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Apart from a cluster at the top I see a bit of a curve. Not much.
Economics and psychology will always be inherently fuzzy because of the whole free will thing.
Hmm sounds like a grad student really trying to make their data say something so they can graduate and finally start the life long process of paying back student loans.
Inflation isn’t just a function of unemployment. Unemployment isn’t just a function of inflation.
It could be that with all else held constant, plotting the two against each other would give a similar curve to the left. Or it could be that the curve on the left was presented as an oversimplification of the big picture to manipulate policy or political will.
From my pov, the ratio of money supply minus savings to goods/services supply is the biggest factor for inflation, though there’s a time lag and prices are sticky downward.
Focusing on money supply misses the most significant factor in inflation, missed by all armchair economists- the private banking system.
A $1 million asset is not part of the money supply, if it’s value increases to $2 million it has no impact on inflation.
If the owner of that asset then aquires a loan against that asset and spends that money, they have increased the money in circulation. That is a far more significant driver of inflation than government spending. Meanwhile the FED (or equivalent) has not printed one additional dollar.
These models don’t work because they ignore the MOST significant driver of inflation
These models don’t work because they ignore the MOST significant driver of inflation
Wellll… they work just fine for their intended purpose - demonstrate the correlation between 2 variables in an understandable way.
What you are (correctly) referencing is that there is a much more complex system in reality than the simplified model - they literally exist to try and explain difficult concepts in digestible ways. Everyone’s eyes glaze over if you try to do the "if this, then that, but if this then the other (at 45 variables level).
So yes, inflation is wildly more complex than just money supply or demand push inflation (the flavour the Phillips curve is looking at).
But the people in this thread bitching about economists dumbing stuff down so they can understand it resulting in simplistic models that don’t reflect the real world would be just as quick to bitch about how they’re in an ivory tower because they refuse to explain things in laymans terms.
Damned if you do, damned if you don’t.
What’s the loan money in your example if it’s not an increase of the money supply?
Or a reduction in savings.
Edit: though it is more complex than that because the banks can reloan the money as others put it into their savings.
A lot of macroeconomics in particular seems to follow aristotlian thinking, i.e. you can just logic your way from step to step. It is interesting in that pure mathematics does work this way in that you can start with a bunch of axioms/definitions and combine them and work with them until you reach a conclusion without any need for experimentation. For example, you don’t need to measure a bunch of triangles to show that the Pythagorean theorem is true.
The way i was taught macroeconomics in school, it takes the mathematical approach of starting with a list of assumptions that seem to be true, and using mathematical logic to derive conclusions. The trouble is that: 1) many starting assumptions aren’t as true as you’d think, and 2) many of the “logical” steps also aren’t as logical as you’d think.
Supply and demand is an easy example. The classic idea is that as supply goes up, price goes down, and vice versa, while as price goes up, demand goes down. The existence of Veblen goods (i.e., things that people want because they are expensive) shows that the demand part isn’t right.
None of this would be a problem if it was just an intellectual exercise to help develop hypotheses for use with more sound scientific methods, but it’s used for policy directly.
Economists refuse to accept that their subject is really just sociology. They like to imagine it being like physics, where study of reality leads to underlying mathematical truths to extrapolate from. Not a big messy subject where you can’t be certain of anything.
What makes it even more freaky is that many of the subjects being studied know they are playing a game. So in many ways economy is more like the evolving metagame of competitive sports, where hardcore nerds constantly try to game the system and outplay each other, and what was a solid strategy last month doesn’t work anymore, even if the rules are the same.
“Econ 101” is just that and if you think it’s representative of “economists” you’re dunning-krugering.
There are a lot of very competent interdisciplinary socio-economic scientists. The problem is that no-one listens to them because everyone still has the hots for the ghost of fucking Milton Friedman and trickle-down raeganomics.
Populist ideologues will always promote simple economic models, that’s not the economists’ fault. Sociologists can tell you why bad economic policy is self-sustaining under democratic capitalism but they can’t really do anything about it because no one asks for their opinion.
Hell, right now the US is ruled by a moron whose understanding of economics is so bad that even the most hard-line libertarian economists are saying “you wot m8”.
Yeah, I think the problem is that the Chicago School is to economics what Freud is to psychology. Despite a century of progress since Freud, pop psych is still all based on him. The difference is that those in charge of policy don’t derive any benefit from applying Freud to mental health policy the way that they might derive a benefit from applying Friedman to economic policy.
When learning about options and future markets, one of the axioms is that no indivial have the power to move the market on any direction. But that’s just bullshit when people with enough money and power like Buffet, Elon or Trump can play the market and fuck up all your fancy mathematics.
Well tbf we cant make a replica of a national economy in lab and run experiments on it. We only have mathematical models
No, but you can examine historical conditions with largely similar situations aside from the variable you’re studying. And you can do more limited experiments without emulating a national economy.
You can also look at “artificial” economies in games like EVE Online; I seem to recall a few economics papers coming from behavior seen there.
Yeah i try to do when explaining anything aboit economics to people. No one beloves that because it happen elsewhere is would happen here. Even something simple as lower inflation by rising interest rates.
Yeah, that’s true, but that’s not the only way to run experiments. “Natural experiments” where experimental conditions happen naturally can be exploited for scientific aims.
I think it should be treated similar to the medical field. They human body is super complex, and there’s competing mechanisms for all sorts of things. You could discover a mechanism by which a compound decreases blood pressure. There could be another mechanism by which the same compound increases blood pressure by a much larger amount. A lot of economists would just take that first mechanism as ground truth, and recommend giving the compound to a patient with high blood pressure.
I think in lieu of perfect information (which is always the case for economy and medicine), it’s best to just go for whatever is the least abstract benefit. The way I was taught macroeconomics (as a teen, I definitely don’t have a degree in it or anything), a minimum wage places an artificial limit on the total amount of labor that will be done, and therefore decreases GDP, and therefore everyone is worse off. That could be the case (I don’t think it is), but it’s very abstract, so it needs an overwhelming amount of evidence. Contrast that to the fact that a person cannot survive off of $2/hr, which is not an abstract conclusion, and you have good rationale for a minimum wage.
One would think this limitation would give economists some humility when finding conflict with other fields, but it seems quite the opposite.
Beautifully expressed translation of this meme, thank you!
I personally think the biggest flaw of economics is how it takes “people are rational actors” as an axiom.
The fact that so many people can be convinced to vote against their economic best interests by supporting the GOP shows how fallacious that axiom is.
Literally in page one of econ textbooks they will say “a common exception to the rational actor theory is like when people need emergency medical services.” AND THEN they just ignore that GLARING caveat for the rest lf the book. Snake oil.
Another exception is how sometimes increasing prices will increase sales rather than the other way around.
Also a lot of the time, a discount will get more attention than the price itself. Like $1000 with a 60% markdown ($400 final) might sell more than the same thing at $350 with 0% markdown.
yessir! veblen goods https://www.investopedia.com/terms/v/veblen-good.asp
The Udemy system
I love the implication that a “rational actor” would choose death over losing money
hi guyes im disabled and have cancer checks bank account awe sheit well that has been a good life can’t afford this no more😊 ta ta all
You lose money every day paying for living expenses.
Let’s make deal!
I’ve also seen that economists never account for naked greed.
Doesn’t it also assume consumers have perfect information to make their choices in a market?
How informative is the advertising industry?
Yeah, but if you start getting into the irrationality of actors, you are all the sudden studying group psychology or sociology rather than economics.
Although I have always wanted to combine network theory with economics/finance understanding…
economics is not a science, it’s not even a humanity; it’s an inhumanity.
i almost believe there has to be like a reckoning in economics, kind of like with psychology and the backlash against freud. far too many of the assumptions are taken for granted as fact despite haveing no data to back them (like the laffer curve, really?). they just get propogated because rich white men said stuff that benefits them.
like there is definitely some truth to glean in economics. but as it stands, it’s a disservice to call it a science.
like there is definitely some truth to glean in economics. but as it stands, it’s a disservice to call it a science.
absolutely, my statement was real edgelordy, but the idea behind economics, that is to say “resource management” is a valuable field of study, but as you say, it’s all been manipulated shit to make the rich richer.
well expressed!
Nobody ever looked at the laffer curve and went “huh, so we cut taxes for the rich, and tax revenue went down, that means we should raise taxes for the rich.”
It’s been a long time since my college econ classes, but I remember the flaw with Laffer’s curve wasn’t so much that it exists as it was his assumption that we’re on the right side of the curve instead of the left.
As far as I can remember, even if Laffer was correct about his theory (and that’s a hell of an if) no one has been able to demonstrably prove the point where cutting taxes increases federal revenue. It’s pretty obvious at this point the whole theory is just a post hoc rationale for cutting taxes.
We just didn’t cut taxes enough!!!1!! Keep cutting taxes for the rich and someday we’ll ALL be rich!!
But the laffer curve indicates that if we cut taxes a little and that lowers revenue, cutting them even more would be much worse??
The Laffer curve represents the premise that high taxes repress the economy and lower total revenue as badly as extremely low taxes would and that there is a sweet spot on the curve where the tax rate isn’t too high or too low which maximizes total revenue. Conservatives always claim that the tax rates are above that point and that we just need to keep lowering tax rates on the rich to spur the economy and thus boost revenue.
They don’t know where that sweet spot is but they are just sure that we are above it and we just need to keep cutting. In summary, they are idiots who just want to make rich people richer.
Yes, that was my point, that if they actually believed in that model, they would support raising taxes because every time we cut taxes, revenue decreases.
It’s a “science” manufactured to justify neoliberalism and a failing global capitalist system.
I’m a STEM person, so I thought I’d take an economics class in college and it’s all basically voodoo. The textbook contradicted itself all the time and the reasoning was full of fallacies. Do not recommend.
Economics is a science, at least in theory, but it’s a science that’s being practiced very badly.
The core issue is that pretty much the entire field has decided, collectively, that there is absolutely no requirement to test their assumptions against reality. Basically economists will build a model that reflects a vision of reality that seems to make sense to them, and then build a whole set of assertions supported by that model. I don’t recall the origin of the quote, but it’s been said that “Economists would study the price of milk by assuming an infinite number of frictionless spherical cows operating in an infinite vacuum.”
When economists (most often ones who would describe themselves as progressive economists) actually do test the models against observable reality, most of them come crashing down. Good economic science instead says “What does reality tell us, and how can be we build models that explain it?”, but right now good economic science is very much running against the mainstream.
There are good economists out there. The youtube channel Unlearning Economics is a fantastic starting point, as is this lecture series from McMaster University; https://www.youtube.com/playlist?list=PLzLUWMt2NZLRmKY_kEiLc-hvOcyOlgE4N. I also suggest looking into David Graebar, Cristobal Young, and Mark Blyth. The Myth of Millionaire Tax Flight by Young and Austerity: The History of A Dangerous Idea by Blyth are both superbly informative and easy reads.
First “all models are flawed but that does not mean that they are worthless”
To be clear Graeber is an anthropologist and is not an economist. You might like what he says but his degree is in a different field
Cristobal Young is a sociologist again not an economist. You might like what they say that does not mean it has any merit economically speaking (I haven’t looked into any published work)
Blyth actually has a degree and background in political economics. Political economists are mixed bags as they tend to not be able to do the math to support their claims. As is the case with all social science the important part is to see if their claims were published in academic journals first. Blyth is ok not great IMO
What makes something scientific?
that it’s based on the scientific method, and there’s repeatable experiments/steps to take with proven and proveable outcomes.
“Trickle down economics” is a fucking lie, yet we have zillions of (economic) liberals.
Ok so you might want to look that definition up because it’s not great.
No one who is educated in economics who is attempting to have an informed discussion of economics uses the term “trickle down economics”. Theproper term is supply side economics.
Trickle down is proposed by politicians not by economists because economists know it isn’t effective in most situations except things like housing eg (it’s easier to build more homes than convince people they don’t need one of their own)
great , now make it have an impact on people’s lives that matters.
If you think economics has no impact on everyone you might want to check out this link:
https://ocw.mit.edu/courses/14-02-principles-of-macroeconomics-spring-2023/
ok I checked the comments on this because I thought we were gonna start analysing the actual stuff in the graphs or something and now everyone’s yapping about how economists are all evil or something
this is gonna get mass downvoted and I don’t care
Seriously the second graph is garbage and it makes no sense to compare it to the claims of the Phillips curve.
Also the Phillips curve is a two variable snapshot from a multi variate world (iow a simplification so freshmen can understand). The right hand graph is clearly not holding the other non graphed variables constant, hence you don’t get anything useful.
Economics as taught below PhD level is about simplifying down concepts to make a complex system understandable.
Phillips curve says that as unemployment gets worse the ability of suppliers to raise prices gets weaker because consumers have less money.
Of course consumer demand is only one facet of inflation, there’s a whole system of variables there.
And as someone below the Phd level that was always my understanding.
Come on! Get with it! Dogma over debate! Why aren’t you letting yourself be whipped into a blind frenzy?
hmm i value your perspective—i think you’re just outside the popular narrative and that’s alright.
no one here believes economists are evil per se. what i and others are expressing with that language is that economists have been employed to justify oppression through malicious misuse of their perceived authority. some have been active bad actors, while many more are just pawns or unwitting mouthpieces for the funneling of wealth into the top 0.1%
The graph on the right looks like if the ancient Greeks discovered a constellation of a protogen wearing a bowtie.
it’s my brain rewiring after drinking a double aspartame celcius
Economics is a classic form of divination, like astrology or tarot, and its purpose is the same - to provide oracles who will serve the monarch and tell him that the things he wants will happen and the things he doesn’t will not.
I agree economics is not a science. But using a line chart is just dishonest and so is cropping data so that it shows only a stagflation period. There is a reason it has a special name.
I don’t know the answer to this question: have we been in stagflation for the last 50 years? Because cropping data points is a great way to distort the picture, but I counted somewhere over 40 points before I lost the point.
Not quite, stagflation requires both high inflation and unemployment which we did see concurrently during COVID.
But it also needs low or negative economic growth which again we did see during COVID but growth and employment have been up so we haven’t had a long period of stagflation.
The final key thing that I don’t think is technically required is that the fed can’t lower rates to drive growth because inflation is too high hence the economy gets stuck. It feels like this could be where we are heading but haven’t quite been in a prolonged enough period to qualify for yet.
it’s not a technically perfect 4chan post ill give you that. i agree with the sentiment though, given other experiences i have listed in these comments :)
Economics is best understood as a priesthood, similar in purpose to haruspicy. Once you make that mental adjustment, everything they do, the types of employment they get, the vile drippings they emit, it all makes horrible, horrible sense.
There is more to economics than Milton Friedman. Marx was a pioneer in economics and leftest theory has been robust in the field from the beginning.
Criticizing soft sciences for their estrangement from mathematics is classic antiintellectualism. The same logic would demand the disillusion of psychology, sociology, and all the critical theories that are the foundation of modern leftest thought.
You miss the point that the soft sciences are being used as an excuse for bad policy. If the soft sciences informed a model for good policy this post wouldn’t exist but instead we have the Laffer curve and trickle down economics.
No one here is calling for a disillusion of economics. It just needs to be used appropriately instead of as a voodoo magic to transfer wealth upwards.
Economics is a historically flawed and ideological science. But I think it’s getting better and more empirical with time. The scientific method works, economists just have the come down from their high horses and actually follow the data.
That’s easy to say when your mortgage doesn’t depend on the Emperor’s New Clothes being real. Many if not most economists have staked their reputations and networks on pre-empiricism economics.
It’s not a simple matter of “whoops I was wrong about one thing”. Since the 1970s we’ve turned the world economy upside-down to cater to billionaires and inequality has skyrocketed. It would be like a priest admitting he reassigned molesters for decades.
OK but you can’t treat economists as a monolith. If you want to shame the people who did that then go ahead, but I think there’s a newer group of economists who are deconstructing the propaganda and seeking truth, and they should be encouraged.
based. and it’s a weird situation because economists deal with money and money corrupts so there are fallible incentives. just see how trump awarded arthur laffer for his negligible contribution just because his model was convenient for rich people: https://www.washingtonpost.com/politics/trump-to-award-presidential-medal-of-freedom-to-economist-art-laffer-today/2019/06/19/f1505826-9299-11e9-aadb-74e6b2b46f6a_story.html
The real question is why we even bother discussing a curve which was pulled out of the ass of a man who went on to invent a hydralic computer to model the national economy of the United Kingdom. https://en.wikipedia.org/wiki/Phillips_Machine
I think his greatest achievement was to demonstrate the concept of being a really clever idiot.
Economists are the priests of capitalism.
I have examined the
goat entrailsquarterly metrics and determined thatgodsmarkets require morehuman sacrificescorporate tax breaks
Only tangentially related, but it’s often accepted that there is no Nobel prize in economics. There is a Nobel memorial prize in economics (link), but as it was set up after Nobel’s death it is in a slightly different category.
