GDP. So the more South Africans spend having to protect themselves and their property (on top of all the government spending for apparently the same aims which is also added to GDP) means that we can quite simply boost our GDP by encouraging more crime.

--

[Frances Kendall]

When US immigrants first arrived the place was full of forests. They got into habit of building from wood.

It's very cheap & quick. They now use plastic clapboard that looks like wood.

We use bricks because for a long time it was required by law. Also when our guys arrived not lots of forests around.

Sent from Frances iPhone

--

[jacos...@gmail.com]

Thanks Leon. To answer question b), I would love to read some more sense.

Thanks

Jaco

Sent from my BlackBerry® wireless device

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From: "Leon Louw (gmail)" <leon...@gmail.com>

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Subject: Re: [Libsa] Fwd: An economist who speaks sense - see attached article

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[Leon Louw (gmail)]

Yes, all sorts of wealth reduction is miraculously converted to the illusion of wealth creation because national accounts don't measure wealth creation.  GDP measures turnover regardless of whether it's fixing stuff, buying stuff or settling debt.  That's why fighting wars (the sole purpose of which is wealth and life destruction) creates an illusion of growth.  

And GDP doesn't measure all sorts of wealth creation, a mundane examples being cooking meals instead of going out, and DIY instead of DIFY (do it for you).  

--
Leon Louw

work:  +27-11-884-0270

mobile:  +27-84-618-0348

www.freemarketfoundation.com

[Janette]

OK, but you would think that by now they would figure out that cheap & quick just doesn’t stand up to stress.

Where are all the American great inventors to discover new durable materials with which to build houses?

J

[Frances Kendall]

I think that they do last pretty well generally. I stayed in one on Lake Michigan for 8 weeks and it felt very prefab in comparison to our homes, but they're well insulated and do well in summer and winter & I saw a new one built in that two months - almost like a kit house.

A storm like Sandy is very unusual & the clapboard is endemic  on the east coast. I think they'll have to reconsider them there. On the other hand they're quick to rebuild!

Will we see you at libsem?

Sent from Frances iPhone

[Erik Peers]

I think the opposite is true, that our regulations are too rigid, and we should build houses out of materials other than brick and concrete.

The SA building regulations interest with the free market where people could have more free choice about which materials they may build their houses.

This would lessen the (artificial) housing shortage.

[Frances Kendall]

I agree. Especially since we don't have hurricanes! Not that I think it should be regulated in US either. Just if I was rebuilding my house on Staten Island I would consider something more sturdy.

Sent from Frances iPhone

[jacos...@gmail.com]

But do we really have such strict regulations? In the southern cape we see many wooden houses. In fact in some holiday towns they seem to be a majority.

I also remember houses from asbestos type materials constructed in the seventies. (also in white areas)

In Australia wooden houses are also very popular, at least in Victoria. It becomes a cycle, popularity translates into more skilled labour around it, translating into more competitive prices again.

Building that same lake Michigan "kit house" in joburg would take substantially longer than 2 months and probably be more expensive. At least compared to bricks and mortar equivalent...

J

Sent from my BlackBerry® wireless device

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From: Frances Kendall <fken...@mac.com>

Sender: li...@googlegroups.com

Date: Sun, 11 Nov 2012 07:51:12 +0200

To: li...@googlegroups.com<li...@googlegroups.com>

ReplyTo: li...@googlegroups.com

Subject: Re: [Libsa] I'll Huff & I'll Puff!

[Frances Kendall]

Leon says depends where you are, still can't build wood frame house in Jhb. Can in coastal areas.

Sent from Frances iPhone

[Stephen vJ (Gmail)]

Those asbestos houses were dirt cheap, sturdy, quick to construct... but some bureaucrat decided it was dangerous and outlawed using asbestos as building material. It must have been in the late 80's, because I grew up in a house made of asbestos panels in the 1970's and we had classes at school in the 1980's made from them. Those houses and classrooms were warm in winter, cool in summer, are still standing and still look like they did when they were built. I think a huge injustice was inflicted on the country "for our own good". So now you can't breathe in asbestos fibres, but schooling is under a tree and the roof over your bed a traffic sign. I don't think we are better off for it, but the argument against asbestos can be seen, the houses & classrooms not built from it cannot be seen. What is seen usually wins over what is not seen... like the Gautrain won over all the other things that money could have bought but didn't.

 

S.

[Leon Louw (gmail)]

My pleasure.  Knowing someone read that far, dear Jaco, and wants more, massages my fragile ego.

I am addressing myths of foreign trade and foreign debt in my weekly Business Day column this Wednesday, so watch out for it.  

I may do something more elaborate/sophisticated for LibSA thereafter.

ciao

L 

[David Joffe]

I must say, asbestos is really nasty stuff, I researched it a little
while back when I had to get rid of a heap of old asbestos rubble
lying in my yard when I moved. Cancer rates (and other disorders)
resulting from asbestos exposure *can* definitely be seen and are
very predictable, in spite of how intangible or invisible they might
seem (I can't remember exact figures, but for those who have had
asbestos exposure eventual death rate has a pretty predictable and
non-negligible rate). Then of course there are the predictable
higher death rates for everyone working in the construction industry
with the stuff (and literally basically anyone who later does
maintenance on such constructions .. e.g. drilling into the stuff to
install lighting or whatever ... I spoke to a handiman recently who
told me proudly how he'd drilled into loads of asbestos over the
years and he was 'just fine' :/). Some estimates from the World
Health Organization:

"About 125 million people in the world are exposed to asbestos
at the workplace.
According to WHO estimates, more than 107 000 people die each
year from asbestos-related lung cancer, mesothelioma and asbestosis
resulting from occupational exposure."

In South Africa the problems would also be compounded by people
stealing and ripping apart the asbestos to do things like make
shacks from it. I remember having asbestos classrooms ... I remember
kids breaking those walls by pushing other kids right into it (and
when it breaks it releases masses of fibers into the air), and I
remember dangerous shards of the stuff sticking out (along with
fiber glass) and just left there for months, in the classroom. We're
better off without it, I'm not sure that literally effectively
killing people is a meaningful trade-off for classrooms, and I don't
think we want our kids playing around in/with heaps of asbestos
rubble all over the place. Controlled usage is one thing but you
can't really control it ... it ends up all over ... e.g. on garbage
heaps where poor people scavenge, in our fields where kids play. No
thanks. We can really do better, too, because the main reason we
don't have enough classrooms has little to do with the fact that we
can't afford building materials because of asbestos bans, and a lot
more to do with corruption.

The asbestos industry was also one of the prototypical examples of
why people become 'anti-corporate' ... the industry for decades lied
and tried to cover up information about the negative health effects
of asbestos, and lobbied governments to prevent it being banned and
keep promoting it.

Speaking of building materials, but it seems a bit stupid to me to
practically build a whole town with only thatch roofs? ... I know it
sounds like 20/20 hindsight but it's very well known that thatch is
an increased fire risk, so surely this town was a disaster waiting
to happen (check it out in Google Maps, large parts of the town are
100% thatch ... it's pretty, but stupid) ... I can only imagine some
kind of local-level 'fascism' e.g. 'building rules' must have been
at work in enforcing such disastrous uniformity ...

http://www.timeslive.co.za/local/2012/11/11/fire-burns-down-100-hous
es

- David


On 11 Nov 2012 at 15:56, Stephen vJ (Gmail) wrote:

Send reply to: li...@googlegroups.com
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Subject: RE: [Libsa] I'll Huff & I'll Puff!
Date sent: Sun, 11 Nov 2012 15:56:16 +0200
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[David Joffe]

On 12 Nov 2012 at 5:03, David Joffe wrote:

> Speaking of building materials, but it seems a bit stupid to me to
> practically build a whole town with only thatch roofs? ... I know it
> sounds like 20/20 hindsight but it's very well known that thatch is
> an increased fire risk, so surely this town was a disaster waiting
> to happen (check it out in Google Maps, large parts of the town are
> 100% thatch ... it's pretty, but stupid) ... I can only imagine some
> kind of local-level 'fascism' e.g. 'building rules' must have been
> at work in enforcing such disastrous uniformity ...
>
> http://www.timeslive.co.za/local/2012/11/11/fire-burns-down-100-hous
> es

Hmm, from various online sources:

"The village has evolved out of the vision of a man with an eye for
aesthetics. Leighton Hulett started the town from a fishing camp of
thatched rondavels, and friends who came to stay were so enchanted
with the place, that they asked to be able to buy a piece of ground
to build a place of their own. His insistence on a specific style of
architecture, preserving character, ensured the development of a
village that is quite unique."
http://www.scatterhub.com/content/st-francis-bay.html


"In 1954 Leighton Hulett purchased the land and created South
Africa's first marina. He kept strict control over design
regulations, allowing only white buildings with thatched roofs"


http://www.sfbresidents.org/news/2010/Building-guides-mar.htm

"The St. Francis Style shall be characterised by a white walled
building with a 45° to 60° high double pitched thatch or black/dark
grey tiled roofs. Only white walls allowed – no off shades" ... "The
preferred roofing material is thatch."

Probably they will rethink this a bit now.


I've never really been a fan of this sort of enforced conformity,
though I don't think it's necessarily wrong for members of a local
community to have such regulations, if you generally consent to such
when moving there.

[Trevor Watkins]

I stay in a wooden house with asbestos interior walls, because I liked the location and the price. I understand the risks of asbestos, and they are minor, in my opinion, compared to the real risks of living in South Africa. I do not need any "experts" to force their safety opinions on me, no matter how lengthy.

I stay in a closed community and am willingly subject to their contract, just like St Francis Bay. Being smart after the event is such a waste of breath - better predict where the next mindlessly stupid tragedy will occur in South Africa and go sell insurance, or fire extinguishers, there.

Trevor Watkins 

[Stephen vJ (Gmail)]

Well, I'm not saying it is not dangerous. I might yet die of some kind of
lunch disease. What I'm saying is that people are not given the free choice
between using a dangerous building material and all the costs associated
with it vs. the alternative, which is often being homeless / schoolless.
Knowing how bad it is, they might choose to cover themselves with road signs
and be schooled under a tree. They might not. Imposing the bureaucrat's
subjective value system on people means that all those who would have taken
their chances with a harmless substance are deprived of what they see as
value exceeding those risks. I causes decisions to be made based on the
subjective value judgements of a few rather than the subjective value
judgements of everyone.

S.

> Sent from my BlackBerryR wireless device

[Stephen vJ (Gmail)]

Correction: "harmless" should read "harmful" and "I" should read "It".

S.

 

-----Original Message-----
From: Stephen vJ (Gmail) [mailto:sjaar...@gmail.com]
Sent: 12 November 2012 09:42
To: 'li...@googlegroups.com'
Subject: RE: [Libsa] I'll Huff & I'll Puff!

 

Well, I'm not saying it is not dangerous. I might yet die of some kind of lunch disease. What I'm saying is that people are not given the free choice between using a dangerous building material and all the costs associated with it vs. the alternative, which is often being homeless / schoolless. Knowing how bad it is, they might choose to cover themselves with road signs and be schooled under a tree. They might not. Imposing the bureaucrat's subjective value system on people means that all those who would have taken their chances with a harmless substance are deprived of what they see as value exceeding those risks. It causes decisions to be made based on the subjective value judgements of a few rather than the subjective value judgements of everyone.

 

S.

 

-----Original Message-----

From: li...@googlegroups.com [mailto:li...@googlegroups.com] On Behalf Of David Joffe

Sent: 12 November 2012 05:04

To: li...@googlegroups.com

[Colin Phillips]

I think "Lunch disease" sounds like a good way to go, 

[Trevor Watkins]

Hi Leon

I fear that  you prove my point for me - there is less consensus amongst "economists" (if you include Krugman, Zietsman, etc in this term) than there is amongst, for example, physicists or "Hard science" experts. Of course, those who agree with each other do indeed agree with each other.

Trevor Watkins 

[Stephen vJ (Gmail)]

Wow, three spelling mistakes in one short post. At least my logic is solid. ;-)

S.

[Jaco Strauss]

And "lunch" should be "lung"?or do you really fear the dreaded lunch disease?

;-) 

2012/11/12 Stephen vJ (Gmail) <sjaar...@gmail.com>

--
Jaco Strauss
Cape Town

[Erik Peers]

Hi Trevor

Economics is a social science. Theories are tested by empirical evidence which is itself subject to statistical variations. The fact that economists try to explain the real world of human behaviour, does not make economics any less scientific. Psychology is another social science where human behaviour scientists try to explain human behaviour, and subject their theories as far as possible to double blind statistically valid tests and samples of empirical evidence.

There is such a thing as water, and scientists can agree that is is composed of oxygen and hydrogen.

However there is no such thing as a recession. It is merely a construct that economists have defined to try and explain real world behaviour. As such there is much debate as it is impossible to put "recession" in a laboratory. Besides many made millions in the great depression.

Last point, physicists don't agree at all, as you have stated. There is vigorous debate about string theory, dark matter etc etc

Economists agree on most of economics, psychologists agree on most of psychology, and physicists agree on most things physical. But where any of the disciplines try to explain behaviour, be it of people or the cosmos, where that behaviour lies on the edge of current human knowledge, then there is still debate.

It is misleading therefore to single out economics as a science where the experts disagree.

--

[David Joffe]

On 12 Nov 2012 at 8:40, Trevor Watkins wrote:

> I stay in a closed community and am willingly subject to their
> contract, just like St Francis Bay. Being smart after the event is
> such a waste of breath - better predict where the next mindlessly
> stupid tragedy will occur in South Africa and go sell insurance, or
> fire extinguishers

Personally I don't think it's a waste of breath to try prevent such
future events by using 'thinking', but that's just me. Nor is it
'after the event', as perhaps it's just my upbringing (taught to
think about things), but I've been raised to be highly aware of the
fire risks of thatch, and and long ago decided I would prefer to
avoid thatch for that reason.

The problem with you wanting to use asbestos is that you simply
cannot control who else will be exposed to your asbestos. The stuff
lasts virtually forever in the environment, either wearing down
extremely slowly over millenia from water wear, or releasing masses
of fibers each time a piece breaks.

- David

[David Joffe]

Hmm, a little bit of Googling turns up an interesting snippet in a document from August 2010:

"Fire Protection

The Fire Hazard in St. Francis is life threatening and of grave

concern to residents [emphasis in original], yet in spite of the fact that SFB have

thatch on the majority of homes, the SFB Fire Fighting Unit was

withdrawn from the town. This has already led to the fact that 2

years ago a home was burned to the ground, as the Fire Engine

was not able to reach it on time. See Appendix 32 third row.

On the 3rd of August this year, a home was saved from fire by

locals who ripped out burning thatch from its roof. The fire

engine eventually arrived. Major fires have threatened homes

and lives over the last two years (See Appendix 32).

There is an urgent need for maintenance of fire fighting

equipment.

Public Open Spaces need to be cleared of Bush and the KM

needs to monitor property owners with regards to keeping their

plots free of alien vegetation. Currently it only happens

sporadically and follow up is inadequate"

This is contained within a "NOTICE OF DISPUTE

DECLARATION OF A DISPUTE (“DISPUTE”) BETWEEN THE

ST. FRANCIS BAY RESIDENTS ASSOCIATION (“SFBRA”)

AND THE KOUGA MUNICIPALITY. (“KM ”)"

and was signed by the "Chairman: St. Francis Bay Residents Association".

So evidently the residents weren't entirely stupid either - the municipality withdrew firefighting services from the town, and they were evidently in dispute with the municipality about it as recently as Aug 2010. Copies were sent to:

"The Executive Mayor - Mr. Robbie Dennis

The Municipal Manager - Dr. Eddie Rankwana

The MEC - Sicelo Gqobana

President – Jacob Zuma

ADV Andre Gaum

George Seitisho

Elroy Africa

The Ward Councilor – Ben Rheeder"

http://www.sfbresidents.org/pdf/Notice%20of%20Dispute%20Final%20Final.pdf

 - David

  

[Garth Zietsman]

There is the IGM economic experts panel here - which is intended to give an idea of the economic consensus.  The panel samples elite economists from a diverse range of ideologies.  It seems there is a great deal of consensus on a wide range of supposedly controversial economic questions which confirms what a number of surveys have established.  For what it's worth I have agreed with the consensus position on every question they have answered so far and I am pretty sure Krugman would have as well.

No doubt you can exclude me - I'm not an economist - but you are crazy if you want to exclude Krugman from the economic mainstream.  The libertarian economists at George Mason University i.e. Tyler Cowan, Alex Taberock, Bryan Caplan etc all take him very seriously (while often disagreeing).  In fact Caplan recently posted that he cringes every time he witnesses some libertarian claim that Krugman doesn't understand economics.  The truth is the Keynesian models he espouses are definitely PART of mainstream economics (just as Austrian economic theories have been absorbed into mainstream economics), whether the fellows at Mises.org get that or not.  Keynes had some real insights and wasn't by any means a nut.  Hayek and Friedman at least could recognize that.

I figure if we are going to seriously advance liberty and freedom it would be helpful if we didn't align ourselves with, or limit ourselves to, fringe economics - while thinking of it as mainstream.  Those multi-prize winning and widely respected liberal economists that are being so cavalierly dismissed on this thread, are clearly not nutters.  We do ourselves, and the libertarian cause, a disservice if we fail to understand what those guys (and much of mainstream economics) are really saying.  

Garth

-- 

[Gareth Brickman]

@Garth

Have you seen Krugman's story about the babysitting co-op? He describes it as having "changed his life" and that he thinks about  "often".

Read his account of it, because it seamlessly illustrates the breadth of his ignorance when it comes to economic fundamentals. Now, I'm not saying Krugman is wholly ignorant or doesn't have economic insights to add (his work in the 90's on trade is very good), but I think it's drastically under-estimated just how ill-informed and ignorant even esteemed economists are of the basics. 

Austrian economist Jorg Guido-Hulsmann pointed out at a conference recently that basic economics is often taught with the later learning more intermediate stuff in mind, which is predominantly all about modelling. He says that in this framework very often students will get through their basic economics courses without having much understanding at all of the fundamentals, and are not able to really grapple with the different schools and different perspectives that are all about fundamental divergences of theory. I think the same goes for the guys at the top, so to speak, and which is why I very often don't see so much of a debate of principle and theory between differing economists as semantic and perspective confusion. The debate surrounding the eventual effects of Hurricane Sandy is a great example of this.

--

[Gareth Brickman]

In the mean time, Garth, did you read the attached interview? Do you have any thoughts?

On Monday, November 12, 2012, Garth Zietsman wrote:

--

[Stephen vJ (Gmail)]

Here's the cause of the trouble. The typical economist will spend one long evening pulling an all-nighter to pass Economics 101. In that one long evening, one question / fact which is covered, amongst many others, is that GDP as an economic measurement has some shortcomings. One of those shortcomings, depending on which text-book is used, might be that it does not take existing wealth into consideration i.e. the house that you paid off 10 years ago but still derive economic benefit from by living in every day is now shown in GDP. Those textbooks who list that shortcoming will typically note that existing capital is not shown because it is not traded i.e. it has no price (but has value) and therefore cannot be measured. Now, that shortcoming of GDP is a one sub-part of a small part of one long evening. That same economist will now spend the rest of his academic career studying ways to increase economic growth as measured by GDP, determining the impact of monetary policy on GDP, figuring out how changes in GDP affects longevity, what role education plays on GDP and so on. So when Sandy destroys the house that was paid off 5 years ago and GDP remains flat or even increases, do you blame the economist for focusing on the measure his whole academic career has been centred around, forgetting that one factor in that one definition of that one evening back in the early days just before his Economics 101 exam ? Please. Have some compassion.

 

S.

 

From: li...@googlegroups.com [mailto:li...@googlegroups.com] On Behalf Of Gareth Brickman

Sent: 13 November 2012 09:06
To: li...@googlegroups.com

Subject: Re: [Libsa] Fwd: An economist who speaks sense - see attached article

 

@Garth

[Stephen vJ (Gmail)]

F&*@# !!



Correction: "now" should read "not".



S.

From: Stephen vJ (Gmail) [mailto:sjaar...@gmail.com]

@Garth



Have you seen Krugman's story about the babysitting co-op? He describes it
as having "changed his life" and that he thinks about "often".



Read his account of it, because it seamlessly illustrates the breadth of his
ignorance when it comes to economic fundamentals. Now, I'm not saying
Krugman is wholly ignorant or doesn't have economic insights to add (his
work in the 90's on trade is very good), but I think it's drastically
under-estimated just how ill-informed and ignorant even esteemed economists
are of the basics.



Austrian economist Jorg Guido-Hulsmann pointed out at a conference recently
that basic economics is often taught with the later learning more
intermediate stuff in mind, which is predominantly all about modelling. He
says that in this framework very often students will get through their basic
economics courses without having much understanding at all of the
fundamentals, and are not able to really grapple with the different schools
and different perspectives that are all about fundamental divergences of
theory. I think the same goes for the guys at the top, so to speak, and
which is why I very often don't see so much of a debate of principle and
theory between differing economists as semantic and perspective confusion.
The debate surrounding the eventual effects of Hurricane Sandy is a great
example of this.


On Monday, November 12, 2012, Garth Zietsman wrote:

There is the IGM economic experts panel here

<http://www.igmchicago.org/igm-economic-experts-panel> - which is intended

<javascript:_e(%7b%7d,%20'cvml',%20'leon...@gmail.com');> > wrote:

You're being unfair to economists, Trevor. Surveys find that there's a high
level of consensus amongst economists on most issues. The impression that
there are muddled economists arises mainly because media present "both
sides", which leaves the impression that nutters like Krugman and Stiglitz
are representative.



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[Jaco Strauss]

No worries Stephen, I think that typo was pretty obvious. As they say, 'n goeie bekruiper het 'n halwe brood nodig!

I liked your all-nighter analogy as that is pretty much how I passed Economics. Not only "101" but right through to third year. Probably "my bad", but I have always felt that of all the formal education I received, Economics gave the least bang for my buck. Most economists don't seem to have a clue of what is going on in the real world.

How many of them can even correctly predict market turns? The more successful ones simply "predict" the prevailing trend, making them correct 80% of the time and desperately wrong (with disastrous consequences) the other 20% when the trends change.... In fact they cannot even take today's events and predict its impact on tomorrow, but are always willing to connect the dots after the fact, effectively "predicting" the present and the past.

Granted, I probably don't know what I'm talking about, but to me the Economic mainstream is similar to an elaborate confidence trick... 

2012/11/13 Stephen vJ (Gmail) <sjaar...@gmail.com>

[Erik Peers]

Economics is way more than predictions. It is a way of thinking. See Freakonomics for a practical application of economic theory. My Economics studies have served me well and the knowledge gained about price equilibrium, the invisible hand etc are responsible for my being a Libertarian today.

[Trevor Watkins]

Yep - firefighting services has been a point of dispute in the area for years.

One of my most insightful moments down here was when I got involved in facilitating an Integrated Development Plan meeting in the local township in 2010 or 2011. Asked about 40 township residents to rank their most urgent needs, expecting housing and jobs to be top of the list. Instead, their top priority was a decent fire service, which surprised me (and all their councillors). On enquiring afterwards, they said that one of their biggest problems was shack fires, that they lost everything when they occurred, and that they were preventable or controllable with just a little effort. Don't think the municipality did anything to upgrade fire services, though.

Trevor Watkins - Base Software
bas...@gmail.com 083 44 11 721 - 042 293 1405 - (fax)0866 532 363

PO Box 3302, Jeffreys Bay, 6330

--

[Trevor Watkins]

Is there perhaps a Rule of Economics here. "Any economist who is not a libertarian free marketeer is a fool".

Trevor Watkins - Base Software
bas...@gmail.com 083 44 11 721 - 042 293 1405 - (fax)0866 532 363
PO Box 3302, Jeffreys Bay, 6330

[Gareth Brickman]

Interesting, Trevor.

In case you guy's missed it, here's Chris Becker's libertarian take on the St. Francis fires: http://chrislbecker.com/2012/11/12/the-st-francis-bay-fire-crisis-its-causes-and-cures/

--

[Erik Peers]

Why pick on economists? Are others excused because of ignorance?

[jacos...@gmail.com]

Yes Erik, I have read (and enjoyed) Freakonomics, but it is as much about statistics and common sense than it is about economics.

I learned more about economics during my student years from Leon Louw and Ayn Rand than from any economics professor. In fact I became a Libertarian *in spite of* formal economics training!

J

Sent from my BlackBerry® wireless device

---

From: Erik Peers <erik...@gmail.com>

Sender: li...@googlegroups.com

Date: Tue, 13 Nov 2012 10:36:11 +0200

To: li...@googlegroups.com<li...@googlegroups.com>

ReplyTo: li...@googlegroups.com

[Erik Peers]

Brian Kantor indoctrinated us at UCT. For which I am grateful.

[Jaco Strauss]

And one of mine had been Sampie Terreblanche.... need I say more?

2012/11/13 Erik Peers <erik...@gmail.com>

[Erik Peers]

Then I have to add Andreas Wassenaar, by way of his book, and then Milton Friedman of course in "Free to choose."

But I shouldn't leave out the Dept of African Economic History at UCT in the 80's who offered courses in applied Marxism (my words, they were more subtle, or should I say surreptitious.) They did even more to cement my views. I wrote an essay totally tongue in cheek, about why it was bad for blacks to receive an MBA education in SA and still received an upper second (70%+). Their view was that any attempt to give access to SA's blacks to post graduate business education, was bad, as this would create a black middle class, which would postpone the revolution.

So I don't know why economists are getting such bad press on this site?

[Stephen vJ (Gmail)]

I think economists are very good at predicting the future. It is your expectations of their predictions which is wrong. Let me demonstrate.

 

If you want an economist to tell you when a certain commodity price has hit a peak or what the price of butter will be relative to guns, that is just like asking a meteorologist to tell you what the temperature will be on Christmas day. You are expecting omniscience from a mortal in a complex system. It is not that their disciplines are lacking something or that they are stupid & ignorant, but that you expect them to accomplish the impossible.

 

A meteorologist can tell you other things i.e. that it will rain less in 2014 than in 2018 because of the El Nino effect, but they cannot tell you if it will rain on Christmas day. It just happens that the latter is personally more important to the party planner deciding whether to pack shorts and a towel.

 

Similarly, an economist can tell you exactly what will result from certain actions like price fixing = shortages. In Zimbabwe a few years back, they fixed the price of bread on Friday and by Tuesday the shops were empty - 100% hit rate on that prediction. Economists can predict a surprising number of results coming from particular events... what will happen to price if a new import duty is imposed or that the black market in horns will increase if you outlaw hunting, etc.

 

What people can predict is not a reflection of the accuracy and sophistication of their profession as much as it is the layperson's expectations of the extent to which those predictions can be applied to the daily problems they face.

 

S.

[Jaco Strauss]

Not true Stephen, I don't expect them to do it as I KNOW they cannot. The point however is that they CLAIM to be able to do this. When they get invited to give an opinion on what the impact of some event is going to be on some commodity they should own up that they simply do not know. But in stead they tell you with much authority that B will happen because A happened. And in predicting prevailing trends they appear to know what they are doing most of the time.

But have you seen them talk about current events? 

Mr Economist, why is the market rising today? "Oh, investors are positive about some (insert arbitrary measurement) numbers that came out today" 

Mr Economist, why is the market falling today? "Oh, investors are worried about Europe and the pace of the recovery over there" 

So, in the case of the former something as simple as perhaps "unemployment dipping slightly in China" could really relegate Europe as the most important factor driving markets? Or in the case of the latter, everybody all of a sudden woke up to the reality of the elephant messing up the living room?

What they of course should answer is: "I really don't have a clue why the market does what it does...", but I have never heard any of them acknowledge that simple basic truth. Face it, if any of them really knew what event was going to cause which market move they would all have been multi millionaires. 

In fact many of them actually do make a living out of "predicting" the future, but of course not on the markets. No, they rather get paid in tax money to inform Governments on innovative ways to rob the Peters in their vain attempts to "better" the lives of the Pauls. They claim to be able to predict what the "beneficial" effects of these programmes would be and of course that "stimulus" programs would lead to higher unemployment. They are in fact indeed a little like your El Nino meteorologist predicting the weather in 2016... It seems that if either get it right it is more a question of luck than of wisdom....

Many an economist would also tell you that price fixing is an important tool in the furthering of the common good and would therefore not, per se, have had a problem with Zim fixing bread prices. After the inevitable failure (which many of them would not have predicted), they would no doubt be ready with their excuses; right down to the "greedy shop owners" and the "selfish customers".... 

After all, how many main stream economists are vocal opponents of minimum wages, petrol pricing, bread price fixing, affirmative action, etc, etc?

J

 

[Jaco Strauss]

Errata:

Should of course read:  (predict that) "stimulus" programs would lead to higher employment. (or lower unemployment)...

2012/11/13 Jaco Strauss <jacos...@gmail.com>

[Hügo Krüger]

I am of opinion that modern day economics are like the old
witch-doctors or priests. I have yet to seen a democrat appoint
someone of the Chicago or Austrian school and I am yet to see a
republican appoint a Keynesian. The politicians only appoint them so
that they have a way of justifying what they do.

[Colin Phillips]

Erik:

"So I don't know why economists are getting such bad press on this site?"

I think it's a case of a few bad apples giving the other 5% a bad name :-P

[Stephen vJ (Gmail)]

I disagree... and this is rare for us, so it must be a very special case. ;-)

 

An economist who says that the market rose today because people were feeling jittery about Greece must surely know that some individual sold because his wife ran off with the pool boy and he expects some unforeseen expenses to pop up shortly at a nearby gun shop. Greece is not and can never be the only reason or the reason for everyone... but it can be the major reason for most traders.

 

Every economist must also know when saying such things that for every seller there must necessarily also be a buyer and thus half the market feels the current price is worth paying and shouldn't go down much more i.e. feeling more positive about Greece than the other half. Every reason is therefore nil on net. When the whole market moves, he is correct in asserting that the one side's reason dominated slightly, knowing that the other side still exists.

 

The economist who ignores the major reason because there are also a myriad of lesser reasons by declaring his inability to know all of them will never be asked anything by the media again and will in fact be wrong. There is a major reason and he does know it. It is Greek jitters. Not saying so makes a fool of him in front of cameras and colleagues. Admittedly, he should end his sentence with "T&C's apply, not for sale to non-economists under the age of 86", but that is implied in the same way as "80% chance of thunder showers tomorrow" comes with T&C's.

 

"After all, how many main stream economists are vocal opponents of minimum wages, petrol pricing, bread price fixing, affirmative action, etc, etc?"

 

Maybe I only interact with some really special people, but I don't know a single economist who supports any of these on economic grounds. In fact I don't know any economists who support any of those on any grounds, except for one economist who supports affirmative action and even he admits that it is for socio-political reasons rather than economic ones and is quick to point out the economic down-side of it.

[Stephen vJ (Gmail)]

I don't get it. You accuse economists of being priests and then follow that
by an observation of how politicians act. How are the two related and why do
you think economists are like priests please ?

S.

>> <javascript:_e(%7b%7d,%20'cvml',%20'libsa%2Bunsubscribe@googlegroups.

[Gareth Brickman]

I think Hugo means they're like soothsayers- they'll affirm whatever those in power require to be affirmed.

[Jaco Strauss]

Point is they simply DON'T know what is driving the price on a particular day and simply connect the most obvious dots according to conventional wisdom. Around the March 2009 lows I remember the incredible reason given for the market's rise that day against universal bad news articles all round. Apparently their had been a leak email from some clerk at Goldman Sachs predicting growth the following year. Wow. 

Actually the market simply ran out of sellers and only buyers remained, hence the prices had only one place to go. Anything could have caused the tipping point, but trying to pin it on a leaked email was desperation based on no other obvious suspects. It is actually fun listening to them when I have time to waste (which is not often). I've heard them use an interest rate drop as a reason for a market fall as well as the reason behind a rise. And vice versa for interest rate hikes. Market uncertainty as the reason for Oil price up, as well as down, etc, etc.  

It would actually make for a fun reality economics show if you keep the day's market information away from the economist, but give him access to ALL the other news of that particular day and asking him to guess what he thought the market did that day... 

My bet would be that they would get it right less than 50% of the time!

[Gareth Brickman]

Another factor is, quite simply, that most economists aren't market watchers in the way that traders or market analysts such as myself are. There are plenty of good reasons for why markets move in certain ways- they're just not always immediately obvious and can often be the ripple effect of expectations and positions changing somewhere else for elusive or seemingly innocuous reasons. Markets fall behind the curve as well (even though there're a lot of vacuum tubes making trades now) because there're still fundamentally about human expectations, and humans misprice and misinterpret things all the time. Then there's the dark forces- the really big private boys and central banks who are law among and unto themselves only. When they want to move markets they can very easily and there can be no real way of picking up how or why it happened.

[Stephen vJ (Gmail)]

Oh, that makes sense. I once asked a professor in economics why the curriculum was so thin on Austrian economics and he said something like... do you really propose that we advocate to students that the government, who is by far the biggest financial backing of this university, stop its funding ?

 

I guess that is like volunteering your boss for a pay-cut and could get you transferred to the psychology department.

 

That said, I fail to see how this reflects on economists any differently than on the rest of us who use public road, pay our taxes, stop at traffic lights or RICA our cell phones. We all act in our own best interest according to the incentives found in our environment. Economists are no different in that respect.

 

S.

--

[Stephen vJ (Gmail)]

I'm game... except you need to clearly distinguish between economists on the one side and bankers, traders, market analysts, etc. on the other side. I have rarely seen economists make comments on daily stock market movements. Those are usually provided by traders or market analysts.

[Garth Zietsman]

I have indeed read the article that started this thread and I am also very familiar with Krugman's babysitting co-op story.

WRT the interview, my take is that this is straightforward von Mises and as I have intimated in the past I think this theory does explain some phenomena sometimes but I don't accept that it is a comprehensive account of of monetary or economic dynamics.  I don't accept that Keynesianism is either.  He mentions that there is this whole school of thought out there (subscribed to by many bright and sincere economists) that argue in favor of fiat money.  He merely says he thinks they are wrong but doesn't at all address any of their arguments - at least not in the interview.  My view is that the ideas of this other school is unlikely to be foolish and that they deserve a hearing (note that it probably includes Friedman). 

As an example of a specific source of disagreement let me mention his claim that an expanded monetary supply necessarily results in misallocation of resources because some prices rise earlier than others and his view that this is a serious problem.  Fair enough.  I buy that there MAY be some misallocation.  I do not buy that it will be a serious problem and I especially don't buy that it is cumulative.  It seems obvious to me that the disruptions due to mild inflation will be mild at worst and strictly temporary.  Elsewhere he states that a constant supply of money is fine, even in a growing economy, as this will result in a mild deflation.  Somehow while the differential price changes via a mild inflation cause serious disruptions, the same thing via deflation does not????

I have more specific arguments with stuff he mentioned in the interview but let me skip those for now.

WRT the babysitting co-op story I must say I am very surprised that you mention this as an example of failure to understand economic fundamentals.  The story is a perfect illustration that lack of demand CAN cause a recession, even where there are no structural problems or misallocation of resources and everyone is reliable and wants to work.  It also clearly illustrates that Say's law is wrong - supply doesn't necessarily create its own demand.  I suspect that by "fundamentals" you mean "as specified by von Mises".  I do know that Krugman does know what those are but I suspect he doesn't agree that those are the fundamentals of economics.  I would be extremely interested in an Austrian account of the babysitting co-op story and also what it is that Krugman is supposed to have failed to understand.

While I agree that most professionals (and economics) generally have a superficial understanding of even their own field it clearly isn't the case with Krugman.  I tend to think that where one thinks he lacks a basic understanding it is more likely that the person making this observation is missing something.

Regards

Garth

[jacos...@gmail.com]

Fair enough about the distinction, but I simply wanted to illustrate the point that they cannot predict the future. It doesn't really matter whether we are talking hours, days, weeks, months or years.

I wouldn't mind being proved wrong on this though, I just haven't seen it yet....

My biggest gripe with mainstream economists is really their general support of big government's big spending and the prediction of its supposed "positive" impact...

They might very well be demonstrating 'normal human behaviour' feathering their nests as part of an elaborate confidence trick, but as they are using my money to so, I think I am well within my rights to point out the emperor's ugly butt....

J

Sent from my BlackBerry® wireless device

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From: "Stephen vJ \(Gmail\)" <sjaar...@gmail.com>

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Date: Tue, 13 Nov 2012 16:25:10 +0200

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ReplyTo: li...@googlegroups.com

[Leon Louw (gmail)]

The babysitting co-op is a good story, Gareth, repeated with innocent approval in Superfreakonomics.

You're right, the muddled thinking of which even very bright people are capable is astounding.

Here's a little exchange that followed my initial discourse on some of it -- which is the subject of my Business Day column tomorrow:

There's a need to work through the weird mythology that obfuscates international trade/finance.  I'm spending time getting to the bottom of it with a view to (a) understanding it and then (b) communicating it.  Needless to say, there is and should be a heavy onus on anyone who challenges the established view.

I put some of my critique to a workshop with economists recently, including one who mastered in international trade and finance.  They were perplexed, and none challenged me.  The trade economist said he couldn't fault what I said, but he'd have to digest it later because it contradicted too many basic and unquestioned  assumptions, formuli and articles of faith, eg that there are such things as national debt and trade imbalances, that getting more than you give should be called a deficit, and so on. 

You'll be pleased to know that you magically become a co-beneficiary of someone else's exports, but also that you're jointly liable for the imports and foreign debts of everyone who incurred liability without your knowledge or consent.  How and when it happened is a mystery, but be assured that it is so ..... according to the national accounts.  You might not have known it, but "we" have a balance of payments constraint.

thus constrained

ciao

On 13 November 2012 09:05, Gareth Brickman <garetho...@gmail.com> wrote:

@Garth

Have you seen Krugman's story about the babysitting co-op? He describes it as having "changed his life" and that he thinks about  "often".

Read his account of it, because it seamlessly illustrates the breadth of his ignorance when it comes to economic fundamentals. Now, I'm not saying Krugman is wholly ignorant or doesn't have economic insights to add (his work in the 90's on trade is very good), but I think it's drastically under-estimated just how ill-informed and ignorant even esteemed economists are of the basics. 

Austrian economist Jorg Guido-Hulsmann pointed out at a conference recently that basic economics is often taught with the later learning more intermediate stuff in mind, which is predominantly all about modelling. He says that in this framework very often students will get through their basic economics courses without having much understanding at all of the fundamentals, and are not able to really grapple with the different schools and different perspectives that are all about fundamental divergences of theory. I think the same goes for the guys at the top, so to speak, and which is why I very often don't see so much of a debate of principle and theory between differing economists as semantic and perspective confusion. The debate surrounding the eventual effects of Hurricane Sandy is a great example of this.

On Monday, November 12, 2012, Garth Zietsman wrote:

There is the IGM economic experts panel here - which is intended to give an idea of the economic consensus.  The panel samples elite economists from a diverse range of ideologies.  It seems there is a great deal of consensus on a wide range of supposedly controversial economic questions which confirms what a number of surveys have established.  For what it's worth I have agreed with the consensus position on every question they have answered so far and I am pretty sure Krugman would have as well.

No doubt you can exclude me - I'm not an economist - but you are crazy if you want to exclude Krugman from the economic mainstream.  The libertarian economists at George Mason University i.e. Tyler Cowan, Alex Taberock, Bryan Caplan etc all take him very seriously (while often disagreeing).  In fact Caplan recently posted that he cringes every time he witnesses some libertarian claim that Krugman doesn't understand economics.  The truth is the Keynesian models he espouses are definitely PART of mainstream economics (just as Austrian economic theories have been absorbed into mainstream economics), whether the fellows at Mises.org get that or not.  Keynes had some real insights and wasn't by any means a nut.  Hayek and Friedman at least could recognize that.

I figure if we are going to seriously advance liberty and freedom it would be helpful if we didn't align ourselves with, or limit ourselves to, fringe economics - while thinking of it as mainstream.  Those multi-prize winning and widely respected liberal economists that are being so cavalierly dismissed on this thread, are clearly not nutters.  We do ourselves, and the libertarian cause, a disservice if we fail to understand what those guys (and much of mainstream economics) are really saying.  

Garth

On Mon, Nov 12, 2012 at 9:48 AM, Trevor Watkins <bas...@gmail.com> wrote:

Hi Leon

I fear that  you prove my point for me - there is less consensus amongst "economists" (if you include Krugman, Zietsman, etc in this term) than there is amongst, for example, physicists or "Hard science" experts. Of course, those who agree with each other do indeed agree with each other.

Trevor Watkins 

On 9 November 2012 21:52, Leon Louw (gmail) <leon...@gmail.com> wrote:

You're being unfair to economists, Trevor.  Surveys find that there's a high level of consensus amongst economists on most issues.  The impression that there are muddled economists arises mainly because media present "both sides", which leaves the impression that nutters like Krugman and Stiglitz are representative.

 

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[Stephen vJ (Gmail)]

When economists do that, I am certainly right next to you with a torch and a pitch fork (or a gun and a pack of sandwiches, as I believe the new version of that phrase goes). I am just a bit more reluctant to label any old hack an economist and find few real economists actually warrant torching.

 

S.

[Leon Louw (gmail)]

The degree of consensus is an empirical matter thoroughly researched and documented, and it's quite high on most propositions.  There are interesting various between countries.  Duncan Reekie did the local sampling, which should our economists as typical (with a high degree of pro-market consensus on most issues).  

I'm sure the research is easy to find on the net, which, having seen it some years ago (when Reekie published his local findings), I'll leave to others.

On 12 November 2012 09:48, Trevor Watkins <bas...@gmail.com> wrote:

Hi Leon

I fear that  you prove my point for me - there is less consensus amongst "economists" (if you include Krugman, Zietsman, etc in this term) than there is amongst, for example, physicists or "Hard science" experts. Of course, those who agree with each other do indeed agree with each other.

Trevor Watkins 

On 9 November 2012 21:52, Leon Louw (gmail) <leon...@gmail.com> wrote:

You're being unfair to economists, Trevor.  Surveys find that there's a high level of consensus amongst economists on most issues.  The impression that there are muddled economists arises mainly because media present "both sides", which leaves the impression that nutters like Krugman and Stiglitz are representative.

 

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[Leon Louw (gmail)]

I haven't thought prediction through, so am happy to be corrected, but have never been comfortable with the idea that the future can't be predicted.  I think I understand the uncertainty principle and he arguments against predictability, but am left thinking it must be a matter of degree.  I note that you omit seconds and minutes.  Why?  My suspicion s that it's because the theory can be readily demonstrated to break down in the very short term.  I hereby predict that the next key I hit will be x.  There, I was right. 

Oh I know, there was a finite chance I'd be wrong, that millions of variables could have thwarted my prediction, to which I respond by inviting everyone to a betting-on-the-future evening.  I will bet on hundreds of predictions, such as the object in my hand falling towards the ground when I let it go.  I'm serious, this is a genuine invitation.

Between that and predicting precise size of a hail stone that'll strike a sparrow's head sitting on a specified pole in the middle of the Sahara at a precise date/time in 2030, there's a range of predictability from highly predictable to absolutely unpredictable.

Somewhere between the two is eg that free markets will outperform communism, that unborn boys are going to be taller on average than unborn girls, and that the JSE index will not be zero tomorrow.  I predict that Obama will not be struck by assassinated before being reinstated, and that I'll be late for dinner if (a) I don't leave now and (b) am not teleported.

In short, need to be persuaded that the future can't be predicted.  Meanwhile I look forward to the prediction game evening, to which I'll bring my life savings.

[Colin Bower]

You will probably know that Karl Popper was particularly hard on the notion of predictability. Human behaviour (he rightly said) could never be predicted, not under any circumstances. But of course, he was coming from an understanding of the absolute autonomy of the human being - in other words of human free will, and I have a feeling that Leon has argued against the existence of free will before.

Colin B.

[Jaco Strauss]

Hi Leon 

You are of course correct in noting that many things could be predicted successfully, such as that the EP Kings will NOT be the Super XV champions next year or that the Workers International to rebuild the Fourth International would not win the next South African elections. The sun would also still rise in the East tomorrow and the world would not come to an end next month. (And if it does, the wrong prediction won't matter in any case :)

But economic predictions, especially those that involve markets are an altogether different ball game. Markets are being driven by emotions such as greed and fear. And currently greed outweighs fear. Just look at the current situation and imagine you had no knowledge of where the market stood... Or better still, that a year ago you had a crystal ball regarding news events, but not market moves... 

You would know about all the European problems, yet another Greece bailout, record European unemployment, a slowing Chinese economy, renewed instability in the Middle East, uncertainty about Iran, etc etc. Closer to home there is Maikana and De Doorns, Zuma and Nkandla... 

Would you really have been able to predict that the JSE would make record high upon record high in such a climate?

Predicting upward movements are generally the safer bet, but in 2008 you would have lost everything built up since 2000 and then some. And 2013? Who knows, most would predict a rising market and chances are they might be right. But there is a very good chance that a massive drop takes as well.

At least I acknowledge the fact that I have absolutely no idea where the market will be a year from now, but neither do I believe anybody else has the ability to predict it correctly. Those who would have gotten it right would have been either lucky, or have been wrong for so long that they had to be right eventually...

By the way, I am not saying that one cannot play the markets successfully. It can be very profitable as long as your belief in your exit strategy is stronger than your belief in your ability to predict the market direction - whether per second, or per decade (and anything in between Leon ;-)

J

2012/11/13 Leon Louw (gmail) <leon...@gmail.com>

[Stephen vJ (Gmail)]

Correction: "greed and fear" should have read "supply and demand".

You see, I'm so tired, I'm resorting to correcting other people's mistakes instead of my own. How silly of me.

Time for bed. Night all.

[Jaco Strauss]

"Greed and fear" simply translates into the "supply and demand" that ultimately moves the markets. 

So we can agree to agree ;-)

But I would also like to add that because greed and fear are human emotions, they are hard to predict. Especially by us humans who can not be objective observers of a market in which we are active (and very subjective) participants...

At least that is my very subjective opinion!

Good night!

[Gareth Brickman]

Garth,

 

Schlichter's issue is not with mere fiat money- you'll notice he's fine with free banking including fractional reserve? No, the fundamental problem is when fiat money is imposed by govt as the sole monetary unit, usually with either the govt or a subservient organisation ordained as the monopoly producer. 

 

As I said earlier in this thread, I see these sorts of discussions all the time and they never gain much traction because of semantic and perspective confusion. For example, when you say "disruptions due to mild inflation will be mild at worst and strictly temporary". What do you mean by inflation? Do you mean an expansion of the money supply or a general increase in prices in a part of the economy? What kind of money supply do you mean; what sort of banking and monetary system is this happening in? What do you mean by inflation being "mild"? Do you mean a limited expansion of the money supply? Relative to what? How "temporary" is "temporary"?

 

It's important to get the detail and the context right, rather than speaking too broadly and assuming the other person knows what we mean, otherwise we'll end up chasing our own tails around.

 

I say this because in your "specific source of disagreement" paragraph you've ended up conflating separate issues. Schlichter was clear in the section you question regarding inflation that he was framing his explanation in the "modern system"; ergo centrally-banked fractional fiat. To wit (emphasis mine): "Money injections have no lasting benefit for the economy; they always distort relative prices and reallocate resources and thus change the distribution of income and wealth. Money injections always create winners and losers. In our modern system they cause near-term booms followed by busts later, although complete busts are usually avoided for some time through accelerated money creation (monetary 'stimulus') from the central bank during recessions. As a result, the economy accumulates substantial misallocations of capital and other distortions over time that require ever more money-printing to stop from unraveling."

 

At the end of your paragraph, you write: "Elsewhere he states that a constant supply of money is fine, even in a growing economy, as this will result in a mild deflation.  Somehow while the differential price changes via a mild inflation cause serious disruptions, the same thing via deflation does not???" The part where he talks about secular deflation is in response to the criticism that elastic forms of money are a necessity for production. He's describing how, by the market process, the exchange value of a fixed supply or unchanging quantity of money will simply rise relative to the increase of production, therefore constant production of money is not required if prices are allowed to adjust. Under the market process, this is not a problem- see, he's talking about a different environment to the centrally-banked fractional reserve fiat system above, and he's talking fundamentals of money, not giving the effects of monetary deflation preference over the inflationary boom-bust cycle.

 

"The story is a perfect illustration that lack of demand CAN cause a recession, even where there are no structural problems or misallocation of resources and everyone is reliable and wants to work."

 

Unfortunately, the babysitting co-op did have: structural problems; resources couldn't be co-ordinated rationally or efficiently because there was no price mechanism; and whilst the participants were willing to work, the system failed to account for their subjective valuations and preferences.

 

See, the babysitting co-op analogy only stands up if you take its constraints as well as "technical problems", as Krugman calls them, as given. Now, this is very similar to how many can come to misunderstand Keynes' prescriptions for remedying the specific conditions of America's depression in the 30's, and I have actually defended Keynes in light of this, much as his friend Hayek did (Hayek said the problem with Keynes' General Theory was that he called it a general theory, rather than making clear it was for specific circumstances in a specific time).  

 

Nevertheless, here's my critique, and I don't think it requires a particularly Austrian approach:

 

Krugman, I would say disingenuously for his readers, seeks to exaggerate this analogy to whole economies (totally ignoring the vastly different fundamentals between the nature of the scrips and the nature of money), cynically waves away the fundamental alternatives (which he is biased against anyways), and cheekily hints at undesirable consequences of the prescription but does not elaborate ("Eventually, of course, the co-op issued too much scrip, leading to different problems.")

 

The fundamental problem with the scrips was that they assumed every half-hour of babysitting had the exact same value no matter when it was performed. This price control meant that there would naturally be shortages when demand was too high and surpluses when it was too low. The very nature of the scrips would also inhibit supply because it's likely demand would converge at similar times (when the participants would likely all wish to use them and have the opportunity to, like weekends, holidays etc.). See, the problem is the scrips are a lousy medium of exchange. Their exchange-value can't adjust to reflect the varying preferences of those supplying and demanding them; they don't have a price to reflect the prevailing market conditions at a given time. They're a beautiful example to illustrate the important characteristics of a medium of exchange, because as eloquent a solution as they seem to be, there're really just a very constrained form of barter.

The "technical problem" was that the operators of the co-op collected dues in scrip, which ultimately led to the lowered circulation of the coupons which would naturally exacerbate inherently screwed-up supply and demand dynamics.

The organisers of the co-op created their own problems, and even Krugman vaguely admits that their prescription to increase the supply of scrips eventually had more negative outcomes. So, rather than act as an analogy to shill for monetary easing, I think it does a pretty good job highlighting the deficiencies of central planning and reactionary interventionism to such deficiencies.

Oh, and lastly, I don't get the controversy over Say's Law. To me, it simply means that one’s ability to demand goods and services from others derives from the income produced by one’s own acts of production. Is that agreeable or do you have another take?

 

Have a good night,

 

Gareth.

[Stephen vJ (Gmail)]

In that case, Popper did the world a great injustice. That notion probably set the study of human behaviour (and attempts to predict it) back significantly. Luckily, neural science has advanced since Popper's time so that specialists in the field can now predict by means of brain scanners exactly what motions your hands will perform before you become conscious of them (1). It can even predict the frequency with which you will fail to add the "s" suffix to an accusative verb in sentences like "The man walks" just by looking at a particular bit of genetic material from elsewhere in your body (2). It can work out that you are about to have an eureka moment up to 150ms before you actually have it (3). Human behaviour most certainly can be predicted, even moral behaviour which happens on genetic autopilot most of the time rather than through rational thinking as previously thunk (4). Having read about all of this, I know just what chemical reaction the word "thunk" just generated in your mind. Shame. Sorry. The most recent, hard, scientific evidence is solidly against Popper. At least Mises had the insight to say that, as he was writing it in 1941, that human action could not be predicted yet and that mathematical modelling of behaviour could not be done given the tools available at the time (5). It's all changed now, as Paul McCartney said (6).

 

1.       LINDEN, D. J., 2011. The accidental mind. University press audio.

2.       PINKER, S., 2012. The language instinct. Briggins audio

3.       LEHRER, J., 2012. Imagine. Canon gate audio.

4.       WRIGHT, R., 2011. The moral animal. Audible Inc.

5.       MISES, L., 1949. Human action: a treatise on economics. Fox & Wilkes.

6.       MCCARTNEY, P., 1964. Crinsk Dee Night, from Live at the BBC. The BBC.

 

S.

[Stephen vJ (Gmail)]

Oh, I can't sleep. One last comment then before I hit myself over the head in desperation. Emotions like greed and fear are partly electrical current, partly chemical reaction. Because it happens in a sensitive and enclosed space amongst some rather fiddly machinery which is of significant value to its owner, it has been rather hard to measure until now. Much of that machinery is still rather hard to measure, but it is becoming easier by the day. It is machinery none-the-less and as a result can be examined, measured and quantified. With that information comes a fair measure of predictability of behaviour. Admittedly, much of this ability is new, so if you said two decades ago that human behaviour cannot be predicted, I would have agreed... at the time. Right now, some of it can and some can't. Sometime soon, most of it will. The question is no longer a broad philosophical question of whether behaviour can or can't be predicted, but rather a matter of ultimately how much will be possible to be predicted given that we can already predict this much of it.

[jacos...@gmail.com]

In case you are still trying to knock yourself out... What would be the practical application of the ability to predict behaviour based on chemical impulses.

It is not as if all, or indeed *any* market participants will be wired to a supercomputer in order to predict their next steps. Such a market participant would quite predictably not remain a participant for very long....

Sent from my BlackBerry® wireless device

---

From: "Stephen vJ \(Gmail\)" <sjaar...@gmail.com>

Sender: li...@googlegroups.com

Date: Tue, 13 Nov 2012 23:40:27 +0200

[Erik Peers]

Stephen there is a great distinction between brain and mind. The
mechanistic description you present applies only to the brain. And
even there, our understanding of the brain is in its infancy.
Psychology is pretty much like economics. More serotonin will
undepress you unless it depresses you. An increase in the money supply
will sort out a depressed economy unless it doesn't.

So even when we think that we understand the brain, we are really only
playing around with symptoms, oblivious to the real causes of the
things we wish to change. May this applies to economics, and that
money supply, interest rates etc are merely indicators that something
is going on, but that the underlying reality still escapes us.

Nonetheless, economic logic is still helpful.For instance, there were
new houses in Lenasia, then came the bulldozer, now there are fewer.
Real economics, as in man deriving utility from scarce resources,
tells me that a house, is a house is a house. Politicians and lawyers
can debate who should stay in the house, but economics tells me that
SA is a better place for the existence of that house.When the pigs
(rather than the wolf) bash the house down, then the total utility of
those living in SA has decreased. We have become poorer.

As an aside, the activity of bashing the houses down will be added to
GDP. So the stats will show GDP growth over the alternate decision of
not doing anything.

> Sent from my BlackBerryR wireless device
>
> _____

> <mailto:20%27ba...@gmail.com> ');> > wrote:
>
> Hi Leon
>
> I fear that you prove my point for me - there is less consensus amongst
> "economists" (if you include Krugman, Zietsman, etc in this term) than
> there
> is amongst, for example, physicists or "Hard science" experts. Of course,
> those who agree with each other do indeed agree with each other.
>
>
> Trevor Watkins
>
>
>
> On 9 November 2012 21:52, Leon Louw (gmail) <leon...@gmail.com
>
> <javascript:_e(%7b%7d,%20'cvml',%20'leon...@gmail.com

> <mailto:20%27leo...@gmail.com> ');> > wrote:
>
> You're being unfair to economists, Trevor. Surveys find that there's a
> high
> level of consensus amongst economists on most issues. The impression that
> there are muddled economists arises mainly because media present "both
> sides", which leaves the impression that nutters like Krugman and Stiglitz
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[Erik Peers]

Jaco, I think Stephen ate the blue pill. You obviously ate the red one.

[Leon Louw (gmail)]

maybe the issue here is what's meant by "prediction".  Popper was right, it seems, to say nothing cane be predicted with certainty.  If fact nothing can be known with certainty.  All we have is degrees of probability.  

If we mean by "prediction", identifying what's likely, lots can be predicted, all of which amounts to saying "there's x% likelihood of Y".  

Nate Silver's method of predicting election results is clearly better that, say, Gallup's.  When I was made aware of his methodology by Frances I immediately switched to regarding the Obama-Romney election result as a done deal in favour of Obama and remained astonished by how manifestly wrong other methodologies calling a close contest were.  

Of course, the election result might have differed, but it was extremely improbable.  In other words, I'm saying the outcome could be predicted, and was, with a remarkably high degree of accuracy.

The same seems true of economic processes.  I predict, for instance, despite all the complexities you correctly cite, that Greece will have a higher debt to GDP ration than Germany in January 2013.  I also predict that Wall Street will not open tomorrow more than 50% below today's closing price.

I tentatively suggest that we can make sound predictions about almost everything, provided we know what we mean by "predict".  We can assess how many of the determinants we know, what happened when similar concatenations occurred previously, and so on.  This is what scenario planning does, and it seems valid to me.  Since I know noting about fashion, my prediction for next year's fashions has a very high probability of being wrong ... so high that I'll bet on it.  Conversely, Frances' prediction has a high probability of being right ... and I'll bet on that too.

My prediction that I will be alive next year has an even higher probability of being right.  My earlier prediction that Obama's first term would be characterised by increased debt and stagnation was right.  My prediction that his second term will be characterised by higher growth and falling unemployment has a lower chance of being right than Frances' fashion predictions, but is still, I argue, well above 50% and well worth betting on.

[Leon Louw (gmail)]

Regarding Nate Silver and prediction, see this:

http://news.yahoo.com/nate-silver-joe-scarborough-wanna-bet-113615600.html

Here's the running graph he published throughout the process, culminating in a reliable prediction that Obama would win:

Looking at his breakdowns, he got virtually everything right, now and in the past.

[Colin Bower]

Re: Brain vs Mind. Electrical or chemical activirtty may be detected, but this is a fairly straight-forward technological achievement that tells us nothing terribly interesting about thought or human volition. The question is:  why should chemical or electrical activity necessarily result in a thought (if they are indeed the source of thinking)? What is a thought?  It makes complete sense to regard chemical/electrical activity as some kind of proxy or signifier of (for instance) thought, but the obvious question then to ask is: why then did the chemical/electrical activity take place?  I agree with Leon's unpacking of the meaning of the word "predict". We can of course predict many things, and we can often be right, but those predictions are informed guesses. Popper's point is that there is no ontological basis for knowing what will happen in the future. Such a viewpoint is of course central to his rejection of historicism. I admire Popper because - amongst other things - he insisted that there was no absolute existence of anything that is not the effective creation of the human mind ( a table is only a table because the human mind has, collectively, agreed that a design or shape constituting a table is indeed a table). To push the point to its furtherest extreme, there would be no universe if human beings did not exist to experience it as a universe). When you re-ify any otherwise abstract "force" or phenomenon such as an independent  historical force (historicism) as something having an existence independent of human experience, as Marx did with his re-ification of the class struggle and the material dialectic, that human beings must inevitably conform to, you make human beings subject to it. He rejected such a notion as the invention of a tyrant who wouild benefit from the existence of such a force. Yes, a high degree of predictive accuracy may be possible, but if prediction could be certain it would - surely - change in its entirety our experience of living.

Colin B.

[Trevor Watkins]

Mostly for my own benefit, I would summarise this long thread as follows:

1. Popper is right, but boring. The future cannot be known with 100% certainty. A gamma ray burst may/may not destroy all life on earth in the next 15 minutes. The NYSE may/may not close for 2 working days in November, making predictions of opening prices moot on those days.

2. Some things can be known with close to 100% certainty - the sun will rise tomorrow, probably.

3. Some human behaviour of large populations based on incentives can be predicted with a high degree of certainty. More people will rather buy the cheap quality product than the expensive faulty one, when adequately informed.  Apple shares at $50 will be snapped up in full within hours, with 99% certainty, if the NYSE is open.

4. The "correct" (fairest, most efficient, most predictable) way of organising human interactions is through 100% consent requirement, individual choice, individual responsibility. While grey areas remain, they are fewer than all alternatives.

5. Playing in a game where the rules can be changed continuously and arbitrarily is simply a recipe for frustration, if not insanity. Very few useful rules can be extracted, other than that you will lose, and the rule-maker will ultimately win (if winning is defined as wealth accumulation) (Interestingly, this principle was well demonstrated in a game played at the 2nd Libertarian Seminar in Mont-Aux_sources). If this is the only game in town, your options are limited. However, due to point 3 above, dirigiste systems are unstable in the long term. This, I think, is what Schlichter is trying to say.

6. What should one do? Move to a consent-based environment. Redefine the meaning of wealth. Introduce the right incentives. Don't play in a game you can't win.

Next year in Libertaria....

Trevor Watkins - Base Software
bas...@gmail.com 083 44 11 721 - 042 293 1405 - (fax)0866 532 363
PO Box 3302, Jeffreys Bay, 6330

[Garth Zietsman]

Hi Gareth

As I said earlier in this thread, I see these sorts of discussions all the time and they never gain much traction because of semantic and perspective confusion. For example, when you say "disruptions due to mild inflation will be mild at worst and strictly temporary". What do you mean by inflation? Do you mean an expansion of the money supply or a general increase in prices in a part of the economy? What kind of money supply do you mean; what sort of banking and monetary system is this happening in? What do you mean by inflation being "mild"? Do you mean a limited expansion of the money supply? Relative to what? How "temporary" is "temporary"?

I understand that some libertarians wish to define "inflation" as "an increase in money supply" but the conventional definition is "general price increases" and I was using the conventional meaning.  By "mild" inflation or deflation I mean something like the Fed's target of 2% - although I think anything up to 5% could also be considered mild inflation (but would be a bit steep for deflation).  

I don't think it matters if the inflation is caused by a central bank issuing a steady supply of new money, whether there is a new gold find that suddenly increases the gold in circulation in a totally private money system or whether inflation is due to a drop in supply relative to an unchanged stock of money.  He says that elastic money per se is the problem - irrespective of its source - because it a) leads to distortions due to variable timing of price changes and b) leads to too much debt.  I imagine that if elastic money is a problem because of variable timing of price changes then it will be a problem in both directions.  I also imagine that deflation would result in insufficient investment relative to savings.  I think although a sudden surge of new money would result in variably timed price changes a steady supply of new money at a rate that results in steady "mild" inflation i.e. 2-4%, would not.  In that case a steady deflation wouldn't either.  

By "temporary" I mean the sort of time it takes for the price changes in response to a money supply shock to work through the system. BTW mistakes in investment decisions are happening everywhere and all the time.  It seems likely to me that the signal of small variably timed changes in prices would be very hard to detect in all that noise. 

He says new money is unnecessary because a deflation rate/change in velocity equal to the growth rate is no problem.  I don't agree.  I think any price changes not reflecting real supply and demand are a problem and that deflation is worse than inflation so new money is necessary in an expanding economy.

I say this because in your "specific source of disagreement" paragraph you've ended up conflating separate issues. Schlichter was clear in the section you question regarding inflation that he was framing his explanation in the "modern system"; ergo centrally-banked fractional fiat. To wit (emphasis mine): "Money injections have no lasting benefit for the economy; they always distort relative prices and reallocate resources and thus change the distribution of income and wealth. Money injections always create winners and losers. In our modern system they cause near-term booms followed by busts later, although complete busts are usually avoided for some time through accelerated money creation (monetary 'stimulus') from the central bank during recessions. As a result, the economy accumulates substantial misallocations of capital and other distortions over time that require ever more money-printing to stop from unraveling."

I am not sure he is right about the "no lasting benefit" bit.  If there is a long term growth rate that the economy trends to irrespective of busts and booms, recessions, wars etc (and the US economy seems to be like that - at least so far) then he is right - but then it won't do any long term harm either.  If depressions - specially those that result in a lot of long term unemployment - can cause a permanent dip below trend, then he is wrong.  Then there is also the issue of the short term i.e. a few years.  A monetary or fiscal stimulus can fix these short term problems at the risk of other problems down the line.  One has to take a view as to which of these problems is worse.  I think it is legitimate to have different value based views on the matter but not different technical views.  Keynes's response to laissez-faire on this was "in the long term we are all dead" i.e. non-intervention takes so long to fix problems as to be useless as economic advice for any living person. 

I think sound money is very important but I also think that a country (or region - a state perhaps) having the flexibility of its own fiat money is a major advantage in many ways.

Finally there is the issue of liberty.  Central bank controlled fiat money certainly is an infringement on liberty but I think most libertarians massively exaggerate the degree to which it is and also seem to be blind to the freedom enhancement possibilities of it.  It also doesn't seem to occur to gold bugs that a gold standard is also an infringement on your liberty. Likewise the role of mild inflation in liberty is also exaggerated in my opinion.

 

"The story is a perfect illustration that lack of demand CAN cause a recession, even where there are no structural problems or misallocation of resources and everyone is reliable and wants to work."

 

Unfortunately, the babysitting co-op did have: structural problems; resources couldn't be co-ordinated rationally or efficiently because there was no price mechanism; and whilst the participants were willing to work, the system failed to account for their subjective valuations and preferences.

I suspect Krugman would say something about sticky wages here but I think you make an excellent point here and I like your critique in general. 

See, the babysitting co-op analogy only stands up if you take its constraints as well as "technical problems", as Krugman calls them, as given. Now, this is very similar to how many can come to misunderstand Keynes' prescriptions for remedying the specific conditions of America's depression in the 30's, and I have actually defended Keynes in light of this, much as his friend Hayek did (Hayek said the problem with Keynes' General Theory was that he called it a general theory, rather than making clear it was for specific circumstances in a specific time).

Agreed. 

 Krugman, I would say disingenuously for his readers, seeks to exaggerate this analogy to whole economies (totally ignoring the vastly different fundamentals between the nature of the scrips and the nature of money), cynically waves away the fundamental alternatives (which he is biased against anyways), and cheekily hints at undesirable consequences of the prescription but does not elaborate ("Eventually, of course, the co-op issued too much scrip, leading to different problems.")

I think you are right that Krugman tends to wave away fundamental alternatives because he is biased against them - though to be fair he did spell out these "different problems" in more detail than you suggest.  What I think is wrong is the assumption that he doesn't understand these other fundamentals. 

Oh, and lastly, I don't get the controversy over Say's Law. To me, it simply means that one’s ability to demand goods and services from others derives from the income produced by one’s own acts of production. Is that agreeable or do you have another take?

Yes that's right (and I agree with that) but the implication often drawn from this is that nominal shocks can't have real effects which I think is mistaken. That would only be true is the market were one giant instantaneous auction but once people can hang onto money for any period of time nominal shocks can have real effects.

For me the question is how a libertarian should best respond to that.  Denying that demand shortages can exist or that a stimulus in a recession doesn't "work" don't seem to me to be good responses.  For me an answer might be something like reducing the discretion available to the Fed (rather than abolish it) and have intervention be something more automatic and rule based.  Like Hayek I think the main source of problems with government is usually where politicians or bureaucrats have discretion.

Regards

Garth

[Gareth Brickman]

Thanks for the response, Garth. I'm over-loaded today, so I'll reply comprehensively to the first section of our discussion when I can.

Glad I can get the dreaded babysitting co-op out the way ;-)

[Stephen vJ (Gmail)]

What is the practical application ? You're asking that of a free market supporter ? I have no idea what the practical application would be and can only speculate about what marvels the free market could possibly come up with, but fear my imagination will fall far short of what the market can do with it. ;-)

 

By the way, my point was not just around those actions which people can perform while wired to a scanner of some sort. If a "magician" can predict behaviour by inducing a complete stranger to select a stuffed giraffe named Frank from amongst thousands of toys in a 4 floor toy shop, then clearly the machines are optional.

 

My point was that human behaviour can be measured, predicted, manipulated... even groups of humans. Especially groups of humans or individuals operating within groups. Only parts of it, of course, but a lot more now than what was possible before and less than what will be possible in years to come.

 

S.

[Stephen vJ (Gmail)]

Wait a second... I'm really tired from not sleeping enough last night and
then having a day which was like 12 hours of West Wing with me playing the
president. So excuse me if I missed your point.

You say that we don't fully grasp how the mind works and then you say that
economic logic is still useful... is that correct ? If so, I never implied
that knowing how the mind works has any effect (positive or negative) on
economics and / or logic. So I miss your point.

Or... did you assume that I was working under the assumption that economic
agents are perfectly rational ? Let me clarify - I am an anarchist, not a
neo-classical. How people behave and what causes that behaviour helps to
explain economics. It is logical. Not the other way around.

S.

> <javascript:_e(%7b%7d,%20'cvml',%20'libsa%2Bunsubscribe@googlegroups.c

[Stephen vJ (Gmail)]

Nice ! Thanks for that summary. I'm putting it in my Favourites folder.

S.

 

From: li...@googlegroups.com [mailto:li...@googlegroups.com] On Behalf Of Trevor Watkins
Sent: 14 November 2012 09:25
To: LibertarianSA
Subject: Re: [Libsa] Fwd: An economist who speaks sense - see attached article

 

Mostly for my own benefit, I would summarise this long thread as follows: