Against Economics

&gt; Printing money does not cause inflation.<p>Ah, but it does. It creates <i>asset inflation</i>. This may be the worst kind of all possible inflation because it makes people believe they are wealthier than they are. When the inflation can no longer be sustained, large numbers will soon find out they are far poorer than they once thought. That&#x27;s the stuff of revolutions and Dark Times.<p>Asset inflation takes root through policies that distribute money, not to the poor (Great Society), but to the rich (Deregulation and Quantitative Easing). The rich have no use for the money being given out and so drive up asset prices with it.<p>From this perspective, it&#x27;s easier to see how a multi-thousand word essay on new economics fails to mention negative interest rates once.

The article takes things a bit too far with the political angle. Just because economists may or may not be particularly accurate at predicting recessions doesn’t mean that “economics” doesn’t deserve its place in the neo-liberal order.<p>NPR did a podcast a few years ago on six policies it’s ideologically diverse panel of economists all agreed on: <a href="https:&#x2F;&#x2F;www.npr.org&#x2F;sections&#x2F;money&#x2F;2012&#x2F;07&#x2F;19&#x2F;157047211&#x2F;six-policies-economists-love-and-politicians-hate" rel="nofollow">https:&#x2F;&#x2F;www.npr.org&#x2F;sections&#x2F;money&#x2F;2012&#x2F;07&#x2F;19&#x2F;157047211&#x2F;six-...</a><p>They are:<p>1&amp;2) get rid of tax deductions for mortgage interest and healthcare<p>3) eliminate corporate taxes<p>4) replace payroll and income taxes with consumption taxes<p>5) impose carbon taxes<p>6) Legalize marijuana<p>Perhaps unsurprisingly, Europe, Canada, and Australia have all been moving in the above direction (at least slowly) over the past 30 years, marking a period of return to growth after decades of economic doldrums where they were uncompetitive with the USA.<p>There is even less disagreement when it gets into microeconomics. Everyone agrees that markets produce efficient prices so long as you account for externalities. So for example, an EPI study polled economists about the $15 minimum wage (who identified as Democrats 3:1 as compared with Republicans): <a href="https:&#x2F;&#x2F;www.johnlocke.org&#x2F;update&#x2F;what-do-economists-think-about-a-15-hr-minimum-wage" rel="nofollow">https:&#x2F;&#x2F;www.johnlocke.org&#x2F;update&#x2F;what-do-economists-think-ab...</a>. 75% thought it would negatively affect employment, and 84% agreed it would hurt youth employment.<p>Similarly, few economists support rent controls: <a href="https:&#x2F;&#x2F;www.economist.com&#x2F;leaders&#x2F;2019&#x2F;09&#x2F;19&#x2F;rent-control-will-make-housing-shortages-worse" rel="nofollow">https:&#x2F;&#x2F;www.economist.com&#x2F;leaders&#x2F;2019&#x2F;09&#x2F;19&#x2F;rent-control-wi...</a><p>Indeed, the consensus on government price controls is so deep that, with the exception of isolated things like rent control and the minimum wage, where people don&#x27;t perceive it as price regulation, even liberals don&#x27;t really call for price regulation. That is remarkable, because price regulation was a feature of life until the 1970s. Airline tickets, freight trucking, phone bills--all were priced not based on markets, but based on bureaucrats picking numbers.

Oh great, another non-economist getting famous for criticizing economics from a position of comprehensive ignorance. Modern economics has more than enough critics WITHIN the economics field. People who wouldn&#x27;t say something as stupid as &quot;Economists still teach their students that the <i>primary role of government</i> ... is to guarantee price stability!&quot;. Seriously, this has NEVER been remotely close to true. When you say something like that, you effectively lose the section of the audience that knows the something about economics, and are instead rousing the ignorant rabble. The field of Economics has problems (such as an over-reliance on mathematical models), but instead of any of THAT being discussed we have the argument centering around some fantasy-world view of economics and economists!

Does anyone have a good, non-biased resource explaining why keynesians cannot explain stagflation, and what Milton Friedman did during this era to solve that problem and thereby launch us into the modern neo-liberal moment?<p>Whenever I search for this, I have a tendency to find articles that already assume the reader has read on the topic numerous times (like this one), or they they only address the topic in the most watered-down and overtly partisan manner.<p>From reading between the lines on the first few pages of google results, it seems like Keynesian thought in the 1970s hadn&#x27;t evolved far enough to recognize that inflation could have multiple driving factors and could impact different parts of the economy disproportionately. My limited understanding too is that this was resolved theoretically and with obvious and clear explanation in the years afterward (now referred to as neo-keynesian), but by then Milton Friedman had been lionized as the new economic &quot;truth&quot; and the universe moved on in his direction.

After years of unsatisfactory personal research of various schools od economics I had to come to conclusion they are all flawed because they completely omit the important parts which govern our economy.<p>For example having all economical models based around people exchanging goods and not focusing on why money actually disappears from economy in form of monopolies and money parked in real estate. It always has to be poured back into economy in form of money stimuli like QE, yet people are blind to the fact that it yet again gets eaten up by ever bigger monopolies and more expensive real estate. A simple network model of money circulating in economy would show that these sinks are where the money keeps disappearing.<p>Yet no economic school has its primary focus set on these money eating sinks. The closest school is actually the once mighty, now close to extinct Georgist school, in which they at least explain the business cycle of booms and busts as housing cycle, where housing bust is not some random consequence of a business going bonkers, but housing (actually land speculation) being the major cause of these cycles.<p>If you think about it 100% of population (except for hobos) are involved in real estate market and paying close to 50% of paycheck on housing in some form. Yet all economics focus on stock and bond markets and exchange of random little items even though these are dwarfed by the housing markets.<p>I don&#x27;t think it is a conspiracy, but laziness. People like to research things which are easy to research, but not things which are difficult but important.

&gt; To this day, economics continues to be taught not as a story of arguments—not, like any other social science, as a welter of often warring theoretical perspectives—but rather as something more like physics, the gradual realization of universal, unimpeachable mathematical truths.<p>This has always been my main frustration with economics. As a field, it certainly has value and usefulness, just like sociology, anthropology, or any of the &#x27;softer&#x27; sciences. However, it eschews the tradition of teaching a variety of views and perspectives for the rigid orthodoxy of classical physics or chemistry, without the clean experimental results to back it up.<p>Microeconomics and econometrics take a much more concrete and practical view and well-describe localized economic phenomenon, but macroeconomics is a bastardized combination of sociology and capitalist political theory mashed into an unfalsifiable &#x27;science&#x27; and taught as such.

&quot;...government borrowing didn’t divert funds from the private sector; it created entirely new money...&quot;<p>The general answer to this is that public spending crowds out private spending as both are bidding for the same goods and services.<p>Not sure if that&#x27;s a good explanation, but the article doesn&#x27;t seem to address that conventional wisdom.

&gt; We now live in a different economic universe than we did before the crash<p>I think &quot;this time is different&quot; thinking is dangerous. Yes, maybe the world is different now, but it&#x27;s only been 10 years since the big crash, not so long.<p>Expecting the world to keep being the same as it is now is just as dangerous as thinking it will always be as it was for the last 50 years.

“”” The one thing it never seemed to occur to anyone to do was to get a job at a bank, and find out what actually happens when someone asks to borrow money. In 2014 a German economist named Richard Werner did exactly that, and discovered that, in fact, loan officers do not check their existing funds, reserves, or anything else. They simply create money out of thin air, or, as he preferred to put it, “fairy dust.””””<p>Let me stop you there. Economists aren’t trying to create the exact theory that market participants implement. That would almost certainly be short sighted to the point of uselessness. (How often in your life have you woken up with Plan A and wound up doing B - where B is very different from A?) Instead, they’re looking for a theory that agrees in the outcome and may be applied usefully to describe what’s going on in resource allocation. This probably flies in the face of a technology focused era in which surveillance of the masses at the nearly perfectly micro&#x2F;individual level is a prime factor in market valuation. Some of the largest corporations today have access to data no economist ever dared dream to consider.<p>That actually makes me think modern surveillance companies (google, Apple, amazon, etc) could really make market models from the individual to market level in aggregate.<p>Versus the topics at discussion here - which are macroeconomic. Macro is often hurt by a lack of data since there are only so many years of data of the goings ons of nations in a global context - with probably not enough variation to make conclusions.

I would write this author off, this is a rant and nothing more. &quot;We now live in a different economic universe than we did before the crash. Falling unemployment no longer drives up wages...&quot; Wages are certainly going up in places with low unemployment, its just not distributed as evenly as it was in prior history.

&gt; Central banks like the Bank of England create money as well, but monetarists are entirely wrong to insist that their proper function is to control the money supply. In fact, central banks do not in any sense control the money supply; their main function is to set the interest rate—to determine how much private banks can charge for the money they create. Almost all public debate on these subjects is therefore based on false premises.<p>This seems to be a weird oversight on the part of the author. Even if we accept the heterodox view of money creation as espoused by this article (which I do, for what it&#x27;s worth), the central bank still plays a very important role even in the private creation of money. Setting the &quot;risk-free&quot; interest rate for the economy determines how much money banks are going to be willing to lend, which thereby determines how much money they will create. Just because the central bank is not printing the money themselves does not mean that their policy levers are not having profound effects on the money supply.

This article lost me at &quot;printing money does not cause inflation.&quot; How would that be possible? The only answer would be that money is increasing in value for some reason, and the government must print more to keep prices stable (otherwise they would fall). Even then, it would be a technicality.

note to self:<p>Required for education: Unskilled labor &quot;must&quot; pay less to motivate people to get diplomas.<p>Required for productivity: Wages &quot;must&quot; be low enough so that people have to keep working.<p>Since motivation to get a diploma depends on the size of the income advantage &quot;ideally&quot; people without diplomas should barely be able to sustain themselves - forever.<p>All other economic talk seems filler material. All excessive wealth &quot;should&quot; go towards sustaining the filler material or otherwise be destroyed. For this purpose we also see endless investment in businesses that exist only for the purpose of extracting wealth from everyone else. Some of course deliver useful products in return but if they could increase ROI by not making anything most if not all would do it. If they operate at a loss it is even more &quot;beneficial&quot; to the system. For this purpose we also have 32 Trillion &quot;hidden&quot; in tax havens.<p>The whole thing seems to have &quot;evolved&quot; so that we all are as productive as possible only to sacrifice the produce on the altar of productivity again. The bad thing about this is that all this &quot;productivity&quot; destroys everything around us. It all costs finite resources. We would be better off just making what we need efficiently.

Can anyone recommend a book or other resource that gives an overview of the various schools of economics including the &quot;heterodox&quot; ones?<p>When I&#x27;m learning about a subject I find it much easier if I have a framework for categorizing and organizing the different approaches or topics that the subject consists of.

A few observations I generally do not see discussed.<p>Velocity of money has a large impact on the inflationary impact of circulating money.<p>Bank loans endogenously produce new money in the economy. This can dramatically impact the inflation seen relative to Fed printing.<p>Official macro stats, especially inflation are tweaked to death and are not a stable metric.

Highly correlates with what is written in the Incerto[1] series by Nassim Nicholas Taleb.<p>[1] <a href="https:&#x2F;&#x2F;www.goodreads.com&#x2F;series&#x2F;164555-incerto" rel="nofollow">https:&#x2F;&#x2F;www.goodreads.com&#x2F;series&#x2F;164555-incerto</a>

I have an outsider&#x27;s perspective, I studied economics but mostly ended up doing economic history (I am a practical person, and preferred stats to models)...<p>...the point of economics is not to produce models that are 100% accurate. Yes, there is an absolute ton of witchcraft in economics and especially in macro (CGE, DGE to name two areas beloved by civil servants&#x2F;central banks) but it is very far from useless (and, contrary to what the author thinks, there is a hell of a lot of testing of theories). The issue, funnily enough given the author&#x27;s perspective, is often that we use economics to just support whatever we already believe.<p>On his actual content: unsurprisingly, he gets his history totally wrong.<p>First, an important point, the UK never actually adopted monetarism. We were forced to adopt DCE targets by the IMF in 1968 but everyone thought it was bullshit. Even after Thatcher crushed inflation, monetarism was only popular amongst the small group of City economics&#x2F;journalists who came to the idea in the 1970s (and were thought of as crackpots by non-risk takers). The UK was thoroughly Keynesian, that is why we persisted with utterly insane policies through govts under both parties (until Thatcher).<p>Second, saying monetarism causes disaster confuses the cause and effect. Monetarism, whatever its theoretical faults, was correct in 1979 but was only necessary because Labour&#x2F;Heath had fucked the economy beyond belief (the UK went to a three-day week because the economy literally just stopped working).<p>Third, the 1960&#x2F;70s were not a period of economic success. Inflation hit 25%, two devaluations, one trip to the IMF, one banking crisis, and endless begging other people to lend money (and the govt got a reputation for going back on agreements). Incomes policy was, objectively, one of the most disastrous policies ever conceived. It ended up, literally, with unions running the economy in 1974. Yes, growth was high but real growth was lower and supported by population growth. I am not aware of any history which concludes any economic policy pursued in this period worked. Everything failed.<p>Fourth, what everyone forgets about the 1950&#x2F;60s was that there was almost no trade. That is why workers were richer. Most currencies weren&#x27;t convertible until the late 50s. The UK could milk Commonwealth nations dry with no competition. But the evidence here is clear: trade makes us richer. Anyone who says this isn&#x27;t the case, even Trump recognises this, is an ignoramus.<p>Fifth, Greenspan understood there was a bubble. He gave a speech in 1998 saying there was a bubble. The issue - which is perfectly logical if you look at what happened in 1958 when the Fed did burst a bubble - is that people will say you caused the downturn if you intervene (he blames monetarism for causing the downturn but also blames the Fed for not bursting the bubble...what a genius this guy must be, spotting bubbles like he is at a car wash). This is an attempt to inject some psychology into economics, it is amazing the author doesn&#x27;t see this.<p>It is no surprise Graeber has thrown his lot in with Corbyn. The number of crackpot acolytes around Corbyn grows every day (thankfully, he remains unpopular with voters). I would vote for Labour normally...but their current policies are just...ignorant. These ideas have been tried, they didn&#x27;t work, that is why Corbyn has support amongst young people who don&#x27;t read books. The logic is: build a wall, make Goldman Sachs pay for it.

This article is utterly nonsensical (claiming the money supply is essentially unrelated to inflation) but the specifics of their argument say a lot about the field and why things I think are about to get worse.<p>Their argument goes<p>A) current economic regimes are built on shifting sand and border on useless for predicting macro crises (this is true more or less)<p>B) there are other schools of thought out there which are sometimes more predictive than the main stream<p>C) therefore get rid of economics<p>D) and replace it with a different version of economics, specifically one which agress with my politics.<p>The problem is that they are right, mainstream economics is junk, and so it becomes really hard to discredit other wacky ideas like mmt, or endless unmoderated fiscal stimulus because hey, couldn&#x27;t be much worse than our system which seems to blow up and screw everyone over.

This is not an argument against economics, but against specific ideas in economics holding true:<p>&quot;Falling unemployment no longer drives up wages. Printing money does not cause inflation.&quot;<p>This is not fair.<p>A) Wages are the <i>last</i> thing to rise and tend only to do so when unemployment is low. We&#x27;re just now reaching that level.<p>B) Inflation doesn&#x27;t well account for surpluses: we&#x27;re getting a lot of bang for our buck in digital services, something that&#x27;s super hard for the BLS to measure. &#x27;Consumer Surpluses&#x27; are like &#x27;profits&#x27; to the consumer that are not really measured at all - the only place we do this is when the BLS measures the &#x27;quality&#x27; of a basket of goods to figure out inflation: i.e. if the Tomato is getting nicer, redder, juicier, then part of the increased cost of said tomato goes to value, the rest to inflation. This is hard enough to do already, but nary impossible with new services coming online.<p>Case and point: Fortnite. It&#x27;s free. I&#x27;ve played quite a number of hours of that last year <i>and never spent a dime</i>. Apex is a big game, not free. This is a new trend. The surpluses there are vast. Games have a measurable effect on time spent on other things as well.<p>In a nutshell: consumers lives are improving in ways not always appreciated.<p>C) &quot;Printing money does not cause inflation&quot; - generally, it absolutely does! It just depends where you measure said inflation: stocks, housing - massive inflation. We just don&#x27;t put that into our version of inflation. But there&#x27;s inflation for sure!<p>Consider point 1 and 2 together: if stocks are doing well, and CEO&#x27;s are getting their rewards for strong returns, why are they incented to innovate, pay more etc? Screw that - in a game of &#x27;stocks going up because free money&#x27; - the strategy is to &#x27;do nothing&#x27; - just keep operating as per, and avoid risk. &#x27;Push the button, collect reward&#x27;. Risk changes the nature of the operating environment, and who wants that if there&#x27;s steady &#x27;returns&#x27;?<p>D) The Fed is not &#x27;printing money&#x27; really, it&#x27;s not quite fair to say that in the sense usually implied: a government (or anyone else) &#x27;printing money&#x27; to pay for stuff has an entirely different implication.<p>I&#x27;ll state the article misses the most important things:<p>1) Printing money almost assuredly does cause inflation, even now.<p>2) <i>All things equal</i> wages will rise as unemployment lowers. It&#x27;s just that &#x27;all things are not equal&#x27;. Take a look at real surpluses. Take a look at debt-leveraging in homes. Take a look at bifurction of employment from &#x27;tech workers&#x27; to &#x27;powerless gig economy&#x27; people. Take a look at levels of migrants, their relative skill and their relative market power for wages (they have little power, and there are enough that it absolutely moves the needle).<p>&#x27;Economics&#x27; can be used to measure and address all of those things, you just have to start looking at the data, and if not, start measuring things we didn&#x27;t before.<p>My bet is the answers are not actually that far off, and probably not very surprising if we could see &#x27;all the data&#x27; otherwise ignored or unmeasured.