Thread: New Economics

I don't have any real education in economics as far as collage goes, however I do believe I have a strong understanding of the subject.

I personally believe in the Austrian school of economics, which says the best way to run an economy is to leave it alone. Good businesses will grow, bad businesses will fail. Good products will sell, bad products will not. If supply increases, prices drop, if supply decreases, price increase. Everything basically works itself out, and the market will balance itself out, by itself. There is no need for the government to step and gunk up the works.

I think this is a very common sense approach. However mainstream economists, in general hate that approach. The reason why, is because with the Austrian school of thought, says you can't control the economy in any large scale manner. The mainstream economists do not like this, because they feel the economy can and should be controlled.

The end result is that you get the cycles of booms and busts. They try to promote constant and continual growth that pushes things to an artificial and unsustainable level. So things grow out of control until they eventually crash.

You see the economic bubbles created by this approach all the time, and they are very visible and easy to spot. We all know they are going to burst but we continue to pump them up, and really that just makes them worse.

Mainstream economist saw the housing bubble and acted all surprised. They thought they could control it, and of course they couldn't. Economist from the Austrian school of thought, saw the housing bubble 5-10 years before it busted and knew what was going to happen.

You can see the crashes far ahead of time. If you seen a bubble forming, you know what the end result will be, the market self regulates it self and things will balance out, one way or another. When you try to fight it, you just make it worse.

So to answer your question, I believe you are entirely correct. I personally do not feel a degree in economics is worth a damn thing, and there is actually a great many people who agree with me. Because all they teach is the bullshit approaches that just make things worse in the long run.

I am sure they could point to a great number of 'good' things they did, but I am willing to bet if you follow any good thing to its conclusion you will find a horror story. They really are very short sighted. Mainstream economist believe in being proactive, and they are arrogant enough to believe they can control complex systems, and push for unrealistic results. Like you said its illogical, which is why you see people like me who are always complaining about how stupid the government is and stuff, how they waste money and make the economy worse every time they do something.

http://en.wikipedia.org/wiki/Man,_economy,_and_state

http://en.wikipedia.org/wiki/Human_Action

Go for it.

I think the issue is that the economic systems of the developed world are not designed for sustainability, but rather are purposely designed to take wealth from the middle classes, and perpetuate the lower and upper classes. Those that are in control of our system of economy are not interested in sustainability, only wealth consolidation.

Originally Posted by Xei

Modern economics generally treats economic growth as a kind of bedrock of a good economy which must be maintained, else all will fail.

I am not an economist by any means, but as far as I see it, this is a thoroughly backwards axiom upon which to balance an entire philosophy and field of study, for the obvious reason: indefinite growth is mathematically, logically, impossible.

Is a better idea not to aim for some kind of sustainable system?

Well, there's a difference between saying that economic growth is generally a desirable thing, and saying that economic growth is an axiomatic truth which any economy must satisfy or else perish.

The first sentiment is, I think, relatively uncontroversial. Since economic growth is simply defined as increased GDP per capita, it seems that--all else being equal--it is reasonable to view more economic growth as being preferable to less economic growth, as increased GDP per capita typically entails an increased standard of living. We may question whether such economic growth is being translated into an increased standard of living equitably across the modern social board, as Xaq mentioned, but as a general ideal I don't see where the problem is.

As for economic growth being a vital requirement for any economic system; I'm not aware that anybody (or at least many people) endorses this view. My education in economics is admittedly limited, but I've certainly never come across such a strong version of the idea.

A separate but related view, which you may have been hinting at, is that while economic growth is not a vital requirement (vital in the sense that its absence will cause economic "death"), it is a logical necessity which follows from the standard economic models. I think there are problems with this view as well, but they are practical problems concerned with the questionable assumptions which comprise these models, not philosophical problems about what a successful economy ought to or must look like.

Originally Posted by Alric

However mainstream economists, in general hate that approach. The reason why, is because with the Austrian school of thought, says you can't control the economy in any large scale manner. The mainstream economists do not like this, because they feel the economy can and should be controlled.

I'm not sure that it's quite so cut and dried. There are divided opinions within mainstream economics on the extent to which economies should be regulated, so it would be misleading at best to label any one perspective as The View of Modern Mainstream Economics.

Originally Posted by Alric

The end result is that you get the cycles of booms and busts. They try to promote constant and continual growth that pushes things to an artificial and unsustainable level. So things grow out of control until they eventually crash.

You see the economic bubbles created by this approach all the time, and they are very visible and easy to spot. We all know they are going to burst but we continue to pump them up, and really that just makes them worse.

Mainstream economist saw the housing bubble and acted all surprised. They thought they could control it, and of course they couldn't. Economist from the Austrian school of thought, saw the housing bubble 5-10 years before it busted and knew what was going to happen.

You can see the crashes far ahead of time. If you seen a bubble forming, you know what the end result will be, the market self regulates it self and things will balance out, one way or another. When you try to fight it, you just make it worse.

So to answer your question, I believe you are entirely correct. I personally do not feel a degree in economics is worth a damn thing, and there is actually a great many people who agree with me. Because all they teach is the bullshit approaches that just make things worse in the long run.

I am sure they could point to a great number of 'good' things they did, but I am willing to bet if you follow any good thing to its conclusion you will find a horror story. They really are very short sighted. Mainstream economist believe in being proactive, and they are arrogant enough to believe they can control complex systems, and push for unrealistic results. Like you said its illogical, which is why you see people like me who are always complaining about how stupid the government is and stuff, how they waste money and make the economy worse every time they do something.

Well, I agree with your general point that the failure of mainstream economics to predict, react to, and often even retroactively account for, the current economic crisis is nothing short of embarrassing. Although, in line with what I said above, I'd disagree that this was due to dogmatically heavy-handed regulation, and more to do with economic models which are theoretically elegant and mathematically rigorous but which have little or no basis in empirical reality. A group of prominent economics have a working paper in which they are highly critical of the field for just such reasons:
The Financial Crisis and the Systemic Failure of Academic Economics

Spoiler for Abstract:

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s insistence on constructing models that, by design, disregard the key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.