More protesting for the sake of it: Economics students

I know what its like to be a student, and feel like you know everything there is to know.  But the truth is that you don’t, you really don’t.  And that is something that the students walking out of Econ 10 should realise.

I learnt this the easy way – I listened to my lecturers, asked about the issues, and was able to tell that they were significantly smarter than me … and that they had critically analysed many of the same issues in the past.

From this I discovered that economics provides a framework that can be used for understanding the allocation of resources when we have scarcity.  It doesn’t prescribe to us what policies are right or wrong, it just gives us a transparent framework where we can hang up our dirty assumptions for everyone to see and then look at what conclusions pop out.

Look, there is nothing wrong with critical thinking – hell critical thinking is essential in the framework I’ve described about.  But they are complaining about a course that leaves all its assumptions out in the open, leaves itself open to criticism, and helps the student to engage in critical thinking.

If you want to know how poor the understanding of the students is look here:

There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory

Comments like this show to me that the students actually know nothing – and just want to protest the course because they don’t know what the course is, or what economics is.

In fact, I’m surprised at this idiocy.  I’m a fluffy business economist – nowhere near academia or study – but I read the General Theory and Wealth of Nations in my first year of study.  At that point I knew the fact that “Adam Smith’s theories” and “Keynesian theories” were about different things, and shared a lot in terms of the fundamental framework – the framework that is taught by Mankiw in Econ 10.

I find it difficult to believe that anyone could have the arrogance to walk out like this when they have no knowledge or understanding – but then again, maybe I’m underestimating the arrogance of Harvard students …

And this is my issue with a lot of the protests at the moment.  There are real issues in the US and Europe, where protesters SHOULD be out complaining – and the knowledge gained from a course like Econ 10 would help to provide this.  In fact, once you start to understand allocation, you begin to realise just how much there is to protest about – especially with regards to the developing world, and the inequities we tolerate for the worlds real poor.  Instead, the protests are dominated by self-centred narcissists who want attention and want to “fight the system” – giving the whole idea of protest a bad name.

Update:  Mankiw discusses here.

Update 2:  Reading the comments to the articles linked to by Mankiw is one of the most depressing things I’ve ever done.  I hope to god these aren’t actually Harvard students, because the comments are:

  1. Moronic
  2. Filled with a lack of evidence gathering – with people discussing Marx who don’t seem to understand that Marx’s method was Ricardian economics, and people saying there are no empirical studies in economics …
35 replies
  1. Bill
    Bill says:

    I look over at my shelves and see:
    – Is Economics Relevant?
    – Debunking Economics
    – A Guide to What’s Wrong with Economics
    and several other such books. There’s lots and lots of critical thinking about economic theory. It’s also really hard to understand without a good grounding in the canon. Just walking out won’t get you that.
    In fairness, Mankiw’s course may not provide a good picture of the diversity of economic thinking, but what intro course in any discipline can?

    • Matt Nolan
      Matt Nolan says:

      Very true.  To be honest, I have an intense soft spot for reading about economic methodology – literature which tends to be very critical of economics, especially in terms of its application.

      With Mankiw’s course, if its anything like his textbook it is very empty of ideology and prescription – it just describes the general ideas of economics, grounded in the concepts of scarcity and opportunity cost.  If the students are arguing against these concepts with their protest they are morons – pure and simple.

  2. Paul Walker
    Paul Walker says:

    Debunking Economics!!  Awful book. On my selves another Australian,  William Coleman, “Economics and its Enemies: Two Centuries of Anti-Economics”

    • Matt Nolan
      Matt Nolan says:

      I just ordered “fact and fiction in economics: models, realism, and social construction” and “the economic world view: studies in the ontology of economics”.

      I’ve read most of the essay’s before, but I just want to have them sitting together in a book so I can read them outside this summer.

      <3 methodology.

    • SH
      SH says:

      In what sense is Debunking Economics an awful book? What statement or description would you take issue with? Or are your feelings purely ideological?

      I recommend Marc Lavoie “An Introduction to Post-Keynesian Macroeconomics’

      • Matt Nolan
        Matt Nolan says:

        In case Paul doesn’t see your comment I’ll pop down a reply for you.

        I haven’t read the book – so personally I’ve got no real opinion.  I have seen Stephen Williamsons review – and if how he characterises the book is correct, then Debunking Economics attacks a bit of a straw man – and misrepresents the actual economic method pretty sharply.

        I’m sure that is where Paul would have been coming from.

  3. Bill
    Bill says:

    Yeah, straw man arguments is good description. I thought the worst parts were the topics whose standard theory I knew best, which made me skeptical of the whole book. What I like is the easy summaries of heterodox theories, whether I agree with them or not.

  4. Kimble
    Kimble says:

    To paraphrase something I have noted before, economics has to be the most misunderstood classes at Uni. And the people with the greatest misunderstanding have often taken Intro to Econ.

    Those people seem to enter the economics classroom with a twisted perception of the field and only get more ignorant the more they are taught. Weed them out.

  5. Antonio Sanchez
    Antonio Sanchez says:

    What is a reality is that current models have not worked very well, they need to make changes in a short period of time or worsen this situation worldwide.

    • Matt Nolan
      Matt Nolan says:

      The current models are completely consistent with what is going on – the incompetence of policy makers in the current environment is the only real surprise.

  6. Mau
    Mau says:

    There isn’t one iota of a critic worth his salt about ‘debunking economics” all over this banter.
    Read the book, and come back, readingWilliamson’s “review” doesn’t qualify. The fact that neoclassical crap like “debt doesn’t matter, as someone’s debt is someone elses asset” is one if the main reasons the world is and will sink in another Depression, bigger than the last one.
    You would also take notice of the simple fact that “critics” of Steve Keen are the ones inclined to critic him exclusively on an ideological basis…if they try to critic the maths of his book…they all crumble and fail miserably.
    Mankiw persists in transmitting the same fallacies that only apparently are just innocuos “economic principles” …they are the dangerous weapons of mass destruction that will bring your universe down…wether you agree or not is now irrelevant..having passed the no-return point.

    • Matt Nolan
      Matt Nolan says:

      I said I wasn’t criticising it – as I hadn’t read the book.

      I have seen his criticism of profit maximisation before though, and all that showed was that he didn’t understand maths – this is the main reason I haven’t read the book, as I prefer to look at robust critical theory around economics, rather than ill informed “pop criticism”.  If people believe in it then I will definitely consider giving it a read – but I’ve never met a person who knows what economics is and actually likes the book.

      The debt point you raise is also very very wrong – seriously, there is a lot of economic literature and discussion about these issues.  Central banks were introducing regulation to improve the robustness of the financial system before the crisis took place.

      The Lehman brothers crisis showed that systematic risk had not been given the weight is should have been – I’ll agree on that.  However, the last 18 months with the European debt crisis illustrate that people don’t understand the fundamental lessons from first year economics – not that they are behind the crisis.  We are currently in a situation where the majority of economists have been saying “we understand this crisis, and this is the solution” while policy makers have been saying “we are going to ignore it and make terrible erros”.

      This is why Krugman is so angry, understandably.

      • Mau
        Mau says:

        My debt point might be very wrong—only if you qualify why. It is evident just looking outside the window that what is definitely killing the entire economic system of the planet is the quantity of debt and the impossibility to service that ridicolous amount of debt even in an environment in which interest rates are artificially compressed by Central Banks more and more desperate and at a loss of an explanation of why they can’t stop the deflationary spiral even with negative (real) interests rates.
        When you make possible a “financial” system in which every risk, no matter how big, can be hedged at zero cost, it becomes “rational” to leverage to infinite and hedge….until a counterparty like Lehman goes under, and you discover that the infinite chain of counterparties depending on leveraged cash flows…implodes and generates a systemic risk…because all the notionals are several orders of magnitudes bigger
        than any player’s capitalisation. If Central Banks where introducing regulations BEFORE, as you say, how comes European Banks are 25 times leveraged? You know very well what that means , that a slide of 5% in the book value of “assets” wipes out the capitalisation. Americans are “just” 13 times leveraged, so they need assets to slip 10% to wipe them out…and they are full of mortgage backed crap that is worth 0 unless the Fed decides to “monetize” it…printing. You have a minor point on European politicians “denial” and the fact that their inaction and kicking the can has made things unsustainable and more expensive, but you are totally wrong and deluding yourself if you think Krugman’s “solution” is going nowhere….piling up more and more debt and printing indiscriminately will only, briefly, sustain the nominal value of assets…purely in nominal terms and fora brief period, but until you don’t oncrease also the nominal value of salaries, the deleveraging of the middle class of ordinary Joe Bloke of the planet will wipe out everything in front of it…in terms of sheer size. The Us has printed and incurred further debt of 1 trillion US…and obtained a GDP that since 2009 has barely budged from the 14 trillion mark because Joe Sixpack deleveraging and debt cancelled by the books because defaulted, was more than 3 trillions…only until 2010. Steve Keen’s explanations that debt deleveraging kills aggregate demand is the only explanation that makes sense and that may offer you a way out…i.e. if you want to inflate your way out of it, you have to inflate salaries and not just asset prices, and to inflate salaries you have to roll back some of the bright discoveries of globalisation like outsourcing everything to China or India. Otherwise, the only solution is to cancel debt…trahumatically, with the time honoured institute of bankruptcy, bankrupting the insolvent banks ( a good majority of the system…) , guaranteeing the depositants and nobody else…and think about some form of debt jubilee for private subjects, if you are unable to rise their capacity not to just service debt..but to repay principal. Just as a side note…my academic and professional qualifications say I should know something about economics, and , it appears, I liked the book of Steve Keen.

        • Matt Nolan
          Matt Nolan says:

          My issue with looking directly at debt is that we are focusing on a symptom – not a cause.  It was in that context I was rolling out the wrong card.  I think my language implied more negativey than it should have – I apologise about that.

          I’m glad to see you liked his book, and I don’t disagree that high debt levels do lead to lower economic activity – that is both an empirical fact, and intuitively obvious as you have said … after all, people are all different and high debt levels make a section of these people credit constrained.

          However, I don’t think anyone was disagreeing with that point here.  The criticisms I have heard about his book stem form how he treats microeconomics – I have read him going on about total differentiation, and saying how economists are too stupid to do it, when in truth microeconomists do understand 1st year calculus.

          BTW, the idea of inflation in this context is about simply ensuring that the “demand side” consequences of these types of crises are dealt with.  A “supply” style shock stemming from an inability to borrow due to real debt burdens is something people have to live with sadly.

          Now, the European crisis is definitely a supply style shock for them – but the only reason credit markets have frozen up is due to policy incompetence in the region.  Due to that, we are all having to deal with the consequence of it, which is disappointing.

          If we were going to think about the issue of debt more generally we need to look at it in terms of “solvency vs illiquidity”. Where there are solvency issues, both the debtor and creditor need to find a way to split the burden – it is the difficultly of doing this that makes crises in financial markets take so long. 

          In this context, we can have government come in and negotiate, and have a central bank and company law that solve these issues.  However, this also requires regulation – so that people face the cost of risk when they make decisions, instead of just expecting a bail out for free.  This was the route central banks were already moving along prior to the crisis – but it takes time to set these things up.

  7. Kimble
    Kimble says:

    “Just as a side note…my academic and professional qualifications say I should know something about economics…”

     But not as much about spelling. Seriously, if you are going to try and credibly tout your qualifications, then you will need to improve your spelling and grammar. You cant blame people for dismissing the “learned” opinion of someone who cannot be bothered to form a proper sentence, or use the appropriate form of words.

    “If Central Banks where introducing regulations BEFORE, as you say, how comes European Banks are 25 times leveraged?” 
    Introducing regulations is not the same as having regulations established for an amount of time to permit significant changes to the industry. Its like saying, “If as you say the patient was taking their medicine, then how comes he still died?”

    • Mau
      Mau says:

      Criticize the spelling of someone writing on a virtual keyboard that behaves a bit erratically and ignoring the substance and using that “spelling” as a cheap shot to someone you don’t know, qualifies you as the type of individual that resorts to the kind of verbal tactics that make a useful conversation a logical impossibility.
      Regarding the point you think is a critic, again, it lacks any sort of depth; central Banks did not need to “introduce’ anything, they have the power to control ratios and the issuance of credit since their foundation, and the patient had no intention whatsoever of taking any medicine, as the medicine would have curtailed the moral hazard who made outsized “bonus’ the prize…
      As a further note, if you intend to criticise the substance with more substantiated points, most welcome to a friendly exchange..on the contrary, another verbal tactic like this , will confine you in a self referential limbo in which you can float all by yourself.

      • Kimble
        Kimble says:

        And I look back on your comments and I cant see many errors in grammar that can be explained by using a virtual keyboard. So whats that about?

        And I wasnt criticising. I was advising. If you want people to take you seriously, improve your grammar.

        “central Banks did not need to “introduce’ anything”

        But you then go on to say what they should have introduced, conservative ratios, etc. 

    • Matt Nolan
      Matt Nolan says:

      I would note that issues of spelling and grammar also punish my credibility 😀

      Deep down I’m not sure how we’ve gotten onto central banks here – is that a big part of this book I haven’t read that I’m not criticising at the moment?

  8. Mau
    Mau says:

    Matt, Is now clear where you were aiming, the marginal cost and microeconomic theory he criticises. Well, that is the interesting part of it, as he, in my view, has an interesting way of coming to disprove some of those micro curves, accepting the assumptions…and then proving those assumptions do not happen in an empirical world…and cannot be translated, as some do, from micro to macro.
    You may not accept the conclusions…but I assure you it is an interesting reading.
    And the maths go a bit beyond 1st year calculus…as differential equations in a dynamic environment go a bit further down in the math studies.
    From then, he moves you in denying the “equilibrium” state and proving that the equilibrium does not exist in reality. As I said…worth the reading, and , if you can find the hole…you can reject the conclusions, but I tried to model in a similar way, and , inputting the conditions in a neoclassical way…the results disprove the results of the neoclassical curves and, in the end , are consistent with the developing of “Minsky moments” of the kind of Lehman’s one.

    About your view that debt is a symptom…and not a cause, where would you place the cause then? empirical evidence fingers debt in my opinion…but I am interested in your view on where the cause lay.

    • Matt Nolan
      Matt Nolan says:

      As I have said, I haven’t read the book – so I’m not going to criticise it.  I was just trying to cover off a question asked of another commentator.

      I have read a paper he wrote up criticising micro economics though.  In it he discussed optimisation – he took a total derivative of a utility function and talked about how it was different from a partial derivative.  Then he said economists didn’t understand this.  I found this extremely irritating as it wasn’t true in the slightest.

      He also seemed focused on a 1950’s caricature of what micro was – which is a common thing to do when building a straw man to knock down and pretend you are beter than a discipline.

      He may have some good points somewhere, I don’t know.  But I would rather read some of the large body of criticial theory in economics that actually criticises current theory and practice, rather than making a straw man that doesn’t represent the discipline and then knocking that down.

      In terms of equilibrium – we need to be careful discussing that term.  It isn’t so much that equilibrium doesn’t exist, its more that there can be more than one equilibrium.  Given that, we use the concepts in economics to understand tendancies and marginal change.  Furthermore, we can use the framework to understand changes of state, or the multipliciy of equilibrium, rather than just saying things can happen.  Economics is a descriptive discipine, the basic framework is a lot more flexible then people give it credit for.

  9. Kimble
    Kimble says:

    “and then proving those assumptions do not happen in an empirical world”

    How many people were arguing the assumptions were an accurate representation of the real world?

    “From then, he moves you in denying the “equilibrium” state and proving that the equilibrium does not exist in reality.”

    This isnt controversial. I am pretty sure the lack of equilibrium has been the subject of economic thought for ages.


    • Matt Nolan
      Matt Nolan says:

      “How many people were arguing the assumptions were an accurate representation of the real world?”


      The key thing to remember here is that not all assumptions need to be realistic – economics is the study of tendancies, so it is the core assumptions that are most important.

      “This isnt controversial. I am pretty sure the lack of equilibrium has been the subject of economic thought for ages.”

      My impression was that, with the discussion of Minsky moments, the actual call was about multiple eqm rather than no defined eqm.

  10. Roy Powell
    Roy Powell says:

    As long as there is a need for change, a group of people who have the same opinion will protest. There must be valid reason for the walk out. The ones in authority may have rules – but they should heed the call of the majority. Just my two cents…

  11. Brandon
    Brandon says:

    While I’ll admit that the protestors DO seem pretty idiotic, and their ‘reasons’ for walking out are vague, at best, there IS something to be said about how much undergraduate Econ. classes treat students with KID GLOVES.  I mean, it’s ridiculous!  I took at least FIVE Econ. classes, at least a few of which were more advanced versions of the Intro types, and they didn’t seem any more empirically-grounded, unfortunately.  In fact, looking at the syllabi for ALL UNDERGRAD classes offered at my college (Mizzou), I noticed strikingly disappointing theme: Very little empirical backing but a ton of pure theoretical models, many of which don’t really make sense if applied to the real world.  Of course, there WAS one class thta helped you learn how to do empirical research in Econ.- Intro to Econometrics- which I probably should’ve taken but for some reason dropped the ball there.

    Fortunately, my Public Econ. class, which as I found out, was ONLY an elective (sadly), was actually THE MOST ’empirical’ with actual data and facts, but it still was mired by a lot of pure mumbo-jumbo theoretical crap that just annoys the hell outta me.  For example, the section on taxation HAD LITTLE EMPIRICAL EVIDENCE.  It just showed MODELS and ‘explanations’ as to why the “standard economists’ view” on taxation and distribution is right or how it works.  It’s really disturbing.

    I’m so TIRED of this stupid copout for WHY undergrad Econ classes seem grounded and backed by so little empirical evidence- “economists do it with models” or some bs like that.  When I actually took my complaints to the undergrad dean of Econ, she just me some more bs copouts.  I couldn’t believe it!  It seems that Econ classes don’t ACTUALLY get more grounded in empirics until GRADUATE classes, which I find incredibly pathetic.  I was more than ready to learn empirics in class, but I had to sit through all that theoretical garbage and models on end.  

    I mean, what is “general equilibrium” or “market equilibrium” but some theoretical BS that CANNOT EVER be measured nor actually happens? The economy is CONSTANTLY CHANGING, and therefore, THERE IS NO SUCH THING AS EQUILIBRIUM!  If they’d just teach THAT instead of this static “equilibrium” crap, I think students would be better off.  Or how about the HUNDREDS of empirical research articles published in journals each year for Econ. that DON’T HAVE MUCH STATISTICS OR DATA but simply offer “prescriptions” or say “what might happen based on my theory”??  I mean, is it REALLY valid to write a 30-page article full of simply theory and complex algebra and a few graphs here and there with very few numbers and say, “This is why I believe we can privatize SS”, for example?  I don’t think so.

    In NO OTHER field of science or anything claiming to be science does that work.  Yet economics PASSES THE BUCK on REAL peer review.  For example, Pareto efficiency is neither measurable nor makes ANY SENSE in the real world, so why teach it?  “You can’t take away from one person without making another worse off.”  THIS IS NONSENSE!  Apart from being almost impossible to measure on any grand scale, why do students need to “know” this?  

    The ironic thing is that, despite all that ‘formal training’ in Econ. I learned in college, I’ve pretty much shunned all this abstract theorizing, and I think I’m actually SMARTER and more able to tell the BS from the reality in economics than most students out there (and many “economists”, too).  I even have found it a little disheartening that even Steve Keen’s lectures, like the ones posted on his YT page, seem to have MOUNDS of pure theory and models and only sparse empirical data referenced sometimes.  It’s kind of annoying.  

    Yes, I would LOVE if economics were treated as a SCIENCE and taken more seriously, esp. by those CLAIMING to be experts!  STOP WITH THE BS THEORIZING.  Just stop it.  Show students what works, what doesn’t and the empirical data that backs up what.  Or at least INTRODUCE them to it.  THAT is real “intro to econ”, I think.  Teaching some bs oversimplified AS-AD curve or IS-LM nonsense doesn’t pass the smell test.  I didn’t feel that much smarter having passed those basic abstract classes than I was before, tbqh. I just felt like they filled my head chock full of abstract unproven crap and confused me even further.

    Look, I’m the kind of person who LOVES empirical evidence (facts, data, statistics), esp. when it comes to POLICY!  Sadly, too many economists seem to either SHUN empirical evidence or think it should be “secondary” to pure theory, which I think is ABYSMAL for the profession.  We should demand PROOF for all economic claims about how it works!!  Economists play a fairly large role in policymaking, and it is shameful to see them get away with simply coming up with all manner of inane models and then basing big policy prescriptions that have enormous ramifications on millions of people based purely on those models.  This is a recipe for DISASTER.

    It’s time for a new economics- empirical econ.  We CAN do it!  Let’s do it!  Hell, if even Ron Paul and Peter Schiff (whose dad is tax cheat extraordinaire Irwin Schiff and who owns a crappy brokerage firm), two guys who WERE NOT economists nor probably had much formal training in the field regardless, could see the crash coming a mile away, but MOST TRAINED ECONOMISTS COULD NOT, something is seriously wrong with the profession as of late.  REAL reform comes in grounding it in RESEARCH, not simply theories and models.   Just throw out the crappy models.  Get rid of pointless crap like “market equilibrium” or “Pareto efficiency” or “Edgeworth Box.”  This is hypothetical nonsense that helps no one.  It just muddies the waters.

  12. Brandon
    Brandon says:

    I mean, in physics and other natural sciences, you DON’T hear them come up with inane crap like “Pareto efficiency” and a gazillion silly graphs and models.  THEY DO THE RESEARCH AND FIND RESULTS!  IT’S AS SIMPLE AS THAT.  So why CAN’T economics be like that?  

    Am I the only one who feels so out of place in the economics world because of all these outdated and absurd models, graphs, terms, etc.?  Does anyone else ever feel like modern economics is still little more than a morass of pointless terms and theories with seemingly little grounding in reality?  

    I don’t see why it’s so hard to at least do HARD RESEARCH on what you claim to be real or even whether it is real!  Behavioral economics seems to be able to do this all the time.  Why can’t the rest of this profession?   

    It seems to me that hard research and empirical evidence oftentimes are merely taken for granted in this profession.  Yes, I know there are many good journal articles, but there are  also many BAD or absurd ones with no REAL empirical research, that simply ASSUME the theory is totally right, and then they go from there with little data or facts to back it up.  

  13. Brandon
    Brandon says:

    Stuff like “comparative advantage” and the Crusoe “example” don’t seem like they can just be easily applied to WHOLE NATIONS trading amongst one another.  I call bullsh*t.  I think most ANYONE, even the most leftist person, will admit that TRADE CAN MAKE US BETTER OFF.  That’s great.  But FREE TRADE can sometimes screw things up, and free trade kind of implies “international laissez-faire.”  If laissez-faire doesn’t work on a domestic level, WHY should we expect it to work at the international level? This leap of faith makes no sense to me, yet it is never questioned, it seems.  

    Or how about the BS Coase Theorem?  WHY is it still relevant???  If I recall, the article ITSELF did not even cite a single example of that crap being put in place.  Yet EVERYONE in econ. sees this guy as some sort of “god of property rights justification” or some bs.  WHAT community has ever been able to put in place the Coase Theorem, esp. considering that GOVERNMENTS and bureaucracy would probably get in the way of that? Or how about the Tiebout model?  I’m not exactly sure HOW local or state governments can EVER get a “willingness to pay” regarding taxation for certain programs.  Aside from probably taking a very long time to do (the survey or whatever), how do we know it would be accurate? It’s more theoretical mumbo-jumbo from an economist in like 1913 or something.

    AT LEAST Ronald Coase’s theorem was written about in the 1950s!  It’s arcane nonsense like this- almost worshipping defunct economists from several decades ago whose theories have never been put in place even once or proven at all but “sound great” or “make sense” on a logical level- that turns me off to the profession in general.  Don’t get me wrong- I LOVE economics when it’s grounded in strong evidence, but when it’s not, I’m turned off and feel alienated.

  14. Brandon
    Brandon says:

    The sad thing is that SO MANY fabled economists of the past and present have LITTLE EMPIRICAL RESEARCH or articles that really prove a lot of their theories substantively, like Milton Friedman, Pigou, Ronald Coase, Joseph Schumpeter, Minsky, Keynes, etc. etc., YET THEY CONTINUE TO BE almost like GODS to economists, to this day.  

    The most they seem to have are theory, models and/or some fancy-schmancy algebra.  Hell, was the Solow model even developed out of any reverence or respect for the ACTUAL DATA and statistics of nations regarding economic growth in the long run??  

  15. Matt Nolan
    Matt Nolan says:

    Hi Brandon.

    There is a significant body of empirical literature behind a lot of the economic ideas taught at undergrad – really in the same way as any physical science.  Once you get to post-grad you directly look at the empirical results – but you can’t do empirics without an understanding of theory to start with.

    Regarding your comments, a lot of macro and growth theory is based on stylized facts (from the data) – which is then turned into theory, and then tested.  Furthermore, economics is not about prediction – it is about description – given that we don’t have a general theory of economics (given that it is too complicated to have such a theory) these two roles are very seperate.

    Outside of Schumpeter in the aforementioned economists there was A LOT of empirical work done by the economists – Keynes also wrote papers on statistics.

    It is especially uncharitable to attack economists about being unable to forecast a recession that was due to poor and asymmetric information – no matter how good your theory and empirical models are, if information isn’t there no-one can realistically pick the crisis – the people that you mentioned ALWAYS picked crises, because it was in their interest – they could not explain why, and they would not have been able to pick the real timing.

    • Paul Walker
      Paul Walker says:


      Matt is right there is plenty of empirical (and experimental) work out there on most areas of economics. In fact, as a theorist, I would argue there is too much ill informed empirical work being done. We need more theory not less. One of my recent papers had the subtitle of “The Latest Example of “Measurement Without Theory” ”

      As to the Coase Theoem it was formulated in 1963 by George Stigler and I’m not sure what you think its about but all it says is that the approach that Pigou took to dealing with externalities (taxes/subsidies) is unnecessary within the framework that Pigou used, i.e. a zero transaction cost framework. The actual point Coase was trying to make is that we should move away from a zero transaction cost framework and work with positive transaction cost models. I’m not sure what is arcane or nonsense this. After all positive transactions explain why we have firms and why the law matters.

  16. Eric Crampton
    Eric Crampton says:

    Brandon, what do you mean “almost” like gods? They ARE gods!

    Gordon Tullock is the King of the Gods, hurling thunderbolts of fury at  all those who displease him. Then there are the Elder Gods: Friedman, Becker, Stigler, Coase, Alchian, Demsetz, Hayek, Mises, Knight, maybe a few others. And so down through the Pantheon of the Econ Gods. Yay, let us gather laurel leaves and pay homage unto them!

  17. Matt Nolan
    Matt Nolan says:


    I can see due to links coming into the site that you have said I backed off attacking Steve Keen due to your comments.

    If you reread my comments here you can see that I started off saying I hadn’t read the book, and wouldn’t criticise it personally as a result – and I’ll stick to that until I’ve read it.

    I also haven’t backed off my defence of economics at all – not one inch.  As I said above, the issues you are trying to raise against the topic of this post (Mankiw teaching economic fundamentals) either miss the point of the fundamentals, or are attacking a straw man.  The distinction between the general economic framework that can be used to understand ideas, and a more specific macroeconomic paradigm that you disagree with are very very different.

    Hopefully this comment will help to clarify things – I definitely do not want to give the impression that I have backed away from what I have said in any way shape or form.  When I back away from ideas or have my perspective changed I usually say so directly.

Trackbacks & Pingbacks

  1. […] « More protesting for the sake of it: Economics students […]

Comments are closed.