An Everyman’s View of Economic Science

[Goldstein1984]

Let’s just say this up front: There is more voodoo than science in economics. An economic prediction is more propaganda than fact, more wishful thinking than substance, more an attempt to manipulate than inform.

Unlike meteorologists, who can at least look out the window and tell us if it might rain, economists never see a dark cloud until rivers are in flood. Even when the Great Recession was already in progress, some economists were still predicting growth. Economic science is such that the most learned professional in the field appears unable to look out the window and tell whether it’s sunny or cloudy outside.

When coming from Wall Street, or from a government controlled by Wall Street, economic predictions are manipulative; not predictions at all, but attempts to create reality. In an economy based on consumption, boosting consumption by manipulating consumer confidence is the goal. Economists in the service of Power, like ancient soothsayers in the service of tyrants, say what Power wants them to say--their prophecies are self-serving and self-fulfilling.

So, if you want to know the state of the economy, look out the window. Don't depend on an economist.

[dmallind]

1. Sure - as long as you can look out of all windows in all directions simultaneously

Economics is part voodoo part science because it tries to predict human behavior in financial terms. That does not mean you can replace the terabytes of very real data about economic activity that go into the aggregate of economic predictions with simple biased anecdotes and personal observation. Many people have tried that with such achingly naive statements on DU such as "the recession will be over when the cement plant in my home town reopens". They are replacing part science part voodoo with 100% confirmation bias superstition. It's not an improvement.

[Goldstein1984]

3. Economics is a case study in confirmation bias

And when I suggested looking out the window, I was speaking metaphorically. My point was two-fold: To the individual, whether the local cement plant is operating is THE key economic indicator; and 2) with n economists offering n different interpretations of economic data that is already biased, the local cement plant is every bit as good a predictor of economic recovery as a prediction by a professional economist with a preconceived notion.

[dmallind]

4. No it isn't

The signs of economic recovery are widely agreed upon and far more appropriate than the fate of a single factory, and it is borderline insanity to pretend that one plant is as valid as GDP growth, manufacturing orders, temporary labor force size, hours worked, etc across the conomy. What a person "feels" is a key economic indicator does not make it one.

Prediction models and viewpoints vary. Data is consistent.

[Goldstein1984]

7. When the data are fuzzy, the science is fuzzy

In economics, we never hear about parameters like the unemployment rate without qualifiers about the "real unemployment rate" and the "underemployment rate."

Are stock prices a measure of the health of the overall economy? Of the hypochondriacal stock market? The success of industry in cutting costs by eliminating jobs? Do oil prices reflect supply-and-demand, or do they reflect a knee-jerk reaction to the morning headlines? Or maybe on Tuesday they reflect a cutback in supply, but on Thursday they reflect news of a missile test in Iran. Or was it Wednesday?

I used to make my living as a biometrician, and my primary job was assisting fisheries biologists with experimental and sampling design, data transformations, and statistical analysis. In my current job, I help assess the scientific an engineering merit of business opportunities, and the biggest part of my job is reviewing and tossing out junk data, analyses and conclusions. Based on statistical rigor alone, the real sciences would never consider economics a science. It's speculation, hunches, and wishful thinking hiding behind a facade of technical jargon and mathematical models.

You and I are probably going to continue disagreeing on this, I am guessing.

[sui generis]

2. well, economists come in all flavors and that's the problem.

They function as high priests to the high king, ultimately setting economic policy with their glossolalic predilections. I work with a gent whose god is science - to the point of irrationality.

The problem with the highest levels of academic expertise in the business context is that they are compelled to forward their pet theories or risk facing accusations of derivative thinking, and lose credibility. We don't factor THAT kind of risk into relying on a single "popular" economist to boondoggle us into feeling better about what's around the economic corner.

The only thing smart anyone can do is understand that no single person has the capacity or vision to see the entire picture accurately, or if they believe they do, that's not a person you want to pay to rely on.

[dysfunctional press]

5. that's kind of how my grandmother used to do it- look out a window...

she could see i-80 from her kitchen window, and could gauge the state of the overall economy by the amount of trucks she saw on the interstate. when things are good, there's a lot more stuff being shipped around the country.

[Romulox]

6. Economics is ideology, not "science" of any kind.

Moreover, these boobs who failed to predict the greatest economic downturn in 70s years don't even slow down for a mea culpa before issuing new predictions (all of which are perfectly in line with their previously held beliefs.)

[Goldstein1984]

8. I'm an actual scientist, and I agree with you.

But many do not.