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Is economics a busted flush?

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Stephanie Flanders | 15:07 UK time, Friday, 17 July 2009

Has this global crisis shown that economics is a load of rubbish? If you think the answer is "yes", you might be interested to hear that the Economist magazine - that bastion of free market economics - agrees with you.

Traders on the floor of the New York Stock Exchange, during the global financial crisis, Oct 2008Okay, so I'm exaggerating. It doesn't think economics is ready for the bin. But in a series of articles published today, the magazine says the profession has a lot of lessons to learn - and humble pie to eat - as a result of the past few years.

Some in the profession have come out better than others, either because they warned early of trouble ahead (the likes of Nouriel Roubini, Avinash Persaud, and several economists at the Bank of International Settlements), or because they were working far from the scene of the crime - people like the behavioural economist, Richard Thaler, the co-author of Nudge.

But crucial parts of the dismal science have come out of all this, well, pretty dismally - notably macroeconomics and the financial economics.

As the Economist notes, the criticisms levelled against macro and financial economists are:

"[T]hat they helped cause the crisis, that they failed to spot it, and that they have no idea how to fix it."

That's a pretty comprehensive charge sheet. And none is entirely wrong.

In their different ways, both the macroeconomists beavering away at the major central banks and the financial economists in academia and Wall Street took for granted a certain kind of market efficiency which simply didn't hold.

In the case of the macro-economists, famously, the assumption by the Federal Reserve and others was that asset price bubbles could take care of themselves - and even if they didn't, it would be less costly to let them run their course and clean up afterwards than to try to take the air out on the way up. Oops.

Macroeconomists in academia also tended to assume away the financial sector in their models of the economy.

They thought very hard about imperfections in the product and labour markets - imperfections which might cause unemployment, inflation, or both. These, after all, had been the macro concerns of the 1960s and 1970s.

But when it came to the financial market - perfection was the order of the day. Markets always cleared. All information was built into current prices. And all markets were always liquid. In other words, if things got tough you could always sell your troublesome assets to somebody else.

I'm not being entirely fair. There were exceptions. But it's striking how little the profession prepared its students for any of the big issues we face today.

I remember, while studying graduate macroeconomics at Harvard in the mid-'90s, asking a question relating a certain piece of theory to a recent decision by the Federal Reserve. It was like I'd said a bad word.

Introducing real world policy issues to the discussion was considered to be in bad taste. And I should say, this was a class about monetary policy.

And if monetary economics was too abstract, at least there was plenty of it. After the disasters of the 1970s, economists came to an agreement that fiscal policy was more or less useless for short-term management of the economy. So they basically stopped thinking about it and left it to the political scientists.

Paul Krugman reckons that of the 7,000 or so papers published by the National Bureau of Economic Research in Boston between 1985 and 2000, only five mentioned fiscal policy in their title or abstract.

The NBER is responsible for dating US recessions and is the central clearing house for macroeconomic research in the US.

As it turns out, a few more papers on fiscal policy would have come in handy in the past year, as policy-makers gradually came round to the view that fiscal policy was the only economic lever left to pull.

I won't go into the detailed case against financial economics, and the debate over whether economics can really be blamed for rise and fall of credit derivatives, the subprime disaster and the other financial market messes of the past few years.

If you want to read more on the interplay between theory and practice in this area, I would point you in the direction of Gillian Tett's recent book, Fool's Gold - or better, perhaps, Donald McKenzie's superb recent review in the London Review of Books.

(His book, An Engine, Not a Camera, published before the crunch, provides a more academic but hugely readable survey of the topic for those that want to get in deeper.)

Stephanie Flanders with textbooksI did explore some of these issues in a film shown on Newsnight the day of the run on Northern Rock.

At the most basic level, the defence of the high theorists is that their models were only as good as the data that went into them - too many practitioners on Wall Street decided that 20 years' worth of data was enough to tell you that house prices could never fall, and stock prices would never go down by more than 5%.

But they can't get off entirely. For one thing, they also assumed that markets were always liquid. Which of course they were, right up until they suddenly weren't, and all those banks and other institutions were stuck with impossible-to-value assets which were equally impossible to sell.

Also, and related, these models assumed that assets - and the risks attached to them - could be valued on their own, without reference to all the other people in the market holding those assets. They didn't think enough about the fact that if one model said "sell", chances are everybody else's would be saying the same thing.

So, all in all, not an edifying list of complaints. But does that mean economics is a busted flush? I'm afraid not, because even if you think economics got a lot of this stuff wrong, you'd be hard-pressed to understand - or to fix - what's happening in the global economy today without it.

Maybe it's not such a good time to be an economist. But it's one helluva time to study economics.

Comments

Page 1 of 3

  • Comment number 1.

    Economics is not a science even though it involves measurement and doing things with numbers. This is what confuses people.

    Economics is a method of analysising what is happening within the economy at large and in detail. There are all sorts of jolly models that can be applied, but intellectual rigour has to be applied in every measurement.

    When I studied economics some forty and more years ago it was hammered into me that I must be objective even if it meant being unpopular. So I became objective and unpopular as it suited my puritan soul.

    It is the lack of objectivity that has let down economists near and far. Many enjoyed being on the bandwaggon but now the wheels have come off. Sadly, they must pay the price of being clever without necessarily being intelligent. No doubt they will remain popular with their creditors who will write to them every day.

  • Comment number 2.

    Perhaps now there is an opportunity to abandon the childlike concepts of free enterprise and free markets in the context of the catastrophic failure of economies. What is needed is a whole system approach drawing on several disciplines including sociology backed by forensic investigation and analysis of real world events. Traditional market behaviour is rarely found outside economic theory books which are useful only in very specific microeconomic cases. In the turn dare we hope for a model of corporate (not enterprise) behaviour that rational decision making is economic, social and environmental.

  • Comment number 3.

    Economics is all a matter of opinion?

    GORDY brown and his pals NEED to learn that they cant spend money that doesnt exist, as does most of the UK population. . .

    Oh by the way GORDY how many helicopters did you say you NEEDED?

    NONE??

  • Comment number 4.

    "or because they were working far from the scene of the crime - people like the behavioural economist, Richard Thaler,"

    Well, the crucial work was done by Herrnstein and others at Harvard with pigeons in the 60s would you believe, even Kahneman gives a nod to that. But as some of us have been saying for an awfully long time now, 'far from the scene of the crime', there are some rather unpalatable, politically incorrect, empirical truths which people really do need to face up to if they want to grasp why this mess was brought about, and what must now be done to stop it, because Herrnstein and Murray back in 1994 drew on this work, and Herrnstein only moved into this field in the 70s through to his death in '94, after his work on the grounding of behavioural economics - (see hyperbolic discounting and predatory lending in the context of Prospect Theory if you must). It all hinges on differentials which most people have been actively misled into believing are not real, meanwhile those doing so hae been mining them in a most venal manner.

    Glad you've blogged on the broader issue.

  • Comment number 5.

    This is not the first time, and it is unlikely to not be the last, that the pretence of science has been used by a area of study to shield itself from reason and rational debate.

    It was inevitable the 'economics' had to rescue itself from its disastrous performance in the run up to this terrible crash. However I ask: should we let it get away with reinventing itself without first being publicly castigated?

    Stephanie, you and your cohort of similarly educated Harvard (and Balliol) graduates should examine the people who called the tune in your now admittedly incorrect education. Who financed Harvard and Balliol? And did these organisations get what they wanted? (A compliant set of people who were educated to support the position of their financiers.) It is, after all, all about the money!

    It is my view that in economics you need to get back to basics. Money is a basis of exchange. Goods need to have prices. These prices should be as fixed as possible. National regulation is the only partially possible way of regulating the markets in goods and currency. Internationally, money should move to compensate for trade in goods. etc. etc.

    This is why I believe that money should be soundly and stably priced for a stable economic environment. Hence it is almost impossible to achieve any from of stability with irrationally low prices for money and why as a prerequisite for a recovery (no matter how you define it) money should cost a reasonable amount (at least 5 percent.)

    "But it's one helluva time to study economics." Almost persuades me to have another go at it from one side of the lectern or the other! But of course economics as an educational industry is filled with wrongly educated teachers of economists who got it wrong, so the problem will be finding any real economist to be taught by! Your industry still needs clearing out!

  • Comment number 6.


    Is economics a busted flush? To some extent - yes. That's the conclusion I came to, after a 'run' of economists last Autumn all expressed different opinions on the cause and the way out of last year's crisis. It's certainly shown that Hugo Chavez is no worse than any of our leaders at running an economy, and arguably better in some areas.

    With kids grown up, I did an OU degree in Psychology a while back, purely for enjoyment; a complete departure from my background and career. What a revelation - I was surprised how little they knew. It was like have a thousand jig-saw pieces with no straight edges; only the colour allows you to group them, and a few of them fit together! As you rightly observe, you'd be hard-pressed to understand - or fix - what's happening in the global economy without some academic knowledge. I'd say the same applies to psychology. But it's no guarantee they have a solution that will work either.


  • Comment number 7.

    So it has taken a major crisis to reveal the fact that the economics that has been taught for the last 80 yrs in the most prestigious economics departments (particularly in the USA) is in fact largely nonsense. Various atempts have been made to correct this and have been stamped on by the establishment economists just as you were when you asked your question. Neoclassical economics as the current version is called lives in a universe of its own where reality doesn't impinge and rational behaviour and 'efficiency' rule. Even the words are misused as is the maths used to determine the outcome of events. As such it is extremely dangerous since governments and large companies base decisions on the results. The current blinkered approach needs to be broadened out to include empirical observations of what is happeneing in the real world and to adopt a pluralist method of observation and analysis. There is too much to discuss in a short comment but I can reccomend a book - 'Real World Economics. A Post-Autistic Economics Reader' and to paraphrase Einstein, 'We can't used the economists that gots us into this mess to get us out of it' they are thinking about the problem in the wrong way.

  • Comment number 8.

    Loads of problems with both economics and economists. Lots of economists work for financial institutions or governments - they just talk the book. If they don´t they are sacked. Other economists sit in universities and come to believe that their ignorance of the real world is a virtue, instead of the manifest failure that it is.

    You may as well say Medicine is rubbish if you have a hospital that incentivies Drs to ignore clinical diagnosis and just remove peoples livers because some one has worked out that there is a lot of money to be made in the liver market.

    You do not need any great education or intelligence to work out that something that cannot go on forever will not go on forever. Most "ordinary" people knew that the ever burgeoning levels of debt they were being invited to take on was not sustainable. Lots of young people actively sought to avoid buying houses. However there was all kinds of pressures to get on the housing ladder, and so in the end a lot succumbed to temptation - but with reservations.

    "Ordinary" people realise instantly that you cannot cure a debt problem with more debt. Experts who also know this are routinely ignored by the mainstream media. Much better to concentrate on a host of telegenic pump and dump merchants.

    "Economics" has expanded to encompass more and more spheres of the human condition as the process of commoditization sweeps over humanity like a tidal wave. Obviously theoratical economics has been unable to keep pace, just like a Dr. is unable to keep pace with a patient who exhibits a rapid acceleration of multiple symptoms.

    Those with power lie in a multiplicity of ways. Macro economic numbers are fiddled and spun faster than a top. Relevant numbers (but numbers that don´t fit the script) are simply ignored - for example the earnings profile of sub prime mortgage holders.

    Let´s all have renewable energy - but let us never mention how expensive this is. Let´s fiddle the numbers, and then lets be surprised when the actual outturn numbers are vastly different from the projections.

    Socity has essentially abandoned any efforts to keep people honest. Let us all cheer or boo the latest earnings from Goldman, but let us ensure that we NEVER EVER analyse where those earnings come from.



  • Comment number 9.

    As a small business owner, I'm interested in what works in the short, medium and long-term in the market, and in my experience.

    While the mainstream economics 'thinking' seems to be obsessed with macro-economics / micro-economics, and endless models and mathematics, instead of focusing on the individual economic 'actors', they will almost certainly remain permanently baffled by seismic events in the 'real' world.

    The majority of economists show little or no understanding of sound principles, specifically, the importance of practical entrepreneurial activity, and sound money - like Chancellors of the Exchequer, most of them have never had a proper job.

    The only economics that I've come across, that makes business sense, flows from the principles set out by Ludwig von Mises, see http://mises.org/

    .... and "Meltdown", by Tom Woods puts recent events into context using them.

  • Comment number 10.

    "3. At 4:22pm on 17 Jul 2009, alexander-curzon wrote:
    Economics is all a matter of opinion?

    GORDY brown and his pals NEED to learn that they cant spend money that doesnt exist, as does most of the UK population. . .

    Oh by the way GORDY how many helicopters did you say you NEEDED?

    NONE??"

    mmm slightly off topic but as Gordy says the troops dont need any more helicopters, Im assuming he travel around thw combat zone but truck and NOT helicopter next time he visits.

  • Comment number 11.

    This is not a failure of Economics as a whole, it is a failure of Neo-Classical Economics, which is one particular school. The fact that it is so dominant is a reflection of the all too strident US-led opinion that the market will always know best. It won't, and even the most competitive of markets are full of inefficiencies. This is not to say that other systems than market-based economies are better. That is not normally true. But we have to weigh up each market and assess it for its particular criteria, something which the very misunderstood Keynes was keen to emphasise.

    Macroeconomic changes are very hard to predict, and modelling based on rational expectations - the dominant model in our Western financial markets - assumes that our predictions will be mostly accurate. Many economists (including Keynes) have predicted that the herd-like nature of market behaviour is not rational but based on instinct, and that market prices and behaviour will be driven by short-term expectations weighted too highly versus long-run prospects. In other words our bankers and commodity traders are too interested in making the next trade and how much their products will be worth in the immediate future and base their decisions accordingly - they do not take the longer term value into account.

    When looking at our banks failure the media have failed to adequately point out that many of our financial failings are due to mortgage bond prices collapsing to unusually low prices that do not reflect the likely return from buying and holding these bonds. The banks' need to remove these assets from their balance sheets drove the prices far too low, and banks got into trouble because of short term lending obligations and not because all these mortgages were worthless. When the price recovers in the future the holders of these bonds are sitting on a gold-mine, and the price could well sky-rocket once again. Markets are not based solely on fundementals, and building financial institutions on the assumption that they are is unbelieveably short-sighted. This crisis is nothing new either, it is just a repetition of all the other bubbles we have seen, just this time the fact that the mortgage bonds were so widely traded and had a percieved minimum value meant that a much greater portion were bought and sold, and a bigger crisis ensued.

  • Comment number 12.

    Post 1 > Stanilic

    'Economics is not a science ....'

    Economics is classified is a Science -although it is one of the Social Sciences whereby it is taken that these 'things should happen, most of the time to a 95%+ probability'.

    Repeated social sciences experiments will not always produce the same end result - as would of course happen within the true sciences.

    eg the Price/Demand curve (and other models) are useful but they don't come with 100% guarentees, but they are close enough to make a judgement of likely outcome.

    Unfortunately for Economics, the models depend upon Rational Man, ie given this set of circumstances then Rational Man and the Economy will respond as predicted.

    Thaler and others in the Behavioural (US behavioral) School identify that Man does not always act in a Rational manner thus leading to divergence from the predicted Economic outcomes. The School further suggest that many decisions are in fact Behavioural-influenced as opposed to pure Rational decisions; and that preferences, fears, greed, group influences, etc etc are of high importance in understanding and prediction of outcome.

    eg
    The price/demand curve might not operate at the micro level as expected, if spenders are afraid of losing their job (behavioural)
    And similarly at macro level, Governments may not co-operate fully if the outcome may not be of individual medium term benefit to their country, although it may be rational in the long term to do so. (also behavioural)

    So, Economics has utility but to a limited extent as absolute Rationality is not always present in the real world.
    Whereas behaviour nearly always a factor in decisions requiring judgement.

    Simple Economics will continue to fail and miss the target without recognition of the behavioural aspects. The standard arsenal of the Economist is as useful as a Mathematician with a book full of formulae.

    It isn't how many models or formulae are know that is the important bit, it is how the concepts can be applied to produce succesful outcomes in the real world that matters.

    Thaler et al are worth a read.

  • Comment number 13.

    IMHO Traditional 'economics' is dead - because it's both out of date and too narrow in scope. Dr W. Edwards Deming, a renowned 'creative outsider', wrote two landmark books nearly 20 years ago (and please note the titles - 'Out of the Crisis' and a 'New Economics')*. Deming was 20 years before his time, but his books still tell us far more about the future than a book like 'Nudge' (which is interesting, but certainly not profound).

    Economics does need to include more about behaviour (pyschology), but it needs to consider much more besides (e.g. power, values, leadership/management styles, communities, democracy ... ). For example the following simple definitions are built on Deming's work and quickly bring in the concept of values/styles too ...


    Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed.

    Ignoromics = People are either effectively ignorant of the situation (e.g. the overall environment) or not prepared to take responsibility to make sure it changes for the better.

    Leanomics = People taking responsibility for adding value and continuously improving the situation for others (e.g. customers, communities, overall environment), based upon fundamental values such as trust, honor, responsibility and respect.


    By these definitions it's very quick to see why we have a crisis (e.g. in economies, banks, enterprises, governments ...etc) .. as (in the UK/US particularly) a toxic mix of Poweromics and Ignoromics prevail (nb they are partners in crime) ... and Leanomics is also starting to point to the 'enterprises, 'nations' and 'economies' that will succeed in the long run (which Deming also indeed predicted, and which is now starting to become reality ) ...

    Interesting times ahead - and ones 180 degrees different to what most people in the US/UK have become accustomed too ...



    David Clift, A Future 500 Leader


    * "LEAN WORLD: The DNA of Success and the Path to Prosperity" builds on Deming's work too. You can also find out more about Poweromics by taking a look at http://poweromics.blogspot.com/2009/07/economic-fools.html as well as the other posts there too.

  • Comment number 14.

    There's nothing new to that. As Laurence J Peter said many years ago "An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." Recent events have just reaffirmed his perspicacity.

  • Comment number 15.

    the trouble with economics and economists is that with few exceptions they assume:

    (a) markets are about competition - when they're about monopoly and control
    (b) people act rationally - they don't, at least not predictably
    (c) their information is accurate and timely - it isn't
    (d) the past is a reliable guide to the future - it isn't
    (e) short term profit is compatible with long term investment - it rarely is
    (f) Business must grow or die. That's not true. Often the best strategy is to stay the same size
    (g) efficiency is the same as effectiveness - it isn't.
    and
    (h) individual and corporate greed is good - it isn't. Fairness works best in the long term

  • Comment number 16.

    1. stanilic

    Ah stan, a man not afraid to be unpopular. Congrats, you are unusual. Problem is me ol mate is you can be unpopular when things are going well if you individually believe they are heading the wrong way and say such a thing, and then lo and behold you will be even more unpopular if proven right. Absolutely the worst thing you can do. Look at the great pretence which many wish to cling to that this mess could not be foreseen despite all the documentary evidence. No, the answer is to keep your head down and leave those who are determined not to see any danger to do what they want because they will do it anyway. Economics - can't work all the time because the situations do not repeat enough to form a statistically sound basis for decision making. If you put all the great recessions together you only have a fistful of them and different frameworks everytime. So when you really need it you don't have a science. Meanwhile indecisive leaders in any sphere want decision support tools so they do not have to have to make a decision on their own. They then lean more and more comfortably on stuff like economics to avoid holding the total responsibility for any action. Economics is not alone, faux science abounds. And if the good times are rolling nobody wants a party pooper. And if you are busy making a liferaft on the deck of the Titanic when everybody is enjoying deck games and the silver service are you not considered a bit strange. Brown was a coincidental success who came to believe it was all really good decision making. Funnily enough I believe he has made a better job, appart from the world stage theatre tricks, than the Conservatives would have, they were abysmal in the last recession, just let people go hang. Wont save him though. Economics is unlikely to make any great difference on an uplift, it is all paying the bill, slash n burn, firefighting, little scope to move.

    Good luck with being unpopular : )


  • Comment number 17.

    16 glanafon

    "Brown was a coincidental success who came to believe it was all really good decision making."

    Too true. This is in fact a good summary of the whole of the bubble of =/- 1999-2008

  • Comment number 18.

    Lets face it anyone can have a go at forecasting what is going to happen in ALL the immediate, medium and long term with the current state of both the U.K.'s and World Economy, for IF [and thats a BIG IF] anyone was able to predict the future of events, then that person at this moment in time would be dismissed in their way of thinking simply because if it was that easy then that same indivisual would keep their own advice to themselves and invest in the product.

    Therefore, how offen do Horse - Racing tippers bet on their own advice, for instead of telling everyone else how to MAKE MONEY and WIN a fortune for as, if they were/are that confident in their own advice, then they should put THEIR own Money where their mouths are.

  • Comment number 19.

    How long can neo-classical economists ignore Nicholas Georgescu-Roegen?

    http://tinyurl.com/ignoringg-r

    Not only was he critical of their mathematical obsessions (which he labelled Arithmomania) but his accusation against their assumptions of perpetual motion and relentless growth were even more damning:

    "To maintain further that 'the world can, in effect, get along without natural resources' is to ignore the difference between the actual world and the Garden of Eden"

    Perhaps it's time for the Economists to have their prestigious association with science and good work for mankind stripped from them:

    http://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences#Controversies_and_criticisms

  • Comment number 20.

    Message 12 Strategycall

    Yes, economics is deemed a social science. I don't know when the 95% plus probability factor came in as a measure but whilst I consider social science a valid concept - I have a degree in it - I have always challenged the application of the word science. How empirical is social science? How objective can an observer be? This is what lies at the heart of this thread.

    Sociology is also deemed a social science. Auguste Comte argued that sociology was the queen of sciences as it embraced all the other sciences.

    I cannot remember the name of the person who put that idea down with the remark `of course sociology is the queen of sciences as it is certainly not a subject'. Perhaps someone would be kind enough to remind me.

  • Comment number 21.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 22.

    Message 16 glanafon

    I am a contrarian by nature. If I see someone exhorting others to look in a particular direction I immediately look the other way to find out what else is happening. The Big Picture can have very interesting details in it: often the name of the painter.


  • Comment number 23.

    Stephanie,

    very much enjoy reading your blog, and also the contributions on TV and in writing of the Newsnight and economics team, which I find highly educational regarding the economic situation and other matters.

    Regarding your current blog entry, an interesting perspective on mispricing (i.e., against the principle that all information was built into current prices) is given in Surowiecki's (2004) book "The Wisdom of Crowds".

    He draws on the interesting observations of the Victorian polymath Galton (1907) that people at a county fair accurately guessed the weight of an ox (yes the four legged beast) when their individual guesses were averaged. Hence the combined judgement was more accurate than any individual's estimate (including "cattle experts").

    Surowiecki suggests that two of the main conditions for a crowd to display an accurate aggregated mean opinion (or "crowd wisdom" as he puts it), are diversity and independence of opinions among the crowd members. These conditions are not met in bubbles. For instance in the housing bubble, the long period of growth in prices, the proliferation of property investment programmes on TV, estate agent's patter in the local free press, and so forth, can be seen in hindsight as acting to decrease diversity and independence of opinions.

    There is also an analogy here with shortcomings in predictive models in the presence of correlated measurement error between model variables.

    Evidence of mispricing is also shown by the presence of some investors and gamblers who consistently outperform the market, and whose record in that regard cannot be realistically explained as chance.





  • Comment number 24.

    peter_t_clarke (#7) "So it has taken a major crisis to reveal the fact that the economics that has been taught for the last 80 yrs in the most prestigious economics departments (particularly in the USA) is in fact largely nonsense. Various atempts have been made to correct this and have been stamped on by the establishment economists just as you were when you asked your question. Neoclassical economics as the current version is called lives in a universe of its own where reality doesn't impinge and rational behaviour and 'efficiency' rule. Even the words are misused as is the maths used to determine the outcome of events. As such it is extremely dangerous since governments and large companies base decisions on the results."

    Today, more than any time in recent history (largely through light-touch regulation and changes to legislation), the simple empirical reality is that companies and individuals comply with rules/laws only to the extent that breaches of said rules/laws do not adversely impact on their profitability/self-interest.

    All that matters when it comes to government is the extent to which the state can, and does, protect the vulnerable. Today, in liberal-democracies, this is eer more less and less the case. Instead, it's cynically made out that efforts to do so are in fact 'patronizing', that people are all of equal ability, and that anyone can make the right choices if they educate themselves, i.e avail themselves of the right information.

    This is so-called 'people power/choice', aka anarchism, aka caveat emptor aka predatory naked capitalism.

  • Comment number 25.

    strategycall (#12) "Economics is classified is a Science -although it is one of the Social Sciences whereby it is taken that these 'things should happen, most of the time to a 95%+ probability'"

    Subjects are just administrative conveniences. The method is the same across most disciplines. What matters is that one applies logic (these days usually computers) and that one is realistic/honest/accurate about the values of one's variables and their error terms, i.e. how good one's measures are. The problem today is that education has suffered, and that most people who think that they're well educated generally aren't, essentially because we've devalued higher education through massive expansion (5% to 50% of the cohort) to make money out of students.

  • Comment number 26.

    Stephanie - I'm surprised at you for writing that - Basic economic therories and principles remain sound! They just need to be applied properly and with common sense. It is possible to study anything at University these days except ... 'common sense'!

    BUT, there are a lot of self-inflated 'experts' out there (with universities and with major corporations) and who have been put to the 'test' over the last two years and have been found wanting.

    A big mistake for any economic 'experts' has been mixing up and getting confused between the dynamics of their domestic economies with e.g. the dynamics of the global economy.

    I think that Gordon Brown knows he has lost control of the UK economy and UK banking finance sector - he keeps saying the recession is global and inherently his remarks are an admission that the UK is not now in control of its own economc destiny without collosal radical reform and some very aggressive home investment.

    What we have now is our real economy without vast sums of overseas speculation money for e.g. real estate development from non-dom investors - there may not be a UK economic 'recovery'

    In the UK many keep talking about the UK economy/banking/finance sectors as distinct from those of the EEC and other continents' and the global economies.

    This is the difficult bit for the so called experts - many national economies are 'virtual' and have been consumed or subsumed as part of a global roller-coaster economy controlled by about 50 giant global banks with money pouring in and out of tax havens as a few dozen billionaires control a huge proportion of the world's wealth.

    This has made policy making for some countries on economic and finance matters almost impossible for some countries.

    In the UK, for what it is worth, I think that the current labour govt. /administration and the Bank of England have lost control of our economy and the banking sector in the UK as the global economic forces exerted on the UK are too large for the UK 'enforcers' to have full influence/control.

    This is why so many Sirs and Professors are mumbling about very 'red-faced'.

    However, we have yourself and Robert Peston to thank for shining the light forward on economics and by questioning the perceived wisdowms although I have to say Robert has ducked some of the difficult questions put to him recently on e.g. Gordon Brown's government has lost the ability and power to regulate the UK banking and finance sectors as globalisation and internationalisation have gone too far in the UK?

    Different countries - even the USA is trying to manage macro-economic policy on a mainly domestic economic agenda when the goal posts have moved and is facing have a global economy controlled by Who? from where?

    The key to the failure of some 'experts' to understand and comment on the problems is in understanding how far reaching the global banking and finance structure is and still is in messing up national economic policy and financial regulation.

    After months and months of debate and trillions of dollars in global bail outs most simply do not get it and the biggest topic for debate at the next G8 and G20 summits will be - you guessed it - MORE BAIL OUTS!

    What this means is that we will need to do virtually the opposite of most things said by Gordon Brown in order to survive in the medium to long term as a 'rich nation'.

    The countries that do the best economically going forward will be the ones that are agressively innovative and protectionist such as China, Japan, Norway etc.



  • Comment number 27.

    I don't think economic theory is itself busted. After all, how did the theory come about? It was formulated based on observed behaviour. When studying opportunity cost, it was common to use butter and guns as the 2 opposing products? Similarly, in macro-economics, the multiplier effect and balanced, deficit and surplus budgets and central bank functions are taught because these were tried and tested. The reason why we have economic problems is because a small number of people decided to bin all these theories. And I don't mean just the bankers. I just think we need to get back to basics and follow what the theory says. If we follow the theory, then at least more people understand it and can tell if it will work. It will be interesting to see how quantitative easing works or not in the next few months or years.

  • Comment number 28.

    Theory and application often have departures in the real world. Economic theory unto itself is like having a fantasy soccer club. The primary issue related to the collapse was the role of those given the requirement of oversight. Not only did the political systems and their appointees fail in their duties but they tended to facilitate the process by allow financial serivces to develop debt schemes that derived immedicate rewards but were obviously unsustainable. In the recent past bank loans required colateral, but all of a sudden, this was not the basis of a loan. One need not be an economist to understand that the question should be asked related to the matter of defalut. If,in fact, the loan is unsecured and if a substaninable amount of the assets of a bank are unsecured then what happens when the payments can no longer be made. It should be understood that such loans were no principal, interest only with larger payments deferred to a later date were common and because the later date substantially increased payments could be projected it is unclear why the bust was not forecast. As the money rolled in the national, state and local governments were feeding on the taxes and transfer fees. They didn't want to ask the question, they were giddy with resources. The economist were only at fault for not talking to accountants and asking how this all looked on the books. Economist, being human, questionable I know but we must accept them as part of the clan, had within their group those willing,for a substainable fee, to promote the rising tide in a positive light in exchange for the fee. Unethical behaviors are often rationalized when those behaviors offer rewards without consequences. The unfortunate results of all this is that many hard working people lost retirement funds and investments that will impact them the rest of their lives and the residual unemployment will change the lives of many families and children and that there has been no personal accountablility for those who are currently living very well with the millions they made in this scheme. The bigger question that needs to be addressed is, what does this say about our socieities? The political systems and financial systems have betrayed the public on the largest scale in history and not one has stepped up an accepted responsibility, nor has the public demanded any. The governments took dramatic action to recaptialize the financial institutions yet did nothing to recaptialize the accounts of the individuals who lost retirement funds because of the governments negligence and abdication of responsbilities. Not all that glitters is gold.

  • Comment number 29.

    "I don't think economic theory is itself busted. After all, how did the theory come about? It was formulated based on observed behaviour."

    No it wasn't. peole do not behave in rational ways when making choices, they're not even consistent.

    It was premised on two false assumptions a) that people make rational choices and b) that there is equality of ability (bar opportunity). These are two facets of the so-called 'rationality assumption' and they're both false. This is important. It's also venal that the opposite is peddled.

  • Comment number 30.

    Poor old economics - let's all give it a good kicking.

    It's all the fault of the neo-classicicts, we should have paid more attention to the behaviourists (all the world is a rat!!) and even the Austrian's should have been given more credence. Well, if you think so.

    It's just like poplar music. Swing gave way to Rock and Roll which morphed in to Pop and then Punk and then New Romantics and so on and so on. What flavour would you like today? OK, I'll find some 'school' that will provide it.

    It's not the fault of economic thought. The problem lies with what we attempt to do with it i.e. create policy and control mechanisms.

    Many good points have been raised above. I think that stanillic came closest with "Economics is a method of analysising what is happening within the economy at large and in detail." It is a tool for commentry and prediction. It is not a tool for management and control. But over the last 50 years that is what we have been asking it to do. So it's not the fault of Economics per se but a fault in our expectations.

    Just look at the proliferation of economists - sorry Stephanie. We have whole armies of economists. We have international economists, market economists, central and local government economists, health economists, social economists and educational economists. That's not even counting the academics and journalists! What are all these economists doing? Well they certainly didn't control the economy.

    My background is in Corporate and Marketing strategy, both as an academic and practitioner. I see many similarities between the histories of those disciplines and what has happened to Economics. From the mid 50s, Marketing became the new buzz-word. Every firm had to have a Marketing Departmnet if it was to survive in "todays world". We churned-out millions of marketing people to meet the need. Problem was that whilst we were creating new operational structures we forgot about the core philosophy and principles of Marketing. We created a beast that had many tools but had forgotten its basic ethos. A similar pattern has emerged with Economics. We have asked a philosophy to become a management and control function.

    It doesn't matter how much computing power you throw at it or how clever the models appear to be you can not control or acurately predict behaviour in every given circumstance. Human behaviour is at the core of all economic activity. Human behaviour is extreemly complex and does not conform to blunt economic stimulus. The variables are just to diverese to cope with. Therefore, let Economics INFORM but then let others use/missuse that information and take responsibility for their actions.

    It is popular nowadays to say "don't study anything that has STUDIES in the title. I would argue that such Studies can produce a more rounded individual who can see the relationships between disciplines and therefore produce more 'rounded' decisions. So more Economics and less economists.

  • Comment number 31.

    #29 Jadedjean,

    "This is important. It's also venal that the opposite is peddled."

    Would you care to expand upon that statement? No trick. Just interested in hearing your thoughts.

  • Comment number 32.

    Economics is not rubbish, but if economists (real and self-declared) confuse finance with economy, the results are inevitably a big big pile of smelly rubbish that takes many years to be cleared...

  • Comment number 33.

    Has anyone realized that everything is connected, economics and economists are in disarray because they cant predict the future and they cant see half the connections - Try looking at string theory, everything is a basic loop, it might expand in one direction for a period but it will eventually turn and expand in another way, economics is the futile pursuit to understand this ebb and flow...you never will, just forget it your not as bright as you think you are because you cant see past your love of what ever it is your trying to explain..and that's the problem, you can never explain the whole loop, you lot make me laugh a lot...but keep trying please its entertaining....

  • Comment number 34.

    "I remember, while studying graduate macroeconomics at Harvard in the mid-90s, asking a question relating a certain piece of theory to a recent decision by the Federal Reserve. It was like I'd said a bad word."

    Nobody likes a smartass student; especially when he/she is right !! Been there, seen it, done it !! :-)

    "At the most basic level, the defence of the high theorists is that their models were only as good as the data that went into them - too many practitioners on Wall Street decided that 20 years' worth of data was enough to tell you that house prices could never fall, and stock prices would never go down by more than 5%."

    This is just an excuse, not a defence !! It is nothing to do with the data and everything to do with the model !! When a model is flawed, no amount of good data will make it produce better results !! This was the first thing we learnt in Systems Analysis !!

    The problem with most macroeconomic models is that they presupposes an endless supply of cheap raw materials and an equally endless supply of foreign "damned natives" capable of being forced to buy whatever rubbish you deign to produce and sell to them !! Well, those empire days are over and such models no longer work but various governments and "leading economists and industrialists" still cling to them for dear life !! And such attitudes pervades into society, spreading, even as swine flu does, throughout all ranks of those societies !!

    Although not a work on economics but, rather a semi-biographical works, "From Third World to First" is a tale of one man and his dream to re-model macroeconomics and produce a model that is better and *still* successful to this day !! The man is Lee Kuan Yew and his proof is that Singapore is one of the most successful economies today !! He started with a rotten and most corrupt little island and turned it into the envy of most nations !! His brutal Darwinistic approach meant that Singapore has the leanest, meanest, most efficient Civil Service I've ever seen. With absolutely *NO* natural resources except for the abilities of its people, Singapore has become one of the major economies in the world !!

    As a typical pragmatic Chinaman, he has no high-faluting theories, no pack drills; he just rolled up his sleeves (when he has any) and knuckled-down and did it !! Contrast that with our Great Gordo dashing off to save the world and flogging off the last of our family silver (gold) in the process !! One talks a lot while the other does a lot. Who's better for his people ??

  • Comment number 35.

    I have been using econometric models on and off for twenty years. My observations are as follows:
    1. Much of the data input - once interrogated in detail - is inaccurate
    2. Every single model ever built starts with at least one assumption. It is usually wrong
    3. Models go on being used for macro conclusions when time and again their micro conclusions have been shown to be miles out
    4. Almost none of them factor in panic,the wisdom of crowds, and denial. In short,Homo sapiens
    People who were www.notbornyesterday.org already know thia

  • Comment number 36.

    22 stanilic

    Painter - Hmm, think Jackson Pollock in this case.

    30 fddave

    Pop music, yes I think your are onto something there. They have all been break dancing and jive talking when they should have been strictly ballroom. Better get the car industry Morris dancing.

  • Comment number 37.

    #5 "It was inevitable the 'economics' had to rescue itself from its disastrous performance in the run up to this terrible crash. However I ask: should we let it get away with reinventing itself without first being publicly castigated?"

    And here I was thinking that hair shirts and self-flagellation went out of fashion some 200 years ago !! :-)

    "But of course economics as an educational industry is filled with wrongly educated teachers of economists who got it wrong, so the problem will be finding any real economist to be taught by!"

    It's also an "industry" that consumes much but produces little of value !!

  • Comment number 38.

    Nice to see economics admitting the charges I levelled at it when I was 14 years old, which got me roundly and rather unsubtly mocked by an economics professor I used to chat to on IRC, as well as various students. I'd be intrigued to get in touch with them now, and ask them whether they still hold to their opinions which have been so soundly thrashed by the real world.

    Of course, none of it matters, because the ways to fix the problem have been so heavily derided for so many years that we now find ourselves in the wonderful position of having no politically viable solutions.

    Hurrah for capitalism and democracy.

  • Comment number 39.

    Try putting this in your economic machine and crank the handle.

    I went to a local curry house a couple of days ago, reputable, good value, longstanding.

    I was told by the waiter who I have known for a couple of years he was going at the weekend. Business sold on. Mumbled on, sullen. After 20 minutes we managed to get him to take our order. We were the only people in the place. After another half an hour the meal arrived. Sorry we are late in serving, we are busy in the kitchen. I looked around, we where still the only people in the place. One meal was served with the aside of - It's a new chef I don't know what it will be like. Reassuring. My meal was prodded on the tray and a newbie manager called over. Half the meal disappeared. Its not fully cooked I was told. Another wait and it reappeared to join what was on my plate. Having had enough we paid or tried to. We were asked to walk through the monsoon to a nearby cash point as the in house card nachine was not working and only cash was acceptable. A cheque supporte3d by a card was not acceptable. I'm not rushing back, sad. Please tell me how you can model this in a mathematical model. Or some of the other bizarre high street behaviour, just take a walk about town and you will see it, strange irrational rituals that the supplicants hope will give business revenue. Or perhaps explain how you can model the equally bizarre behaviour evident when things were 'booming' and nobody but nobody wanted to hear things might be unstable. It is a fantasy to think you can model this sort of behaviour so economics is I am afraid a fantasy. It might work with 'normal' behaviour when things are 'normal' but so what, you dont need it then. No IMO, economics is about as much use as a chocolate frying pan. Thats why we are between the frying pan and the fire. But if it gives you faith then good on you. Personally I'd rather use the I Ching, at least it doesnt pretend to be a science. For something to be a science it has to have some quantifiable statistical certainty.

  • Comment number 40.

    34. ishkandar

    Thanks, I can now recognise a typical chinaman, I just look for the rolled up sleeves. ; )

  • Comment number 41.

    Alas poor glanafon, curryless and wet! The Charleston may have helped to dry you off :)

    It is interesting that when we talk about the economy we view it from our own experiences. However, when economists talk about the economy they appear to be looking at a very different beast. Rather like the Business News which concentrates upon the financial markets and occassionally reports on business activity! Just to end the rant those ruddy economists have now knicked OUR term "the REAL economy" and mutated it to me something different completely.

    Oh well a REAL decision awaits - beer or rum?

  • Comment number 42.

    foredeckdave (#31) #29 Jadedjean,

    "This is important. It's also venal that the opposite is peddled."

    Would you care to expand upon that statement? No trick. Just interested in hearing your thoughts."


    I've posted at length on this subject over recent years. Group diversity in cognitive ability, plus differences in birth-rates in conjunction with where the 'cognitive elite' is ethnically and demographically conentrated (NY, Florida and California) and and in which professions, made the peddling of equalitarianism as venal as sub-prime loans under the circumstances. It was pretty clear to several in this field that this was economically predatory behaviour (cf. the USA CRA/red-lining), and after the 1999 deregulative legislation, it was clear that predatory lending targetted Blacks and Hispanics (as well as underclass White) preferentially. Many were asking why there was so much immigration from Mexico (and here in the UK, from S. Asia and Africa). Herrnstein was certainly alarmed decades ago about the 'liberal conspiracy' to keep the psychometrics data quiet. ETS finally got brave, picked up on it, and started breaking it publicly in feb 2007.

    Whilst I've spelled all this out in considerable detail in these BBC blogs (especially the Newsnight ones) and elsewhere over the past few years (I thought it would have more import this way than in academic papers) I'm not the only one to have done so.

    Most people didn't want to face the facts. Most still won't, I expect.

  • Comment number 43.

    Nassim Nicholas Taleb's "The Black Swan" lambasts economics because, he says, it doesn't take into account "black swans" - unusual, unpredictable but high impact events - in their predictions. They end up saying retrospectively that "if this unpredictable thing hadn't happened, I would have been right."

    Nevertheless Taleb wrote in this book, published in 2007 that:

    "The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events "unlikely"."

    Looks like he got it right himself. Some other libertarian/right wing economists, like Peter Schiff, did predict the crash. Schiff views the recession not as a problem, but the solution to the earlier bubble, and argues that government intervention (stimulus packages, bailouts, etc.) is only going to prevent that correction from occuring. Important to note that the free market people are suggesting solutions too.

  • Comment number 44.

    Stephanie, you were extremely negative about the economy few months ago. People never lost their optimism, consumer spending never went down.

    There are always economists with a negative view and economists with a positive view. If you are at the peak of the economy the economist with a negative view will became gurus (you colleague Peston) and the optimistic ones trash. The reverse is true when you are at the bottom of the cycle.
    Cheers

  • Comment number 45.

    #39 Glanafon
    That's a very good point. How do you model the "wierd" things that people often do?

    My example is not as good as the curry house case study but anyway....

    Is it just conceivably a little bit possible that practitioners of "wierdness" pretty well know that logical thinkers (think Belbin) will tend most of the time to put what they see into some sort of a pigeon hole with an appropriate label on it?

    Eg. Young man is saving up....must be for a house (could be for a wholesale cocaine deal?) Eg. Business man wants to raise capital.....must be for a profitable investment (could be for a gambling habit?) Eg. Supermarket chain X grows its profits.....must be operating more efficiently than other super markets (could be that profits have been mixeed in with windfalls from increased valuations on high street premises?)

    And best of all.....
    GDP of Western nations goes up.....must be to do with leverage of intellectual capital (could be that the value of credit derivatives was wrongly calculated).

    For the dodgy businessmen in this world....and there are more than a handful.....it must be pretty convenient to let financial analysts and commentators interpret your actions as "expansionary" or "consolidating" or "globalising" or "hedging" or "additive".........better that than be shown up for a snake oil salesman

  • Comment number 46.

    I seem to remember from the dim and distant past of my economics stream at Business School something called Recessional Analysis. i.e. the worst case analysis. What if we had a bust, what if markets aren't rational, what if liquidity does become tight. It seems we have forgotten this in the rush to create new economic paradigms of rosey glow economic forecasting - naming no names of course! Perhaps Economics is still valid if a more rounded and less deterministic approach is taken? Or perhaps Economics has been superceded by Politics and Politicians needs. No names of course.

  • Comment number 47.

    Being an economist who believes in "free markets" has always struck me as utterly ridiculous. It's like being a physicist who believes in gravity or in electromagnetism. Market forces are just that - a force : like gravity or electromagnetism. They mean nothing except within a particular set of boundary conditions. You can use gravity to power a water-wheel. You can use electromagnetism to light a bulb. But either way you have to design a system in which a force of nature will do something USEFUL.

    You can utilise market forces to power an economy, but that economy still has to be DESIGNED. Chaos and anarchy achieve nothing. Only a designed economy will succeed and we have had generations of economists and politicians who have abdicated their responsibility to design an economic system that stands a chance of working in the interests of the population as a whole.

    I think the right way of looking at economics (or more precisely economic system design) is as a form of engineering rather than a science. It's too complex for any human being to fully understand what's going on. But you can design any system to isolate problems, to have fall-backs when things go wrong, to have fire-walls in place so that if something goes wrong it doesn't destroy the whole system.

    I was reading this week about the Apollo mission. How they designed a computer system that succeeded in getting astronauts to the moon and back. You might I suppose call it "rocket science", but actually it's more a matter of designing a system that breaks the problem up into manageable chunks, considers all the possible things that go wrong, has fall-backs in place, etc. It can be done and it has been done. The same approache ought to be taken with regards to designing national and international economic systems.

    As for the half-wits who thought that just because something hadn't happened for 20 years it would never happen, frankly I despair that they ever got into jobs more responsible than petrol-pump attendant (and actually I sincerely apologise to any petrol-pump attendants out there for making such a comparison).

  • Comment number 48.

    Many years ago when I was working towards my degree in pure physics I found myself at physics lectures and tutorials with people studying economics and physics, business studies and physics, to name just two strange combinations. Although physics and mathematics do have a role to play in every day life, I did find it difficult to understand the relationship between running an economy or business on the theory behind physics or maths. Mathematical models are useful in predicting outcomes to fairly simple situations, and have become very useful in modeling things like the weather, however they are just tools for predicting an outcome given a prescribed set of variables, if those variables become out of a set range then the model becomes worthless, and the weather is raining instead of sunny. Ask any meteoroligist about how confident they are of their prediction for the weather further than three days away.

    Economics and business have highjacked something they do not truly understand to ligitamise what they truly do not understand, their own greed.

  • Comment number 49.

    No 20 Stanilic,

    '..I don't know when the 95% plus probability factor came in ...'

    Yes you do, you might not remember the 'when' but you will remember the principle.

    It is the confidence level around the Null Hypothesis where above a 5% inconsistency says the theory may rejected. Otherwise continue with proof.

    Anyway, to complete the circle arising from your original and subsequent posts... the country needs more, not less, questions and explanations.
    So your contrarian approach is far, far, preferable to passive acceptance.
    More of the same is needed in any number of current situations.

  • Comment number 50.

    If this crisis and your blog proves anything, it's not that economics is 'rubbish', as you put it with more than your usual subliteracy, but that economics editors 'write rubbish'. I remember you were scaremongering a crash in your columns way back in 2003 and now that one has come, six years later, only Chicken Little is more excited and self-congratulatory than you. Tone it down, Stephanie, or at least save it for the tabloids where balance, maturity and style aren't at a premium.

  • Comment number 51.

    #14 "As Laurence J Peter said many years ago "An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." Recent events have just reaffirmed his perspicacity."

    Professor Laurence J Peter also came up with the Peter Principle about people being promoted to the level of their incompetence. A look at our current government might seem to dispute that Principle since they (the ministers) seem to be incompetent to start with and got promoted for it !!

  • Comment number 52.

    I suppose a further comment is that for perhaps 30 years now we have had an academic system that teaches students the knowledge that is required to make money out of the flaws in the economic system - not how to design a better economic system that doesn't have those flaws. How many students have studied economics in the hope of getting a well paid job in the City? And how many have been driven by the desire to fix the system and make the world a better place?

    It's not hard to see the gaping holes in the logic of the economic belief system that has developed over this period. All you have to do is say "forget the paper money - what's the impact on real goods and services?" and it's all pretty obvious. But teaching this was just not what was wanted at the time.

  • Comment number 53.

    #42 JJ,

    Thanks for the reply.

    There is another way of viewing the sub-prime fiasco which says that it has more to do with greed and the manipulation of a 'lightly' regulated market than a deliberate predatory strategy purportrated on an under-class.

    Now we have crossed swords more than a few times (and probably will again) but I will accept that there are questions posed by both migration and immigration. However, I feel that these probably have more to do with culture than ability. The fact that, in the UK, the 'host' community has been unable to agree on the tennants of their own culture has led to a very confused picture. The situation in the USA is totally different. There you have a society uneasy with itself built upon waves of immigration and ridled with racism and unequal opportunity.

    Still, thanks for the response

  • Comment number 54.

    This article (and author) loses so much cred by omitting the name of Vince Cable from the list if those who "warned early of trouble ahead". Quite an extraordinary omission from a BBC journalist.

    (Foreign readers note - chap named Vince Cable was the sole British politician who, in the face of total Government and Opposition derision, warned time and time again of what was coming - echoing Winston Churchill's pre-war experiences of many years ago. His forecasts were derided despite his immense knowledge and experience as former head economist of a major worldwide oil company. As it turned out, his forecasts were spot on.)

    Really, really extraordinary omission, esteemed author. Begs the question - why, Stephanie, why? You know the facts. Why?

    (Note: I have no axe to grind - and have joined up solely to post this response to your blog)

  • Comment number 55.

    Post 52 - Good points and well made. The existing education system has arguably been re-enforcing levels of 'incompetence' / 'greed' for some time ... and this is exactly the same in leadership / management ( and political science ? ) too ...

    The education system is also probably 20-30 years out of date now too ( I know for certain most MBA's are - as they are often referred to as 'Maybe Best Avoided' now, and I believe posts 13 and 51 probably give us an idea where we are with politics at the moment too ) ...

    I believe we are beginning to get to the 'roots' of the problem now ... and starting to see just a few of the challenges ahead ... e.g. changing this, as well as evaluating / re-addressing our nations 'fundamental philosophies' and 'value systems' !

  • Comment number 56.

    #55 lanomist,

    "The education system is also probably 20-30 years out of date now too ( I know for certain most MBA's are - as they are often referred to as 'Maybe Best Avoided' now, and I believe posts 13 and 51 probably give us an idea where we are with politics at the moment too ) ..."

    If you "know for certain" then you can supply the evidence for you claim. I'm sure that the staff and students of our Business Schools would be very interested to see it.

  • Comment number 57.

    LIBERTARIANS' MARKET-FORCES AND 'CONSUMER CHOICE'

    foredeckdave (#53) Has not Austrian/Chicago School 'Libertarian' economics dogmatically asserted that cultures demand critique, and that in the absence of this, one risks ending up with monopoly/tyranny?

    Has any of this been done intentionally and can anyone (or group) be held accountable, or is it truly just a case of scotoma/incompetence/lack of cognitive ability (call it what on will)?

    Surely one has to ask why so many people seemed so willing to abandon so many lessons from history?

    Can one define 'greed' non-intensionally? If one doesn't see the nature/scope of this problem (see Part 5), does one really know what I (and others) have been talking/warning about?

  • Comment number 58.

    #40 "Thanks, I can now recognise a typical chinaman, I just look for the rolled up sleeves. ; )"

    Now for the next lesson !! To spot a typical Indian small businessman, watch out for the dhoti tucked up at the waist !! This means that he's willing and able to go for the "blood, sweat and tears" to make the extra buck for his family !! :-)

  • Comment number 59.

    #41 foredeckdave - "Oh well a REAL decision awaits - beer or rum?"

    If you are truly on the foredeck, may I suggest a Singapore Sling or, perhaps, a Mai Tai !! However, rum in a young coconut with a fair bit of shaved ice will also do nicely but, be warned, try not to eat the little paper umbrella they put in it. It may stick in your craw !! ;-)

  • Comment number 60.

    #43 Nassim Nicholas Taleb's "The Black Swan" lambasts economics because, he says, it doesn't take into account "black swans" - unusual, unpredictable but high impact events - in their predictions. They end up saying retrospectively that "if this unpredictable thing hadn't happened, I would have been right."

    In IT, this is know as "Exception handling" and, if not dealt with properly, can lead to BSOD (Blue Screen Of Death) in Windows, for example !! In the days before Microsoft Windows existed, the guy teaching me about exception handling gave me, as tongue-in-cheek illustration, "If his mum had married well, he could have been born as the next King of Saudi Arabia" !!

    Or, to paraphrase a famous American, any one can handle the known knowns and only the better ones can handle the known unknowns. However, it takes genius to handle the unknown unknowns !! This is what's lacking in the economics theory scam, *genius* !!

  • Comment number 61.

    #47 "I was reading this week about the Apollo mission. How they designed a computer system that succeeded in getting astronauts to the moon and back. You might I suppose call it "rocket science", but actually it's more a matter of designing a system that breaks the problem up into manageable chunks, considers all the possible things that go wrong, has fall-backs in place, etc. It can be done and it has been done. The same approache ought to be taken with regards to designing national and international economic systems."

    The only notable thought from the Apollo program came when one of the astronauts was asked what his most memorable thought was. After pondering a bit, he said, "There he was in a capsule, far from possible rescue, and every bit of that capsule was tendered to the cheapest bidder" !!

    "As for the half-wits who thought that just because something hadn't happened for 20 years it would never happen, frankly I despair that they ever got into jobs more responsible than petrol-pump attendant (and actually I sincerely apologise to any petrol-pump attendants out there for making such a comparison)."

    Hey !! Any serious failure by a petrol-pump attendant could result in a mimic of Hiroshima, 1945 !! :-)

  • Comment number 62.

    #48 "Although physics and mathematics do have a role to play in every day life, I did find it difficult to understand the relationship between running an economy or business on the theory behind physics or maths."

    As a physicist, you should know better that to look at only one side of the equation. Perhaps they were using *economic theories* to manage a business in physics !! Were any of them at Chernobyl, perhaps ?? :-)

  • Comment number 63.

    As a non economist i am always surprised that the market takes so much notice of them when time after time statistics published are always "worse than expected" or "better than expected" rarely are they "as expected". Economists are a bit like weather forecasters, they have huge resources at their finger tips but weather forecasting is no more accurate today than fifty years ago.. apparently you get a better success rate if you just say "the weather tomorrow will be the same as today"...you will be right 80% of the time!
    So we have to ask the question "what is the point of an economist?" are they any more use than a weather forecaster?

  • Comment number 64.

    You make a point about what happens when everyone's models "says sell". The sad fact is that all respected economic theories are wrong - and the more widely-accepted they become - the wronger they become. It goes like this:

    1 A theorist observes the economy and develops a new model of how it (or some part of it) might work.

    2 Others can see that the theory is well-formed and fits the historical data very well. So they endorse it, enhance it and (meme-style) it rapidly becomes orthodoxy throughout the ranks of the economic litterati.

    3 Eventually, the theory becomes widely used by all sorts of important actors in the economy to predict what the economy (or part of it) will do in the future and they make their decisions accordingly....

    And there the whole thing breaks down. Because when the theorist formed his theory, he was observing behaviour in an economy WITHOUT knowledge of his new theory and without its predictive systems and subsequent responses being affected by the same. So his original theory - by definition - no longer fits the real world.

    The self-referential nature of all economic theory dooms us forever to produce correct constructs with a very short shelf-life. There is the exception, however; where a theorist produces a correct theory but, for some reason, no-one else believes him or her.

    Conclusion - only genius-level Cassandras and iconoclasts have a real chance of being "right" about what the economy is about to do? But if everyone started to work on that basis - then this also would become a false precept...there's no escape I'm afraid.

  • Comment number 65.

    ~63

    Weather forecaster makes some predictions about the behaviour of some physical stuff based on theories of behaviour of physical stuff.

    Economist makes some predictions about the behaviour of some nonphysical stuff ( money) based on theories of behaviour of nonphysical stuff (minds).

    Can you see the problem ?

  • Comment number 66.

    56 foredeckdave

    Anyone who has bothered to study 'lean', 'lean management', 'lean management systems' (and Dr. W. Edwards Deming's work - nb quoted earlier) know that business schools are 1-2 generations out of date - in fact most people with an MBA have to unfortunately unlearn a lot of what they have learnt at a business school before they can start to learn what they really need to know (e.g. to scrap, rather than re-enforce, arbitrary targets, league tables, bonuses, management by numbers ...etc etc etc) ...

    All you have to do is ask a few questions (e.g. what are the above?), look at current business school MBA syllabuses, and understand the differences between 21st century leadership / management and traditional leadership and management [e.g. take a quick look at table 2.39, P139, in the book below for instance] ... you'll find they are completely opposite, and you'll also find most business schools struggle to answer the basic questions above in any meaningful way (and find they are just as out of date as Wikipedia!).

    I'm afraid 21st century leadership/management is mostly common sense, and very different to what we're accustomed to, and it's been mostly decoded now too (e.g. just take a look at "Lean World" ... it's available to read worldwide on Google Books*) ... all the Deans of Business Schools I've met and spoke to have read it and loved it, and the business students I lecture love it too ... it's a shame that business schools (all around the world) never properly researched it (or Deming's work for that matter - as they would have found they're inextricably linked) ... and/or never thought to tell students about it/write about it, as most people point out it's both profound ... and applies a lots of common sense ... which is arguably something we need a lot more of right now ...

    ... but the challenge today is not just one of education, but of politics and power (and the 'misuse' of 'power') too ... and that's yet another story again ... just take a look at http://poweromics.blogspot.com (and some of my posts here too e.g. P13 above) for instance ... but this will be eventually changing too, powered by the internet ...


    *http://books.google.co.uk/books?id=-8xAIgkewOUC&printsec=frontcover

  • Comment number 67.

    RaulMagister (#64) "The self-referential nature of all economic theory dooms us forever to produce correct constructs with a very short shelf-life. There is the exception, however; where a theorist produces a correct theory but, for some reason, no-one else believes him or her.

    Conclusion - only genius-level Cassandras and iconoclasts have a real chance of being "right" about what the economy is about to do? But if everyone started to work on that basis - then this also would become a false precept...there's no escape I'm afraid."


    This is not strictly true. In several areas of human behaviour the task of the specialist is to rather mundanely model what's going on at the population level, i.e to empirically describe activity in real-time. The control comes simply through being able to observe/measure what's going on. Once you has such measures in place one just has to legislate and enforce the rules, which is uually labour intensive. The problem in liberal-democracies is the extent to which the last part has been rolled back. There are reasonably well controlled environments where the problems we are concerned with now do not happen (or do so predictably), although there do seem to be an increasing number of 'Oppositionally Defiant' people about these days who appear determined to make it otherwise. The EU idea of NUTS is, as I see it, essentially a step to reduce this management problem, but we do have many other micro closed/insular environments/economies if one looks hard enough for them. The City/Wall Street and Financial/Business Services in general are major exceptions as one might expect, but they have been made this way by design, i.e. to venally make money out of more compliant others. It doesn't matter whether the politicians were complicit or naively manipulated, it's just the outcome that matters. Over a couple of decades now, there has been a systematic programme to liberalise even our most closed environments in order to make them easier to sell off as private ventures on grounds of their no longer functioning 'efficiently' in the Public Sector!

  • Comment number 68.

    By definition, economics which is an imperfect science cannot be a busted flush. A flush in cards is a perfect solution, and a busted flush is a perfect solution rendered useless by an imperfect constituent.

    Nor is economics rubbish; it is a model, subject to interpretation.

    Unfortunately, most interpreters are driven by politics, and false conclusions are reached. If they just stuck to explanations of what is happening instead of trying to change the world, then we would all benefit.

    Many economists spotted the development of this crisis, by studying what had gone before but they were ignored by our leaders who were all on the make:
    http://www.debtdeflation.com/blogs/2009/07/15/no-one-saw-this-coming-balderdash/

    Now we are all paying the price, literally, with our savings.

  • Comment number 69.

    67 Any theory of "micro/closed/insular environments /economies" will prove itself as flawed as any other as soon as enough economic actors start to believe in them too fervently - however "empirical" the concepts claim to be. Once the legislation you advocate is in place, the basis of the theory is no longer wholly valid - the fundamentals have been shifted.








  • Comment number 70.

    Economics in the UK is just like the BBC, untrustworthy, seems they have their own private agenda, economists and the BBC should be based on objective criteria, rather than on the basis of self interest.
    I dont watch the BBC news in-fact , I dont even watch any BBC channels because its rubbish, they dont publish the facts from both sides, the last time i watched the BBC news was 4 years ago. The economists in the media are all the same, they have an element of vested interests just like the BBC.
    Some of us knew this was coming we could see it way back in 2004, yet all the commercial media economists kept looking at the positives and not even one of them warned are the outcomes, they are also partly to blame. Do you really think high house prices are good for the economic environment, the government and others around the world help create this mess buy aiming their polices on cpi rather than rpi, the outcome greater percentage of individuals that are pushed away from home ownership more money out of the circular flow. The governments hidden policy to create less social housing and more private housing, thus the government isnt working for its people but working against its people, the aim of any western government is to work for its people , not for big business.
    They push the fact that globalisation is good, and how well all benefit from this, yet a large percentage of the pop needs tax credits to live and this is increasing, this system shows tells me one thing market failure and the worker is subsidized by the government while business leaders profit.
    So we can say economists and the government have ruined the hope and chances of giving same lifestyle the boomer generation had/has. they are increasing retirement the posibility of no pension, then they expect us to save for are old age, how can anyone save for their old age when the cost of housing etc.. is way to high.

  • Comment number 71.

    #67 Jaded Jean . ishkandar. stanilac and fordeckdave. Thanks for the extra (sometimes) very deep analysis and conclusions. Stephanie and Robert certainly get you going and then you run. Brilliant.
    I have learnt more from these contributions in the last 18 months than I ever thought it possible to know. Especially where references are given.
    I have delved and dug, read and tried to comprehend.
    I consider myself financially naive, and have been stung and robbed by several of the products that brought the economy tumbling.
    Having been bitten I am shy and cautious.
    I love the T'interweb and use it extensively now that I actually have some time.
    Economic models are only models and people are only people.There are lots of different types of each.6 billion of the latter and probably about 1,000 of the former.
    The sociopaths who used to get to lead the charge and self-destruct have become profligate, and their contributions and behaviours are now being questioned.
    I believe that they never got this far before in terms of control and leadership and that has taken the social glue by surprise.
    The "normal" social, biological, chemical, physical and emotional rules don't apply and self-interest & greed became "normal" for this group wherever they took control.
    They don't get "guilt, shame, self-control, care or responsibility".
    Nothing will change much until they are lead away in handcuffs, and told to spend the rest of their lives trying to show anyone who will listen, (usually lawyers, who have always managed this split), that they weren't guilty.
    Review the social concept, it's quite interesting.
    Just off to see Harry Potter.
    Oh! this isn't Twitter is it!

  • Comment number 72.

    leanomist

    You aren't also a memeber of The Flat Earth Society are you? What you present as evidence is as flawed as JJ's claim that Behavioural Analysis is a valid control mechanism.

    If you are proposing that the future of this, or any other country, should be based on such limited, at best tangental, views then you are as deluded as GB believeing that he had saved the world. Perhaps you should 'lean' on JJ then there would be two souls crying in the wilderness - of thier own making!

  • Comment number 73.

    #39 glanafon. Your curry example is pretty straightforward - the business goes bust, thus freeing up resources for someone that can use them for a better purpose.

    The problem comes if the curry house has abandoned the making of curry to curry favour (geddit?!!) with the government. The government then decides that the curry house must stay open and people should be forced to buy curry whether they want it or not. The media decide to start promoting how the lovely the curry is, and victims of food poisoning do not get to see Drs. but lawyers. The lawyers explain to them that they cannot prove how they got poisoned and that they can be locked up for financial terrorism if they dare criticise the curry house.

    Because people are now forced to buy curry from a particular place, other competing businesses suffer a loss of trade and go bankrupt, thus providing an opportunity for the state subsidised curry house to expand and poison yet more people.

  • Comment number 74.

    #43 wrathofpiglet. There is a You-tube compilation of Peter Schiff interviews. A few years ago people were openly laughing at him, saying he was bananas.

    Now that he has been proven correct corporate media talking heads criticise him for being un-patriotic and not loving America with sufficient fervour.

    This is a big problem - anyone that deviates from devotion to pump and dump and either ignored or ridiculed.

  • Comment number 75.

    foredeckdave (#72) The weather and climate is a function of known physical, measureable, variables, yet even though we can not control, or even predict either very far into the future, bright people do not, you might note, abandon the laws of physical science.

    To be clear, there are lawful measures of behaviour which are important determinants of economic behaviour, and yet these are being ignored by some. Our government is not one of these, as it has such measures on the younger generation down to postcode.

    Behaviour can be controlled. How much it is controlled is not reflection of what is known about behaviour from Behaviour Analysis.

  • Comment number 76.

    erratum (#75) "How much of it is controlled, is not reflection of what is known about behaviour from Behaviour Analysis."

  • Comment number 77.

    A number of bloggers have commented on the lack of precision of Economics compared to Physics or even Engineering. Economists love charts. So do Engineers and Physicists. However Economists always seem to speculate as to whether, say a recovery, is V shaped or W shaped or even like a hockey stick, J shaped. I presume that is because unlike Engineering a recovery curve cannot be accurately predicted in Economics, which indicates the lack of precision of the underlying model or maths. So Economics is just guessing or being wise after the event. Heaven help us if Engineering or Physics were the same. Imagine not being able to quantify the breaking strain of steel beam under load. QED

  • Comment number 78.

    Post 72 - there is lots of evidence - but from your strange comments it appears you either don't bother to look or you interpret things in very strange ways ... to be honest I'm not here to educate, but you asked the question, so I tried to quickly answer it ... and pointed you towards 21st century practices too (that are all grounded in common sense, and very different to current practice) ... and already starting to overtake outdated practices (and outdating thinking) too ... those who already know, know better, and those who do not know, or choose not to know, will find out eventually I guess (and probably the hard-way I'm afraid - my concern is for all the otherwise good people that get taken down with them however). Curiosity has to outweigh apathy if a nation wants to survive.

  • Comment number 79.

    Ah great!

    This is a great article.

    Neoclassical economics has failed, and must be replaced.

    I will take this opportunity to plug my two favourite mentors:

    Steve Keen:
    http://www.debtdeflation.com/blogs/2009/07/15/no-one-saw-this-coming-balderdash/comment-page-2/#comment-12634

    and

    Richard Duncan:
    http://www.amazon.com/Dollar-Crisis-Causes-Consequences-Cures/dp/0470821027


  • Comment number 80.

    Also

    http://www.economist.com/displaystory.cfm?story_id=14030296

    I think it is wonderful such things are being discussed. It is great that new approaches can be explored, people with new ideas can get heard, and some creativity can blow a breath of fresh air into things.

  • Comment number 81.

    #69 - RaulMagister

    A great, huge, resoundingly emphatic shout of agreement!!

    I think this is THE crucial distinction between economics and other studies, with the exception of quantum physics. Both economics and quantum physics share this one thing in common: the act of describing/observing affects what you are trying to describe/observe.

    Soros has been warning us of this crucial difference with his philosophy of reflexivity for a long time. It is the source of feedback loops that render our economic framework inherently unstable dynamic systems.


  • Comment number 82.

    ...and as corollary to #81 ...it is possible to advance a model that includes itself, and thus neutralises the effect of reflexivity by incorporating it. Would you agree?

    In other words, simply by saying that "thinking people are part of the problem we have to think about", we are already on the way....

  • Comment number 83.

    FrankSz (#79) Is there not something just a little bit statistically improbable about this (see % of economics Nobels elsewhere) given that the mean IQ of the Chinese/Japanese/Koreans etc is really not much different from this group's, and yet the ratio of East Asians to this group is phenomenal. Might there be something other than ability at work here as I've covered at length? What is this disposition which differentiates these two ethnic groups?

  • Comment number 84.

    #83 Ha! Cool, actually. I like it - how come a tiny percent of the population of the world called Jews are getting loads of Nobel prizes??

    Certainly something is skewed in favour, and it is worth looking a little deeper. My guess is that it is down to World War 2, and the capitals of Europe, especially German ones, incentivising people in certain directions..and also that being an outsider makes one think in conceptual frameworks that reject the status quo. I think Relativity for example is something a kid could have come up with if it wasn't bogged down with concepts of the aether....

  • Comment number 85.


    I studied Economics some forty years ago, but majored in international relations. I feel that any approach to todays problems must consider the "human condition" and the way we make decisions and why?

    History shows us greed/fear and power can corrupt both individuels, then Governments and Nation States too. The Equation has been added to in the past decade or so, by the Global Trader and Global Corporation which has dwarfed some Nation States in terms of influence and power.

    The Age of Consumerism and Celebrity has also fundamentally affected both the National Economy and the Global interworking of a World Trading Economy. David Beckham is known to possibly 2 Billion people worldwide if not more whilst Gordon Brown may be known to perhaps 200 Million at most.

    My thesis today, in an explosive internet driven Information Age, where the individual mind is frequently overloaded by such information, we must have ethically considered decisions made by moral men and women. Withut trust and respect we are lost as both Nations and Societies. We have contempt today for both Politicans and Bankers, yet stand with respect in silence in our thousands at Wooten Bassett to see the bodies of our young soldiers brought home.

    We collectively need to understand our priorities and our risks and who we can or will trust, both now and in the future. The result of these individuel decsions will change the way the World and the Global Economy works in the future and whether we see growth or not. What type of growth do we really want to see? Its all "Back to Basics" for Economists everywhere, there assumptions forget the balance of "Greed and Fear" which affects all decisions of either Bankers or Politicians.

    This is not over yet, by a long way.........

  • Comment number 86.

    Steph,

    Economics suffers as do many of the 'sciences', social sciences in pasrticular from the cultural blind spot exposed by the mathematician Kurt Godel and systematically ignored ever since.

    Kurt proved using pure mathematics in his widely accepted 'Incompleteness theorem' that the answer to any mathematical problem is only correct within the axioms (frame of reference) of that problem. Change the frame of reference and the correct answer changes.

    It is related to relativity and he was a great friend of Einstein.

    Rationality works very well within the framework of rationality. When a man drops a ball of a certain size from a tower we can use rationality to predict its speed of impact with the ground, the time it takes to get there within very fine tolerances.

    What it can not do is deal with the man deciding he does not want to drop the ball from the given point he decides (for fun) to hide it under his jumper and pretend he has lost it.

    All the modelling suddenly becomes ...meaningless out side of the very limited axioms we set for it.

    It is no different for economics, there must be a whole army of indoctrinated highly paid economists now who realise all thier fancy modelling was just a means of gambling with atomic level indentations on computer hard drives. It had very little to do with reality and how the world works.

    No doubt there will be a scramble to come up with a new frame of reference that the economists can busy themselves within.

    Its pretty simple really, but 'pretty simple' does not keep tens of thousands of economists and university professors in work does it...







  • Comment number 87.

    #83 Jadedjean. You are barking up the wrong tree. Who cares about Nobel Prizes? They gave Kissinger one, for peace, this after he was instrumental in devising a policy that killed upward of 4 million.

    Any competition in which he could be a winner, is not really a competition worth caring about.

    #86 JohnnyZero66. You are basically correct, but the problem is that any entity, body or organisation worthy of respect has been systematically destroyed or undermined (see above).

    Yes the people of Wootten Bassett show respect for the dead (there is something left). But remember the bodies of the fallen used to be taken to Brize Norton. But the local coroner kept recording verdicts that the politicians found embarrassing. So they switched to Lyneham - I guess they hoped for a more pliant coroner. Even the death of teenage soldiers is spun for some kind calculated advantage.



  • Comment number 88.

    Post 84. I agree. 'Creative outsiders' (such as Dr. W. Edwards Deming) create breakthroughs because they are not constrained by existing frameworks and accepted norms (e.g. steered by mainstream education/practice). They are also naturally curious, ask lots of basic questions, and are often able to see things in a very different light. Traditional establishments/enterprises are well known for becoming almost 'blind' to new concepts/ideas ... they regularly reject (and sometimes fear) them too (for as long as they can at least) ... because they often undermine much of what they had previously come to understand (e.g. see Einstein, Galileo, Newton, Wegener ...) and it may not fit their frame of reference too (e.g. created by traditional mainstream education). This is why businesses regularly get overtaken by more innovative ones ... and it is 'why nations will fail' if they 'fail to be curious' too ... and it turns out there is a subtle cultural element to this too [Q: and do you think this favours countries like the UK/US?] ... This is turning into a very interesting/insightful discussion/blog ... well done for starting it off Stephanie.

    Post 85 - I fully agree with this too - well put.

  • Comment number 89.

    Jericoa (#86) That's wrong.

    What Godel's proof showed was that 'pursuit of truth' (science) is nota priori, or even valid synthetic a priori, but an empirical unended quest. Hence my advice to study 'Two Dogmas of Empiricism', my criticism of Austrian School libertarianism which has blighted our economies for at least three decades, and my urging you and others to pay more careful attention to what I've been posting here.

  • Comment number 90.

    Dear Stephanie,

    Much of mainstream economics is a bit like a 'king with no clothes'.
    It is easy to to see the nakedness of economics, once the mass-hypnosis whihc was produced and maintained by the commercial mainstream media has been ended by the shock-therapy of recession and real life poverty. You, Stephanie, could help to overcome the media induces mass-hypnosis by enthusiastically continuing your economics studies. But this time round please research a bit further into the universe of worldviews, beyond the current fashionable vistas of Chicago, Washington, New York, Oxford, Cambridge and London. You don't even have to travel far or even attend, expensive universities. You could, for example, study carefully the web site of Nobel Laureate Prof Joseph Stiglitz:
    http://www.josephstiglitz.com/

    and the web site of the pioneering Fred Harrison:
    http://renegadeeconomist.com/

    Sincere thanks in advance for the service to humanity which your diligent study could provide, given your priviledged position as a BBC jounalist and your ability to share your new insights with a wide audience.

    P.S: Please keep Robert Peston informed of your new learnings.
    Thanks a lot in advance!

    For further reading, please visit also:
    http://globalinsights.wordpress.com/

  • Comment number 91.

    armagediontimes (#87) "#83 Jadedjean. You are barking up the wrong tree. Who cares about Nobel Prizes?"

    The same people who care about celebritism, i.e all too many people in the Liberal-Democratic economies.

    Try to see the much bigger demographic/epidemiological picture which I have been painting for some time in these blogs, not your current grasp of it.

  • Comment number 92.

    #78 leanomist,

    Me thinks you doth protest too much. The refernce that you gave is not unfamiliar to me. If I were to put it politely then I would say that there's is a germ of an idea here that has been stretched far beyond is capabilities. If I was to use intentional terms it's rubbish! The 'thinking' that is supposed to underpin the claims is muddled and merely rejects reality when it finds it contrary to the stated drift. The data presented can best be said to be highly manipulated but it is amusing.

  • Comment number 93.

    I know the message is more important than the spelling...but I just wish people could get to grips with difference between 'there' and 'their'.

    It's got nothing to do with IQ...just upbringing!

  • Comment number 94.

    #75 JJ

    Oh come on! We both know that Behavioural Analysis like what it is writ is, in reality, nowhere near ready to control populations in the same way as the legislative framework or government decrees. Let's have some degree of credibility.

    We don't know what behaviour actually is. We, at best, observe actions and then try an interprit conclusions from it. In Consumer Behaviour we can see that a large proportion of consumers tend to react in the same way to differing stimulli. However, we cannot guarantee that they will do this consistantly and that here are others who have valid reasons for not conforming to the pattern ie there is a propensity and no more! Even you JJ, as a consumer, cannot rely on you genes to act rationally or consistantly in all of your purchase decisions.

  • Comment number 95.

    fordeckdave (#94) Do you know which controlled environments I am tacitly referring to in #75?

    Where is control of behaviour crucial?

  • Comment number 96.

    foredeckdave

    To be honest I doth care little about what you think, as I think your comments say more about yourself than me. Perhaps one day you'll stop hiding behind a pseudonym and tell people who you really are and what you know, and stop being so dismissive / rude to other people. Then I might take more notice of what you have to say.

  • Comment number 97.

    #91 Jadedjean. Now, now. It was you who referenced Nobel Prizes and tou who alluded to hidden truths that may be revealed by analysing the ethnicity of their recipients.

    I merely pointed out the debasement and hence complete irrelevence of the whole scheme. Not that I am ever likely to be offered a Nobel Prize, but given past recipients I would not even be bothered to flush one down the lavatory, much less collect one.

    The macro picture must be a composite of the micro. Your Nobel Prize micro example is irrelevant and Henry Kissinger proves that point.

  • Comment number 98.

    #88

    Well yes, it favours the UK but it does not,,,now.,.favour the US. The problem with the US is that on the whole it is too conservative. It favoured Europe because there were a lot of independent thinkers (aka. rich, spoiled brats) who got into science. Those thinkers ran off to the US, but since WW2 they have been heading back to Europe and India, and with their departures the USA share of global GDP has been dropping.

    This is the kind of demographic megatrend that really shapes the national economy, and it transcends national policies. This is one of the points that I think JJ advances and if so I agree.

    I think that we might see changes now - as Western enclaves like Shanghai in China become more attractive as places to REMAIN, as opposed to platforms to move on to MIT or UCLA, then the number of patents per locale per year (interesting metric) might shift in favour of China....





  • Comment number 99.

    armagediontimes (#97) "#91 Jadedjean. Now, now. It was you who referenced Nobel Prizes and tou who alluded to hidden truths that may be revealed by analysing the ethnicity of their recipients."

    That's right, but perhaps it's an important issue to look into when considering the impact of neo-liberal (Friedman etc) economics vs Keynesianism over the decades, the focus being I suggest, the encouragment of anarchism/narcissism, which, as I've said many times now, is essentially an infantile/adolescent identity disorder, which I suspect (in the abisence of reliable empirical data beyond what I've pointed to), differs in prevalence across groups, and is reinforced by some conditions, e.g. Liberal-Democracy, which I think provides advantageous envionmental conditions for this group at the expense of others. This is just a hypothesis, but, I submit, an expanatorily powerful one if supported by the evidence. It's scientifically testable.

    I agree with the rest of what you post in #97, just don't throw out the baby with the bath-water. What I have to say is not about animosity to any groups, it's just explication of how groups (businesses if you like) competee, sometimes disguising/veiling group interests. See Trivers.

  • Comment number 100.

    Post 98 - The shift in knowledge creation from West to East is an interesting one, and this youtube video* is probably worth a look if you haven't seen it before (it also eludes to more fundamental failures in education too - which this blog has also been discussing). People from the far east also turn out to be more questioning and curious on average too. The east is also starting to train lots more scientists themselves as well, and some research establishments in the UK are already moving their work over there instead of doing it in the UK. A mega-trend indeed (with both short term and long term implications), and one that links well with the point I tried to make earlier - i.e. 'why nations will fail' if they 'fail to be curious' (nb and/or 'fail to understand, or act on, what they find!'). As we say, interesting times ahead - and another good point which shows yet more weakness in traditional economics, as well as some of the fundamental weaknesses in our economy ...


    David Clift, A Future 500 Leader


    * http://www.youtube.com/watch?gl=GB&feature=related&v=ljbI-363A2Q **
    ** if you like this you may be interested in this too, as it refers to this video (and goes on to highlight some of the root causes of why we are failing our children too - which turn out to be mostly outdated leadership & management practices - a subject referred to earlier too) ... http://poweromics.blogspot.com/2009/07/poweromics-failing-our-children.html

 

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