There is some empirical support for many theories. The concept of supply and demand is pretty well established by observing reality, for example, But macroeconomics is hard because of the complexity involved. For example, sure, you can do a stimulus, but can you implement it effectively? In the modern age, infrastructure projects cannot be stimulative in the short term because the regulatory process is so byzantine. As the President found out, there’s no such thing as “shovel ready”.
The so called laws of supply and demand became quaint right about the time it was discovered that demand could be artificially created and supply artificially manipulated. DeBeers diamonds, most classic case evah!
Claiming that modern economics depends upon supply and demand to be validated is like calling relativity advanced arithmetic.
“There is some empirical support for many theories” is adorable. If you could get all the college level economics texts in the country, and do a word count, which would you get more of: Keynes or von Mises?.
College is just for brain-washing, duh. Everyone knows you’ve learned all you needed to by age 18.
Not exactly – I’m sure there have been some people who have given up looking for a job. That is not good, and we need more improvement. But things are better now than in 2008, and I think there’s an easy argument that Democrats could make that things are better (while still needing improvement).
The exit polling indicated that people didn’t believe Obama when he told them, in essence, “Things are better. Who are you going to believe, me or your lying bank account?”
I’m talking about a strategy that would hopefully motivate more Democrats to vote. Also, I’m talking about a strategy that would change some people’s minds. I recognize that the polling right now is down on the economy – if it wasn’t, then my strategy wouldn’t be needed!
And I agree with iiandyii to some extent. The economy is pretty good, actually. But who would believe it’s good when both sides talk it down?
Since we’ve talked about Sam Wang and Nate Silver in this thread, I think it’s safe to say that Wang’s prestige has been diminished a little. Not so much because of his model, but because he went after Stu Rothenberg for his data-free prediction. Yet Rothenburg’s gut beat Sam Wang’s model. Furthermore, Wang came right out when Rothenburg made his prediction to say he was wrong. He also said that Silver’s model giving Republicans a 25% chance of getting 54 seats was badly wrong.
Sam Wang’s model had some calibration issues methinks. Eh, it happens. Anyway, where did he go after Stu Rothenberg?
Also, if Rothenberg is operating purely from his gut, I’d need a lot of evidence to be persuaded of his usefulness. But frankly, I doubt that. Charlie Cook for example has a staff and rather systematic methodology. It just isn’t statistics intensive, though he does know how to read a poll. So where’s the evidence that Rothenberg operates entirely from his gut? Judging from his website, he doesn’t strike me as a Dick Morris type bloviator.
Personally, took averages of the polls and read 538 for interpretation. I also dipped into Charlie Cook’s articles and website periodically: I’m on his email list. I avoid reading the tick tock of campaign reporters. They are typically bored of policy and do a crappy job with the horserace on top of that. They are useless.
I’m trying to keep this out of the pit. Note though that this post was all assertion.
Sigh.
I trust that adaher can assert new things faster than I can substantiate them. But here it goes anyway.
There’s a great deal of evidence for textbook economics. There’s a great deal of evidence against folk economics.
Here’s a selection.
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Three professional economic forecasting operations agree with textbook economics: the stimulus worked: http://delong.typepad.com/sdj/2010/02/assessing-the-stimulus.html
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Conservatives agreed with Keynes during the 2001 recession, when they held power. When Conservatives Loved Keynes | The New Republic
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Cross country comparisons: IMF study: higher spending during recession gives faster growth. Cutting spending depresses economies. Spending and Growth, 2009-13 - The New York Times
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More generally, there was more austerity in Europe, which explains why their economies are now in the shitter relative to the US.
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We indeed had rapid expansion of the monetary base and the ignorant chattered about currency debasement and hyperinflation. They were wrong: inflation declined. It turns out that studying a topic actually helps in understanding it.
Prior to 2008, I had thought that we couldn’t have a Great Depression again. I figured that any administration boneheaded enough to avoid textbook economics, would be thrown out of office. I was wrong. I didn’t take into account the possibility of economic sabotage by the opposition. I didn’t understand the political attractiveness of austerity during recessions and depressions. We only experienced a lesser depression and lost decade this time around, but I can no longer rule out future catastrophe.
I wonder if you really understand the theories of Keynes. Here’s a pro-tip: they are built on the laws of supply and demand, much as relativity is built on arithmetic. To suggest Keynesianism replaced supply and demand is nonsensical. It is no more than Smithian principles with fiscal recommendations.
The “modern economics” that you think you are referring to are the interventionist ideas of liberal economists, and they are far from universally accepted.
Wang’s model isn’t the problem, as it does tell us pretty accurately how the election will go the closer we get to it. But further out, his model was not only useless, but he actually claimed that Silver and Rothenburg were wrong. For the record, this is what Wang was saying in mid-September:
Probability of GOP control of Senate: 15%. Probability of Dem control: 85%
Later on in September, he said 93%
http://www.internetsupernova.com/sam-wang-93-chance-democrats-maintain-control-of-the-senate/
In Rothenburg’s case, Wang tweeted that Rothenberg was “wronger than wrong”, and when discussing the issue of a bet with Silver he said he felt he would have been comfortable betting against Silver’s best case scenario for Republicans, 54 seats, which he said was extremely unlikely(Silver had it at 25% at the time).
Now perhaps Wang will appreciate the power of fundamentals.
Not empirical. That’s modelling, which is otherwise known as “predicting the past”.
Also not empirical, although I’ll grant that all things being equal, I think we all agree that putting more money into the economy is going to juice it. My contention was that we don’t necessarily know the best way to do this, nor does doing it guarantee success, since all things are not equal and the economy is extremely complex. Note that I didn’t disagree with Keynesian theory, I disagreed that “we know how to create good recoveries”.
Except in the US during the latter part of the BUsh administration and the beginning of the Clinton administration, when taxes went up and spending went down and it led to the best economic expansion in postwar history.
Since you said, “more generally”, I can’t call this statement wrong, but Europe didn’t actually do austerity except for Greece and Spain, who were in such a deep hole that they didn’t have the option to do stimulus, which made me wonder why Krugman was bitching at them. Stimulus is a luxury only rich countries have.
Now the European Central Bank, they were pretty conservative, Krugman’s definitely right about that, and that has probably held back recovery. But the budgets of the non-crisis EU countries have not gone down.
I wouldn’t be counting out the other Nobel Prize winner just yet: Milton Friedman. Inflation is always due to expansion of the monetary base. Those who have predicted inflation based their prediction on two points:
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We were going to recover anyway, so higher spending and QE would result in inflation since it would be going on with economic tailwinds.
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The Fed doesn’t know how to exit QE gracefully.
Maybe they are wrong, but don’t get all Krugman here and spike the ball and claim that they should be banished into Non-Credible Land, never to be heard from again. The economy is complex and predictions of how the economy will behave when certain things are done to help it or harm it are always going to be iffy.
Since you brought up the people who were wrong about inflation, I’ll bring up the fact that Keynesians were totally wrong about US austerity causing a new recession. Spending is flat since 2009 and taxes have gone up(strangely Krugman did not predict recession due to tax increases, even though it’s textbook Keynesianism). Yet unemployment continues to drop and our economy is recovering faster than any economy has in recent memory from a banking crisis.
Not empirical?!?!?! Er, if your model is fubar, it won’t fit the past.
And the basis of that is? CITE?
We got a great recovery during WWII, despite the fact that military spending gives you little on the supply side. We understand how to do this. What we lack is political support. And infrastructure continues to be underfunded.
Those occurred after the recession. Textbook economics recommends counter-cyclic governmental spending and taxation. That’s what we did.
Since they shared a currency with the rest of the EU, they could have gotten loans. And if you look at the scatterplot, you can see a range of shifts in governmental spending.
Automatic stabilizers and reduced tax receipts will automatically give you higher deficits, before you add stimulus incidentally.
ECB: No shit. Budgets of non-crisis: they needed more stimulus.
Friedman’s Monetary History of the US called for an increase in the money supply during the Great Depression. Not the monetary base. The monetary base exploded during the Lesser Depression. But M2 did not.
Friedman is on the side of the angels and the Krugmans on this one. Or rather, he would have called for monetary expansion (possibly more than QE) but limited fiscal efforts. He was wrong on his take on the Great Depression, but that wasn’t clear until the Fed followed his playbook in 2008-2010 and didn’t get the sort of traction that Friedman implied would occur. The professor who ended up smelling like a rose wasn’t a liberal incidentally: he was the conservative economist Benjamin Bernanke, who stressed the structural problems that occur when financial intermediation breaks down. It’s not just an issue of expanding the money supply, or so it turned out.
Inflation has stayed under 2%. The inflation hysterics were simply wrong. And the fiscal and monetary authorities didn’t go far enough: we experienced a lost decade.
Well that’s where the modeling comes in. There are some built in tendencies for economies to recover-- among those factors are replacement of depreciated plant and equipment. But the process has been more glacial than it needed to be.
I’d have to check that, but that’s my impression. Which is frustrating - I can point to peculiarities in the US (i.e. McConnell’s insight into the benefits of obstructionism by minority parties) but the fact is that the worldwide track record for these sorts of recoveries is pretty bad.
In more good news,the GOP has now picked up eight confirmed seats in the Senate, and will probably add another in December.
Regards,
Shodan
Gillespie came stunningly close to an upset over Warner.
It would be somewhat as if, by analogy, Wendy Davis closed within 3% of Abbott.
Sam Wang made a pretty solid claim that 9 seats was not going to happen.
We’ll see about that.
Cite.
Especially now that his Tea Party opponent has endorsed himin the run off.
Regards,
Shodan
Cite? Link? I find your report plausible. But if we want to fight ignorance we need to evaluate the original claim. Fewer posts, higher quality please.
Separately, if the Alaskan reports are true, this was a wave election. Yeah, yeah: everyone knows that: I’m just updating my election night claim. In fact, a 9 seat gain sounds like a Charlie Cook style tsunami election, similar to 1980, 1994, 2006, 2010. It happens.
Cook said the election was a wave, but not a tsunami, but that was on Nov 8. http://www.nationaljournal.com/the-cook-report/a-wave-but-no-tsunami-20141107
The only thing that didn’t happen was a toppling of a candidate with a 10 point lead. And Warner came within a razor’s edge of meeting that criteria. I say that for 2014, 7=wave, 8=big wave and 9=tsunami.
http://equitablegrowth.org/2014/09/10/sam-wang-proposes-senate-election-bet-nate-silver/
He also tweeted after Rothenburg made his prediction of a GOP wave that Rothenburg was “wronger than wrong”. Can’t find that tweet now though.