This seems like a problem that appears everywhere in science, not just in the case of economics. There is a known phenomena of science results agreeing with the organizations that fund the science, and this seems to be an extension to that.
Is there any good way to solve it that won't result in less valid science work getting funded?
>Is there any good way to solve it that won't result in less valid science work getting funded?
Bona fide science has peer review and falsifiability. Also imperfect, but nowhere nearly as commonly manipulated as is economics for hire by business interests and their think tanks.
In fact, this seems like a good time to mention the only Senator I've ever seen in decades of observing politics who actively attacks this problem is Elizabeth Warren.
Funnel plots are used in meta-analysis to detect the self-censoring bias of publishing only results when an effect showed up. Maybe they can be used or adapted for this too?
Most of economics is an intellectual veneer to justify politically motivated policy actions. The 'science' is seldom predictive, nor does it even attempt to be. It has more in common with augury.
This blurb, for instance, openly admits their expert opinions are for sale,
'Economists have an “incentive to get a reputation as someone who will make a certain type of argument. People will hire you because they know what testimony you will give,” said Robert Porter, an economist from Northwestern who has never testified on behalf of a corporation in an antitrust matter.'
Indeed I suspect a great number of people who scream on TV never actually read The Wealth of Nations or at least not this passage:
"It is but equity...that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed and lodged."
The Wealth of Nations should be understood as the attempt of someone whose cultural tendencies (from Scotland) were socialist, to explain the wealth of a rabidly free market society (England).
Nobody from inside of England could have written the book - it would be like a fish trying to explain water. But his underlying sympathies emerge in numerous places.
That's a personal interpretation based on my knowledge of the times, ongoing economic changes, and the cultures involved.
Smith was born not long after England (whose per capita wealth was around 5x that of Scotland) took over Scotland. He lived during a period where England was building a worldwide trading empire, Scotland was benefiting from exposure to England, and the Industrial Revolution was just starting. Oh right, and two civil wars (the Jacobite rebellions) about whether Scotland wished to continued to be united with England.
A definite intellectual challenge for the Scots of the day was how it was that England, in every way seemingly worse than themselves, should be the ones in charge. Smith provided part of the answer.
England did not "take over" Scotland. There was no invasion or conquest, as in Ireland. The two countries voluntarily merged, scotland was represented in the British parliament and so on.
The Wealth of Nations is not weitten about England. Smith was describing the society around him, in Scotland, many of the examples given in the book are directly taken from his everyday observations in the central belt of Scotland.
At that time Scotland was in a tumult of intellectual and socialrevolution. Smith coukd look around and see the beginnings of an industrial society on his doorstep.
A better explanation for why Smith and other enlightenment figures were in scotland and not so much England would be local cultural factors, such as scottish presbytereanism making for an incredibly high literacy rate in scotland as compared to england, or the great abundance of universities in scotland compared to England.
Interesting, but really not consistent with either Smith's own writings or multiple biographies. Dugald Stewart's memorial is among the shorter versions, if you care to compare notes.
Others are John Rae (1895), Edwin Cannen (1896), Francis Wrigley Hirst (~1910), Bagehot, and Emma Rothschild (various, ~1970s to present).
"Socialism" is one of those nebulous words. Most modern socialists don't think the word comes from or implies Marxism.
Also, Wikipedia: The socialist political movement includes a diverse array of political philosophies that originated amid the revolutionary movements of the mid-to-late 1700s
The subjects of every state ought to contribute towards
the support of the government, as nearly as possible,
in proportion to their respective abilities; that is,
in proportion to the revenue which they respectively
enjoy under the protection of the state.
> Nobody had ever conceived of 20% 50% 60% taxation. The plebes would riot with only a few % tax hike.
First of all, that's not true. Taxes in the early modern period are estimated to have been in the range of 15-20% of overall production, and rose significantly during industrialization.
But more importantly, most taxes in that period were typically assessed either as a fixed per-unit tax on the production or import of specific goods, or as a yearly fee for the possession of certain items. In this respect, they were quite different from modern income taxes -- it's hardly possible to compare them numerically.
The Wealth of Nations was not written by a 'socialist' by any means.
It describes Supply and Demand in a mechanical way, illustrates the power of comparative value, the 'invisible hand' etc..
Smith was a Ethicist and a heavy duty Christian, and so he also realized how the system could be imbalanced, and definitely took the concerns of the plebes to heart etc..
But by no means was this a social treatise, or an attempt to validate social theory or 'socialism' (which didn't really exist).
And I think your comment about Scotland/UK is not true at all.
The 'Supply and Demand' bit that Krugman said 'all econs agree on' is really from Adam Smith.
Marx basically evaluated that in the context of the fact that some small group apparently had all the capital, while others had none, which creates an inherent power/class struggle and so it turns into a political issue.
Smith and Marx probably would have agreed on 'the problem' though almost surely not the solution :)
This was always my understanding. I am a free market proponent, but a Adam Smith style free market proponent. In that I believe in a market that is actually free, not one with thickets of patents, generous subsidies for corporations, and bailouts while all at the same time a laissez-faire stance on workers rights. You don't get to scream free market while cutting wages and then cry for regulation because a union committed an "illegal strike", or an important worker failed to give you 2 weeks notice and is headed to your direct competitor with knowledge of "your clients". Nobody owns a worker or client in a true free market system.
I've always thought the problem with the major economic systems isn't that either of them is inherently flawed, just that they haven't really even been implemented in a large enough scale for any decent period of time. In America we pay socialist taxes and get capitalist benefits, that's the problem. We have to pick one and commit to it.
There used to be a 'free market' it was called 'feudalism'.
Not quite, but almost.
If you believe in 'Adam Smith' then you understand under a totally free system, one person would end up with all the wealth.
Adam Smith was not a libertarian, or a 'laissez faire' kind of dude. He was an Ethicist and heavy duty Christian and to him capitalism was a moral issue.
Unlike the 'Chicago School' and Libertarian types who really state that corps exist for the shareholders, that's it, end of story.
As noted above, Smith invented progressive taxation.
Get this - do you know what Smith said the #1 quality of a CEO is?
Get this: 'Benevolence'
Not something you'd hear too often in America.
Onerous regulation is obviously a problem, and wasted taxation inefficient government is also a problem.
But there's no doubt they have to exist.
There's a 99.9% chance you'd be a serf were there to be a truly free and open, 'laissez faire' market. You wouldn't even have a chance at going to a good Uni. You know Trump's son-in-law, Kushner? He only got into Harvard after his parents gave $2.5M to the school. Maybe 1/3 Harvard students buy they way in. In a totally capitalist system, 100% of top spots would be 'bought' - industrialists want to ensure their legacy, and that their kids get into the top schools, and that would guarantee the longevity of their Empire.
Anyhow, that taxes can be too high and spent inefficiently does not mean they should not exit.
Paul Krugman once said something to the effect that all economists agree on supply and demand, but disagree on everything else.
I think you're right in your assertion that the "dismal science" is cherry-picked to support a perspective, not unlike using hard science in the same way, but without the ability to reliably reproduce results.
The trouble is that economists, of whatever theoretical school (well, except Marxians who are rather different) usually are asked to weigh in on the issues that are not well-investigated and where considerable disagreement exists. Basic concepts like supply and demand, and subjective value, are taken for granted by economists, even though they're the things that the average layperson does not understand and really should. The genuinely important insights of economics are too rarely discussed, while the controversies get all the airtime - so of course what we hear is the non-reproducible, opinion-driven stuff.
> Paul Krugman once said something to the effect that all economists agree on supply and demand, but disagree on everything else.
That's why it is hard to take economists seriously. If economy is a science, then facts should establish themselves and economists should agree on more and more things. That does not seem to happen.
Take the statement "Lowering income taxes causes people to work more and in the end generates more revenue for the state". That theory has been put to test in many countries (like in the US during Reagan's presidency) but they still can't agree on if it is true or not. So how can economy be a science when empirical evidence doesn't cause facts to accumulate?
I searched for that Krugman quote and found nothing. I think he never wrote it. I think that is exemplary of the problem here - not that economists struggle with facts, but that most people struggle with facts, including facts about other people struggling with facts.
I think it might be useful to distinguish micro and macroeconomics here; microeconomics is much easier to call a science, because lots of it can be experimentally validated. Macroeconomic systems can't be reproduced for experimentation in quite the same way, and are thus much harder to draw conclusions from.
Economics is a science the same way climatology is a science, or ecology is a science. While you can fairly accurately determine what will happen on very small scales on short time spans (microeconomics, in short), questions about what will happen on larger scales over longer time spans get exponentially more difficult as you scale up, since the system is so complex and so difficult to measure. It doesn't mean that it's not worth doing, it just means that there needs to be some epistemological humility there.
This is an essential insight of economics, and one that was not really systematically grasped until recently (and still not grasped by the majority of the public.) It is as close to true as a sociological/ecological thesis can be, and is almost universally accepted. But because it is so accepted, you don't hear much about it.
What you're referring to is the Laffer curve - based on the observation that, at both 0% and 100% marginal tax rates, no tax revenue will be collected (none at 0% because no tax, essentially none at 100% because of disincentive.) That means that, in between those two end-points, there has to be a curve of some shape showing the total revenue collected, with a peak (or peaks) somewhere on it where revenue is maximized. The discussion is about where this peak is, and how the curve is shaped. To say "does lowering income taxes increase revenue" is an incomplete question: lower from what rate? Under what macroeconomic conditions? At what overall national wealth level? Interacting with what other taxes? Considering what conditions in capital markets? Etc, etc. Teasing out these huge numbers of other factors is the challenge of economic study, and why so many seemingly "simple questions" are unanswered: because they're not actually simple.
They're not actually simple and we don't actually get to play god with populations of actual people interacting in the real world under different conditions. We can devise experiments that (imperfectly) try to compare the results of different legal and other environments on outcomes. And some compelling results in economics come about from creating especially interesting "experiments" in this manner.
> That means that, in between those two end-points, there has to be a curve of some shape showing the total revenue collected, with a peak (or peaks) somewhere on it where revenue is maximized. The discussion is about where this peak is, and how the curve is shaped. To say "does lowering income taxes increase revenue" is an incomplete question: lower from what rate?
That's the point. Assuming the Laffer curve theory is correct, the question should be "what is the optimal tax rate?" That would mean that economists should propagate for the tax rate to be increased in some countries because it is too low and decreased in others. That's not what economists have been doing (if I'm wrong can you show me an economist favoring increasing taxes using the Laffer curve theory?) and instead they have only asked "how much lower should the tax rate be?"
Now the theory might be discredited, but I'm sure economists will come up with a new one to justify lowering taxes. :)
> Etc, etc. Teasing out these huge numbers of other factors is the challenge of economic study, and why so many seemingly "simple questions" are unanswered: because they're not actually simple.
But the questions aren't going unanswered. Politicians ask and economists do answer questions about tax rates, unemployment rates, interest rates, wage growth...
In climatology, at least the basic principles have been tested in laboratories; higher concentration of CO2 in air -> less reflected sunlight -> higher temperature. The Laffer curve theory was never tested in a laboratory, yet it was for decades trotted out as the truth by economists.
The disagreement is not whether Laffer curves exist, in a basic sense - nobody disagrees that there is some kind of revenue curve (and it changes over time in response to various factors.) However: the Laffer curve does not necessarily say what the optimal tax rate is, though - just what the revenue maximizing rates are. And these are not the same thing - do not conflate the two! The reason Laffer curves were considered significant was because some economists said that some marginal tax rates were on the right-hand side of the peak - that is, by lowering these high marginal tax rates, the incentive to avoid tax and minimize earnings would be reduced, and therefore the government would collect just as much or slightly more revenue total. What the optimal tax rate is, depends on a lot of other things - like the other economic factors I just mentioned, as well as what outcomes you want to encourage with a particular tax policy. The Laffer curve is just a particular technical description of the situation (and sometimes carelessly associated with Arthur Laffer's personal opinion of where on this curve current policy is located.)
Note what's happening here: most economists either think that a cut in federal income tax rates would lead to higher GDP, or are uncertain/think there's no effect. However, almost all also think that such tax cuts would not increase revenue - so any argument for tax cuts, according to these economists, is not based on the Laffer curve. Indeed, because of where these economists think US income tax rates are on the Laffer curve, they would have to agree, to be consistent, that increasing tax rates would increase revenue, on the margin. Therefore, the "Laffer curve consensus" among US economists is in fact the opposite of what your impression is.
> But the questions aren't going unanswered. Politicians ask and economists do answer questions about tax rates, unemployment rates, interest rates, wage growth...
In climatology, at least the basic principles have been tested in laboratories; higher concentration of CO2 in air -> less reflected sunlight -> higher temperature. The Laffer curve theory was never tested in a laboratory, yet it was for decades trotted out as the truth by economists.
Politicians get certain answers to these questions from different economists, but they're definitely live issues in the field itself. Don't confuse the theory that Laffer curves exist - which is not controversial - with the argument that a particular tax regime is on a particular point of the curve - which is more uncertain. Just because you get an answer does not mean the question is definitively concluded.
And you can test the Laffer curve in a lab - but only with small numbers of people in a limited economic context. When you scale it up to a large number of people in a complex economy, the picture is much less clear and more complicated. (Likewise with climatology.) That's why it's hard!
It's by David Henderson for Cato, who's quite in favour of cutting taxes. But rather than jump on the argument as a useful "justification" for doing so, he points out the numerous limitations of the model, and the possibility of unusual Laffer Curve shapes that would mean tax cut...
"Lowering income taxes causes people to work more and in the end generates more revenue for the state".
Reducing taxes does cause people to work more. Whether it results in more revenue for the state depends on how much income tax was before and after the change. Elasticity of labour supply is not constant over all tax rates.
I know people like to crap on the Laffer curve but they crap on it because it's trivial if you have the barest knowledge of economics, not because it's false.
Macroeconomics is closer to the morass you describe but it still accumulates truth, if possibly depressingly slowly and with thirty year periods of regress. Microeconomics is on much firmer ground, in large part because they have more data and it's easier to accumulate it.
If you want a very readable introduction to price theory, which is a large part of microeconomics check out "Hidden Order" by David D. Friedman. It's based on his Price Theory textbook but rewritten for interest and readability. If you want something a bit more mathematically sophisticated, (basic calculus) look at Intermediate Microeconomics, Hal Varian.
> Take the statement "Lowering income taxes causes people to work more and in the end generates more revenue for the state". That theory has been put to test in many countries (like in the US during Reagan's presidency) but they still can't agree on if it is true or not. So how can economy be a science when empirical evidence doesn't cause facts to accumulate?
This is not the best example. When a panel of economists was asked whether "a cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut," none of them answered in the affirmative. 8% said they were "uncertain," and 71% either "disagreed" or "strongly disagreed." (5% answered "no opinion" and the rest didn't answer at all.) See: http://www.igmchicago.org/surveys/laffer-curve
If you don't take economists seriously, you might not notice when they agree on things.
It's a social science; you can't exactly run experiments like they do in natural sciences. There are measurement errors & omitted variables errors you have to deal with in social science.
This. The real problem with making definitive statements in economics is you can't run double-blind experiments.
Let's say you create some sort of giant monetary stimulus package. If the economy gets worse proponents will say "Whew! Just think how terrible things would have been without our stimulus package," and opponents will say "Things got worse because of the stimulus package!"
There's no way to know who's right. The best you can do is make imperfect models to encapsulate trillions of individual decisions people make. But that's not proof.
And yet this shortcoming seems to in no way inhibit the field's broad pronouncements and interjection of themselves into public policy. Emmisaries of far more rigorous and testable scientific fields comport themselves with a great deal of academic probity(e.g. Climatologists whose verifiable observations have amongst the most dire of consequences for us, and yet whom still are cautious in their framing). Meanwhile, economists like Rogoff and Reinhart never missed a chance to peddle their faulty math and data errors as God's Only Truth to every outlet available. Or buddy up to oppressive regimes like Friedman and his University of Chicago ilk. Or to peddle discredited, vaguely eugenicist studies like Levitt and Dubner for the sake of selling books.
> This blurb, for instance, openly admits their expert opinions are for sale,
This has nothing to do with economics - that's how expert opinions work in law. It happens with all kids of expert opinions presented as testimony, from economics to medicine to cryptography.
Take a look at the way the expert opinions presented from both sides of the Newegg trial worked if you want to see jaw-dropping expert testimony action - Whitfield Diffie's own testimony on RSA (which he co-invented) was, a priori, given equal weight to the testimony of an expert hired by TQA. It was up to Newegg's and TQA's respective legal teams to convince the jury that Diffie's testimony was more mathematically sound than the other expert's testimony.
It's quite possibly the least poignant and lowest-common-denominator populist cliche I've ever read. It's like describing Computer Science as the study of how to make Flappy Bird clones and To Do apps.
They are not practitioners of the field, they're just people who happen to have a degree in that field. One of my coworkers has a degree in chemistry, yet she works in accounting, does that mean that the field of chemistry is defined by accounting? Yes, SW development is closer to CS, but it's still a separate endeavor.
Tell me more about the justification for arbitrarily low interest-rates for banks at an all-time market high. Tell me more about how helicopter money QE is justified being put into circulation when wages are stagnant.
You obviously are an economist who has an extreme biased.
Macroeconomics represents less than 20% of the practitioners of economics as a profession. Of those macroeconomists, maybe 5% actively involve themselves in business cycle theory, and only a fraction of those would fall into the monetarist theory camp which would advocate for such interventions. So even your absolutely idiotic straw man argument concerns at most a fraction of 1% of the practitioners of economics.
And no, I'm not an economist with "an extremely biased [sic]". I'm a supply chain engineer that has directly worked with dozens of economists for approximately 3 years, incorporated dozens of their econometric models into supply chain decision systems, and have never once have discussed anything political with them. And I just witnessed a clueless bullshitter malign the field of study that they have dedicated their lives to with an argument that could be considered libel at its most forgiving interpretation, and decided to call that clueless bullshitter out on it.
You're operating off of an observability bias. The ones who spend all day writing op-eds in the NYTimes or WSJournal are more likely to be using a thin veneer of economics to shill for a particular policy.
The ones doing actual actionable economics are publishing and working on policy in non-sexy journals you're never going to stumble across. Or working in invisible, non-controversial advisory roles.
So yes... the economists spend their lives _not actually doing economics anymore_ are probably pushing politically motivated actions. Shocking! Scandal!
None of these are particularly politically-fashionable positions to take, with the possible exception of the CIT issue, which plays well with one half of the electorate and is broadly viewed as liquid evil by the other half.
Exactly. It's like how I keep seeing people accusing "economists" (usually as an undefined group) with being concerned with "justifying the status quo". This, despite most economists having frequent, major disagreements with common current policies in many areas. What it tells me is that they're probably not really looking at the field as a whole.
It's the trouble with people making equivalences between "a particular person calling themselves an economist" and "economics". There are hundreds of thousands of people with economics degrees, it is trivially easy to find one who says what you want to hear. But then, that economist's words are often taken to reflective of economics as an entire field of study - regardless of the reasoning behind it, or how many other economists actually agree. So most economists may have totally sensible reasons for supporting Policy A, but when one dissenting economist supports Policy Not-A, the "consensus view" gets ignored. I don't know why this is. Maybe because people feel competent to judge economic reasoning in a way that they don't with other fields (and which might lead them to seek more opinions.)
This is interesting if true, and a little strange.
As an example, I have a Computer Science degree, however I can't imagine anyone taking what I have to say about Computer Science to be reflective of the greater industry. I'm just a schmuck with a degree.
I think maybe it has to do with what people are asked about, and with the level of uncertainty. Most questions that people would ask of a CS degree holder are probably specific technical ones, with fairly well-defined answers. But with economics, everybody wants answers to the sweeping, big-picture questions that are very hard to answer definitively (people who say, "we just don't know the answer, and here's why" tend not to be terribly popular in the media.) People are also, I feel, not well-informed about the basics of economics, so that they can take a particular jargon-y or specific statement by an economist out of context and totally misinterpret it. (Imagine: "These data are organized in a tree." "Hah, computer scientists think my laptop is powered by tiny forests!" Yet this is what happens when economists talk about "value" or "cost", or things of that nature.)
Of course this phenomenon does happen in other fields too - think of how often there's an article where "science says x!", when in reality it's just one paper with a tentative conclusion. It just seems particularly common for people to misunderstand economics.
Economists are in favor of carbon taxes because the alternative is environmental regulation. They favor open immigration policies because it brings flexibility to the job market. Leading to less job security for low skill workers and more profits for multinational companies.
Economists are not intentionally supporting multinationals interests over people's interests. They do so as a side effect of their belief in the correctness and practical relevance of microeconomics and neo-classical theories. This behaviour is in turn encouraged and rewarded by multinationals and investment banks, leading dissenting voices to be marginalized. Of course there are notable exceptions, Stiglitz, Krugman, Rodrik, and a few others. But the general point is that if you want to get an economics PhD from a red brick university you will have to support this viewpoint.
I would be very curious to know why this has happened to economists alone--out of all the liberal arts departments. Are sociologists, historians, and political scientists immune to these influences? Or have the multinationals just refrained from attempting to influence them? What explains the lack of "multinational capture" among non-economist academics?
Economics studies the production of wealth, which is more relevant to business? Also economics claim to have a strong predictive power? I don't know.
There are also interesting differences in how economists view themselves compared to other humanities, see this (biased) paper:
Fourcade et al, the Superiority of Economists http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.1.89
Economics tend to be a more insular and hierarchical discipline, and views itself as non-normative.
One possibility, which I believe to be correct, is that what the parent wrote above isn't true. Economists study a field in which many people both have a strong bias, and a strong belief they know what they're talking about. Not many people vigorously disagree with historians cause not many people care that much about history. With economics, they do care.
Which means that when economists have theories that fly in the face of what people believe (like pretty much all of science), people get more annoyed.
Yeah, I probably wasn't obvious enough--my point was that if your hypothesis is "big companies capture academic fields," then you would not predict a world where economics, and only economics, is captured by "big multinationals." (And why "multinationals" instead of, say, the many large and powerful companies that benefit from tariffs and other protectionist policies?)
To me (like you), that suggests that GP is telling a just-so story about why we can ignore economists.
Well, the other liberal arts departments don't portend to not be liberal arts departments. Economics sells itself as rigorous and predictive. And "multinational capture" has occurred in myriad actual scientific fields, for similar reasons (using the prestige of rigorous, academic work to convince governments to do things).
There's also the matter of the "rational actor" theory of human behavior, the a priori assumption of classical economics. It describes a being which is basically non-existent among flesh and blood humans. But corporations can form themselves in the image of this mythical economically rational being. And so, if classical economics does objectively describes the world, corporations are the uber-mensches of such a world and poised to dominate it in perpetuity - a clear incentive to capture and control the field, lest dissident economists succeed in espousing a revision of their core assumptions.
You are dismissing an entire field of study because of your own mistaken assumptions. This post is a good example of how it is much easier to accept a simple narrative - "Economics is entirely dependent on an absurd assumption!" - because it offers an illusion of understanding rather than engage with the messy reality.
The "rational actor" is just a model, only applicable to limited situations, and acknowledged to be so. It's a specifiable model against which to test hypothoses. This rather shopworn critique - "humans aren't like idealized rational actors!" - is based on the implication that classical-type economists think that the model is fully congruent with reality. They don't! And furthermore, they wouldn't agree that "corporations" (hey, why not unincorporated entities too?) can form themselves in this way. They recognize the limitations of information, incomplete knowledge of preferences, and limited foresight and prediction - and these apply no less to groups of people as they do to individuals. If you tried to suggest in a classical-school economics environment that corporations can actually, in real life, form themselves into idealized rational actors, you'd probably give them gut-busting laughing fits.
> Economists are in favor of carbon taxes because the alternative is environmental regulation.
Regulation is inefficient, markets could be more efficient if they were markets with supply, demand and competition (which is clearly not the case in the emission markets at least not where I live)
> They favor open immigration policies because it brings flexibility to the job market. Leading to less job security for low skill workers and more profits for multinational companies.
This only happens if you start with an imbalanced market to begin with. If there is competition between the multinationals, then they are forced to decrease prices.
In other words, lower salaries result in lower prices which in turn benefit everybody, including and especially those low skilled workers that keep their job.
One way to make everybody richer is to decrease prices but this is basically overseen today and called the "deflation monster" even though it's a natural process due to tech advances.
> Economists are not intentionally supporting multinationals interests over people's interests. They do so as a side effect of their belief in the correctness and practical relevance of microeconomics and neo-classical theories.
Yes and these theories are IMO very misled and make no sense at all. Take even Krugman (the one I'm most familiar with) - he favors printing money to resolve an economic crisis caused by printing money. If that were the solution, we could all be rich by just printing our money and living happy ever after. See the problem?
Most economists today don't know what a market is and why it's superior, otherwise they wouldn't be in favor of a central bank. A Central bank basically practices price fixing for the market of money.
What viewpoint? Getting a PhD is a matter of 1) passing technical qualifying exams and 2) producing research of a reasonable quality. Most of the time the research will be very narrow in focus with no broader policy implications. At no point is your adherence to some free market ideological viewpoint tested out.
You highlight Stiglitz and Krugman as exceptions - but the fact that they won Nobels for their academic work suggests that economic theory itself does not directly lead to policy recommendations.
There's an important difference between "This is my opinion. You may contract me to express it at your venue" vs. "You may contract me to express any opinion you wish at your venue".
The former seems completely legit to me. The lawyers just need to look around for a witness that already has the opinion they prefer.
It's up to the people receiving the testimony to judge the credibility of the witness.
> There's an important difference between "This is my opinion. You may contract me to express it at your venue" vs. "You may contract me to express any opinion you wish at your venue".
> The former seems completely legit to me. The lawyers just need to look around for a witness that already has the opinion they prefer.
I agree with you, but think that it's important to distinguish "No scandal here" (your words) from "no problem" (an easy apparent synonym). Getting paid to espouse your honest opinions is (almost by definition!) not dishonest, but lending the lustre of academic support to fringe positions can lead to bad policy and decision-making. (The general public is, or even just non-academics and non-specialists are, not in a position to evaluate whether the paid opinion is representative of the academic consensus, or a fringe opinion held by a few; and, though the latter opinions have every right to be heard, it may be important to be aware of their status.)
Absolutely. In fact the original name of what we call Economics today was actually "Political Economy" and has its roots in moral philosophy. Rest assured, there is very little of anything resembling science going on. It's all agenda. There is something that they want to push and they are trying to find a way to justify it and make it palatable to the rest of society.
If science had anything to do with it we would eventually see a consensus form after a sufficient amount of time regarding issues of monetary policy and other topics that are currently contested.
Slightly off topic, but ProPublica does really great investigative work. They recently took over many of the technical functions that The Sunlight Foundation was going to shut down. They do important work on civil rights, criminal justice reform, asset seizure, public corruption, corporate corruption, etc.
If you have some spare cash, setting up a recurring monthly donation in any amount really helps them operate and plan for the future. I've added a subscription to the WaPo and recurring donations to ProPublica, ACLU, and The Marshall Project. This work is too important to neglect.
There are some stories they do that are really good. But as with all stories - ProPublica or not - please understand there may be an implicit bias or agenda.
On a different matter involving trial lawyers and an industry group, they reported a "scandal" where there was none. I am familiar with that issue (so I have my own biases!). It was my opinion that they were repeating the trial lawyer's argument and calling that an investigative journalism piece. Others may disagree with my assessment. I do not want to link to that story here.
This is one reason why I choose not to financially support ProPublica.
EDIT: I'm getting sick of the downvotes on Hacker News. This is not reddit where a downvote == disagree. Just don't upvote it. It's frustrating to take a few minutes to write a comment and then watch it get nuked because it's "controversial".
But please feel free to downvote away because my off-topic rant.
Fair point, they won't be perfect for everyone and they may rightly or wrongly ding organizations that people hold in high esteem (e.g. when they displayed the rank incompetence of the Red Cross a few years ago).
I'd argue that funding ProPublica and then funding an outfit who takes a contrary position on whatever issue is important to you is a better solution though. We need more journalism not less.
That's a useful concept. Sort of like a free speech hedge, or like buying carbon offsets. Could be gamed, though -- start an extreme paper to pump donations to your centrist paper ;)
Just because a side is associated with trial lawyers doesn't say anything about bias to me, one way or the other.
Sometimes they get involved in issues which seems like it would increase undesirable litigation. (of course people have differing opinions of what is undesirable).
But going further, sometimes laws are setup by congress which essentially 'outsources' enforcement to private parties. You can hold a good or bad opinion of the practice, or specific laws which are enacted, but in those areas, cases going to litigation can be the only way that the law is ever enforced.
I downvoted you because you are repeating the tired old trope about implicit biases and agendas. It's as if once we think we've identified someone's agenda, we can tell whether they're telling the truth. But this is false: the proper way is to assess the quality of reporting first, and if it is low-quality, then we can ask questions about how shoddy work got through, and then the answer might be biases and agendas. If it's good reporting, then biases and agendas are irrelevant. But in any case objective quality always comes first.
You can have objective high quality reporting and still be pushing an agenda. It will show in what you choose to report and what issues you just don't talk about.
In that case, I'd say choosing what to report is itself part of reporting, and if the choices are poor, that's low-quality reporting. So I don't really see an issue.
The alternative is neutrality, as in the old "we have to give 50-50 time to both sides". So 50% to climate change activists and 50% to climate change deniers, and so on. Is that really better than objective bias? I would think it's not. NYTimes also (publicly) gave up on neutrality in 2012, I believe.
The real problem today is most media today (and I don't include ProPublica in this) isn't even objective anymore. They're just biased, and engage in biased activism, with little objectivity and facts in its way.
Glenn Greenwald did an interview on this issue recently, which I think is worth watching for his perspective on this. Some may see Greenwald as "biased", but I think he's not only less biased than most "journalists" or pro-establishment figureheads on TV, but that more journalists should strive to be like him:
It's also been useful in identifying which types of bias people refer to when they're talking about bias. I know I personally didn't have a system in place to categorize these things, and generally thought of only a few of them at a time.
So for a meaningful criticism, you need to point out how their agenda is pernicious or contrary to their stated purpose, not just complain that they have it.
Is that really true? Good, quality reporting doesn't necessarily make biases irrelevant. If (hypothetically) it's true that both candidates in an election are corrupt, though one is more corrupt and dangerous than the other, a story that carefully exposes and discredits the less-corrupt one may be objective reporting on its own, but still serve a biased agenda.
I think we need to ask ourselves: when we seek out the news source's agenda first, what are we really trying to accomplish? Are we trying to think critically about what we're about to read? Or are we applying a quick heuristic filter to decide whether to read at all?
Think about it this way: I come across an article on XYZ site. I determine (or guess) that XYZ's agenda is generally conservative, and I consider myself a liberal. What do I do with that assessment? Do I stop reading and move on? Do I preemptively and summarily discount anything the article has to say? Or do I continue to read, perhaps skeptically, but nevertheless with an open mind?
I'd like to think we're doing the latter. But I'm not convinced.
My point is, it's totally fine to consider the source when making assessments of an article. It's totally fine to consider the source's agenda. But if seeking out the agenda becomes a routine, primary step in the process of consuming news, that worries me. That's essentially just seeking out confirmation of one's own biases as a reader.
That's fair. I think a lot of this depends on the precise definitions of words like "objective" or "biased." The 'best' strategy would be to always read everything incredibly critically and carefully, but we all need to use some cognitive shortcuts to actually get our news, and I think which shortcuts we choose have deep impacts on our perception of the world.
If you strongly disagree with someone and care to correct them you should actually UPVOTE them. This way the public gets to learn the correct way/thinking/method. If you bury them many who may have the same wrong notion may not get the chance to be enlightened.
But "the tired old trope about implicit biases and agendas" the whole content of the Pro Publica piece here? Take away all the facts just there to support that angle, and what's left?
The whole article is about implying pro-merger biases and agendas on the part of the economists on the basis of who they work for and how much they get paid.
> I downvoted you because you are repeating the tired old trope about implicit biases and agendas.
Hardly tired- biases and agendas caused the deep political divide in the U.S. and Brexit in England. While it's not news to those in the know, it's certainly not something we should hide or stop talking about.
Why not? You say they did something wrong, but then do not cite to what it was other than saying it involved "trial lawyers and an industry group". Why not provide a link to go along with your opinion and let people read it and decide if they agree with you or not rather than insinuating impropriety?
I didn't want to skew the discussion even more off-topic. Plus, I know I didn't have the time today to respond to all the counter-arguments to the article.
Everyone has an agenda. Here's an idea; judge a piece or organization by the quality of the work. I'll read pieces from the National Review even though I don't share their bias. Why? Because they employ good journalists and check their work.
Even without the cesspool of comments, I won't read Breitbart because the editorial quality is non-existant. Same goes for crapy left-wing blogs like RawStory.
In once case they released a study of how algorithms used by police were supposedly biased against minorities. Their results were "almost statistically significant". In other words, they weren't statistically significant. But they went ahead and published it anyway, under an alarming clickbait headline. https://www.chrisstucchio.com/blog/2016/propublica_is_lying....
It makes me pretty upset, because that is the study/article that everyone references when discussing that issue.
Can you explain what you mean with agenda? When i read the nytimes i expect a bit of an bias, i am totally ok with that. Every newspaper has an opinion. But i would not be ok with an agenda if you interpret that as selecting stories that mostly fit with your goal and bending stories to favour your goal. That's not journalism.
It's not just economists. I recall professors in other departments were contacted for "consulting" work. General Electric offered one political science professor a lucrative hourly rate (I think it was $650/hr) to consult on a legal case for the Dabhol power plant. This was years ago, so surely the fees have gotten larger. The professor turned it down for other reasons but said it would have been "easy money".
Based on my personal experience, that seems like a fairly typical ballpark number for hired expert work in legal cases. It can take a big chunk of time (and it may not see the light of day), but it can be interesting and the pay is quite good.
Take the money, write the op. But before sending it off, offer the academic you disagree with most fervently half, and ask her/him to write a counter-opinion. Publish both.
I understand that jononor's post https://news.ycombinator.com/item?id=12971712 was describing the most intellectually honest, rather than most profitable, approach; and in that capacity it's not clear, I think, that your objection is really an objection.
The best way to handle this seems to be accountability. There needs to be a reasonable way to hold companies to what they say. Currently, a company says the effect would be X in 5 years. In 5 years, these effects should be studied and if the variance is more than a reasonable standard - the merger should be relooked at and appropriate recommendations should be taken.
The current system looks at merger decisions as a one time policy decision. It should take it up as an iterative exercise.
This is really interesting. One solution would be social norms expressing scepticism towards pundits that made bold claims without publicly placing a large bet corresponding to the position.
This is really interesting. One solution would be social norms expressing scepticism towards pundits that made bold claims without publicly placing a large bet corresponding to the position.
Then that academic can make a company out of it, and charge $2000/hr. :)
The issue is academics cashing in on their research. I think this is fine in general. Having been through grad school I've worked with professors who I felt placed their entrepreneurial endeavors ahead of their educational requirements. This is an ugly practice. Ethical standards need to be in place to address this. If you're primarily conducting business using your academic credentials, then relinquish your chair to someone else, and take up some "fluff" title and pay your grad students out of your own kitty. Also, pay the university for the non-human resources you use, because it's like you're a hairstylist renting a chair in a salon to obtain and service clients.
I think this is primarily the reason why there's a generation of postdocs sitting on the sidelines waiting for a full professorship. They eventually get bored (and hungry) and move into the private sector, robbing academia of fresh blood and new ideas. So a de facto privatization of research emerges. We all lose when this gets out of hand.
> If you're primarily conducting business using your academic credentials, then relinquish your chair to someone else, and take up some "fluff" title and pay your grad students out of your own kitty.
This may be fair to ask of the professor, but it is perhaps reasonable to consider whether it is fair to ask of his or her graduate students (who are probably not to be blamed for their advisors' extracurricular habits). I work in math, where corporate sponsorship is (generally) not an issue, and so my opinion may be skewed; but it seems to me that a graduate student of someone with a 'fluff' title might be perceived less seriously than a graduate student of someone with a grander academic title, and so suffer even if his or her work is sterling. (On the other hand, perhaps driving students away from working with corporate consultants is a desireable side effect …?)
"Once a merger is approved, nobody studies whether the consultants’ predictions were on the mark. The Department of Justice and the Federal Trade Commission do not make available the reports that justify mergers, and those documents cannot be obtained through public records requests. Sometimes the companies file the expert reports with the courts, but judges usually agree to companies’ requests to seal the documents. After a merger is cleared, the government no longer has access to the companies’ proprietary data on their pricing."
While in school I went to an event hosted at the home of an Econ professor who worked on the Microsoft trial. It was lakefront property in a very posh suburb. We called it "The house that Bill Gates built."
The sad fact is that academics these days occupy themselves with chasing money and power, not science (at least the ones in "elite" schools).
Check out the movie "Inside Job":
- Glenn Hubbard (the Dean of Columbia University School of Business). His work for Countrywide Financial for $1200/hr, attesting that the lender's loans were no worse than a control group of mortgages and not fraudulent, was examined by an attorney for MBIA. MBIA was suing Countrywide over its mortgage practices.
- Frederic Mishkin, who, according to the Wall Street Journal, was paid almost $135,000 by the Icelandic Chamber of Commerce in 2006 to author a report that praised the stability of Iceland's economy and banking system—two years before they collapsed.
Genuinely curious: You think business school profs serving on the boards of big companies is "sad"? If I wanted to get an MBA, I would prefer to learn from people who have actual real-world experience rather than studying with someone whose experience was purely theoretical...
I think there's a valid concern about academic independence from industry. Without a reputable source of independent research, we fall into gaslighting pretty quickly.
This also reminds me that I really wish the restrictions can be reduced or removed so board of directors (like @pmarca) and CEOs can tweet more on public companies, which is part of what I mean by "Yishan-style CEOs".
This would be great. Lifting the restrictions that keep insiders from publicly disclosing information would likely improve market efficiency, reduce the value of true insider trading, reduce the spoils that go to information thiefs, and help to motivate and educate new entrepreneurs.
Lawyers from the very first day in law school are _intended_ to serve their clients (guilty or not); in the other hand professors -and educators in general- are supposed to be a lighthouse for knowledge, not another source of bad science due being paid.
In this context, calling professors "educators" is like calling lawyers "paralegals." Professors are academics. They are being paid for their professional, informed opinions based on knowledge and years of study. This is the same as lawyers sharing their legal opinions based on educational background (knowledge of the law) and real-world experience.
Also: In mergers, there is no "guilty or not". There is contract law, risk mitigation, strategy, and negotiation. Lawyers do so much more than simply saying what is "legal or illegal."
« They debated who had the better case. Carlton conceded that AT&T and T-Mobile would have found it hard to win at trial, according to an attendee. But he wished it had gone to court. He was eager to try out a new and provocative argument for mergers: That even though prices would have risen for customers, the companies would have achieved large cost savings. The gain for AT&T shareholders, he contended, would have justified the merger, even if cell phone customers lost out. »
According to this, obviously hearsay, Carlton truly wanted to argue that a merger was beneficial because shareholders won even though customers lost; this boggles the mind because the major intent of anit-trust law is to protect customers!
This article is focussed on anti-trust regulation, but the problems it addresses are much broader.
Every spending and tax law, for example, is scored by the Congressional Budget Office/Joint Committee on Taxation to determine the budgetary impact. Economists are hired to lobby these organizations about the "right" way to score policy, and then the organizations might or might not adjust their methodologies. Sometimes Congress can place pressure on the scoring organizations, too.
This would all be fine, except that neither the economic methodologies nor the data are publicly available. Sure, the big picture methodology is disclosed, but not the key assumptions.
If the economic methodologies were disclosed in full, I'd be all for outsiders suggesting ways to improve the methods. Then a scientific discussion could be carried out in public, and I think it would be obvious to anyone observing the process that the JCT or CBO economists are trying to do the best job that they can.
One step towards disclosing methods is through documentation, but given the importance of detail in the types of analyses that JCT and CBO do, supplemental documentation is unlikely to be sufficient. Instead, the organizations need to make their analytical code available. In other words, CBO and JCT should make their code available to the public and take outside suggestions for improvements. They should be open source!
Granted the data won't always be available to the public given that CBO and JCT rely on administrative data that is highly private, but they can at least produce dummy datasets and detailed summary statistics.
All of this same reasoning applies to the anti-trust situation. They ought to open source their analyses as well.
[Disclaimer, I'm a contributor to a few open source models for public policy analysis.]
It is possible mega-mergers make sense economically. However economists do not take into account individual ambition. A chairman or a CEO might say satisfying words for a merger, but with real plans to increase prices due to increased market share
As someone who studied economics and works as an economist, I agree economics today is full of bull$h^t and biased "experts" and politicking masquerading as legit social science work, I see it daily. And it goes on in mainstream and heterodox economics, in industry and in academia.
(I'd preferred to call my job something like "statistician focused on economics and finance" - not economist, but it didn't fit on the business card)
I just wanted to point out $1000 an hour pay is a quite common amount paid to any/all professions when law firms needs an outside expert opinion for a case.
This $ is not unique to company merger cases nor economists.
e.g. if a lawsuit needs a medical expert or engineering expert it's likely they are getting paid ~$1000 an hour for this time. And I don't doubt the clients are being billed way more than that - $1000 is just the expert's cut.
Not defending anything, just pointing out this amount is what law firms commonly pay for outside "professional expert" opinion work.
Curious if there is a way to force these companies to place bets on the predictions that they make. They say that a merger is going to do XYZ -- well, with what degree of certainty? And are you willing to take a position tied to the outcome? Because as it stands, they can make an argument it will help with consumer choice -- but that isn't the driver, it's about profits. So if the idea is to protect the consumer or benefit them, make a prediction about that and then take a position where you will get an additional payoff if you are right. If you are wrong, you'll be "fined" by having to cover the bet.
Dennis Carlton is as crooked as they come. Smart for sure, selfish of course. He has a legion of poorly paid graduate students publishing his junk science and manipulating data from flawed studies to say whatever it is he likes.
And at the end of the day, what makes you smart does not mean you're intelligent. Just because you can master a discipline to achieve your goal of extreme wealth accumulation is unimpressive. I feel that some day when money does not matter, rich people who actually created very little value (and may have even been a net negative) will be looked on as one of the great evils of society.
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[ 3.3 ms ] story [ 208 ms ] threadIs there any good way to solve it that won't result in less valid science work getting funded?
Bona fide science has peer review and falsifiability. Also imperfect, but nowhere nearly as commonly manipulated as is economics for hire by business interests and their think tanks.
In fact, this seems like a good time to mention the only Senator I've ever seen in decades of observing politics who actively attacks this problem is Elizabeth Warren.
https://www.washingtonpost.com/politics/how-elizabeth-warren...
This blurb, for instance, openly admits their expert opinions are for sale,
'Economists have an “incentive to get a reputation as someone who will make a certain type of argument. People will hire you because they know what testimony you will give,” said Robert Porter, an economist from Northwestern who has never testified on behalf of a corporation in an antitrust matter.'
"It is but equity...that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed and lodged."
Nobody from inside of England could have written the book - it would be like a fish trying to explain water. But his underlying sympathies emerge in numerous places.
Is this your interpretation or based on Smithian scholarship? I've studied a fair bit of that and not run across this particular view.
Smith was born not long after England (whose per capita wealth was around 5x that of Scotland) took over Scotland. He lived during a period where England was building a worldwide trading empire, Scotland was benefiting from exposure to England, and the Industrial Revolution was just starting. Oh right, and two civil wars (the Jacobite rebellions) about whether Scotland wished to continued to be united with England.
A definite intellectual challenge for the Scots of the day was how it was that England, in every way seemingly worse than themselves, should be the ones in charge. Smith provided part of the answer.
England did not "take over" Scotland. There was no invasion or conquest, as in Ireland. The two countries voluntarily merged, scotland was represented in the British parliament and so on.
The Wealth of Nations is not weitten about England. Smith was describing the society around him, in Scotland, many of the examples given in the book are directly taken from his everyday observations in the central belt of Scotland.
At that time Scotland was in a tumult of intellectual and socialrevolution. Smith coukd look around and see the beginnings of an industrial society on his doorstep.
A better explanation for why Smith and other enlightenment figures were in scotland and not so much England would be local cultural factors, such as scottish presbytereanism making for an incredibly high literacy rate in scotland as compared to england, or the great abundance of universities in scotland compared to England.
Others are John Rae (1895), Edwin Cannen (1896), Francis Wrigley Hirst (~1910), Bagehot, and Emma Rothschild (various, ~1970s to present).
Also, Wikipedia: The socialist political movement includes a diverse array of political philosophies that originated amid the revolutionary movements of the mid-to-late 1700s
https://en.wikipedia.org/wiki/Socialism
https://www.adamsmith.org/blog/tax-spending/adam-smith-and-p...
Progressive taxation is not socialism.
Moreover, in his day, common taxes were very, very low. Nobody had ever conceived of 20% 50% 60% taxation.
The plebes would riot with only a few % tax hike.
The USA was born out of a tax revolt of a measely few % that was frankly needed, for the protection of their own trade.
First of all, that's not true. Taxes in the early modern period are estimated to have been in the range of 15-20% of overall production, and rose significantly during industrialization.
But more importantly, most taxes in that period were typically assessed either as a fixed per-unit tax on the production or import of specific goods, or as a yearly fee for the possession of certain items. In this respect, they were quite different from modern income taxes -- it's hardly possible to compare them numerically.
It describes Supply and Demand in a mechanical way, illustrates the power of comparative value, the 'invisible hand' etc..
Smith was a Ethicist and a heavy duty Christian, and so he also realized how the system could be imbalanced, and definitely took the concerns of the plebes to heart etc..
But by no means was this a social treatise, or an attempt to validate social theory or 'socialism' (which didn't really exist).
And I think your comment about Scotland/UK is not true at all.
The 'Supply and Demand' bit that Krugman said 'all econs agree on' is really from Adam Smith.
Marx basically evaluated that in the context of the fact that some small group apparently had all the capital, while others had none, which creates an inherent power/class struggle and so it turns into a political issue.
Smith and Marx probably would have agreed on 'the problem' though almost surely not the solution :)
I've always thought the problem with the major economic systems isn't that either of them is inherently flawed, just that they haven't really even been implemented in a large enough scale for any decent period of time. In America we pay socialist taxes and get capitalist benefits, that's the problem. We have to pick one and commit to it.
There used to be a 'free market' it was called 'feudalism'.
Not quite, but almost.
If you believe in 'Adam Smith' then you understand under a totally free system, one person would end up with all the wealth.
Adam Smith was not a libertarian, or a 'laissez faire' kind of dude. He was an Ethicist and heavy duty Christian and to him capitalism was a moral issue.
Unlike the 'Chicago School' and Libertarian types who really state that corps exist for the shareholders, that's it, end of story.
As noted above, Smith invented progressive taxation.
Get this - do you know what Smith said the #1 quality of a CEO is?
Get this: 'Benevolence'
Not something you'd hear too often in America.
Onerous regulation is obviously a problem, and wasted taxation inefficient government is also a problem.
But there's no doubt they have to exist.
There's a 99.9% chance you'd be a serf were there to be a truly free and open, 'laissez faire' market. You wouldn't even have a chance at going to a good Uni. You know Trump's son-in-law, Kushner? He only got into Harvard after his parents gave $2.5M to the school. Maybe 1/3 Harvard students buy they way in. In a totally capitalist system, 100% of top spots would be 'bought' - industrialists want to ensure their legacy, and that their kids get into the top schools, and that would guarantee the longevity of their Empire.
Anyhow, that taxes can be too high and spent inefficiently does not mean they should not exit.
I think you're right in your assertion that the "dismal science" is cherry-picked to support a perspective, not unlike using hard science in the same way, but without the ability to reliably reproduce results.
That's why it is hard to take economists seriously. If economy is a science, then facts should establish themselves and economists should agree on more and more things. That does not seem to happen.
Take the statement "Lowering income taxes causes people to work more and in the end generates more revenue for the state". That theory has been put to test in many countries (like in the US during Reagan's presidency) but they still can't agree on if it is true or not. So how can economy be a science when empirical evidence doesn't cause facts to accumulate?
I recommend this article at The Atlantic about what economists agree on. It has citations to surveys of economists: http://www.theatlantic.com/business/archive/2012/04/4-politi...
Related but reductionist cartoon: http://www.smbc-comics.com/?id=3117
And contrary to popular belief, economists would generally agree that certain facts have established themselves and been agreed upon. For example, subjective value: https://en.wikipedia.org/wiki/Subjective_theory_of_value
This is an essential insight of economics, and one that was not really systematically grasped until recently (and still not grasped by the majority of the public.) It is as close to true as a sociological/ecological thesis can be, and is almost universally accepted. But because it is so accepted, you don't hear much about it.
What you're referring to is the Laffer curve - based on the observation that, at both 0% and 100% marginal tax rates, no tax revenue will be collected (none at 0% because no tax, essentially none at 100% because of disincentive.) That means that, in between those two end-points, there has to be a curve of some shape showing the total revenue collected, with a peak (or peaks) somewhere on it where revenue is maximized. The discussion is about where this peak is, and how the curve is shaped. To say "does lowering income taxes increase revenue" is an incomplete question: lower from what rate? Under what macroeconomic conditions? At what overall national wealth level? Interacting with what other taxes? Considering what conditions in capital markets? Etc, etc. Teasing out these huge numbers of other factors is the challenge of economic study, and why so many seemingly "simple questions" are unanswered: because they're not actually simple.
That's the point. Assuming the Laffer curve theory is correct, the question should be "what is the optimal tax rate?" That would mean that economists should propagate for the tax rate to be increased in some countries because it is too low and decreased in others. That's not what economists have been doing (if I'm wrong can you show me an economist favoring increasing taxes using the Laffer curve theory?) and instead they have only asked "how much lower should the tax rate be?"
Now the theory might be discredited, but I'm sure economists will come up with a new one to justify lowering taxes. :)
> Etc, etc. Teasing out these huge numbers of other factors is the challenge of economic study, and why so many seemingly "simple questions" are unanswered: because they're not actually simple.
But the questions aren't going unanswered. Politicians ask and economists do answer questions about tax rates, unemployment rates, interest rates, wage growth...
In climatology, at least the basic principles have been tested in laboratories; higher concentration of CO2 in air -> less reflected sunlight -> higher temperature. The Laffer curve theory was never tested in a laboratory, yet it was for decades trotted out as the truth by economists.
Here's a reasonably representative survey of US economists about the laffer curve: http://www.igmchicago.org/surveys/laffer-curve
Note what's happening here: most economists either think that a cut in federal income tax rates would lead to higher GDP, or are uncertain/think there's no effect. However, almost all also think that such tax cuts would not increase revenue - so any argument for tax cuts, according to these economists, is not based on the Laffer curve. Indeed, because of where these economists think US income tax rates are on the Laffer curve, they would have to agree, to be consistent, that increasing tax rates would increase revenue, on the margin. Therefore, the "Laffer curve consensus" among US economists is in fact the opposite of what your impression is.
> But the questions aren't going unanswered. Politicians ask and economists do answer questions about tax rates, unemployment rates, interest rates, wage growth... In climatology, at least the basic principles have been tested in laboratories; higher concentration of CO2 in air -> less reflected sunlight -> higher temperature. The Laffer curve theory was never tested in a laboratory, yet it was for decades trotted out as the truth by economists.
Politicians get certain answers to these questions from different economists, but they're definitely live issues in the field itself. Don't confuse the theory that Laffer curves exist - which is not controversial - with the argument that a particular tax regime is on a particular point of the curve - which is more uncertain. Just because you get an answer does not mean the question is definitively concluded.
And you can test the Laffer curve in a lab - but only with small numbers of people in a limited economic context. When you scale it up to a large number of people in a complex economy, the picture is much less clear and more complicated. (Likewise with climatology.) That's why it's hard!
Also, consider the following paper, written around the same time that people first started calling it the Laffer Curve (though the basic idea had been understood well before.): https://object.cato.org/sites/cato.org/files/serials/files/c...
It's by David Henderson for Cato, who's quite in favour of cutting taxes. But rather than jump on the argument as a useful "justification" for doing so, he points out the numerous limitations of the model, and the possibility of unusual Laffer Curve shapes that would mean tax cut...
Reducing taxes does cause people to work more. Whether it results in more revenue for the state depends on how much income tax was before and after the change. Elasticity of labour supply is not constant over all tax rates.
I know people like to crap on the Laffer curve but they crap on it because it's trivial if you have the barest knowledge of economics, not because it's false.
Macroeconomics is closer to the morass you describe but it still accumulates truth, if possibly depressingly slowly and with thirty year periods of regress. Microeconomics is on much firmer ground, in large part because they have more data and it's easier to accumulate it.
If you want a very readable introduction to price theory, which is a large part of microeconomics check out "Hidden Order" by David D. Friedman. It's based on his Price Theory textbook but rewritten for interest and readability. If you want something a bit more mathematically sophisticated, (basic calculus) look at Intermediate Microeconomics, Hal Varian.
Is there any evidence to back that statement up?
This is not the best example. When a panel of economists was asked whether "a cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut," none of them answered in the affirmative. 8% said they were "uncertain," and 71% either "disagreed" or "strongly disagreed." (5% answered "no opinion" and the rest didn't answer at all.) See: http://www.igmchicago.org/surveys/laffer-curve
If you don't take economists seriously, you might not notice when they agree on things.
Let's say you create some sort of giant monetary stimulus package. If the economy gets worse proponents will say "Whew! Just think how terrible things would have been without our stimulus package," and opponents will say "Things got worse because of the stimulus package!"
There's no way to know who's right. The best you can do is make imperfect models to encapsulate trillions of individual decisions people make. But that's not proof.
This has nothing to do with economics - that's how expert opinions work in law. It happens with all kids of expert opinions presented as testimony, from economics to medicine to cryptography.
Take a look at the way the expert opinions presented from both sides of the Newegg trial worked if you want to see jaw-dropping expert testimony action - Whitfield Diffie's own testimony on RSA (which he co-invented) was, a priori, given equal weight to the testimony of an expert hired by TQA. It was up to Newegg's and TQA's respective legal teams to convince the jury that Diffie's testimony was more mathematically sound than the other expert's testimony.
In practice? It's a little bit true. How many CS grads work at companies roughly in the sectors you mention? How many want to?
What a field is or is not about is not determined by what graduates of said field do or want to do post graduation.
theory and application BOTH define the field. it's an unfortunate tendency in academia to claim that _only_ the research/theory part is the field.
You obviously are an economist who has an extreme biased.
And no, I'm not an economist with "an extremely biased [sic]". I'm a supply chain engineer that has directly worked with dozens of economists for approximately 3 years, incorporated dozens of their econometric models into supply chain decision systems, and have never once have discussed anything political with them. And I just witnessed a clueless bullshitter malign the field of study that they have dedicated their lives to with an argument that could be considered libel at its most forgiving interpretation, and decided to call that clueless bullshitter out on it.
The ones doing actual actionable economics are publishing and working on policy in non-sexy journals you're never going to stumble across. Or working in invisible, non-controversial advisory roles.
So yes... the economists spend their lives _not actually doing economics anymore_ are probably pushing politically motivated actions. Shocking! Scandal!
You'd have to move to China to get a top-tier PhD in Marxist theory. Why is that?...
Economists broadly want to eliminate the mortgage interest deduction, corporate interest deductions, and reduce the corporate income tax, want employers to stop providing health insurance as an employment benefit (http://www.igmchicago.org/surveys/tax-reform, http://www.igmchicago.org/surveys/healthcare), and broadly disfavor rent control (http://www.igmchicago.org/surveys/rent-control). Yet before we go off accusing economists of being right-wing shills, they also broadly want carbon taxes over income taxes (http://www.igmchicago.org/surveys/carbon-taxes-ii) and favor open immigration policies (http://www.igmchicago.org/surveys/high-skilled-immigrants).
None of these are particularly politically-fashionable positions to take, with the possible exception of the CIT issue, which plays well with one half of the electorate and is broadly viewed as liquid evil by the other half.
It's the trouble with people making equivalences between "a particular person calling themselves an economist" and "economics". There are hundreds of thousands of people with economics degrees, it is trivially easy to find one who says what you want to hear. But then, that economist's words are often taken to reflective of economics as an entire field of study - regardless of the reasoning behind it, or how many other economists actually agree. So most economists may have totally sensible reasons for supporting Policy A, but when one dissenting economist supports Policy Not-A, the "consensus view" gets ignored. I don't know why this is. Maybe because people feel competent to judge economic reasoning in a way that they don't with other fields (and which might lead them to seek more opinions.)
As an example, I have a Computer Science degree, however I can't imagine anyone taking what I have to say about Computer Science to be reflective of the greater industry. I'm just a schmuck with a degree.
Of course this phenomenon does happen in other fields too - think of how often there's an article where "science says x!", when in reality it's just one paper with a tentative conclusion. It just seems particularly common for people to misunderstand economics.
Economists are not intentionally supporting multinationals interests over people's interests. They do so as a side effect of their belief in the correctness and practical relevance of microeconomics and neo-classical theories. This behaviour is in turn encouraged and rewarded by multinationals and investment banks, leading dissenting voices to be marginalized. Of course there are notable exceptions, Stiglitz, Krugman, Rodrik, and a few others. But the general point is that if you want to get an economics PhD from a red brick university you will have to support this viewpoint.
There are also interesting differences in how economists view themselves compared to other humanities, see this (biased) paper: Fourcade et al, the Superiority of Economists http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.29.1.89 Economics tend to be a more insular and hierarchical discipline, and views itself as non-normative.
Which means that when economists have theories that fly in the face of what people believe (like pretty much all of science), people get more annoyed.
To me (like you), that suggests that GP is telling a just-so story about why we can ignore economists.
There's also the matter of the "rational actor" theory of human behavior, the a priori assumption of classical economics. It describes a being which is basically non-existent among flesh and blood humans. But corporations can form themselves in the image of this mythical economically rational being. And so, if classical economics does objectively describes the world, corporations are the uber-mensches of such a world and poised to dominate it in perpetuity - a clear incentive to capture and control the field, lest dissident economists succeed in espousing a revision of their core assumptions.
Regulation is inefficient, markets could be more efficient if they were markets with supply, demand and competition (which is clearly not the case in the emission markets at least not where I live)
> They favor open immigration policies because it brings flexibility to the job market. Leading to less job security for low skill workers and more profits for multinational companies.
This only happens if you start with an imbalanced market to begin with. If there is competition between the multinationals, then they are forced to decrease prices.
In other words, lower salaries result in lower prices which in turn benefit everybody, including and especially those low skilled workers that keep their job.
One way to make everybody richer is to decrease prices but this is basically overseen today and called the "deflation monster" even though it's a natural process due to tech advances.
> Economists are not intentionally supporting multinationals interests over people's interests. They do so as a side effect of their belief in the correctness and practical relevance of microeconomics and neo-classical theories.
Yes and these theories are IMO very misled and make no sense at all. Take even Krugman (the one I'm most familiar with) - he favors printing money to resolve an economic crisis caused by printing money. If that were the solution, we could all be rich by just printing our money and living happy ever after. See the problem?
Most economists today don't know what a market is and why it's superior, otherwise they wouldn't be in favor of a central bank. A Central bank basically practices price fixing for the market of money.
You highlight Stiglitz and Krugman as exceptions - but the fact that they won Nobels for their academic work suggests that economic theory itself does not directly lead to policy recommendations.
The former seems completely legit to me. The lawyers just need to look around for a witness that already has the opinion they prefer.
It's up to the people receiving the testimony to judge the credibility of the witness.
No scandal here.
> The former seems completely legit to me. The lawyers just need to look around for a witness that already has the opinion they prefer.
I agree with you, but think that it's important to distinguish "No scandal here" (your words) from "no problem" (an easy apparent synonym). Getting paid to espouse your honest opinions is (almost by definition!) not dishonest, but lending the lustre of academic support to fringe positions can lead to bad policy and decision-making. (The general public is, or even just non-academics and non-specialists are, not in a position to evaluate whether the paid opinion is representative of the academic consensus, or a fringe opinion held by a few; and, though the latter opinions have every right to be heard, it may be important to be aware of their status.)
This is completely unfair. 'Most of economics' is just academic, and has little to do with policy.
Moreover, there's absolutely nothing wrong with companies hiring economists to build models for things that interest them.
AT&T's acquisitions are mostly their business, and so long as the government does it's job, then there should be little concern.
The 'issue' should be the competence and ability of those green-lighting M&A.
If science had anything to do with it we would eventually see a consensus form after a sufficient amount of time regarding issues of monetary policy and other topics that are currently contested.
If you have some spare cash, setting up a recurring monthly donation in any amount really helps them operate and plan for the future. I've added a subscription to the WaPo and recurring donations to ProPublica, ACLU, and The Marshall Project. This work is too important to neglect.
On a different matter involving trial lawyers and an industry group, they reported a "scandal" where there was none. I am familiar with that issue (so I have my own biases!). It was my opinion that they were repeating the trial lawyer's argument and calling that an investigative journalism piece. Others may disagree with my assessment. I do not want to link to that story here.
This is one reason why I choose not to financially support ProPublica.
EDIT: I'm getting sick of the downvotes on Hacker News. This is not reddit where a downvote == disagree. Just don't upvote it. It's frustrating to take a few minutes to write a comment and then watch it get nuked because it's "controversial". But please feel free to downvote away because my off-topic rant.
I'd argue that funding ProPublica and then funding an outfit who takes a contrary position on whatever issue is important to you is a better solution though. We need more journalism not less.
Sometimes they get involved in issues which seems like it would increase undesirable litigation. (of course people have differing opinions of what is undesirable).
But going further, sometimes laws are setup by congress which essentially 'outsources' enforcement to private parties. You can hold a good or bad opinion of the practice, or specific laws which are enacted, but in those areas, cases going to litigation can be the only way that the law is ever enforced.
The real problem today is most media today (and I don't include ProPublica in this) isn't even objective anymore. They're just biased, and engage in biased activism, with little objectivity and facts in its way.
Glenn Greenwald did an interview on this issue recently, which I think is worth watching for his perspective on this. Some may see Greenwald as "biased", but I think he's not only less biased than most "journalists" or pro-establishment figureheads on TV, but that more journalists should strive to be like him:
https://www.youtube.com/watch?v=WTC-GvWRlQ8
https://en.wikipedia.org/wiki/False_balance
I found the media bias article on Wikipedia to be a good primer on types of bias to keep in mind while reading.
https://en.wikipedia.org/wiki/Media_bias#Types
It's also been useful in identifying which types of bias people refer to when they're talking about bias. I know I personally didn't have a system in place to categorize these things, and generally thought of only a few of them at a time.
Accurately reporting current events is an agenda.
So for a meaningful criticism, you need to point out how their agenda is pernicious or contrary to their stated purpose, not just complain that they have it.
'Balance' is often used as a cover for an agenda.
Think about it this way: I come across an article on XYZ site. I determine (or guess) that XYZ's agenda is generally conservative, and I consider myself a liberal. What do I do with that assessment? Do I stop reading and move on? Do I preemptively and summarily discount anything the article has to say? Or do I continue to read, perhaps skeptically, but nevertheless with an open mind?
I'd like to think we're doing the latter. But I'm not convinced.
My point is, it's totally fine to consider the source when making assessments of an article. It's totally fine to consider the source's agenda. But if seeking out the agenda becomes a routine, primary step in the process of consuming news, that worries me. That's essentially just seeking out confirmation of one's own biases as a reader.
If you strongly disagree with someone and care to correct them you should actually UPVOTE them. This way the public gets to learn the correct way/thinking/method. If you bury them many who may have the same wrong notion may not get the chance to be enlightened.
Hardly tired- biases and agendas caused the deep political divide in the U.S. and Brexit in England. While it's not news to those in the know, it's certainly not something we should hide or stop talking about.
Here's a study for you:
http://siepr.stanford.edu/highlights/sticking-script-rise-bi...
http://web.stanford.edu/~gentzkow/research/politext.pdf
Why not? You say they did something wrong, but then do not cite to what it was other than saying it involved "trial lawyers and an industry group". Why not provide a link to go along with your opinion and let people read it and decide if they agree with you or not rather than insinuating impropriety?
Says who? Not the creator of this site, at least: https://news.ycombinator.com/item?id=117171
(Note: I personally don't downvote when I disagree, but I don't think there's an official position by the site)
https://news.ycombinator.com/newsguidelines.html
Even without the cesspool of comments, I won't read Breitbart because the editorial quality is non-existant. Same goes for crapy left-wing blogs like RawStory.
It makes me pretty upset, because that is the study/article that everyone references when discussing that issue.
I am not American but after the US elections have decided to actively get involved in supporting progressives/liberals anyway I can.
They will be sorely needed...
I understand that jononor's post https://news.ycombinator.com/item?id=12971712 was describing the most intellectually honest, rather than most profitable, approach; and in that capacity it's not clear, I think, that your objection is really an objection.
The current system looks at merger decisions as a one time policy decision. It should take it up as an iterative exercise.
This is really a case study in how the morality of individuals in a country determines the fate of the country.
The issue is academics cashing in on their research. I think this is fine in general. Having been through grad school I've worked with professors who I felt placed their entrepreneurial endeavors ahead of their educational requirements. This is an ugly practice. Ethical standards need to be in place to address this. If you're primarily conducting business using your academic credentials, then relinquish your chair to someone else, and take up some "fluff" title and pay your grad students out of your own kitty. Also, pay the university for the non-human resources you use, because it's like you're a hairstylist renting a chair in a salon to obtain and service clients.
I think this is primarily the reason why there's a generation of postdocs sitting on the sidelines waiting for a full professorship. They eventually get bored (and hungry) and move into the private sector, robbing academia of fresh blood and new ideas. So a de facto privatization of research emerges. We all lose when this gets out of hand.
This may be fair to ask of the professor, but it is perhaps reasonable to consider whether it is fair to ask of his or her graduate students (who are probably not to be blamed for their advisors' extracurricular habits). I work in math, where corporate sponsorship is (generally) not an issue, and so my opinion may be skewed; but it seems to me that a graduate student of someone with a 'fluff' title might be perceived less seriously than a graduate student of someone with a grander academic title, and so suffer even if his or her work is sterling. (On the other hand, perhaps driving students away from working with corporate consultants is a desireable side effect …?)
https://theintercept.com/2016/11/15/google-gets-a-seat-on-th...
They wanted her to do some consulting for them, relevant to mergers, acquisitions and the result on oil prices.
She wanted to politely tell them no. So she quoted triple her normal hourly rate, already hundreds of $ per hour.
They said "sure" -- so she had to tell them no the old-fashioned way :)
Check out the movie "Inside Job":
- Glenn Hubbard (the Dean of Columbia University School of Business). His work for Countrywide Financial for $1200/hr, attesting that the lender's loans were no worse than a control group of mortgages and not fraudulent, was examined by an attorney for MBIA. MBIA was suing Countrywide over its mortgage practices.
https://en.wikipedia.org/wiki/Glenn_Hubbard_(economist)
- Frederic Mishkin, who, according to the Wall Street Journal, was paid almost $135,000 by the Icelandic Chamber of Commerce in 2006 to author a report that praised the stability of Iceland's economy and banking system—two years before they collapsed.
https://en.wikipedia.org/wiki/Frederic_Mishkin
Most of the profs in "elite" business schools sit on boards of big companies like GE, are members of Council on Foreign Affairs, etc.
Just sad.
Also: In mergers, there is no "guilty or not". There is contract law, risk mitigation, strategy, and negotiation. Lawyers do so much more than simply saying what is "legal or illegal."
An economist need not be either a prof or an educator.
Tons of them work for banks, specialists just like devs, consultants, mathematicians, lawyers etc..
According to this, obviously hearsay, Carlton truly wanted to argue that a merger was beneficial because shareholders won even though customers lost; this boggles the mind because the major intent of anit-trust law is to protect customers!
Every spending and tax law, for example, is scored by the Congressional Budget Office/Joint Committee on Taxation to determine the budgetary impact. Economists are hired to lobby these organizations about the "right" way to score policy, and then the organizations might or might not adjust their methodologies. Sometimes Congress can place pressure on the scoring organizations, too.
This would all be fine, except that neither the economic methodologies nor the data are publicly available. Sure, the big picture methodology is disclosed, but not the key assumptions.
If the economic methodologies were disclosed in full, I'd be all for outsiders suggesting ways to improve the methods. Then a scientific discussion could be carried out in public, and I think it would be obvious to anyone observing the process that the JCT or CBO economists are trying to do the best job that they can.
One step towards disclosing methods is through documentation, but given the importance of detail in the types of analyses that JCT and CBO do, supplemental documentation is unlikely to be sufficient. Instead, the organizations need to make their analytical code available. In other words, CBO and JCT should make their code available to the public and take outside suggestions for improvements. They should be open source!
Granted the data won't always be available to the public given that CBO and JCT rely on administrative data that is highly private, but they can at least produce dummy datasets and detailed summary statistics.
All of this same reasoning applies to the anti-trust situation. They ought to open source their analyses as well.
[Disclaimer, I'm a contributor to a few open source models for public policy analysis.]
(I'd preferred to call my job something like "statistician focused on economics and finance" - not economist, but it didn't fit on the business card)
I just wanted to point out $1000 an hour pay is a quite common amount paid to any/all professions when law firms needs an outside expert opinion for a case.
This $ is not unique to company merger cases nor economists.
e.g. if a lawsuit needs a medical expert or engineering expert it's likely they are getting paid ~$1000 an hour for this time. And I don't doubt the clients are being billed way more than that - $1000 is just the expert's cut.
Not defending anything, just pointing out this amount is what law firms commonly pay for outside "professional expert" opinion work.
And at the end of the day, what makes you smart does not mean you're intelligent. Just because you can master a discipline to achieve your goal of extreme wealth accumulation is unimpressive. I feel that some day when money does not matter, rich people who actually created very little value (and may have even been a net negative) will be looked on as one of the great evils of society.