2nd Quotation of the Day…

by Don Boudreaux on September 14, 2011

in Economics, Hubris and humility

… is from the effervescent James Grant’s review, in the Wall Street Journal, of Sylvia Nasar’s new book Grand Pursuit: The Story of Economic Genius:

Economics may be an “engine of analysis,” as Alfred Marshall said, or an “apparatus of the mind,” as Keynes put it. But economists no more set the world to producing and consuming than baseball statisticians hit home runs. Then, too, you’ll never see Bill James, the dean of the baseball sabermetricians, trip up a base runner the way the government thwarts an entrepreneur. The intervention-minded economists are the ones who give the government its big ideas.

Beware especially of any economist who poses as a genius.

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{ 34 comments }

Andrew_M_Garland September 15, 2011 at 12:07 am

Beware of economists posing as an economist.

Anotherphil September 15, 2011 at 1:25 pm

Beware especially of any economist who poses as a genius.

Yes and beware of economists, posing as statesmen, policians, accountants.

Oh hell just beware of economists.

Stone Glasgow September 15, 2011 at 5:00 am

The analogy fails because the world is still confused about the rules of the game and the laws of nature.

Some think the game will work well as long as umpires stop base-stealing and brawls, and the other thinks that throwing more balls on the field to random players and moving runs from the winning team to the other will make the world a better place.

vidyohs September 15, 2011 at 6:15 am

I don’t know, mate. I think the analogy succeeds for the obvious reason that neither the economist or the statistician are in the game of choice. Trade, markets, and business happens regardless of whether it is being studied by an economist or not. The same with baseball, it is played whether it is cataloged by a statistician or not.

Both the economist and the statistician look at the numbers and see trends that may enable the student (manager, player) to improve performance in a specific area under specific conditions.

The mistake governments and managers make is to attempt to manage based entirely on statistics and forgetting the individuals that create those stats by performing in the game. The individuals performing in the game (business, markets, baseball) are effected day to day by an unpredictable myriad of factors that move those stats forward or backward, and unless they are willing to listen to coaching from (management, government) trying to forcibly tweak their actual play will typically not have good results.

Kirby September 15, 2011 at 6:30 am

Right. And in this case, the manager would be the CEO, Board of Directors, or manager. The government would be the umpire, who realizes that the NY Yankees make so much more money than everybody else and tries to level the playing field by randomly assigning points to the other team, in order to stimulate them to work harder.

vidyohs September 15, 2011 at 10:04 am

I didn’t go as good a job explaining what I meant as I had hoped.

What I meant to include was the understanding that economist and statisticians can only study what happened, history in other words. From that study they can see and show trends. Managers can use that data in a constructive way but get into trouble when they become convinced that they can predict based on that data.

Individuals are the invisible hand, and this is true whether the invisible hand is engaging in a baseball game or engaging in being a market. When carrying my analogy to its logical conclusion, isn’t a professional baseball player acting as a market in playing the game?

The pure random chance nature forces on the living makes it impossible to predict anything with 100% accuracy 100% of the time.

Not even an objective genius can do it. Much less a subjective hack political economist.

W.E.Heasley September 15, 2011 at 6:06 am

Beware especially of any economist who poses as a genius. – Don Boudreaux

-Or-

How Can You Be In Two Places at Once When You’re Not Any Where at all – Firesign Theatre

Anotherphil September 15, 2011 at 1:27 pm

How Can You Be In Two Places at Once When You’re Not Any Where at all – Firesign Theatre

Because its the only way you can do so.

Daniel Kuehn September 15, 2011 at 6:24 am

I’ll do you one better and say beware of anyone who poses as a genius. Sometimes it may take time for others to see them for who they are, but geniuses generally don’t have to pose.

SweetLiberty September 15, 2011 at 9:06 am

Unless they’re super-model geniuses. Hey, it could happen!

Gordon Richens September 15, 2011 at 8:15 am

My father-in-law once opined that today’s economists are capable of intervening in an economy with reliably satisfactory results.

As his punishment I instructed him to write a 2000-word essay on Merton & Scholes’ contribution to the collapse of LTCM.

Price B. September 15, 2011 at 7:21 pm

+100 Internet points.

You may redeem them for captioned felines of your choosing.

muirgeo September 15, 2011 at 9:37 am

“The intervention-minded economists are the ones who give the government its big ideas.”

And the non-interventionist are the ones who allow slumps like this to drag on telling us prosperity is just around the corner….. and all while the data says they are wrong.

“When the recession officially ended, spending was rising at an annual rate of around $60 billion; now it’s declining at an annual rate of $60 billion. That difference is around 1 percent of GDP, and maybe 1.5 percent once you take the multiplier into account. That makes the turn toward austerity a major factor in our growth slowdown.” Says Krugman. He adds, “Still, I guess the beatings will continue until morale improves.”

The only good thing about this is from the debate standpoint. It will continue to be ever more clear that austerity will drag us further and further down and that we will only see improvement with drastic policy change. At that point MAYBE the market fundamentalist will admit their errors…probably not.

The big scare is for a Rick Perry type Republican to gain control…totally drop out the economy and respond to civil unrest with something along the lines of Marshall Law.

But the big picture is that it is absolutely clear the break from this will NOT come from Republican/Libertarian policy. All the low hanging fruit is gone… Any push in their direction will make things clearly worse. They have NO CHANCE for a solution because they are clearly wrong about the problem.

Again the biggest failure of any profession in the modern world has been that of the economics profession. And hearing yet one more economist telling us the problem is government intervention is just more doubling down on that failure.

Ike September 15, 2011 at 10:19 am

Okay, so let’s engage in a thought experiment.

Let’s say the issue really IS that we need to goose consumption and the demand side of the equation.

Let’s also stipulate that aggregate demand really does matter, and what we need is a half-billion dollars of spending to free up assets that are “frozen.” (I don’t agree, but let’s just stipulate it for this post.)

Now… who says the government has to be in charge of the spending?

Would you — as a Keynesian — be satisfied if we gave coupons to individuals to make the spending decisions?

You — Joe Smith — have $25,000 in the bank. We — the Federal Government — will give you a tax break on part of that money if you get out and Consume with it. Not invest, but spend. Go buy a new big-screen TV, go buy a boat. What you CAN’T do is move it into a different savings mechanism. You must SPEND it.

At the end of the year, you’ll get a tax credit for what you spent. (And I am sure this program will necessitate hiring a few extra compliance officers to pore over those affidavits.)

So… here’s the deal. It would be voluntary. The federal government would still have a 447-billion dollar hole in the books, through tax credits and whatever else. But you would have your guarantee that the money was spent, and went into the economy.

Now — would that work? Would that be superior or inferior to central planning? And if it WOULD be different in result from central planning, how would that not violate the principles of Aggregate Demand?

Invisible Backhand September 15, 2011 at 11:10 am

“Now — would that work??”

Well duh, the money would have to be spent on the frozen assets to work.

Your homunculus made of the dried stalks of cereal plants fell over.

Ike September 15, 2011 at 5:51 pm

You didn’t answer my question.

Would it work?

If it would, then what’s so special about having the spending decisions made by an arbitrary bureaucrat (or even worse, a politician with friend$?)

If it would not work, then is the Aggregate Demand number the wrong thing to focus upon.

I am not setting up a straw man… it was a legitimate question from a non-economist.

(And I thought the “frozen assets” were the things we were trying to encourage people to liquidate, into the economy. Not the things they would be purchasing.)

I am asking you for a reasonable answer. Tell me what I am missing, because I am trying to understand your side of it.

brotio September 15, 2011 at 4:05 pm

Okay, so let’s engage in a thought experiment

You wrote that to Yasafi? LMAO!

anthonyl September 15, 2011 at 11:43 am

You forget the production side of the equation. How production is paid for is important. People must produce first, then consume. If production is not correctly directed consumption also becomes misguided.

Anotherphil September 15, 2011 at 1:29 pm

Beware of economists that pose as the only one able to see the invisible hand.

Anotherphil September 15, 2011 at 1:54 pm

“And the non-interventionist are the ones who allow slumps like this to drag on telling us prosperity is just around the corner….. and all while the data says they are wrong.”

You mean noninterventionists like Krugman and the rest of the hee-haw gang?

Your capacity to make swiss cheese arguments never fails to amaze me. I guess you get some perverse enjoyment from being the court jester though.

vidyohs September 15, 2011 at 11:12 am

I have a general question.

Is there a world in which one can borrow with the intention of never paying back, never pay back, and not be labeled as a thief?

Does a mugger become legitimate when he points a gun at you and says “I’ll just borrow your wallet, thank you very much?”

Is it possible to live an existence where credit is income?

The Other Eric September 15, 2011 at 12:40 pm

There’s no world where that is true… but there is this District where that happens.

Jim September 15, 2011 at 11:14 am

I read an anonymous comment on the Internet the other day.

If you want evidence of the intellectual bankruptcy present in much economic “thinking” look to the comments made by Swedish medal modelers Krugman and Stiglitz, in which the bursting of a credit bubble, which was the end result of a deliberate decades long effort by Congress, to expand speculation in credit via a very wide variety of direct and indirect subsidies, is described as the result of “anti-regulatory” behavior.

Folks, when a fat man who has been gorging for 30 years splits his pants, after he reaches 450 pounds, the fact that he didn’t special order his pant seams to be stitched with filament designed to haul in a 25 foot marlin, doesn’t make it accurate to say that poor wardrobe decisions are what bared his ass.

All I can add is that the world’s largest conglomeration of economists at the Federal Reserve aided and abetted those market distortioins with low interest rates and accommodative monetary policy every step of the way, missed the coming disasterous re-alignment, and drastically under-estimated its impending effect.

Further, I see that interventionist economists are increasingly vocal in encouraging Mr. Boudreaux and Mr. Roberts to tame and civilize their rhetoric on this blog. As a humble reader of this website, I can only urge its owners to take that criticism as the highest form of compliment, and thank them for any faith I still retain for economics as a discipline.

vidyohs September 15, 2011 at 12:40 pm

Amen! Like +2

yet another Dave September 15, 2011 at 1:47 pm

…I see that interventionist economists are increasingly vocal in encouraging Mr. Boudreaux and Mr. Roberts to tame and civilize their rhetoric on this blog.

I sincerely hope our hosts don’t tame the rhetoric. Even if their hearts are pure and their intentions are noble, interventionist economists (and the politicians they enable) are a cancerous blight on civilization and should be opposed at every step.

Methinks1776 September 15, 2011 at 1:50 pm

*LIKE!*

vidyohs September 15, 2011 at 11:34 am

Let’s just look at some numbers to get the full impact of what all this spending means to the average working man, if it is indeed intended that the credit is every meant to be made good.

Numbers predicated on an assumed tax input of $20,000 a year on personal wealth created by the average working man; which is probably high, but knowing that only makes the numbers more appalling.

The Obama congress approved $750,000,000 to be used by the State Department in grants to repair Muslim Mosques.
$750,000,000 divided by $20,000 means one man would have to work (slave) 37,500 years to come up with that money to pay that debt if his money went exclusively to that debt. If we divide that 37,500 by 45 years of productive tax paying years, we see that 833.333 people would have to work (slave) their entire careers in order to cough up the money to pay that debt.

Obama saw to it that Solyndra got $535,000,000 taxpayer dollars, which has of course been pissed down the drain.
$535,000,000 divided by $20,000 means one man would have to work (slave) for 26,750 years to cough up enough money to pay that debt. And divide the 27,750 by 45 and we see that 594.4444 people would have to work (slave) their entire career to cough up the money to pay that little gift to cronies.

Now Obama wants $450,000,000,000 to piss away in spending.
$450,000,000,000 divided by $20,000 means one man would have to work (slave) 22,500,000 years to cough up the money to pay that debt. And, divide that 22,500,000 by 45 and we see that 500,000 would have to work (slave) and see their entire career taxes put towards paying that idiocy.

Any volunteers? Or, do we stop it now, soon, ever?

Insult to injury is this:
http://twitter.com/#!/philipaklein/status/113987557909475329

Hey, no problem, eh! Billions trillions, pretty soon we will be talking about real money, eh?

Anotherphil September 15, 2011 at 1:46 pm

Hey, no problem, eh! Billions trillions, pretty soon we will be talking about real money, eh?

Hey, there’s lots more where that came, right?

brotio September 15, 2011 at 4:12 pm

Hey everybody!

Yasafi just started a New-Economics website!

http://www.freeworldcharter.org/

Make sure you watch the video!

vidyohs September 15, 2011 at 5:36 pm

Make sure you also click on Charter and actually read that.

Holy crap, Bro, those people are scary stupid.

Well maybe they just found the missing magic wand.

Jim September 15, 2011 at 7:43 pm

Extra cool; another commune. They should institute the charter in a failing state that needs help. Say, California. They could rename it Star Trek California, since Star Trek advanced beyond the concept of money also.

And good luck with that.

Methinks1776 September 15, 2011 at 8:03 pm

As painfully stupid as that is (and “painful” is an understatement), it’s far more sophisticated than anything YASAFI could have ever generated.

I do notice the narrator is from a PIGS. Coincidence? I think not.

Price B. September 15, 2011 at 8:19 pm

Breaking News: Scarcity is a lie.

At first, I laughed uncontrollably. Then I realized that this is real, and there are real people signing this.

robert_o September 16, 2011 at 12:33 pm

I like how the Charter asks you to agree that the world has unlimited resources, and then later that the world has very limited resources. How humans must live with no debts or obligations, but then have debts and obligations to other humans.

Do people not have have a memory spanning more than 5 seconds?

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