Author Joris Luyendijk: Economics Is Not a Science (theguardian.com)

The Real Dr John writes: A Nobel prize in economics, awarded this year to Angus Deaton, implies that the human world operates much like the physical world: that it can be described and understood in neutral terms, and that it lends itself to modeling, like chemical reactions or the movement of the stars. It creates the impression that economists are not in the business of constructing inherently imperfect theories, but of discovering timeless truths. In 1994 economists Myron Scholes and Robert Merton, with their work on derivatives, seemed to have hit on a formula that yielded a safe but lucrative trading strategy. In 1997 they were awarded the Nobel prize in economics. A year later, Long-Term Capital Management lost $4.6bn (£3bn) in less than four months; a bailout was required to avert the threat to the global financial system.

Comments

Re:It should be obvious

[roman_mir]

Maybe it is time to retire that particular prize.

100% Especially given that in order to get those prizes a person has to present complete lack of common sense and total misunderstanding of economic principles that guide markets but instead they have to prop up government ideas on how to run the world.

Federal reserve bank is a great example of complete lack of sound economic principles by the government and pseudo-government agencies like that one. Will they raise interest rates after 7 years of 0-0.25 rate range, will they not, will they decide at the last moment....

The reality is that 7 years of 0% interest rates have put the USA economy onto a stimulus that cannot be removed. The entire USA economy now depends on 0 (and even sub-0) rates of interest provided by the Fed, which would never be possible on sound money (gold). Nobody would lend you gold for nothing, however printed (electronically generated) money for nothing is no problem for governments.

Treasury is supposed to have treasure in it even to be called treasury, what if instead it has no treasure and only debt? Shouldn't it be called Debtory?

Debt ceiling that the Congress votes on.... what a joke! To believe that raising the real debt ceiling is up to Congress as opposed to the buyers of Treasuries is nonsense. To believe that getting another extension of limit on the credit card is 'paying our debts' is nonsense. Yet millions of people live by this nonsense ... as long as they can until they can no more, because the real creditors (those who manufacture stuff and give it to you for your fake money and fake IOUs) keep propping you up ... until they no longer do. China decoupled from the USD, as the USD was in the bubble, now as the USD will go down, Chinese Yuan will go up instead, China will not be there to save US dollar and will not buy US debt, it's selling it already.

There are people who understand economics and then there are hacks (like Krugman) who understand which way the bread is buttered.

Economics is not science, it is a set of rules that are very simple and that work over long and short time periods, but they do not fail to work.

Get rid of your manufacturing and you will lose your economy. Get away from real money and you will lose your manufacturing. Promise something for nothing and get elected that way and you will end up getting away from real money. It's not a secret in any way, it's very much common sense, it's just common sense is not that common.