|DEBATE CONTINUES IF "ECONOMICS" A SCIENCE!!!....sometimes called "voodoo science"...today seems to be "wrecking human life"....|
Posted by Vishva News Reporter on August 22, 2012
and "the trickle-down
theory" are terms used in
United States politics to refer to the idea that
or other economic benefits provided by government to businesses and the
wealthy will benefit poorer members of society by improving the economy
as a whole. The term has been attributed to humorist
who said during the
that "money was all appropriated for the top in hopes that it would
trickle down to the needy." The term is considered pejorative by some
Today, "trickle-down economics" is most closely identified with the
economic policies known as
supply-side economics. Originally, there was a great deal of support
for tax reform; there was a dual problem that loopholes and tax
shelters create a bureaucracy (private sector and public sector) and
that relevant taxes are thus evaded. During
Ronald Reagan's presidency, the Democratic
Party-controlled House, at the urging of President Reagan, cut the
marginal tax rate on the highest-income tax
bracket from 70% to 28%......(you can
know about trickle-down economics by clicking
LET US TAKE THE LEARNING ABOVE
TO THE "ACCEPTED" MEANING
OF SOCIAL SCIENCE OF
"Economics is the painful elaboration of the obvious."
"Economic statistics are
like a bikini,
what they reveal is important, what they conceal is vital."
- Professor Sir Frank Holmes, Victoria
University, Wellington, New Zealand, 1967.
The first lesson of
economics is scarcity:
There is never enough of anything to satisfy all those who want it.
The first lesson of politics is to disregard the first lesson of
— Thomas Sowell
(born June 30, 1930, is an
social theorist, political philosopher, and author. A
National Humanities Medal winner, he advocates
laissez-faire economics and writes from a
libertarian perspective. He is currently a Rose and Milton Friedman
Senior Fellow on Public Policy at the
Hoover Institution at
"Economics is extremely useful as a form of employment for economists."
John Kenneth Galbraith
Kenneth Gallbraith (October
15, 1908 – April 29, 2006),
He was a
a leading proponent of 20th-century
His books on economic topics were bestsellers from the 1950s through the
2000s and he filled the role of
from the '50s to the 1970s on matters of economics)
Economics is the
social science that analyzes the
services. The term economics comes from the
"management of a household, administration") from
"custom" or "law"), hence "rules of the house(hold)". Current economic
models emerged from the broader field of
political economy in the late 19th century. A primary stimulus for
the development of modern economics was the desire to use an empirical
approach more akin to the physical sciences.
Economics aims to explain how
work and how economic
agents interact. Economic analysis is applied throughout society, in
business, finance and government, but also in crime,
social institutions, war,
science. At the turn of the
21st century, the expanding domain of economics in the
social sciences has been described as
Common distinctions are drawn between various dimensions of
economics. The primary textbook distinction is between
microeconomics, which examines the behavior of basic elements in the
economy, including individual markets and agents (such as consumers and
firms, buyers and sellers), and
macroeconomics, which addresses issues affecting an entire economy,
including unemployment, inflation, economic growth, and monetary and
fiscal policy. Other distinctions include: between
positive economics (describing "what is") and
normative economics (advocating "what ought to be"); between
economic theory and
applied economics; between
mainstream economics (more "orthodox" dealing with the
"rationality-individualism-equilibrium nexus") and
heterodox economics (more "radical" dealing with the
"institutions-history-social structure nexus"); and between
behavioral economics.....(please keep studying a comprehensive
overview at your leisure by clicking
here...especially after reading
today's main news/Knowledge sharing about what the science of economics
means today to you and those who profess to know economics...
WHO IS AN ECONOMIST....
you put two economists in a room,
you get two opinions,
unless one of them is
Lord Keynes, in which case you get three opinions.”
Sir Winston Churchill
((30 November 1874 – 24 January 1965) was a British politician and
known for his leadership of the United Kingdom during the
Second World War.
He is widely regarded as one of the great wartime leaders and served as
A noted statesman and orator, Churchill was also an
in the British Army, a historian, a writer, and an artist. He is the
British prime minister
to have received the
Nobel Prize in Literature,
and was the first person to be made an
Honorary Citizen of the United States.
law of economic policy":
Economists have the least influence on policy
where they know the most and are most agreed;
they have the most influence on policy
where they know the least and disagree most vehemently.
Alan S. Blinder
(Alan Stuart Blinder
(born October 14, 1945) is an
He serves at
as the Gordon S. Rentschler Memorial Professor of Economics and Public
Affairs in the Economics Department, Vice Chairman of The Observatory
Group, and as co-director of Princeton’s Center for Economic Policy
Studies, which he founded in 1990. Since 1978 he has been a Research
Associate of the
National Bureau of Economic Research.
He is among the most influential economists in the world according to
and is "considered one of the great economic minds of his generation)
Harry S. Truman.
makes a cognate observation in his famous plea for a one-handed
"one who would not say “on the one
hand … but on the other hand …”
S. Truman (May 8, 1884 –
December 26, 1972) was the
President of the United States
(1945–1953). As President
Franklin D. Roosevelt's
(the post 1929 Depression and WWII - the only 4 term USA President from
March 4, 1933 to April 12, 1945) third vice president and the
Vice President of the United States
(1945), he succeeded to the presidency on April 12, 1945, when President
Roosevelt died less than three months after beginning his historic
Why did God create economists ?
In order to make weather forecasters look good.
An economist is a professional in the
social science discipline of
To be correctly classified as an economist, one must hold a PhD in the
subject (much like a lawyer requires a J.D. or a medical doctor a M.D.
or equivalent degree). The individual may also study, develop, and apply
theories and concepts from economics and write about
economic policy. Within this field there are many sub-fields,
ranging from the broad
to the focused study of minutiae within specific
microeconomic analysis or
financial statement analysis, involving analytical methods and tools
mathematical finance and
knowing more about an economist please click
the above definitions of economics and economist.....
|....Please click on the next line to receive and digest for this weekend
a primer on how the current science of economics is causing so many
problems to your life-digestion...and to understand Prof. Sargent,s
(2011 Economic Nobel Prize co-winner) saying this economically
mysterious statement: “We economists experiment with our
models before we wreck the world.” .....and as we at PVAF always
remind and recommend...do not forget to click on the
hyperlinks at your
leisure and/or to evolve your lifestyle choice for a
tomorrow than today simply because you have more
Life-knowledge to remove your "life-poverties"......
|......ON THIS WEBPAGE PVAF SHARES
WITH YOU .....
....A SECRET OF ECONOMICS DATING BACK TO
and it was called
Kerk Phillips made my morning when I
arrived at work today by telling me his discovery of the earliest
example of habit persistence that he has ever heard of. The following is
taken directly from Kerk's blog.)
"Habit persistence is a relatively new idea in economics and finance
which argues that people's utility or sense of well-being rises with a
rise in consumption
only in the short-run. In the long-run, people
become accustomed to higher levels of consumption and these new higher
levels yield the same amount of utility as the lower ones did in the
"This is not a new concept, however. Last night while reading
Women, a play by Euripedes dating from 415 B.C., I ran across the
following lines spoken by
Hector's wife, who is
discussing the death of another woman, a former princess of Troy.
Hektor, was a
prince and the greatest fighter for Troy in the Greek-Trojan
"But if the choice is between a miserable life, mother,
it is between a miserable life and death,
death is preferable.
the dead feel no misery and
hey know nothing of grief,
whereas for the
if a happy woman falls into misery
he must deal with
the memory of the joy she previously enjoyed.
Her soul seeks the joys of
|....DID YOU KNOW WHAT IS THE FEAR OF
IN USA REPUBLICAN PARTY TODAY....
|....and now let
us hear from the founding father of
Todays' Science of Economics....
Adam Smith is considered the
founding father of modern economics.....
talking to his higher-self about
how humanity ignored his following plea
to consider the essence of
human being in any theory in economics.....
indeed, neither intends to promote the
public interest, nor knows how
much he is promoting it. By preferring the support of domestic to that
of foreign industry he intends only his own security; and by directing
that industry in such a manner as its produce may be of the greatest
value, he intends only his own gain, and he is in this, as in many other
cases, led by an invisible hand to promote an end which was no part of
added by PVAF)
UNDERSTANDING OF ADAM SMITH OF
INDIVIDUAL AND COLLECTIVE HUMAN TRAIT OF
GREED AND LUST
"ANY INDIVIDUAL AND/OR COLLECTIVE COST"
IS THE ROOT CAUSE OF MAJORITY OF
PAST AND CURRENT ECONOMIC MALAISE...."
such as the latest 2007 Financial Crisis by "Sub-Prime Mortgage"
financial vehicles to hide
the financial pandemic pathology of subprime mortgage
created by major world financial and insurance companies...
....check out the
amazing Truth about the "human factor"
clearly seen by Adam Smith of what, how, when and where of
"world-wide financial crisis"
the "list of such financial crisis"
by clicking on the preceding hyperlinks...
(Above Thought-sharing contributed by
Champak Mistry of
Edmonton, Alberta, Canada...who contributed today's news item and also
provided PVAF's headers, comments and hyperlinks and related cartoons
from his internet search....all with a prayer that this sharing
as volunteerism inspires humanity with an knowledge quest interest to
life-economics for a stress-free happier lifestyle choices....which
shall give all one wishes-desires-wants individually and collectively
with his family and community at all levels of existence today and
today's news/Knowledge sharing in Canada,
the nation of collection of world peoples
who uprooted themselves from their homelands
in search of optimum collective life-style choices
without the human-ideology imposed human poverty
of a few over many ....
.....Economics has met the enemy,
and it is
|The ‘dismal science' has been shaken by its
failure to predict the financial collapse of 2008 or to solve the
ensuing crisis – but, some would say, not shaken enough.
reports on the insurgents among the heirs of Adam Smith, who say it's
not just the math but the methods and even morals that have got to
Globe and Mail:
Canada: October, 15, 2011: By
Ira Basen is a
radio producer, journalist and educator based in Toronto, Ontario,
Canada...He graduated from Carleton University and from University of
Wisconsin-Madison with an M.A. He taught at the University of Toronto,
and the University of Western Ontario. He is currently teaching radio
journalism at Ryerson University. He has won multiple awards in the
field of journalism.)
(The article hyperlinks added by
After Thomas Sargent learned on Monday morning that he and colleague
Christopher Sims had been awarded the
Nobel Prize in Economics for 2011,
the 68-year-old New York University professor struck an aw-shucks tone
with an interviewer from the official Nobel website: “We're just bookish
types that look at numbers and try to figure out what's going on.”
Cause and effect
research wins economic Nobel prize But no one who'd
followed Prof. Sargent's long, distinguished career would have been
fooled by his attempt at modesty. He'd won for his part in developing
one of economists' main models of cause and effect: How can we expect
people to respond to changes in
prices, for example, or
According to the laureates' theories, they'll do whatever's most
beneficial to them, and they'll do it every time. They don't need
governments to instruct them; they figure it out for themselves.
Economists call this the “rational expectations” model. And it's not
just an abstraction: Bankers
and policy-makers apply these formulae in
the real world, so bad models lead to bad policy.
Which is perhaps why, by the end of that interview on Monday, Prof.
Sargent was adopting a more realistic tone: “We experiment with our
models,” he explained,
“before we wreck the world.”
Rational-expectations theory and its corollary, the
hypothesis, have been central to
mainstream economics for more than 40
years. And while they may not have “wrecked the world,” some critics
argue these models have blinded economists to reality:
universe was unfolding as it should, they failed both to anticipate the
financial crisis of 2008 and to chart an effective path to recovery.
The economic crisis has produced a crisis in the study of economics
growing realization that if the field is going to offer meaningful
solutions, greater attention must be paid to what is happening in
university lecture halls and seminar rooms.
While the protesters occupying Wall Street are not carrying signs
denouncing rational-expectations and efficient-market modelling, perhaps
they should be.
They wouldn't be the first young dissenters to call economics to
account. In June of 2000, a small group of elite graduate students at
some of France's most prestigious universities declared war on the
economic establishment. This was an unlikely group of student radicals,
whose degrees could be expected to lead them to lucrative careers in
finance, business or government if they didn't rock the boat. Instead,
they protested – not about tuition or workloads, but that too much of
what they studied bore no relation to what was happening outside the
They launched an online petition demanding greater realism in economics
teaching, less reliance on mathematics “as an end in itself” and more
space for approaches beyond the dominant neoclassical model, including
input from other disciplines, such as psychology, history and sociology.
Their conclusion was that economics had become an “autistic
lost in “imaginary worlds.” They called their movement
The students' timing is notable: It was the spring of 2000, when the
world was still basking in the glow of “the Great Moderation,” when for
most of a decade Western economies had been enjoying a prolonged period
of moderate but fairly steady growth.
Some economists were daring to think the unthinkable – that their
understanding of how advanced capitalist economies worked had become so
sophisticated that they might finally have succeeded in smoothing out
the destructive gyrations of capitalism's
boom-and-bust cycle. (“The
central problem of
prevention has been solved,” declared
another 1995 Nobel laureate,
Robert Lucas of the University of Chicago, in
2003 – five years before the
2008 economic collapse
-greatest in more than
half a century.)
The students' petition sparked a lively debate. The French minister of
education established a committee on economic education. Economics
students across Europe and North America began meeting and circulating
petitions of their own, even as defenders of the status quo denounced
the movement as a Trotskyite conspiracy. By September, the first issue
Post-Autistic Economic Newsletter
was published in Britain.
As The Independent summarized the students' message: “If there is a
daily prayer for the
global economy, it should be, ‘Deliver us from
It seems that entreaty went unheard through most of the discipline
2008 economic crisis, not to mention in the offices of
and the Stockholm Nobel selection committee. But is it ringing louder
now? And how did economics become so abstract in the first place?
The great classical economists of the late 18th and early 19th centuries
had no problem connecting to the real world – the Industrial Revolution
had unleashed profound social and economic changes, and they were trying
to make sense of what they were seeing. Yet
Adam Smith, who is
considered the founding father of modern economics, would have had
trouble understanding the meaning of the word “economist.”
What is today known as economics
arose out of two larger intellectual
traditions that have since been largely abandoned. One is
economy, which is based on the simple idea that economic outcomes are
often determined largely by
factors (as well as vice versa).
But when political-economy courses first started appearing in Canadian
universities in the 1870s, it was still viewed as a small offshoot of a
far more important topic: moral philosophy.
In The Wealth of Nations (1776), Adam Smith famously argued that the
pursuit of enlightened self-interest by individuals and companies could
benefit society as a whole. His notion of the market's “invisible hand”
laid the groundwork for much of modern neoclassical and
laissez-faire economics. But unlike today's free marketers, Smith didn't
believe that the morality of the market
was appropriate for society at
and co-operation, not
(PVAF: also see
were the keys to happiness and
Smith's vision was a
capitalist economy in a
But by the end of the 19th century, the new field of economics no longer
concerned itself with
moral philosophy, and less and less with
economy. What was coming to dominate was a conviction that markets could
be trusted to produce the most efficient allocation of
that individuals would always seek to maximize their utility in an
economically rational way, and that all of this would ultimately lead to
some kind of overall equilibrium of
supply and demand.
Political economy was less vital because government intervention
disrupted the path to equilibrium and should therefore be avoided except
in exceptional circumstances. And as for morality, economics would
concern itself with the behaviour of
What he did outside the confines of
the marketplace would be someone else's field of study.
As those notions took hold, a new idea emerged that would have surprised
and probably horrified Adam Smith – that economics, divorced from the
study of morality and politics, could be considered a science. By the
beginning of the 20th century, economists were looking for theorems and
models that could help to explain the universe. One historian described
them as suffering from “physics envy.” Although they were dealing with
the behaviour of humans, not atoms and particles, they came to believe
they could accurately predict the trajectory of human decision-making in
In their desire to have their field be recognized as a science,
economists increasingly decided to speak the language of science. From
Smith's innovations through John Maynard Keynes's work in the 1930s,
economics was argued in words. Now, it would go by the numbers.
The turning point came in 1947, when Paul Samuelson's classic book
Foundations of Economic Analysis for the first time presented economics
as a branch of
applied mathematics. Without “the invigorating kiss of
mathematical method,” Samuelson maintained, economists had been practising “mental gymnastics of a particularly depraved type,” like
“highly trained athletes who never run a race.” After Samuelson, no
economist could ever afford to make that mistake.
And that may have been the greatest mistake of all: In a post-crisis,
2009 essay in The New York Times Magazine, Princeton economist and Nobel
laureate Paul Krugman
wrote, “The central cause of the profession's
failure was the desire for an all-encompassing, intellectually elegant
approach that gave economists a chance to show off their mathematical
Of course, nothing says science like a Nobel Prize. Prizes in chemistry,
physics and medicine were first awarded in 1901, long before anyone
would have thought that economics could or should be included. But by
the late 1960s, the central bank of Sweden was determined to change
that, and when the Nobel family objected, the bank agreed to put up the
money itself, making it the only one of the prizes to be funded by
Officially, then, it is known as the
Sveriges Riksbank Prize in Economic
Sciences in Memory of Alfred Nobel – but that title is rarely used. On
Monday morning, Prof. Sargent and Princeton University Prof. Sims were
widely reported to have won the Nobel Prize in Economics.
The confusion is understandable, and deliberate, according to Philip
Mirowski, an economic historian at the University of Notre Dame. “It's
part of the PR trick,” Prof. Mirowski argues. Awarding the economics
prize immediately after the prizes for physics, chemistry and medicine
helps to place economics on the same level as those other
The prize also has helped to transform one particular
"Economic Orthodoxy in Theory and
Practice"). Prof. Mirowski, who is co-writing a book on the
history of the economics prize, notes that throughout the 1970s and
1980s, economists whose work supported neoclassical, pro-market,
laissez-faire ideas won a disproportionate number of those honours, as
well as support from the increasing numbers of well-funded think tanks
foundations that cleaved to the same lines. People who rejected
those ideas, or were skeptical of the natural sciences model, were
quickly marginalized, and their road to academic advancement often
The result was a homogenization of economic thought that Prof. Mirowski
believes “has been pretty deleterious for economics on the whole.”
The road to hell is paved with good intentions,
rational expectations and efficient markets.
Many critics of neo-classical economics argue that it has a powerful
pro-market bias that's provided an intellectual justification for
politicians ideologically disposed to reduce government involvement in
The rational-expectations model, for example, assumes that consumers and
producers all inform themselves with all available data, understand how
the world around them operates and will therefore respond to the same
stimulus in essentially the same way. That allows economists to
mathematically forecast how these “representative” consumers and
producers would behave.
During a recession, say, a well-meaning government might want to enhance
benefits for the unemployed. Prof. Sargent, for one, would caution
against that, because a “rational” unemployed worker might then
calculate that it's better to reject a lower-paying job.
much of the chronically high unemployment in some European countries on
the presence of an army of voluntarily unemployed workers, and spoken
out against the Obama administration's recent efforts to extend
Indeed, under the rational-expectations model, most market interventions
by governments and central banks wind up looking counterproductive.
Meanwhile, the efficient-markets hypothesis, developed by University of
Chicago economist Eugene Fama in the 1970s, has dominated thinking about
financial markets. It posits that the prices of stocks and other
financial assets are always “efficient” because they accurately reflect
all the available information about economic fundamentals.
By this reasoning, there can be no
speculative price bubbles or
the stock market or
housing market, and
speculators with evil intentions
cannot successfully manipulate markets. Conveniently, since markets are
self-stabilizing, there's no need for
government regulation of them.
Critics point out that both these theories tend to ignore what John
Maynard Keynes called the “animal spirits” – playing down
irrationality, inefficiency, venality and
ignorance. Those are qualities
that are hard to plug into a mathematical equation that purports to
model human behaviour.
These models also have failed to take into account the profound changes
wrought by globalization, and the growing importance of
other financial institutions. Yet they have successfully
provided a “scientific” cover for an
that is popular on Wall Street and in some Washington political circles.
Inside jobs: Pay no attention to that banker behind the curtain
The Great Depression of the 1930s led many economists of the day to
question some of their discipline's most fundamental assumptions and
produced a decades-long heyday for
Keynesian economics. So far, the
Great Recession has led to less of a fundamental shift.
Notre Dame's Prof. Mirowski believes that more rethinking is necessary.
“Everyone thought the banks would have to change their behaviour,
they got bailed out and nothing changed. The economics profession has
also been bailed out because it is so highly interlinked with the
financial profession, so of course they don't change. Why would they
Indeed, economics may be the
dismal science, but there is nothing dismal
about the payoffs for those at the top of the heap serving as advisers
and consultants and sitting on various boards. Unlike some disciplines,
economics has no guidelines governing
conflict of interest and
In 2010, the Academy Award-winning documentary
several disturbing examples of
academic economists calling for
deregulation while working for
financial-services companies. And in a
study of 19 prominent
financial economists, published last year by the
Political Economy Research Institute at the
University of Massachusetts
Amherst, 13 were found to own stock or sit on the boards of private
financial institutions, but in only four cases were those affiliations
revealed when they testified or wrote
This year, the American Economics Association agreed to set up a
committee to investigate whether economists should develop
guidelines similar to those already in place for
But there appears to be little enthusiasm for the idea among mainstream
Prof. Lucas of the University of Chicago, in an interview
with The New York Times, objected: “What disciplines economics, like any
science, is whether your work can be replicated. It either stands up or
it doesn't. Your motivations and whatnot are secondary.”
Several billion pennies for their thoughts
The critics, however, are more numerous and considerably better financed
than the French students a decade ago. In October, 2009, billionaire
financier George Soros said that “the current
paradigm has failed.” He
resolved to help save economics from itself. He pledged $50-million
toward the establishment of the New York-based Institute for
Economic Thinking (INET), with a mandate to promote changes in economic
theory and practice through conferences, grants and campaigns for
graduate and undergraduate education reforms.
Perry Mehrling, a professor of economics at New York's Columbia
University, is the chair of the curriculum task force at INET. He says
his graduate students at Columbia are growing increasingly frustrated by
at the tendency to define the discipline by its tools instead of its
subject matter – like the students in Paris a decade ago, they find
little relationship between the mathematical models in class and the
world outside the door.
Prof. Mehrling believes that economics education has become far too
insular. Never mind
cross-disciplinary study – even courses in economic
history and the history of economic thought have all but disappeared, so
students spend almost no time reading Smith, Keynes or other past
“It's not just that we're not listening to sociologists,” Prof. Mehrling
laments. “We're not even listening to economists.”
He says he has no problem with teaching efficient-markets and
rational-expectations theories, but as hypothesis, not
object to the idea that these are articles of faith and if you don't
accept them, you are not a member of the tribe. These things need to be
questioned and we need a broader conversation.”
The challenge, as Columbia University economist
Joseph Stiglitz said at
the opening conference of INET, is that “we need better theories of
persistent deviations from
Some of those theories are coming from the rapidly growing field of
behavioural economics, which borrows insights about
human motivation from
cognitive psychology: A paper titled
The Hubris Hypothesis of
Corporate Takeovers, for example, examines how the
chief executive officers can lead them to pursue
takeovers, even when
all available evidence suggests that the move could be a
It is not yet clear how such new approaches can evolve into workable
models, but they hint at what a post-autistic economics might look like.
Prof. Mehrling is cautiously optimistic. “There's a recognition that
things we thought were true aren't necessarily true,” he argues, “and
the world is more complicated and interesting than we thought – so all
bets are off, and that's exciting intellectually.”
Change comes slowly in academia.
The few jobs that are available don't
generally go to people who challenge
But over the next
decade, as the post-crash crop of economics students make their impact
felt in government, business and schools, the lessons learned may well
seep into the
Theories based on assumptions of rationality, efficiency and equilibrium
in the marketplace are likely to be treated with a great deal more
Homo economicus is a lot more
complex than most economists believed. And, as Adam
Smith recognized, he has a
ethical dimension that should not
Today, the Post-Autistic Economic Network continues to publish its
newsletter, now known as the
Real-World Economic Review.
It remains a
thorn in the side of mainstream economics. In an editorial in January,
2010, the editors called for major economics organizations to censure
those economists who “through their teachings, pronouncements and policy
recommendations facilitated the global financial collapse” and pointed
to the “continuing moral crisis within the economics profession.”
It is unlikely that Prof. Sargent will acknowledge any of this when he
travels to Stockholm to accept his (sort of) Nobel Prize in December.
Nor is he likely to speak about what role, if any, his models really
might have played in “wrecking the world.”
But he did make one concession in his interview with the Nobel website
this week: “Many of the practical problems are ahead of where the models
are,” he admitted.
ENHANCING THE ABOVE SHARING.....
KEEP ENJOYING ECONOMICS OF
OTHER KINDS....SUITING YOUR LIFESTLE CHOICES.....
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