Just a quick note on my previous post. My comments about the importance of petroleum to our industrial civilization in no way mean that I like the oil industry. I would so very much prefer that the United States had built a wide ranging high quality public transportation network than the current automobile dominated system. Of course, given the environment in which this country evolved politically and economically, it is easy to understand the current state of affairs.
Where do you get your economic news from?
by bohm 22 Replies latest jw friends
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jamesmahon
Thanks Bohm for starting a good thread. There are some really good points made here and I would largely agree with most of them.
Is economics a science? I suppose the question is can we adopt the scientific method? The answer is probably no, not in a sense that would please a chemist or physicist. At best we can undertake natural experiments, but not ones we have much control over. There are some economists that look at behaviour in a controlled way but this is psychology more than economics.
There is a reality that even before any recognisable economic theory there were markets, unemployment, inflation, taxation etc. Economic theory just came along to try to explain why this happened. I am not so pessimistic as the person you quoted Dave on Economics being a load of bunk - I think that relates to economic forecasting pretty accurately though. On the point particularly about money being seen as just being a unit of exchange - this is wrong. A system with money is one way of addressing those three fundamental economic questions. If money leads to social power that in turn leads to a poor selection of goods produced that are also allocated poorly then the system is wrong. But economics allows us to assess this system against others - say a barter economy. Too many people think that economics is all about money - if I lived on a desert island with two other people (or some would say even with myself) then economic theory would still have much to say about those three basic questions.
I am an econometrician by trade as much as an economist and think that econometrics (or just good statistics) are a useful way of providing evidence of relationships. I think the problem is that in Government (I can only speak for the UK) there is an obsession with statistics as being the be all and end all. They are useful and do highlight so interesting correlations but causation? You need other ways other than statistics to show why things happen and you need a good understanding of statistics to not have the wool pulled over your eyes by its misuse.
What economics provides is a way of thinking and approaching those initial three questions I set out in my previous post. When I said that no one asks the real questions anymore, what I mean is that we do not ask those three fundamental questions anymore. Because the market model (free or regulated to different degrees) has been correlated with massive increases in output, everyone assumes that it must be 'best'. Better than socialism? Certainly at raising output, although in the short term maybe not (see 1920's and 30's Russia). It provides incentives for individuals and companies to innovate, but also leads to wasteful competition rather than cooperation. It is really, really rubbish at allocating resources fairly, unless you take the line that those that can generate the most output - meaningful output or not - deserve the biggest share of the pie. Poor people are poor becuase they have no market value. Whether this is because they are lazy or because they do not have skills the market values is irrelevant. Equally, rich people can be rich not because of what they have achieved but because capital is allowed to accumulate between generations. Churchill said that capitalism is bad, but it is better than the alternative. I just think there may be other alternatives that have not been thought of yet - but whatever system was proposed economics has the tools to assess it.
If I had to be specific, a couple of big questions that I think do need to be addressed that are not discussed openly in any serious way are
- What is a fair way to allocate inter (and intra)-generational wealth
- Should there be a limit on fixed resources, such as housing, that people are allowed to own or control where it is signifciantly detrimental to other people?
As a bit of an aside, but to show how approaching a problem from an economist's perspective rather than say a politicians, take healthcare provision in the UK and US. In the UK there is a levy placed on everybody based on ability to pay with actual provision at point of consumption free for everyone, whereas a simplified version of the situation in the US is you pay an insurance premium based on individual risk with no provision if you do not or cannot pay. Now, if you look at the three basic economic questions, these are two different ways of deciding what healthcare gets provided, how it is provided and who gets it. If we were assessing which system is better we could rephrase these questions as to which system is most economically efficient (able to procure the units for healthcare production for the least - keeping quality in mind), technically efficient (able to put the resources of health care production together to get the most bang for the buck) and allocatively efficient (able to allocate the resources in such a way that it generates the most benefit - however you want to measure 'benefit'). Economics provides the toolkit to be able to make this assessment and actually is surprisingly good at it (these sort of assessments are what I spend most of my life doing).
Anyway just waffling now. Bohm, you wanted to know a good book? It is a long time since I was a student but there are load of good primers in micro and macro economics that would make you able to read the opinions of others with a more critical eye. Lipsey did a good one I seem to recall but there may be better ones now. I would read one of those before reading another 'popular' economics book.
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jaguarbass
I get my economic news from my paycheck. I havent gotten a raise in 3 years.
Also my stock portfolio has gone sideways since Bush, the dumber.