By Cathy O’Neil, a data scientist who lives in New York City and member of the Occupy Wall Street Alternative Banking Groups. Cross posted from mathbabe.org
As a loudmouthed data scientist/blogger/activist, I go on record regularly complaining about quants and data scientists who sacrifice their integrity to put out crappy or misleading or exploitative or destructive models because they want to make their bosses happy, or rake in big bonuses, or because they’re afraid to speak up and get fired, or because they don’t bother to think through the consequences of their actions.
Recently I’ve even started asking the mathematical community to come together and start some kind of modeling panel which studies and writes up analyses of current high-impact, far-reaching models that affect public workers or the general public, to make sure those models are using the authority of mathematics in a reasonable and credible way. I think that could really help.
Note: I’m not asking mathematicians to come down on one side or another on political issues. I’m instead asking for people to use mathematics appropriately. It’s akin to asking people to wear a mask when they’re in a lab with bunsen burners. I think we can do this in mathematics, and I think mathematicians care enough about this to make it happen.
But here’s the thing, I’m not sure what anyone can do about economists.
Not every economist is bought, of course, and there are large swaths of economics and econometrics that seems to be genuinely trying to understand how the world works and how they can, say, make healthcare genuinely more affordable or at least create better forecasts.
But then you have people like Glen Hubbard who give economics such a terrible name, it makes you want to cry.
I have been intending to research Hubbard’s record ever since the New York Times published a rather frustrating piece on him a few weeks ago, insinuating that Columbia’s president Bollinger wanted him fired but not explaining why. But then I reread the article, and I was struck by two passages. Here’s the first:
As Mr. Hubbard has moved seamlessly through the Republican upper echelons of Washington, he has also cultivated relationships in corporate suites. He serves on three corporate boards, which collectively paid him $785,000 last year. One of those is the board of KKR Financial, a finance firm affiliated with Kohlberg Kravis Roberts, the private equity firm of which Henry R. Kravis was a co-founder. In 2010, Mr. Kravis pledged $100 million to the Columbia Business School, his alma mater, for the construction of a new building. It was the largest gift in the school’s history.
That gift seems to have quieted down Bollinger on his quest to get rid of Hubbard. Next, the article says:
Mr. Hubbard has helped to draft many of Mr. Romney’s economic and tax policies, and, at least implicitly, lent his imprimatur to others he did not conceive. The benefits are potentially mutual. If Mr. Romney is elected, Mr. Hubbard is considered a strong candidate for the job of Treasury secretary and even, after Ben S. Bernanke’s term expires, chairman of the Federal Reserve. (Robert Zoellick, former president of the World Bank, is another possible contender for the Treasury job.)
Taking this all in, we have a picture of someone who has enough power to pull $100 million dollar strings to get out of trouble (whatever that trouble was) and, moreover, someone who can use the authority of economics, and implicitly of mathematical modeling, to assign himself a job running our country (in the economic sense, but then again what else is there and has there been recently?). Readers, I’d like to ask you this:
Why are we not outraged by this?
How have we become so used to this kind of behavior from elite economists and businessmen?
Charles Ferguson, who absolutely skewered Hubbard in his documentary Inside Job, has recently written more about Hubbard and how much of a shill he is for industry and Republican politics in this Huffington Post article. From the article:
Let’s start with tax cuts, since Romney claims that he can cut tax rates sharply without increasing the deficit, and without benefiting the rich. Mr. Romney claims that tax cuts will be fully paid for by closing loopholes and deductions, and will not add to the deficit; Hubbard has publicly supported Romney’s claims. Interestingly, Mr. Hubbard has quite a record on this very issue. Shortly after becoming chairman of the Council of Economic Advisors in 2001, he spearheaded the Bush administration’s tax cuts, and he said lots about them.
How did that work out? First, we now know that over half of the benefits of the Bush-Hubbard tax cuts went to the top 1% of the population. In part to benefit the wealthy, the tax cuts were also structured to reward investment in financial assets, rather than either consumer spending or real capital investment. As a result, the tax cuts caused huge budget deficits, yet did little to stimulate growth or job creation: There were basically no new jobs created during the Bush administration, despite adding trillions to the national debt.
That is not, however, what Hubbard said would happen. On August 22, 2001, he published an article in the Wall Street Journal entitled “Tax Cuts Won’t Hurt the Surplus.” Oops. In the article, Hubbard also predicts that his tax cuts would preserve the Clinton budget surpluses by causing GNP to grow 0.3% per year faster.
Now, there’s nothing wrong with being wrong. We’re all wrong sometimes. I’m wrong sometimes too.
But here’s the thing about economists like Hubbard. They don’t give errorbars with their opinions. There’s no acknowledged error in titles like “Tax Cuts Won’t Hurt the Surplus.”
And while that was in 2001, Hubbard more recently came out with a paper with three other “esteemed” economists which is called “The Romney Program for Economic Recovery, Growth, and Jobs” and, after describing what a useless windbag Obama has been, contains plenty of tasty tidbits like this one:
Governor Romney’s economic plan will completely change the direction of economic policy. It will emphasize the long-term changes that will increase GDP and job creation, both going forward and now. It will put growth and recovery first.
Here’s what really gets me, as a mathematician and a citizen of this country who wants the public to be informed with clear and unbiased information: Hubbard not only has no errorbars, but he makes full use of the imprimatur of economic theory and mathematics with every sentence in this paper – it’s the equivalent of the line “you wouldn’t understand it, it’s math”. It gives economics a bad name.
But wait a minute! Perhaps I’m being too harsh. After all, there are copious references to academic papers which support their projected growth estimates of Romney’s suggested policies (which are never actually spelled out, and there are no models, and there are no admitted assumptions).
What do the authors of those papers say about being cited in Hubbard’s whore-rag of an academic paper?
Ezra Klein wrote a fantastic response blog post in the Washington Post called “Economists to Romney campaign: That’s not what our research says”. From Klein’s blog:
Each of these sections include supporting documents from independent economists. And so I contacted some of the named economists to ask what they thought of the Romney campaign’s interpretation of their research. In every case, they responded with a polite version of Marshall McLuhan’s famous riposte. The Romney campaign, they said, knows little of their work. Or of their policy proposals.
I mean, the least Hubbard could have done when he sacrificed the integrity of economic research for Tim Geithner’s job is to refer to his own work rather than other people.
People! Can we think of a way to demand more than this from our thought leaders?
Or, barring that, can Bollinger grow some balls and kick this guy out of his job of leading Columbia’s Business School for being so shamelessly willing to sell the remaining authority of economics to the Romney campaign for a job?
Or, for whatever other dirt Bollinger has on Hubbard (readers: please speculate what said dirt could be)?
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Please. Let’s not insult whores by comparing them to economists.*
NOTE Flyover states economists excepted, of course ;-)
I have known some distinguished sex workers (“whores”) who worked very hard for their earnings and never pretended to be something they weren’t. Unlike Hubbard who pretends to be a thoughtful professional while searching on his knees for corporate genitalia.
The only American economist who ever consistently told the truth was Veblen. Henry George told the truth but was not really an economist. JK Galbraith was consistently honest but romantically misguided in his attempts to make something it was not out of Organized Labor. The remaining assorted Economic Foozlers of the past one hundred years divide between Charlatans and Simpletons. None of them is worth the time required to shred their fatuous assumptions, myopic theories and absurd conclusions. Intelligent people should just ignore them and look hard at what is all around us to understand what it is we face.
It’s an old groaner but you could lay all the economists in the world head to toe and they still wouldn’t reach a conclusion.
It occurred to me quite a while ago that this system of economists and politicians (i.e. popularity-contest winners with, at times, some understanding of government) charting, with almost no input from anyone besides other elites, the future course of humanity and the world, is absurd and frightening.
Could complete anarchy, nay chaos, necessarily have a worse outcome potential, long-term? Maybe not. IOW maybe just tossing a coin or having a policy roulette wheel, or putting my cat in charge for a while, would do no more harm, because the system we’re trapped in now, with a bunch of immoral money-grubbers at the wheel, is driving us right off the œkonos cliff.
jc, so true. They keep burying Veblen, as was pointed out by Michael Hudson in the latest biography of Veblen by a party-line academic, which sought “to bury Veblen, not to praise him.” The party-liners really hate Veblen, because he makes them look like ignoramuses, vainly doing the bidding of the Master Class.
Below is the link to Hudson’s great review of the book by David Reisman:
http://michael-hudson.com/2012/10/the-social-economics-of-thorstein-veblen/
There are some American economists you might consider useful truthtellers if you were to read their books. But since the establisment has never even mentioned their names, it is understandable if you have never heard of them.
John King: http://www.amazon.com/Chaos-America-John-King/dp/1893157091
Charles Walters Jr.
http://www.amazon.com/Raw-Materials-Economics-Charles-Walters/dp/0911311327
and. . . http://www.amazon.com/Unforgiven-Charles-Walters/dp/091131167X
Mr. King seems to have died in 1990. His book was ‘updated’ in 2002 by some hungry publisher who added a preface. It seems to be one of those ‘move to a rural area, grow your own food and store guns and ammo’ tracts. This may prove to be good advice, but chaos seems to be taking longer to develop than Mr. King expected. I recall a guy named Harry Brown saying the same things in 1979. This sells a lot of books, but calling these guys economists is something of a stretch.
I would upgrade your posting title to call Glen Hubbard the economic myth whore.
It is the cover for the class system of economic control by the global inherited rich that he is the whore for. Animal spirits are a major BS myth of economics.
The other myth out there is that the Fed is public banks instead of private banks as we really know them to be.
Thanks for the posting Cathy. I agree that most economic models are vodoo propaganda creations that need to be evaluated for math rigor as well as logic.
The largest complaint by students of economics who founded the “Post-Autistic Economic” movement (now renamed “Real-World Economics) and professional but, non-whore, economists has been “the math”. It is clear that human beings have been left out of equations and economics is nothing but a bunch of math abstracted from human nature and the Natural Order generally. Thus, following the math may be the opposite direction I would recommend.
The study of the originators of ideas which have actually worked will reveal “The Other Canon” http://www.othercanon.org/papers/tree.html James Galbraith, William K Black, Dean Baker, Henry C K Liu, Paul Krugman and fine amateurs like Ellen Brown, Lyndon LaRouche & others, are along this ancient line of economic thinking. I hope prejudices of any kind don’t cause you to stop reading further because I name names you don’t like, or really know of, in our present times…
I have found the US Labor Party’s 1970 publication, “The Political Economy of the American Revolution” to be the most informative book on economics I have ever read, quoting as it does from the actual historical writings of Elizabeth I, Colbert and others, which led up to the ideas of Franklin, Hamilton & Marx. And, then on to our heroes, Quincy Adams, Clay, Crockett, Lincoln, Roosevelt, Eisenhower & Kennedy.
It is in the Columbia University edition preface to Volume II of Franklin’s collected works that Marx is quoted in a letter to a friend, “I have often been accused of inventing the Labor Value Theory. But, I was only a discoverer, growing already as it was from out of the humus of the New World, from out of the pen of the young Franklin in his Modest Inquiry…’
It is a great lie that this is a Capitalist nation. It would be an equally large lie to say the founders were Socialist, supporters of a Religious State or any brand of dogmatists. In fact, and obviously so, they were the creators of a Republic. A Republic doesn’t exist for any other reason than to protect “The General Welfare” of “The People”. And, any idea that can be proven to be helpful to the People generally, is supposed to be the Law of the Land. This country is a Democratic Constitutional Republic.
We have three Parties today reflecting Democrat, Constitution & Republican ideals, the machinery of which only one, The Constitution Party, is uncorrupted by anti-People interests (The 1%).
No – math is what it is. It is the foundational assumptions that are wrong with economics. Speaking as someone who left the study, it is the underlying assumptions that cause utter destruction. There is nothing wrong with matrix algebra. It’s a tool. There is something profoundly wrong with assuming that economic systems seek an equilibrium – and further, that is the golden spot where everything is efficient. There is something horrific in assuming that efficiency is the most important thing in the world, or that money flows naturally where it belongs because (the mother of all stupid assumptions) we’re all rational actors bent on utility maximization. “Economic man” is a lie, not calculus.
Economics is not a monolithic theory based on a single set of mathematical axioms/assumptions. One can form a set of complete and consistent assumptions different than the one current used and build a solid mathematically theory on top of them. This will not make the assumptions valid, correct, useful or realistic.
Quite simply as I commented below–there is no such thing as economics that is not political. Otherwise I agree with you.
“There is something horrific in assuming that efficiency is the most important thing in the world”
Indeed. I once saw a sign in the PRC that stuck with me: 效率是生命 “Efficiency is life.” If you want to see the manifold inhuman manifestations of that idea a one-week trip there can provide many; and here in the US we’re at their side.
As corporations become people, people become corporate; this is one of the most salient, and depressing, phenomena to reveal itself to someone who spends a lot of time outside of the “rich” and “developed” countries when he returns there (here) from the real, real world.
Efficiency has become synonymous in this modern world with speed. Efficiency is considered a good thing if it speeds up production. Productivity. Which is all very ironic when you look at its byproducts, like Sandy. Real efficiency, which can surely be calculated given enough information, takes the whole environment into account. And when it does so truth emerges not as speed but as a long, slow, organic process.
Contract / transaction / velocity maximization to proliferate maximum fees and rents.
I wrote the Chinese because efficiency in Chinese is literally “effect-rate,” so as you said the faster the “better.” Except when it comes to quality, but since under this paradigm quality must decrease (since speed cannot QC must needs slip), eventually everything’s cheap and crappy but no one notices, cares, or feels they can do anything about it. Like modern music, politics, products, “friendships,” etc etc etc.
BTW there’s more than one word for life in Chinese and though this is the only appropriate one, it’s literally “life-mandate from heaven” so there’s a connotation of deadly seriousness lost in the translation.
The problem with using math to describe human behavior is that numbers are discrete objects and human beings are not. You can slice and dice numbers and make new numbers with math without losses of information. Human beings overlap each other. They exist as members of multiple complex relationships, eg families, friends, religions, cultures,nations. They can be quantified for math, but those manipulations resiult in nothing more than shadows than can be interpreted in infinite ways.
When I wrote “friendships” above I was referring to the facebook concept; merely one of many alterations of the meaning of fundamental concepts, values, mores, and it seems to be getting more severe with time.
Is the “interlapping” as you call it of “friends” not analogous to the mathematic abstraction you’re describing. They seem part of the same process.
Problems with Econ:
1) assumptions made for the sake of easy modeling are never afterwards accounted for, and only rarely even mentioned (since they are absurd enough to be embarrassing)
2) words with everyday meanings are used in a technical sense, far from what the ordinary understanding of these words are. Again, this fact is not mentioned to general audiences and is even forgotten about by economists themselves; e.g. using the word efficiency when only pareto-efficiency is meant, not bothering to mention that there’s a difference, but making use of the positive valence associated with the word “efficiency” (to prove, of course, that this really is the best of all possible worlds).
3) insisting on “positive” economics and disdaining anything that smells of the “normative”. This is a philosophically re-cock-ulous position, since holding that economists should restrict themselves to only “positive” statements is, itself, a normative statement (not to mentioned that I’ve never met an economist who didn’t insert normative conclusions into their “positive” economics)!
So, to sum up, the problems mostly stem from economists wanting to sound more certain in their knowledge than they actually are; and not admitting this, either to the lay-folks listening to them, nor even to themselves. Also, there are plenty of straight-up scoundrels (Hubbard) who probably got into the profession in order to be a yes-man for our financial overlords in the first place, and should be duly tarred and feathered and ridden out of town on a rail.
Lee Bollinger is a careerist whose only sense of purpose is to advance himself. I witnessed his agenda while he came and went from the UofM, leveraging his position at Michigan to get into Dartmouth, leveraging his position as provost to become president back in Ann Arbor where he acted as demagogue for affirmative action to leverage his position at Columbia. If and only if he does something as career jeopardizing as firing or even publicly denouncing somebody as well connected as Hubbard, it can only mean he is planning on again jumping ship, or retiring.
Is he connected to Bollinger Shipyards of Louisiana? Deeply *political* family.
Per a Wikipedia bio, Hubbard is on the Board of at least six companies. In alphabetical order: ADP, Black Rock Closed In Funds, Duke Realty, KKR, Met Life, and Ripplewood Holdings. Caution, some of the citations are from 2008 sources.
Jah! I-and-I Vibration, Chase those crazy bumheads, chase those crazy numbheads, chase those crazy bumblers, chase those crazy numbers, out of town , . . right out of town
Build your penitentiary, we build your schools,
Brainwash education to make us the fools.
Hate is your reward for our love,
Telling us of your God above.
We gonna chase those crazy –
Chase those crazy bunkheads –
Chase those crazy baldheads out of the yown!
We gonna chase those crazy –
Chase those crazy bunkheads –
Chase those crazy baldheads out of the yown!
Here comes the conman
Coming with his con plan.
We won’t take no bribe;
We’ve got [to] stay alive.
We gonna chase those crazy –
Chase those crazy baldheads –
Chase those crazy baldheads out of town.
-Bob Marley, Chase those Crazy Baldheads
http://www.youtube.com/watch?v=YTmYXttrAvE&feature=player_embedded
“we now know that over half of the benefits of the Bush-Hubbard tax cuts went to the top 1% of the population”
Ah, the good old days.
To me, as in Karl Popper’s sense, economics is at best a pseudo science as is true for almost all social sciences. But as long as serious scientists in that field are not only accepting the Sveriges Riksbank Prize but are themselves calling that prize misleadingly a “Nobel Prize” plus are indolent to who ever receive that prize next to them (e.g., Scholes, Merton, Friedman), economics is not even a pseudo science. This is not as academia should be, unscientific behavior in the field of economics obviously warrants no academic consequences, hence their academic community continues to fail miserably.
I am still waiting for, e.g., Krugman and Stiglitz to give back their prizes in protest of the sorrow state of their field. That might be a landmark, a whistle-blowing that can’t be overheard, a starting point for curing the field and restoring academic integrity.
If economics is science, then it is a subdiscipline of social science and economists should take pride in acknowledging that and should not try to hide behind fancy maths to pretend otherwise, misleading the public for the sake of elevating and enriching themselves. Or, as Samuel Brittan put it in an FT article in 2003, entitled “The not so noble Nobel Prize” (my emphasis):
Economics is one, but only one, type of social interaction human beings engage in. There is no economics if there is no human social community. Period. Economics then could be applied social science. But there is no economic science if there are no truly scientific rules attached to it and enforced by academic peers. If it remains as it is – buyable – then it’s nothing but a disgusting scam, parading around with a bank sponsored prize for abundant dishonesty: It can’t be worse. Watch his face. The emperor hath no clothes.
I suppose this is a rather obvious comment – but I would guess all this nonsense occurred because somewhere along the line the “hard sciences” gained pre-eminence in our hierarchy of “useful thoughts”. In order to be a “legitimate” scientist, which of course was of more “value” to society and had greater prestige than those “touchy feely” soft “sciences” or other disciplines, one had to deal with numbers and equations and formulae and graphs and all that, so if you want be taken seriously you have to use all that stuff whether it is legitimate in the area you are analyzing or not ….
I remember reading James’ Varieties of Religious Experience and noting with some amusement the difficulty he seemed to having trying to study the psychology of religion in a “scientific” manner – when psychology was desperately trying to come out from under the wing of philosophy to establish itself as a “real” science …
As long as we give “Reason/Logic” the top chair in our hierarchy of religions, ‘twil be ever thus … Once we consider it simply another tool to be used in navigating through life, to be used when appropriate and useful and put aside when not we will make more real “progress”, ISTM; perhaps, ironically, it may be most useful when it is used to decide whether it IS useful ….
Aquifer, what you suggest produces the most creative, most humane outcome for civilization, history shows.
I may be naive but I think (okay, would hope) that Hubbard’s abysmal “Take your best shot” scene in Ferguson’s Inside Job would constitute enough dirt for a university to ask him to leave. His behavior didn’t reflect well on the institution especially considering he’s clearly identified as the Dean of Columbia Business School.
But maybe Bollinger doesn’t go see documentaries at cineplexes. Or maybe it doesn’t matter if a Dean is exposed to be a crooked lying hack in the mass media.
Rereading Ferguson’s article I can’t help thinking he and Rmoney belong together. The certainly share an obvious disdain for financial disclosures.
as, and as any New Orleanian can tell you, Hubbard’s reply was so bitchy, that you know he has to be Somebody’s Bitch to get away with it.
One easy thing to check is division by zero. I read a paper by the University of Chicago guy, Casey Mulligan, where division by zero was possible in several of his math sequence, and he doen’t recognize that this is a real problem.
Mathematicians could pledge agnosticism.
It could be a variation on the following
lines:
“The undersigned take no position on the
validity or applicability of models used in
economic forecasts, in choosing economic policy
or in quantitative finance.”
The Wikipedia article on Agnosticism mentions
related topics/links in the “Certainty series”:
http://en.wikipedia.org/wiki/Agnosticism
—-
I once supported Pablo Triana in an article on VaR
and all I got as further comments was not fun reading.
My comment was the first of five chronologically, but
is the “least popular now”. The topic of Triana’s
article was VaR:
http://www.futuresmag.com/2010/12/01/var-the-number-that-killed-us
My comment is normally at the very bottom, with
Ph.D. (Mathematics).
Physicists would likely be quite annoyed by this:
(Fake) declaration of agnosticism by mathematicians:
“The undersigned take no position on the
validity or applicability of models or equations
used in physical theories, in models of physical phenomena
or in theoretical physics.”
I pledge to quantify myself:
To learn to love the cold side of the pillow in winter
To wear my long johns even when they make
My butt look big
To cool the nights by slowing down my days
By not driving, by walking
By buying only what I need
And making what I foolishly
Think I want – nobody cares what anybody wants…
I pledge to be there for the long haul
It will take a generation
I pledge to demand a 100-year budget.
I pledge to check out your butt even when you’re wearing long johns.
yeah, we gonna chase them crazy numbheads right out of town
ZF, god-killers usually are shunned, if not murdered.
Just barging into this discussion to point out that viewing economics as a separate subject is intellectually untenable. There is no such thing as “economics” that is separate from politics just as there and can never be such a thing a market that is not supported by political institutions.
Exactly so.
“Economics” and “Ecology” have the same root; regardless, any economics that, like ours, treats ecological damage as a plus, and fails to acknowledge we live in a very finite, paper-thin (on the earth) biosphere, and thus believes growth without end is a good thing, is doomed to fail but when it does that will be the least of economists’ worries.
Sadly, it’s true. There are no barriers to entry … into the field of economics. Any 3-card monte ‘artiste’ can claim to be an economist and his can claim can be supported by math.
Picasso said, “Art is a lie that makes us realize truth.” Economics is the dark art, the lie that measures the relative sizes of the other, little lies. Math is not really necessary, only friends in the right places and a straight face.
Using complex mathematics can leave people dizzy and totally dependent on the credibility of the economist. A better way is to develop a simulation based on what people can agree on the basic architecture of the financial system. A simulation then allows people to make their own assumptions about cause and effect and human behavior. Steve Keen is one such advocate of this approach and hs developed some very basic models using easily available simulation tools.
I do believe economic theory went intentionally of the tracks a long time ago. Seems that there has been such a long lineage of teaching in the economics profession that we no longer can see the forest thru the trees. I do believe that Henry George had a track on good economics but, was deliberately taken down by the rentiers and, higher forms of kleptocratic fauna that have metastasized into todays high priests of economic theory. A link below to the origins of the deliberate derailing.
w.masongaffney.org/publications/K1Neo-classical_Stratagem.CV.pdf
Inevitably, the finer grained distinctions our language has given us have been washed over with more generalized terms that disguise the real battle grounds. For instance: Business or big business fails to distinguish between wealth producing and wealth destroying business. Further, wealth has been perverted to mean money instead of: Money is a commodity, invented to help people by facilitating transactions. It is not wealth in itself. Wealth is natural resources, water, food, land, education, skill, spirit, ingenuity, art.
I could go on to include words such as Speculation and Gambling where, speculation is not – taking a risk in the investment of capital and labor to produce wealth – ie:wealth can only be created by labor and capital.
Money can be invested in money to produce money and not wealth; gambling on derivatives, from lending for currency and commodity speculation, making takeover loans and other predatory financial practices,international carry trade (computer-driven interest rate and currency arbitrage) that has no linkage to the production-and-consumption economy, financial bets on the economy’s zigzagging measures,gambles on collateralized debt obligations etal.
The great sore spot in our modern commercial life is found on the speculative side. Under present laws, which foster and encourage speculation, business life is largely a gamble, and to “get something for nothing” is too often considered the keynote to “success”. The great fortunes of today are nearly all speculative fortunes; and the ambitious young man just starting out in life thinks far less of producing or rendering service than he does of “putting it over” on the other fellow. This may seem a broad statement to some: but thirty years of business life in the heart of American commercial activity convinces me that it is absolutely true.
If, however, the speculative incentive in modern commercial life were eliminated, and no man could become rich or successful unless he gave “value received” and rendered service for service, then indeed a profound change would have been brought in our whole commercial system, and it would be a change which no honest man would regret.- John Moody, Wall Street Publisher, and President of Moody’s Investors’ Service. Dated 1924
There is a bright side, after watching great minds combat the recession you should be rid of your inferiority complex.
I’m gonna frame your last sentence.
Tom, you are dead right.
Nice post. This is why I usually write “poor” and “rich” and “developed” in quotes. Of all the places I frequent, I find the saddest, most stressed-out-looking faces in the “rich” countries. Personally I’ve had severe economic ups-and-downs and aside from the severe stress of not having enough money for basic needs, my “poor” times have been no worse, or better, than my “rich” times.
I certainly have less people trying to get in my pockets now that the bankster gangsters took my livelihood and trashed it,
and I don’t think I have any more bad days than I did when I didn’t have to worry much about expenses.
They study markets and things like that.
They don’t look at the “whole human”, or the
human side of things.
Anthropology looks at the human side of things,
and so does phychology or sociology.
People interact through markets, but the
human side is left out of economics.
A real pity.
reductionism creates numerous fields of study/endeavor that don’t communicate well thus rendering all of them useless or harmful in at least some ways, with economics that disconnection can be fatal.
99.9% of modern economics is propaganda giving cover to looting by the rich and our elites. How else to explain the promotion of theories that patently have nothing to do with reality, indeed disdain reality, yet just happen to consistently advantage the rich and the elites. Modern economists aren’t stupid or incompetent. They are the intellectual face of a criminal enterprise.
This is what I am talking about.
This is what bad, bad, bad, economics coverage does.
Who corrupted Esther Duflo?
How is her work NOT connected to reality? How can any work get any more real than hers? And guess what- she is at MIT, the biggest of the big Econ departments.
Who corrupted Daniel Kahneman? How is his work not connected to reality?
What about Amos Tversky?
What about Richard Thaler?
What about Alvin Roth?
What about Vernon Smith?
What about Daron Acemoglu?
Yves Smith- you and people like you are at least partly responsible for this.
You always talk about “social responsibilities” and ethics yet you cover economics with such shocking biases that people have no idea just how much hard, real work top-notch economists have put into advancing the science and making life better for millions of people.
Hugh, 10/10!
Much as I’m tempted to join the excoriation of economics in its current state, I’ll save that for another time and content myself with a comment on the state of university administration, particularly with respect to business schools. Charles Ferguson’s much-praised documentary accurately points out how “academics” in business schools, especially in the more quantitative fields such as finance, have long been coopted by lucrative consulting work. When I was a doctoral candidate at Stanford’s GSB (no degree), it was run by Dr. Robert Jaedicke (Smilin’ Bob, as I liked to think of him). Many years after my personal train wreck, I had the distinct schadenfreude of watching Jaedicke be pilloried by a Senate Committee as to why, as someone with a Ph.D. in Accounting, and over a decade as leader of the top business school in the U.S., he could have sat on Enron’s Board of Directors and not have known that Lay, Skilling, and Fastow were running a corporate finance shell game. Smilin’ Bob wasn’t smiling that day.
Hubbard is safe as long as he’s not on the board of the next Enron. THen again, given the company he keeps (so to speak), maybe he’s not as safe as he thinks.
P
Sadly, we may someday look back on Enron as a Good Old Days of morality and responsibility.
At least a few of the grifters saw the inside of a courtroom, and a few the inside of a prison cell. Note Jon Corzine as the new paradigm of corporate governance.
One important aspect of the feudal system was the power of the law over the various social levels. That is, less constraint as you go up the ladder. Mr. Hubbard is only a lackey to the elite, but this gives them a reflected immunity.
While this is indeed disconcerting, what do you think it suggests?
I know questions have also arisen about Harvard Business School people. Do you think business school doesn’t teach enough ethics or that it actually encourages bad behavior?
Do you think this accounting guy is a one-off or are you saying there are a lot more like him?
maybe one or two. :)
we gonna chase those crazy, ha, gonna chase those crazy, gonna chase those crazy bumheads, yah, gonna chase those crazy numbheads, we gonna chase those crazy slumbheads, right out of town.
Hi,
I think the utility of teaching ethics to MBA students is worth exploring.
IIRC, Yves has written on this, with a certain amount of Yves-esque skepticism, and I’d defer to her on this. Not least, I have to hesitate to opine on MBA education because at Stanford and many other biz-schools (although not Harvard, if *I* recall correctly), the Ph.D students exist in a separate world from the MBAs – something I thought bizarre at the time because the large majority of Ph.D students who matriculated the year I did had come directly from undergraduate programs, and I was non-plussed how they could go on to teach MBAs when they had no experience of real world businesses and other organizations outside of academia. As you might surmise, back then I was easily non-plussed.
That said, my quick take on teaching ethics in biz-school is that it is both too little and too late: too late in that if a person has gotten to adulthood without developing a moral rudder then trying to teach them right from wrong as adults will be an exercise in frustration, not unlike the proverbial trying to teach a pig to sing; and too little in that many, I would argue most, people, particularly ambitious ones, take their behavioural cues from the organizations in which they find themselves, and, given the rampant lack of morality that corporations have exhibited since the 1980s, the hope that an ethics class back at business school would keep them on the straight and narrow is sadly a triumph of hope over experience.
To paraphrase James Madison, if men (and women) were angels there’d be no need for government. This, BTW, is why I’m an ardent fan of government ;-)
P
Let’s clarify.
Glen Hubbard in his political capacity is not an economist.
He is a political figure.
Economists do economics. That means serious research that sadly most people (including Yves and including the vast majority of the people who comment here) are not at all familiar with.
What Hubbard does to get into office is political business. It has no bearing on his economics because economists won’t take his research more seriously just because he is Treasury Secretary.
If it has no merits, it’ll be moved on from by the community regardless of his position.
Now your complaint seems to be more so that Hubbard/Romney market Romney’s political views as based on high-quality economic research, which you say it is not.
Well that’s the fault of people like Yves Smith who bash economics all the time but do very little to present some of the fascinating mainstream research which addresses many of the topics Hubbard and Romney mis-address according to you.
Plenty of good economics has been done on ZLB behavior, labor tax elasticities, income distribution/inequality and its consequences for business cycles, etc.
Maybe present that and show what economics is really about instead of bashing it constantly, discrediting perfectly good, honest work and therefore being unable to disentangle the good work from the bad work when that’s what needs to be done (i.e. in this case).
PS: And please don’t bring up the stuff from Randy Wray and Steve Keen.
It’s nice these guys are the most popular economists here but their stuff, while fascinating and surely far more intelligent than anything I can say on the subject, is not even close to being as profound as NC has made it out to be compared to some other high quality work NC has ignored.
OKay, re-reading my post I realize it sounds too forceful and unfriendly. Sorry Yves and Cathy, etc.
But frankly I get annoyed when “economics” is taken to be what Glen Hubbard and Edward Prescott do while you almost never see any kind of coverage on the work by guys like Esther Duflo, Brunnermeier, Iacovello, Cunha, Veldkamp, Malmendier, Werning, Farhi, Nakamura, Steinsson, Day, and many others who address many of the topics you think “conservative” economists mis-address.
Some of these are very young, very promising economists (Veldkamp, Malmendier, Cunha) who do research into all kinds of fascinating subjects that you are concerned with that is very complex, very intelligent, and very interesting.
That is bad. It gives people a very skewed impression of what economists do.
And I’ll also say this:
Your systematic wrecking job of economics is helping eviscerate a field in which you have many allies.
You are destroying the image of people who are working hard to move the science forward, to take it where you think it should be- realistic, complex, connected to actual problems.
By portraying economists are money-hungry, unscientific mongrels you are ruining the impact that many exceptional people WHO ARE TRYING TO ADDRESS THE ISSUES YOU WANT TO SEE ADDRESSED could have on society.
It’s so, so, so sad and bad for you, for people like Esther Duflo, Acemoglu, Thaler, etc., for the people who read your blog.
I am not sure what your goals are.
You always say you want to reform various industries, society, etc.
Yet the people who can help you the most with that, the people who are working 12 hours a day building new theories to displace the old ones are in the field you are trying so hard to kill.
Please tell me that these folks you speak of are proposing alternatives to private banking, ongoing inheritance and accumulating private ownership of property.
If not then perhaps they are irrelevant in the real world I and others live in.
I’m at a loss to understand exactly what you propose. Go to the INET website and read of their criticism of the economics profession. Read countless criticisms within the economics profession of its manifest failures and tell me what you would have Yves and others here say. (Yves is more than capable of speaking for herself, but I think she has done a profound public service with her writings and her far-too-infrequent appearances on TV).
The central difficulties of economics are manifold but I would nominate two: the fact that basic concepts such as ‘wealth’ have resisted any truly objective definition, not unlike the concepts of work and entropy before Boltzman and the thermodynamics revolution; and that economics is inextricably linked with political science/theory in that the two are intimately coupled in the idea of property and contract rights, and, as we know from even a cursory reading of history, politics is a vicious cesspool in which self-interest masquerades as principle all too often.
I have more to say on this but for now I’ll just conclude with the saying ‘a wink is as good as a nod…”
P
Economics is one of the “cargo cult sciences”, the following is quote from Mr.Richard Feynman’s Caltech address (1974):
“…In the South Seas there is a cargo cult of people. During the war they saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to imitate things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas — he’s the controller — and they wait for the airplanes to land. They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.”
Economics just mimics the hard sciences with math, etc.
Really?
So you think in physics, biology there is concrete agreement on how things work?
You don’t think the huge public fights between Peter Woit and co vs. large swaths of the physics community or Einsten vs. Bohr were disagreements that the hard sciences also face huge difficulties in coming up with robust conclusions we can all agree on?
You think their models don’t need serious parameter tweaking to fit the data?
How do you feel about Lambda-CDM or string theory? Loop quantum gravity? Where is the agreement there?
Why is there so much model fine-tuning there?
People have this illusion that physics is this amazing, 100% linear science in which truths just kind of come into place like pieces of a puzzle.
It’s not.
Biology even less so.
Economics is just more public and it deals with more complex systems so its disagreements are more obvious to people who have taken fewer econ classes than physics classes but think they have nailed the epistemology of both sciences down.
“So you think in physics … there is concrete agreement on how things work?”
Eh? What’s the “concrete agreement” doing here?
Physics delivers – the internet you have just used to blabber inconsequential “concrete agreement” is the proof – ie the planes land.
Economics doesn’t deliver – the current state of the 1st world economy is the proof – ie the planes do not land.
Oh boy…
I am glad you understand now.
So you think that this thing called economics deals with more complex systems than biology…..LOL What are you smoking?
Just because we now talk of currency amounts in the trillions and there are not that many stars in the Cosmos this guy thinks that propaganda cover for the class system and the global inherited rich is more complex than biology.
Please tell us how this works. I can hardly wait.
igor, how else are they and their quants gonna get laid? “No going back.”
The weather whores have backed off …. good news for East Coast! (Although still drilling West Coast with chemtrails neutralized with vinegar) Weather patterns returning to normal …. chem dumped block gone under Greenland….. see here: http://www.eldoradocountyweather.com/satellite/ssec/conus-us-composite/conus-color-composite.php
gozo, thanks for the update. There: “Nothing ever happened.”
It seems economists form their opinions based on their political views and then come up with an economic rationale(Paul Krugman on the left comes to mind, I’m sure there are plenty of other examples on the right)
Hubbard obviously is “somebody’s sweetheart” – like Robert Zoellick, also mentioned in the post, also an “untouchable.” They are disgusting, and a source of dishonor to whoever is keeping them.
The maths isn’t wrong, the assumptions that the maths is based upon are extremely wrong, ‘crap in,crap out’. Steve keen has been busy building a working model based on more realistic assumptions and seems to have been quite successful. I would recommend that everyone looks at Mr keen’s work
I guess I jumped the gun yesterday posting how laughable this article was.