If the pie gets bigger and is distributed like it is now I'll get a bigger piece of pie.
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Thomas Piketty's Le Monde OpEd on the Sanders Campaign in English.
- Thread starter piezoe
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So will we all. If you're satisfied get back to work.If the pie gets bigger and is distributed like it is now I'll get a bigger piece of pie.
At least we've had eight years to see how destructive demand side economics is. How it failed to grow an economy and could only prop it up in a barely life sustaining position by borrowing almost ten trillion dollars from the economy's future and stealing another trillion from savers via zirp.
When All Economics Is Political
The dismal science has too much junk science, says Russ Roberts, an evangelist for humility in a discipline where it is often hard to find.
By
KYLE PETERSON
Updated May 13, 2016 10:07 p.m. ET
The models have been run and the numbers crunched: Bernie Sanders’s presidential platform, if enacted, would create 26 million jobs and 5.3% growth. An economist has done the calculating, and there’s no use arguing with mathematics. CNN’s headline reads: “Under Sanders, income and jobs would soar, economist says.”
When I run that line by Russ Roberts, he replies with a joke: “How do you know macroeconomists have a sense of humor? They use decimal points.”
Mr. Roberts is a fellow at the Hoover Institution, a University of Chicago Ph.D., and the gregarious host of EconTalk, a weekly podcast that celebrated its 10th anniversary in March. He is also an evangelist for humility in economics. “The world’s a complicated place,” he says. “We demand things from economics that it can’t provide, and we should be honest about that.”
What’s striking is Mr. Roberts isn’t talking only about politically contrived agitprop. Nobody believes that stuff: One of President Obama’s former economic advisers stirred ire from Sandernistas earlier this year when he said that getting Bernie’s agenda to add up requires assuming “magic flying puppies with winning Lotto tickets tied to their collars.”
The deeper question is: How much better—more credible, or reliable, or falsifiable—are the economic forecasts pouring out of respectable think tanks, the White House and Congress? Mr. Roberts’s answer: not all that much.
He cites the Congressional Budget Office reports calculating the effect of the stimulus package—for instance, one in late 2009suggesting it had increased employment by between 600,000 and 1.6 million. Leaving aside the incredible range of the estimate, how did the CBO come up with those numbers? Did it somehow measure employment in the real world?
Nope: The CBO gnomes simply went back to their earlier stimulus prediction and plugged the latest figures into the model. “They had of course forecast the number of jobs that the stimulus would create based on the amount of spending,” Mr. Roberts says. “They just redid the estimate. They just redid the forecast. And you’re thinking, thatcan’t be what they really did.”
Economics fancies itself a science, and Mr. Roberts used to believe, as many of his peers do, that practitioners could draw dispassionate conclusions. But he has in recent years undergone something of a crisis of economic faith. “The problem is, you can’t look at the data objectively most of the time,” he says. “You have prior beliefs that are methodological or ideological about the impact of things, and that inevitably color the assumptions you make.”
A recent survey of 131 economists by Anthony Randazzo and Jonathan Haidt found that their answers to moral questions predicted their answers to empirical ones. An economist who defines “fairness” as equality of outcome might be more likely to say that austerity hurts growth, or that single-payer health care would bend the cost curve. The paper’s authors quote Milton Friedman’s brief for “value-free economics” and reply that such a thing “is no more likely to exist than is the frictionless world of high school physics problems.”
This seems obvious to an outsider, given the field’s tendency to devolve into stalemate. Each side has highly intelligent scholars, some with fancy Swedish gold medals, and yet each finds the other’s conclusions self-evidently stupid. The old saw in science is that progress comes one funeral at a time, as disciples of old theories die off. Economics doesn’t work that way. “There’s still Keynesians. There’s still monetarists. There’s still Austrians. Still arguing about it. And the worst part to me is that everybody looks at the other side and goes ‘What a moron!’ ” Mr. Roberts says. “That’s not how you debate science.”
If economists can’t even agree about the past, why are they so eager to predict the future? “All the incentives push us toward overconfidence and to ignore humility—to ignore the buts and the what-ifs and the caveats,” Mr. Roberts says. “You want to be on the front page of The Wall Street Journal? Of course you do. So you make a bold claim.” Being a skeptic gets you on page A9.
There does, however, seem to be increased chatter lately about whether economists are simply partisans with better charts. One reason might be that credibility problems in the other social sciences are metastasizing. A yearslong attempt to duplicate 100 psychology findings reported in August that only 36% could be reproduced. Extending the idea to 18 lab experiments in economics, a March examination could replicate only 61%.
How is it that economists, working in good faith, wind up with dubious results? To start, they can overanalyze the data. Modern computers spit out statistical regressions so fast that researchers can fit some conclusion around whatever figures they happen to have. “When you run lots of regressions instead of just doing one, the assumptions of classical statistics don’t hold anymore,” Mr. Roberts says. “If there’s a 1 in 20 chance you’ll find something by pure randomness, and you run 20 regressions, you can find one—and you’ll convince yourself that that’s the one that’s true.”
As if to prove the point, an economist two decades ago wrote an article charmingly titled “I Just Ran Two Million Regressions,” which found economic growth to be strongly correlated with Confucianism. Yet many studies aren’t so methodologically transparent. “You don’t know how many times I did statistical analysis desperately trying to find an effect,” Mr. Roberts says. “Because if I didn’t find an effect I tossed the paper in the garbage.”
Economists also look for natural experiments—instances when some variable is changed by an external event. A famous example is the 1990 study concluding that the influx of Cubans from the Mariel boatlift didn’t hurt prospects for Miami’s native workers. Yet researchers still must make subjective choices, such as which cities to use as a control group.
Harvard’s George Borjas re-examined the Mariel data last year and insisted that the original findings were wrong. Then Giovanni Peri and Vasil Yasenov of the University of California, Davis retorted that Mr. Borjas’s rebuttal was flawed. The war of attrition continues. To Mr. Roberts, this indicates something deeper than detached analysis at work. “There’s no way George Borjas or Peri are going to do a study and find the opposite of what they found over the last 10 years,” he says. “It’s just not going to happen. Doesn’t happen. That’s not a knock on them.”
Pondering the limits of economics has a storied history. John Maynard Keynes in 1939 referred skeptically to “statistical alchemy.” A 1983 paper, “Let’s Take the Con Out of Econometrics,” assailed analysts’ “whimsical” assumptions. Milton Friedman wrote in 1991that the computer revolution had “induced economists to carry reliance on mathematics and econometrics beyond the point of vanishing returns.”
Mr. Roberts cites Friedrich Hayek’s 1974 Nobel lecture. “He basically says macroeconomics is scientism,” Mr. Roberts says. “He gives the analogy to a sporting event. He said if we knew everything there was to know, if we had all the data, we could figure out who’s going to win a sporting event—including how well each player slept the night before, their nutrition, their worries, their anxieties, their mental state, et cetera. And he said we can’t know those things.”
But why not? “More data!” the crowd cries. To a hard materialist, the world is physics all the way down. If free will is an illusion, if knowable laws govern every unfolding event, then why can’t social scientists march toward a perfect understanding?
Mr. Roberts is decidedly not in the materialist camp. He has described himself as a believer, a religious Jew, and he has a penchant for literature. One of his books is an “economic romance” about a young high-school teacher who woos a colleague over talk of the invisible hand. In another of his novels, a heavenly magistrate sends a 19th-century economist back to America to discredit protectionism. Sterile, soulless Ayn Rand this is not.
Is religious faith a presupposition before all others, one that disposes Mr. Roberts to see economic actors’ humanity, where others perhaps see only bundles of particles bouncing in predictable, if complicated, patterns?
This is about the only moment in two hours of conversation where he pauses. “Hayek, who was an atheist, not a religious person, he was really warning against the worship of reason, and of rationality,” Mr. Roberts eventually says. “So you don’t have to be a religious person to be worried about this.” After a bit more conversation, he adds: “But I think as a religious person, there’s an extra appeal to that. Because we think there is something else, higher than human reason, that we ought to be humble toward.”
None of this is to suggest that math is irrelevant. “I’m not saying facts don’t matter. I’m not saying evidence doesn’t matter,” Mr. Roberts maintains. “I’m not saying economics is a waste of time. It’s a wonderful way to help you organize your thinking about how the world works.”
But he is saying that economists ought to be humble about what they know—and forthright about what they don’t. Nobody would expect a biologist to answer such questions with specificity. “I’m going to introduce a whole bunch of new species of trees into a forest: What’s going to happen to the squirrel population?” Mr. Roberts says. “Who the hell knows? I don’t even know what the squirrel population isnow.”
Yet humility isn’t always well received. Several years ago, Mr. Roberts was pressed by a reporter to put a number on how many jobs the North American Free Trade Agreement had created. When Mr. Roberts replied that he had no idea, the reporter accused him of ducking the question. “He said—he literally said this—‘But you’re aprofessional economist,’ ” Mr. Roberts recounts. “He meant, ‘Isn’t that what you do? Isn’t that your job?’ And of course my answer is no. We’re not good at that.”
So what use is economics to politics? When the White House calls to ask how many jobs its agenda will create, what should the humble economist say? “One answer,” Mr. Roberts suggests, “is to say, ‘Well we can’t answer those questions. But here are some things we think could happen, and here’s our best guess of what the likelihood is.” That wouldn’t lend itself to partisan point-scoring. The advantage is it might be honest.
Mr. Peterson is an associate editor at the Journal editorial page.
http://archive.is/C4HjI
The dismal science has too much junk science, says Russ Roberts, an evangelist for humility in a discipline where it is often hard to find.
By
KYLE PETERSON
Updated May 13, 2016 10:07 p.m. ET
The models have been run and the numbers crunched: Bernie Sanders’s presidential platform, if enacted, would create 26 million jobs and 5.3% growth. An economist has done the calculating, and there’s no use arguing with mathematics. CNN’s headline reads: “Under Sanders, income and jobs would soar, economist says.”
When I run that line by Russ Roberts, he replies with a joke: “How do you know macroeconomists have a sense of humor? They use decimal points.”
Mr. Roberts is a fellow at the Hoover Institution, a University of Chicago Ph.D., and the gregarious host of EconTalk, a weekly podcast that celebrated its 10th anniversary in March. He is also an evangelist for humility in economics. “The world’s a complicated place,” he says. “We demand things from economics that it can’t provide, and we should be honest about that.”
What’s striking is Mr. Roberts isn’t talking only about politically contrived agitprop. Nobody believes that stuff: One of President Obama’s former economic advisers stirred ire from Sandernistas earlier this year when he said that getting Bernie’s agenda to add up requires assuming “magic flying puppies with winning Lotto tickets tied to their collars.”
The deeper question is: How much better—more credible, or reliable, or falsifiable—are the economic forecasts pouring out of respectable think tanks, the White House and Congress? Mr. Roberts’s answer: not all that much.
He cites the Congressional Budget Office reports calculating the effect of the stimulus package—for instance, one in late 2009suggesting it had increased employment by between 600,000 and 1.6 million. Leaving aside the incredible range of the estimate, how did the CBO come up with those numbers? Did it somehow measure employment in the real world?
Nope: The CBO gnomes simply went back to their earlier stimulus prediction and plugged the latest figures into the model. “They had of course forecast the number of jobs that the stimulus would create based on the amount of spending,” Mr. Roberts says. “They just redid the estimate. They just redid the forecast. And you’re thinking, thatcan’t be what they really did.”
Economics fancies itself a science, and Mr. Roberts used to believe, as many of his peers do, that practitioners could draw dispassionate conclusions. But he has in recent years undergone something of a crisis of economic faith. “The problem is, you can’t look at the data objectively most of the time,” he says. “You have prior beliefs that are methodological or ideological about the impact of things, and that inevitably color the assumptions you make.”
A recent survey of 131 economists by Anthony Randazzo and Jonathan Haidt found that their answers to moral questions predicted their answers to empirical ones. An economist who defines “fairness” as equality of outcome might be more likely to say that austerity hurts growth, or that single-payer health care would bend the cost curve. The paper’s authors quote Milton Friedman’s brief for “value-free economics” and reply that such a thing “is no more likely to exist than is the frictionless world of high school physics problems.”
This seems obvious to an outsider, given the field’s tendency to devolve into stalemate. Each side has highly intelligent scholars, some with fancy Swedish gold medals, and yet each finds the other’s conclusions self-evidently stupid. The old saw in science is that progress comes one funeral at a time, as disciples of old theories die off. Economics doesn’t work that way. “There’s still Keynesians. There’s still monetarists. There’s still Austrians. Still arguing about it. And the worst part to me is that everybody looks at the other side and goes ‘What a moron!’ ” Mr. Roberts says. “That’s not how you debate science.”
If economists can’t even agree about the past, why are they so eager to predict the future? “All the incentives push us toward overconfidence and to ignore humility—to ignore the buts and the what-ifs and the caveats,” Mr. Roberts says. “You want to be on the front page of The Wall Street Journal? Of course you do. So you make a bold claim.” Being a skeptic gets you on page A9.
There does, however, seem to be increased chatter lately about whether economists are simply partisans with better charts. One reason might be that credibility problems in the other social sciences are metastasizing. A yearslong attempt to duplicate 100 psychology findings reported in August that only 36% could be reproduced. Extending the idea to 18 lab experiments in economics, a March examination could replicate only 61%.
How is it that economists, working in good faith, wind up with dubious results? To start, they can overanalyze the data. Modern computers spit out statistical regressions so fast that researchers can fit some conclusion around whatever figures they happen to have. “When you run lots of regressions instead of just doing one, the assumptions of classical statistics don’t hold anymore,” Mr. Roberts says. “If there’s a 1 in 20 chance you’ll find something by pure randomness, and you run 20 regressions, you can find one—and you’ll convince yourself that that’s the one that’s true.”
As if to prove the point, an economist two decades ago wrote an article charmingly titled “I Just Ran Two Million Regressions,” which found economic growth to be strongly correlated with Confucianism. Yet many studies aren’t so methodologically transparent. “You don’t know how many times I did statistical analysis desperately trying to find an effect,” Mr. Roberts says. “Because if I didn’t find an effect I tossed the paper in the garbage.”
Economists also look for natural experiments—instances when some variable is changed by an external event. A famous example is the 1990 study concluding that the influx of Cubans from the Mariel boatlift didn’t hurt prospects for Miami’s native workers. Yet researchers still must make subjective choices, such as which cities to use as a control group.
Harvard’s George Borjas re-examined the Mariel data last year and insisted that the original findings were wrong. Then Giovanni Peri and Vasil Yasenov of the University of California, Davis retorted that Mr. Borjas’s rebuttal was flawed. The war of attrition continues. To Mr. Roberts, this indicates something deeper than detached analysis at work. “There’s no way George Borjas or Peri are going to do a study and find the opposite of what they found over the last 10 years,” he says. “It’s just not going to happen. Doesn’t happen. That’s not a knock on them.”
Pondering the limits of economics has a storied history. John Maynard Keynes in 1939 referred skeptically to “statistical alchemy.” A 1983 paper, “Let’s Take the Con Out of Econometrics,” assailed analysts’ “whimsical” assumptions. Milton Friedman wrote in 1991that the computer revolution had “induced economists to carry reliance on mathematics and econometrics beyond the point of vanishing returns.”
Mr. Roberts cites Friedrich Hayek’s 1974 Nobel lecture. “He basically says macroeconomics is scientism,” Mr. Roberts says. “He gives the analogy to a sporting event. He said if we knew everything there was to know, if we had all the data, we could figure out who’s going to win a sporting event—including how well each player slept the night before, their nutrition, their worries, their anxieties, their mental state, et cetera. And he said we can’t know those things.”
But why not? “More data!” the crowd cries. To a hard materialist, the world is physics all the way down. If free will is an illusion, if knowable laws govern every unfolding event, then why can’t social scientists march toward a perfect understanding?
Mr. Roberts is decidedly not in the materialist camp. He has described himself as a believer, a religious Jew, and he has a penchant for literature. One of his books is an “economic romance” about a young high-school teacher who woos a colleague over talk of the invisible hand. In another of his novels, a heavenly magistrate sends a 19th-century economist back to America to discredit protectionism. Sterile, soulless Ayn Rand this is not.
Is religious faith a presupposition before all others, one that disposes Mr. Roberts to see economic actors’ humanity, where others perhaps see only bundles of particles bouncing in predictable, if complicated, patterns?
This is about the only moment in two hours of conversation where he pauses. “Hayek, who was an atheist, not a religious person, he was really warning against the worship of reason, and of rationality,” Mr. Roberts eventually says. “So you don’t have to be a religious person to be worried about this.” After a bit more conversation, he adds: “But I think as a religious person, there’s an extra appeal to that. Because we think there is something else, higher than human reason, that we ought to be humble toward.”
None of this is to suggest that math is irrelevant. “I’m not saying facts don’t matter. I’m not saying evidence doesn’t matter,” Mr. Roberts maintains. “I’m not saying economics is a waste of time. It’s a wonderful way to help you organize your thinking about how the world works.”
But he is saying that economists ought to be humble about what they know—and forthright about what they don’t. Nobody would expect a biologist to answer such questions with specificity. “I’m going to introduce a whole bunch of new species of trees into a forest: What’s going to happen to the squirrel population?” Mr. Roberts says. “Who the hell knows? I don’t even know what the squirrel population isnow.”
Yet humility isn’t always well received. Several years ago, Mr. Roberts was pressed by a reporter to put a number on how many jobs the North American Free Trade Agreement had created. When Mr. Roberts replied that he had no idea, the reporter accused him of ducking the question. “He said—he literally said this—‘But you’re aprofessional economist,’ ” Mr. Roberts recounts. “He meant, ‘Isn’t that what you do? Isn’t that your job?’ And of course my answer is no. We’re not good at that.”
So what use is economics to politics? When the White House calls to ask how many jobs its agenda will create, what should the humble economist say? “One answer,” Mr. Roberts suggests, “is to say, ‘Well we can’t answer those questions. But here are some things we think could happen, and here’s our best guess of what the likelihood is.” That wouldn’t lend itself to partisan point-scoring. The advantage is it might be honest.
Mr. Peterson is an associate editor at the Journal editorial page.
http://archive.is/C4HjI