Comentários de uma notícia do The Economist

What went wrong with economics
http://www.economist.com/displayStory.cfm?story_id=14031376


Ghalib wrote:July 24, 2009 18:52


Economics is really silly stuff masquerading as science. As an engineer, I could never understand how one may draw a graph without showing any numbers on the various axes. Now I understand. There is is little or no experimentation or first principles stuff to provide a foundation for the whole dross. I did an MBA to cure myself of 30 years of engineering, but I was appalled by the loose thought processes, chicanery, propaganda and deceit that underpin so much of finance and economics.
As they are weapons for acquiring and holding power, I should not have been so surprised. My high school reading of Talleyrand and Goebbels had taught me that.
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edino wrote:July 24, 2009 10:30


good article , but we have to focus more on over-valued managers and bankers to understand the crisis .
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DO Kimberley wrote:July 24, 2009 9:25


I see that a number of readers have referred to the Austrian school, which your article does not mention.
In the late 1970s Hayek gave a lecture entitled "Coping with Ignorance". In it he explained why he thought that macroeconomics was unscientific and was likely to lead to erroneous conclusions and policy prescriptions. His conclusion was:
"It seems to me more and more that the immense efforts which during the great popularity of macroeconomics over the last thirty or forty years have been devoted to it, were largely misspent, and that if we want to be useful in the future we shall have to be content to improve and spread the admittedly limited insights which micro-economics conveys."
His Nobel lecture on the Pretence of Knowledge made a slightly different but related point, that we have been misled by using apparently scientific methods (but methods which are in reality completely unscientific) to prove as correct theories that are in reality not correct. Lest anyone think that he was biased on the subject he described Milton Friedman's Positive Economics as quite as dangerous as Keynes's General Theory.
My guess is that Hayek was right. Unfortunately humans do not like to admit to ignorance. They tend to prefer an explanation that is wrong to no explanation and a quack doctor to no doctor. Admitting that we simply do not know many of the things that economists have claimed to know is going to be very hard for most of us and particularly for economists to swallow.
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Angry Pancho wrote:July 23, 2009 4:42


You'll never achieve betterment with the pursuit of wealth. It's like judging a family's happiness by its income. But you boys just go on playing anyhow; clearly you were meant for it.
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SteveKeen wrote:July 22, 2009 22:42


Since your commentary singled out Austrian Economists for special mention as having heralded the crisis, you should next also note that the other major group of economists who correctly predicted the crisis were the POST-Keynesians--non-neoclassical economists who believe that the conventional "neoclassical" interpretation of Keynes by Samuelson and Hicks was a disaster.
Three of the 12 economists singled out by Bezemer as having correctly foreseen the crisis are emphatically Post Keynesian in their economics--Wynne Godley, Michael Hudson and myself--while I could describe three more as having links and sympathies in that direction, though they might not call themselves Post Keynesian (Dean Baker, Eric Janszen and Madsen & Sorensen).
If I can speak somewhat generically, what we all have in common is admiration for Hyman Minsky's "Financial Instability Hypothesis", an interpretation of Keynes that Minsky developed over 40 years ago that warned of the tendency for capitalist economies to fall into a debt-induced crisis in the aftermath to a debt-fuelled boom.
Minsky stands at the crossroads of several important currents in economics: his PhD supervisor was Joseph Schumpeter, his parents met at a communist party function (so Karl Marx was on the family bookshelf), and the insight that sparked the development of his financial instability hypothesis came after reading Keynes's 1937 paper "The General Theory of Employment" made him realise that the so-called Keynesian IS-LM model was a total distortion of Keynes's thinking.
So note Minsky please in your next editorial commentary--and if you'd like a quick introduction to his views, then read this post on my blog:
http://www.debtdeflation.com/blogs/2008/03/10/time-to-read-some-minsky/
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OtherWorldIsPossible wrote:July 22, 2009 19:00


Shann Turnbull described the real problem perfectly :
"No economic theory can be relevant for a financial system that is not connected to the real world without feedback information to correct its excesses".
Money is the problem. Due to global speculation, financial crisis ( and the unsolved debt crisis ) it no longer determines the real ( economic ) value of goods and services, giving false prices ( US housing bubble and oil prices are good examples ) and distorting the global Economy.
If Finance goes crazy, corrupting money, so does the Economy.
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Mike the Inventor wrote:July 22, 2009 15:34


As an engineer, I analogize our economy with a faulty structure. Our economy relied on a stucture that could not stand on its own, it was unstable, artificial, and required active management by our government. There is no market for sub-prime mortgages without the government a la Fannie & Freddie. This artificial market had to collapse. Unfortunately, too much structure was built on top this false foundation and a local failure propagated through the whole structure.
There were some bad actors in this deal, and people need to hold their feet to the fire (Barney Frank, et al). If we insist on fanciful (and fundamentally unstable) economic structures, we will end up with many more failures. I only hope that our government and private capital will endeavor to compartmentalize the damage rather than shift it from their balance sheets to those of the taxpayers!
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SAEconomistInTraining wrote:July 22, 2009 15:09


What went wrong with economics is that people started thinking that price was a fair valuation of value and completely ignored capital flow analysis in favor of the debunk efficient market hypothesis. Rationality does not exist on the market and we should stop assuming that it does. All the statistics point to this conclusion and I think it is time that we start teaching students how to try work out intrinsic value. Shares are bound to be under or over priced that is the inconvenient truth. EMH looks great on paper but really bad in reality.
http://www.saeconomics.blogspot.com
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econfused wrote:July 21, 2009 14:42


Luckily I live in two worlds, the primitive and the sophistcated, this keeps me informed and aware-I cannot help but notice how the so called sophistcated thinkers who have the resources to become our political, business and academic leaders detach themselves from the masses, as they enjoy the fruits of the primitves labors. It is a horrific site to observe this in real time -the disconnection of the result of thier actions -as the pursuits for status and money provide the securtiy one needs to tough it out in this world ,it does little for what truly nurtures the soul . On thier journey to the top, they exploit the ones who can afford the least, when the get there they eventully become benevolent, concerned and thoughtful-only to find they cannot relate anymore ,then they become bitter. When this flaw is adressed then we will have progress until then it will always be the mutated, agressive and competive mindset that rules over the masses. Some economists are subjects of large organizations their information is always biased-the independents who are prescient are almost always dismissed or smeared( as any forward thinker can attest) There should be a panel of the most prescient economists the ones with history of getting it right -and they should guide our econmic policy. Not the ragtag approach as is the case today.
Gregory F. Kruger GFkrugerco@aol.com
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malacapricornis wrote:July 21, 2009 0:20


I find it odd that the same magazine that continued to sound the alarm about housing bubbles in the US and the danger to the world economy over a SEVERAL year period is now doubting the forecasting power of economics. Even "laypeople" knew that something fundamentally was out of whack when their neighbors were buying houses in the $500,000 range SOLEY because house values were rising.
What went wrong is that political calculations in the modern democracies are guided by the wrong incentives. The policies that encouraged the reckless behavior of the markets are enacted by politicians indebted to a barely educated electorate.
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VoiceofDissent wrote:July 19, 2009 19:55


What Went Wrong is that, more then any other science, economics is subjected to politics. In other fields dissenters are allowed to prove their worth and their theories. In economics conformers get published and recognition. There were plenty of correct economic voices out there, but we failed to hear them.
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re-publica wrote:July 19, 2009 19:45


The current crisis does not at least diminish the value of economic theory. The opposite is the case. Subtract all the politics and the rhetoric and it comes down to: aggressive monetary policy (loose money) creates a gigantic bubble whose burst is spectacular. Nothing new, nothing economic theory does not know.
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bela bacsi wrote:July 19, 2009 18:04


As a former communist country citizen I can only say that nothing at all went wrong. With all ups and downs, in the end the greedy capitalist world will be always better than any other experiment. Economics is still valid, as it was for the past couple of thousand years. Bubbles cannot be avoided, one has to live with them. As such, governments are always more dangerous than anything else, because they have the monopoly of money printing and "legitimate use of violence".
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V H Hellenstein wrote:July 19, 2009 4:50


I read upon some naive comments here with disdain and disgust.
To those that are denouncing economics as 'useless', please bear in mind the Economics discipline that you're advocating to abandon is dealing with one of the universe's more unpredictable forces - the Human Kind.
What kind of results to you expect when you're studying a race that, at every turn, manage to manipulate nature and use it to their advantage. Just like science, where theories and conjured, debunked and revised...it took scientist hundreds, if not thousands of experiments to get it right.
Stop with your naysaying and unreasonable expectations. There are, what? 6 billion people in this world? That's approximately 6 billion factors, multiplied with millions of other factors that could equate a gazillions outcomes. You want a 100% accurate outcome? Go rub your crystal ball.
Economics can and never will be 100% accurate. It will and always be flawed. WHY? Because HUMANS are already flawed themselves.
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siamdave wrote:July 19, 2009 4:34


One needs to consider what 'economics' really is. To pretend it is a great science uncovering important information like the 'law of supply and demand' is, to be extremely polite, disingenuousness of the first order. You do not need 10 years of university to 'explain' something pretty much anyone above the level of nematode understands - we do not, for instance, have a 'science' to explain that most people prefer to be in a warm place when the weather is unpleasant outside, and we do not require 10 years of university to understand that if there is a lot of something and people do not value it much, the price is relatively cheap, but if something that a lot of people want exists in only a limited supply the price will be higher. We do, however, require a great deal of obfuscation to hide the single most important economic fact of our lives in the modern world - we live in a system where a small group of privately controlled entities are allowed to create and essentially control the money supply upon which all modern economies and societies depend, and who demand and get 'service charges' on that entire money supply each and every year, and from this single, simple fact, all of our current financial problems follow. The money supply is manipulated by these same people to create booms and busts and further steal massive amounts of money from the hapless citizen who understands nothing of what is happening except that she is getting poorer and poorer, and more stressed about everything, whilst the bankers are ordering their new private jets to fly off to their new jetset retreats somewhere far away from the madding crowd. The obfuscation is required because most people, if provided with any real information about the money supply and the power of those who control it, would rightly conclude that in a 'sovereign' country, under democratic control, this most important aspect of our daily lives should be controlled by 'we the people' democratically, for the public weal, rather than by a small group of people, whose single central priority is maxing the accumulation of wealth from 'our' society, who have arrogated this great privilege unto themselves over the years - and kept this knowlege generally out of the public eye by using much of that money to control the things 'our' politicians and media report on or what is 'taught' in our schools. So this has been the great 'failure' of modern economists, and the media, to understand and report on this money-creation situation, and how it relates to everything. More detail on how all of this is related to the current world financial meltdown at Global Financial Meltdown: Forces beyond our control, or the greatest scam ever? http://www.rudemacedon.ca/greatest-sting-ever.html .
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Vangel wrote:July 19, 2009 2:21


I do not agree with the basic premise behind the commentary. Economics did not get the story wrong; it is the mainstream economists that got it wrong as they usually do but those are the only people that the media pays attention to as it dismisses others as cranks.
The evidence is very clear. Most of the economists that belong to the Austrian School saw the crisis coming and warned people about it in countless of interviews, papers, articles and commentaries. But they were laughed at and dismissed as fools who just didn't get IT. Now that they have been proven right the mainstream media ignores the fact that they actually saw it coming and understood the implications of central bank monopoly over money creation.
Readers should do their own research to check that the Economist has ignored the facts. Plenty of comments were written long before the collapse by many individuals who belong to the Austrian School. A good place to start is to look at the book, Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse, by Thomas Woods. Mr Woods provides a good overview of how the crisis unfolded even as people like Peter Schiff, James Grant, Jim Rogers and Ron Paul were warning about the consequences of the credit expansion and the explained the harm that would be created by the housing bubble and its inevitable end.
Other members of the Austrian School have been explaining to the public exactly what was happening and why. Marc Faber, Bill Fleckenstein, and many of the contributors at mises.org were warning readers about the ultimate consequences of the actions taken by the Fed and the government. Subsequent events proved them correct and vindicated the Austrian School even as it exposed the Keynesians and the Monetarists.
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gabzadu wrote:July 19, 2009 2:12


Dear sirs:
I am amazed at your conclusions on what went wrong with economic science. The laws of the market economy are blind and work absolutely oblivious of the warnings that economists might utter. The bottom line is all that matters to the actors. The repulsive greed visible in Goldman Sach's policies -to pronounce one of the many names of the beast- is the true blood that runs in capitalism's veins. Trying to stop bubbles with "economic science" is about as effective as current obamanomics. In the long term the crisis will run its course and bubble-time will be back with all the idiotic theories about growth everlasting riding high in the saddle again. Because that is what investors want and need. What is great about The Economist is that it is a wonderful mirror of the miseries of capitalism. Keep doing what your are good at and don't try to explain too much.
Yours
Gabzad
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Ari Rose wrote:July 19, 2009 0:53


@jomellon: It is clear that you are looking at this through the prism of American partisan politics. I strongly advise you to explore these issues with an open mind.
Krugman and Stieglitz write a lot of interesting things, and are very good at pointing out the symptoms and the processes that brought them about. What they are unwilling to do, however, is point their finger at the root causes (fractional reserve banking, the banking cartel, as well as Chinese currency manipulation). I do not know why they do so, but by the looks of it, they seem unwilling to take sides with anyone who is not in their natural political camp.
Unofrtunately, in order to overcome the current crisis - and to avoid future ones - a true shift is required in American politics, and people from both sides are required to reconsider some of their key stances.
As for Naomi Klein - sorry, but she is really not a contender in this ideaological battle. She is a popular critic, and points out interesting trends, but she proved to be completely ignorant on too many account. Her "critique" of Milton Friedman, for example, is completely outrageous and raises doubts as to wether she has read any of his books. It looks more like she is fighting his political ghost - her idea of what he would think based on the people who listen to him - and not his actual ideas.
Friedman (as Hatek, Rothbard, and others) was against intervention in the affairs of other countries, against the state monopoly on violence, and against coercion of any kind unless absolutely necessary in order to defend the basic freedoms of other individuals.
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The Yankee (No special talents...Just an inquisitive mind wrote:July 18, 2009 23:17


Of what use is economics when economists cannot agree on the principles that make it go or not go…
In this respect, economics is much like religion, one can place his belief in any of its published doctrines, but without exact truth in any of them being accepted above all others as the “Chosen One,” it has to follow that down the road all of them eventually become open to question…
But one ineluctable truth of economics is as follows: Any economic system that pays wages that are regained by the payer of them in the goods sold, is a system doomed to failure from the start…This is all ye need know about economics….All things other, are but the mechanics of economics…
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Luke-skywalker wrote:July 18, 2009 18:00


Upon further consideration, I am even more distressed by the philosophical bent of this article. Free-market economics is a broad theory, and instead of trying to figure out why markets have failed to follow theory, you have instead tentatively asked the question of what is wrong with a theory that doesn't perfectly predict what is happening in the world. That is an absurdly high bar to set for any theory, or for the theoreticians who follow it. The two approaches would lead to drastically different conclusions. On the one hand, you might be tempted to throw much good theory out the door, and on the other, you might do something positive by actually attempting to consider what conditions exist in the world that have caused it to fail to follow theory. There is no part of free-market doctrine that calls for all of the perverse conditions that persist in this world and oppress upon the smooth functioning of markets, so there is absolutely nothing wrong with the theory. The Economist is indeed a weak reed to lean on in times of philosophical turmoil.
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GregPytel wrote:July 18, 2009 17:51


To Luke-skywalker:
In a way you are right. But actually this crisis is "The largest heist in history."
This crisis should not lead to re-writing economy books. It is about going to basics: using pyramid structures in finance as a model is bound to fail and indeed is criminal. So when are we going to see the mass trial (like Madoff was tried) of financiers, regulators and politicians? This would be far more effective for the future than any tinkering with law and regulations. They did not fail, they simply were not obeyed. If this lot learns their lesson (having been jailed for lengthy terms and their wealth was confiscated), I am pretty sure that their successor will be less likely to embark on any kind of financial scam.
For more check up: "Financial crisis? It's a pyramid, stupid."
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Luke-skywalker wrote:July 18, 2009 17:38


This article shamefully fails to mention the ways in which government has skewed the ability of finance (and economics) to work as predicted by financial and macroeconomists. Central bank practices, captured and patchwork regulation, failure to encourage tranparency, tax laws subsidizing homeownership, Fannie Mae and Freddie Mac, legal subsidies of rating agency malpractice, (not to mention the actions of other government outside our control, i.e. China's currency manipulation), and so on, all were far more responsible for what happened than any fault of free-market doctrine. Indeed, they almost serve to prove the value of free-markets in the face of what happened.
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W.J.Herter wrote:July 18, 2009 17:27


Economics is an inexact science. Many micro and macroeconomic models and principles are based on assumptions that are uncharacteristic of the real world.
A second point point is free market mechanisms do not work in reality as they do in theory. According to neo-liberal thought, free markets are the best determinant of the most efficient and productive use of capital in an economy. The housing and construction bubbles in the United States and much of the Western World have proven that free flowing investment capital seeks the highest returns in an economy, which does not always lead to the type of economic growth and development that was originally envisioned. Capitalism is about greed and making money and the banks and financial institutions that were allocating capital to bubbles and projects that created no real wealth can be partly to blame for the financial crisis that has swept the globe. These banks are not the only accountable players in this tragedy. Politicians and regulators that allowed these excesses to take place without questioning the possible outcome are also at fault. It is not surprising that economists and whistleblowers that spoke out about the inherent dangers of what was taking place were shunned by the masses. No one like pessimists, especially when the global economy is booming and people are making vast sums of money.
The next few years will be painful for billions of people. They will have to come to the realization that their assets are not as valuable as they were led to believe and that the high rolling times of the pre-crisis era are not coming back anytime soon. The anger on Main street is understandable. The large majority of the population did not make these decisions about where investment capital should go in the economy, but unfortunately, for not being part of the process, they have been horribly punished.
Economists are not without fault. They use economic models and theory to justify their assumptions about how the world works. Politicians and financiers use economists as a credible source because many people do not have any understanding of the field other than it sounds technical and complex. Economists are as fallible as anyone else and their insights should be taken with as much skepticism as the recommendation of a telephone psychic.
People need to think for themselves and understand that there are more important things in the world than profits and economic gain. Those are the goals of the banks (and the economists they employed) that helped fuel the financial bubble and to use them as a benchmark for socio-economic development and stability is misguided and wrong.
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CanadaEU wrote:July 18, 2009 14:08


It would seem that most economists have never read Adam Smith's "Wealth of Nations" but are intimately acquainted with Machiavelli's "Prince".
Today's economists seem to be far more interested in currying favour than than proffering a true analysis of the economic situation.
It would appear that the economists are corrupt and co-conspirators: prison and or executions (China does get some things right) would seem to be an effective go forward strategy to cleaning up this mess and ensuring that economists take their jobs seriously.
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observer and root cause wrote:July 18, 2009 13:59


Jean Michel July 81 10:10 writes:"Another cause of the bubble is speculation, especially in the securities sector, where speculators create money by billions by simply buying and buying the stocks and derivatives, creating new wealth at the expense of the productive sectors."
That is why the stock market still has not been outlawed - YOU say "creating new wealth" -sorry it does NOT CREATE NEW WEALTH - but all playing this casino game think so: it just circulates it. When fake money is put down on the stock market ( for example if a person flipped a house $300,000 for $500,000 - that building did not suddenly greatly improve its design,structure, durability, improve in R-Value, etc) then more of exponentially fake money gets swirled further exacerbating a bad situation. Its strange that supposedly intelligent people do not understand the the difference between one person sucking up money from all in his community (circulating money) and the whole community increasing in wealth ( the capacity to produce goods and services) by actually producing something of value. We have a problem huston and its not mechanical.
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