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What Is Economics?

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After reading 1929crash sig:

"The problem is, of course, that not only is economics bankrupt but it has always been nothing more than politics in disguise . . . economics is a form of brain damage."

- Hazel Henderson

Just what exactly is economics?

Is it a pseudo science?

A science in it's infancy?

More of a religion? Certainly many free marketeers / marxists seem to have blind faith that there system is perfect and can overcome all obstacles.

Is it as stated above nothing more than politics in disguise pretending to be a science?

Is economic more closely philosophy?

Or all of the above?

So what is it we are actually discussing?

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'A' level response from 20 years ago (if i can remember the wording):-

The study of the allocation and distribution of limited resources in an effort to satisfy unlimited wants.

In short, we live on a planet with abundant (or not so abundant) resources. How do we make decisions on how to use these in their existing state or process them, and how do we divide them up amongst (allocate to) economic participants?

To make that relevant to HPC'ers, many of those decisions are questoned on these threads. Decisions such as lowering interest rates favour borrowers and punishes savers. This allocates cheaper housing to some home owners at the expense of others.

Economics then, is the study of all the decisions we (that means individuals, businesses and politicians) make and how this affects the allocation and distribution of resources available to us.

We then extend into politics by making value judgements about the fairness of those policies.

Edited by Nick Dastardly

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After reading 1929crash sig:

"The problem is, of course, that not only is economics bankrupt but it has always been nothing more than politics in disguise . . . economics is a form of brain damage."

- Hazel Henderson

Just what exactly is economics?

Is it a pseudo science?

A science in it's infancy?

More of a religion? Certainly many free marketeers / marxists seem to have blind faith that there system is perfect and can overcome all obstacles.

Is it as stated above nothing more than politics in disguise pretending to be a science?

Is economic more closely philosophy?

Or all of the above?

So what is it we are actually discussing?

The free market is not perfect, that is like saying the atom is infallible.

Edited by domo

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Just what exactly is economics?

The study of economies... :)

It definitely isn't what I'd consider a science because scientific method is undermined by the impossibility of experimental control (i.e. we only have one global economy) but I'm willing to accept that the view that it is a 'soft science' - though I find that term rather unpleasant... I see it as being very unfortunate that we live in an age where allusion to being a science is perceived as the only way to gain credibility. There are many subjects that lie outside science - and I consider it a grave error to insist on applying scientific terminology where it is clearly a bad fit. It reminds me greatly of the insistence, in Galileo's time, that scripture must be the reference for astronomy... utterly preposterous and verging on the retarded... yet, today, we do something equivalent, alluding to political science; social science - etc. - not to mention the curious way in which our financial system is modelled on Newtonian physics without any credible justification.

Soros talks about wanting to establish a philosophy for 'reflexivity' - and while I think him hopelessly pompous for a man whose claim to fame is using massive wealth to corner markets to create even more massive wealth... I think his basic argument is OK - it suggests that economic questions are best served by appeal to the human condition - i.e. questions I consider beyond science by their very nature. Science is the religion of our time - its authority is appealed to by all the confused - and, tragically, many accept anything presented in scientific terminology as fact - even if it has no basis and can't be tested. The scientific paradox concerns free-will... if automatons are a good model for people, free will is an illusion - if they're not, we need non-scientific techniques to make decisions where the problem domain prevents rigorous scientific method from being applied.

Personally, I get the distinct impression that economics is a branch of politics... where most material is concerned with bun-fights between opposing figures - and little more.

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Economics is a science in its infancy and economic policy is a technology in its infancy. That's why the response of governments around the world has been so dangerous. They have a level of understanding and skill in economic matters which is on a par with a medieval surgeon's understanding and skill in medical matters. They can do some things, but not very well, and often the medicine is worse than the disease. What is the economic equivalent of a bacterial infection to a society which doesn't even know what bacteria are? That's the level of ignorance I'm talking about. At least a medieval surgeon would have had the sense not to try a heart transplant on a living patient, which is the crazy level of experimenting on a live economy which governments are trying with QE, zero interest rates, bank bailouts, and massive deficit spending. They should have let the fever run its course naturally and had a guess at what caused it so they can avoid doing it next time.

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That's the level of ignorance I'm talking about. At least a medieval surgeon would have had the sense not to try a heart transplant on a living patient, which is the crazy level of experimenting on a live economy which governments are trying with QE, zero interest rates, bank bailouts, and massive deficit spending. They should have let the fever run its course naturally and had a guess at what caused it so they can avoid doing it next time.

We now have a society which considers sustainability for the products it consumes. How long before sustainability becomes a point of analysis for economic policy for any / all of the major parties?

This affects all parts of our lives. Pensions for example. We have been looking down the barrel of an on-coming pensions crisis since before i was born, but what has any government done to prepare? In fact, what have they done to even condition people about their expectations as the baby boomers give our demograpics a top heavy feel at a time when the old live longer?

We currently have a system of long term planing by short term thinking. When will the public see through this and expect long term strategy from its politicians?

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"The study of the allocation and distribution of limited resources in an effort to satisfy unlimited wants...........................................................................

.............We then extend into politics by making value judgements about the fairness of those policies."

Reminds me of when the lecturer walked into the room for our first meeting and wrote "What is Economics" on the board.

I always remember it as "The allocation of scarce resources" same as what you post here.

In our first meeting with the lecturer in politics they wrote "What is Politics" on the board. I remember the quote "What you believe is a fair allocation of scarce resources" as the answer.

I dispute with those who claim it is not a science. With given knowns ( for example, QE) a known outcome can be predicted.

It's politicians who ignore the bleedin obvious, and step outside of rational actions and thought processes, that screw it up for the rest of us.

Same as it ever was.

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I dispute with those who claim it is not a science. With given knowns ( for example, QE) a known outcome can be predicted.

Honestly I just don't think that's true. Japan did QE for years and still had deflation almost every quarter. It goes against standard theory, but what should you believe: theory or empirical facts?

I do think economics is a science, it's a bunch of people trying to figure out the truth of how a system works, but they haven't got very far with the job yet. Like I say, compare it to other fields where the science and technology are much more advanced. Doctors can transplant faces and limbs, engineers can build rockets and skyscrapers, computer scientists have given us the internet. Economists couldn't even give Japan inflation.

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Honestly I just don't think that's true. Japan did QE for years and still had deflation almost every quarter. It goes against standard theory, but what should you believe: theory or empirical facts?

I do think economics is a science, it's a bunch of people trying to figure out the truth of how a system works, but they haven't got very far with the job yet. Like I say, compare it to other fields where the science and technology are much more advanced. Doctors can transplant faces and limbs, engineers can build rockets and skyscrapers, computer scientists have given us the internet. Economists couldn't even give Japan inflation.

No, but they did give everyone else inflation.

The problem economics has is that it can prescribe only in the way nutritionists proscribe - do this and usually x will follow.

No one has to follow nutritional advice, no one has to obey supply and demand and free markets etc

But

The consequences are as set in stone as only eating huge amounts of chips and cake are.

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I do think economics is a science, it's a bunch of people trying to figure out the truth of how a system works, but they haven't got very far with the job yet. Like I say, compare it to other fields where the science and technology are much more advanced. Doctors can transplant faces and limbs, engineers can build rockets and skyscrapers, computer scientists have given us the internet. Economists couldn't even give Japan inflation.

I agree with the bold bit. You could argue that economists are similar to social studies researchers or art critics, both sets of people trying to lay down laws, rules of thumbs to explain something which can be both simple and complex at the same time.

Social studies - birth rates, parental efforts can be influenced in complex ways (immigration, age profiles, childcare costs), or it's the a simple act of a lonely girl wanting to be loved and to have something (baby) to love back and not knowing or thinking about alternatives. Add booze and boredom.

Art critics would look for complex reasons why a piece of art is good, bad or indifferent. In truth, someone might just like a bit of colour?

Economics has rules of thumb which real life stretches against, rebound etc. I think the way to get closer to the truth is to think what the fundamentals are.

For years there has been a credit bubble and for most people property has been their favourite asset to overpay for.

Government and many people are over-indebted. There is no reason people in the west can live on benefits while people elsewhere starve if they have no work. Pay rates will get closer, only a lack of corruption makes a difference, and this will probably draw closer as well.

Over the long time, these waves are just noise.

The overtaxed, overindebted west will have to economise. The poor starving east (?) will get comparatively richer.

Overvalued assets will be devalued (one way or another). It will take years and lots of ups and downs and will be unpleasant for many.

Just keep an eye on the trends, fundamentals and keep safe.

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Guest Steve Cook
After reading 1929crash sig:

"The problem is, of course, that not only is economics bankrupt but it has always been nothing more than politics in disguise . . . economics is a form of brain damage."

- Hazel Henderson

Just what exactly is economics?

Is it a pseudo science?

A science in it's infancy?

More of a religion? Certainly many free marketeers / marxists seem to have blind faith that there system is perfect and can overcome all obstacles.

Is it as stated above nothing more than politics in disguise pretending to be a science?

Is economic more closely philosophy?

Or all of the above?

So what is it we are actually discussing?

"Economics" is the latest cover story for why things are the way they are.

An after the fact justification for unequal allocation of resources.

The content of the story changes over time according to circumstance. The reasons for it's existence don't.

Edited by Steve Cook

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I'm not sure what it is since it stopped being Political Economy, its clear more of a domain of enquiry than a body of knowledge. I don't think it has any techniques that could said to belong or to have been originated by it.

Personally I think we'd be better handing these things over to the human geographers. Some of which we call economists anyway (depending) but still, people from that background and tradition rather than people with a BSc (etc) in Economics out of the gate. Strict subject boundaries are of course entirely artificial and exist largely for marketing purposes. What does differ though is that different sorts of people have different types of training leading up to the point where they take on real problems in the world that don't, as it were, care what it says on your letterhead. I think human geographers have the better outlook and can cope better with the data.

The guy who drew that confidence curve that keeps getting posted was a human geographer IIRC, whatever his name is, he's interested in shipping costs and infrastructure primarily I believe. I think that is a better way to get insight than someone just squinting at the Baltic Dry Shipping index and trying to fit trend lines to it.

Edited by Cogs

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Whatever it is, I'm convinced the practice of it is via computer models. It's a comparitively recent development that the effects of budgets are modelled 3, 5 or even more years into the future.

Of course it is all cobblers, they don't know what is going to happen next week never mind in 5 years ("who saw this coming ?" :). However, the treasury will be stuffed with highly-paid individuals changing this or that parameter to see what the computer model says will happen in 3 years.

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QE does have a known outcome. It can be deduced from when currencies have been debased before.

If you debase a currency you destabilize the economy that uses that currency.

Lets not forget that Japan and Sweden hit the buffers when the rest of the world economy seemed to be doing fine. They had markets for their exports, now everybody's GDP is going downhill.

Deflation and inflation are two sides of the same debased coin. Seems to me that we are just waiting to see which currency collapses first.

Injins analogy of cake and chips is appropriate, question is, who ate all the pies?

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An enlightening book about what Economics could be is 'The Origin of Wealth' by E. Beinhocker. It's a survey of the latest thinking in the field of 'Complexity Economics', which basically seeks to explain emergent phenomena from the ground up as an evolutionary process. I liked it and think many on here would too.

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There is "The Economy" and then there is the "real economy". When did the two become divorced ?

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There is "The Economy" and then there is the "real economy". When did the two become divorced ?

No more boom and bust = "The Economy"

No more boom = "The Real Economy"

The lawyers are arguing over the divorce settlement as we speak.

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The study of economies... :)

It definitely isn't what I'd consider a science because scientific method is undermined by the impossibility of experimental control (i.e. we only have one global economy) but I'm willing to accept that the view that it is a 'soft science' - though I find that term rather unpleasant... I see it as being very unfortunate that we live in an age where allusion to being a science is perceived as the only way to gain credibility. There are many subjects that lie outside science - and I consider it a grave error to insist on applying scientific terminology where it is clearly a bad fit. It reminds me greatly of the insistence, in Galileo's time, that scripture must be the reference for astronomy... utterly preposterous and verging on the retarded... yet, today, we do something equivalent, alluding to political science; social science - etc. - not to mention the curious way in which our financial system is modelled on Newtonian physics without any credible justification.

Soros talks about wanting to establish a philosophy for 'reflexivity' - and while I think him hopelessly pompous for a man whose claim to fame is using massive wealth to corner markets to create even more massive wealth... I think his basic argument is OK - it suggests that economic questions are best served by appeal to the human condition - i.e. questions I consider beyond science by their very nature. Science is the religion of our time - its authority is appealed to by all the confused - and, tragically, many accept anything presented in scientific terminology as fact - even if it has no basis and can't be tested. The scientific paradox concerns free-will... if automatons are a good model for people, free will is an illusion - if they're not, we need non-scientific techniques to make decisions where the problem domain prevents rigorous scientific method from being applied.

Personally, I get the distinct impression that economics is a branch of politics... where most material is concerned with bun-fights between opposing figures - and little more.

Great post - on economies!

You can sum economics up with their word "elasticity" - usually on page one of most text books!

They don't comprehend(or ever admit) their policies/theories are complete ******** till they 'twang' back and hit 'em in the face!

They then cover this over with a 'new' slightly adjusted bullsheet theory - ad infinitum!

Edited by erranta

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Although the "proper definition" is as other's have quoted, I do remember day one and thinking this will be interesting. It's not, it was just a series of dull equations, graphs, and theories, which seldom had much connection with reality.

My definition would be, "economics, war without the bloodshed."

p.s. It's getting interesting now :unsure:

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