Originally Posted by
Keyser Soze
The field of economics is interesting, but just like politics and technology there are arseholes in the sphere, who cling to theories like a comfort blanket. Usual bilge of Left v Right, red v blue, bog standard tribal baboonery. In this case, tribalism in their theories.
These people are apparently university educated and are supposed to learn the art of objectivity, logical reasoning and critical thinking. Yet despite an alleged higher IQ than the average person many still display tribal behaviours, and the predictable mental hijacking of their amygdala that many humans have not shaken off since the day of the caveman.
Economics has some well founded branches of theory and some are emerging. The more established are the four schools Keynesian, Austrian and Monetarist and the discredited Marxist school. But they are nnown quantities. Less tested, and more niche, but no less relevant, are branches that use network theory, historical / cultural school, complexity theory and the new areas of mesa-economics to explain economic behaviour. All schools have their pros and cons.
The real skill, and what the best economists are doing, is to acknowledge by observations and data (bottom up) what is working, and connect to the theory (top down) to arrive at a consumate conclusion. Those skilled ones will be handsomely paid by the private sector to make predictions - mega corporations, investment banks and hedge funds for example, who cannot afford their six figure salaries. Real money follows their economic predictions and if they are wrong too often they get fired or moved. Most academics hiding in universities, the research rooms of the OEDC, IMF and Treasury can cling to their theory and talk bollocks as often as they want. If they are wrong they keep their jobs or protected by unions, so they don’t have skin in the game. No money nor reputation on the line. Free hand to talk shite. No come backs. Often paid a low 40-50k for their verbal and written diahorrea. Many of you will not know that economic advisors to The Treasury and those at the Bank of England are also paid a low salary of 35k to 60k for their verbal and written porridge, depending on their civil service grade and time served, not competence.
The most ridiculous branch in recent years was Modern Monetary Theory (MMT). These were the real bimbos in the room. They are the real boobie blondes in the world of economics. When interest rates were near zero years ago, the press actually gave these monkey air time. They said “Look! Debts and deficits don’t matter - borrow more! Aren’t we a genius?!!”. Even the FT gave them a platform. On this forum people discussed it. I pointed out on here and the FT that the major fault was the ignorance of interest rate and inflation cycles that come and go, and that 0% rates were a historical anomaly and wouldn’t last. Then I said the high debt affordability will be hurt by rising rate. Lo and behold rates shot up in 2022. MMT has died a death since and MMT economists have returned to their academic cocoons. Pain has appeared.In true keeping with boobie blondes they are temporarily useful, and soon dismissed and offloaded once we have seen and heard enough.
Let me point another example out. When you heard the nonsense that “Inflation is transitory” from the central banks and general media, I pointed out (yes please search the threads) this was rubbish. I pointed out that inflation would continue upwards, interest rates will follow it and that there will be some pain. I knew that because the central banks had faulty modelling and were saying “But look at the data inflation is low. I see no evidence.” The central bankers use old historical Keynesian data models. They wait for inflation to hit in the form of rising consumer prices or wages. Useless for predicting inflation as they have to wait for it to happen before declaring it has happened. They don’t look at the sources of inflation (aggregate money supply, commodity prices, and supply chains that ship those commodities.) I could see differently as I was using multiple schools of economics to draw my conclusion, and wasn’t tribal.
- Using financial market data I could see that most commodity prices had risen.
- I could also see that wide money supply metrics were out of control. of economics models. Monetarist school of economics models that Keynesians ignore.
- I could see that credit was out of control. Inflationary. Austrian school of economics models that Keynesians ignore.
- I was also using knowledge from the Historical school of economics. I knew that inflation went crazy after World War 2 due to supply shocks, not demand side issues. I also knew that interest rates and inflation moved in historic cycles. I also knew from the 1960s and 1970s that Middle East conflict caused issues for oil priced and inflation. As this is Bayesian data and not sufficient date in the models, Keynesians will ignore.
- Using mesa-economics I could see that the Panama and Suez canal restrictions would create a supply issues and drive prices up. I could also see this being reflected in shipping and freight rates - inflationary. Models that Keynesians ignore.
- I also knew from complexity theory that at times like this, that politicians and central bankers make mistakes on inflation. Information that Keynesians ignore.
So as you can see, like economics in the high paid private sector I wasn’t interested in clinging to one theory. All the other schools of economic theory (other than Keynesian models) were giving me warning signs that inflation was coming. I went off that, rather than clinging to my “favourite theory”. That is what many so-called academic economists have been making poor calls in the last five years.
You have to know what school and model applies to the point in time and event you are trying to assess, and try and use multiple schools to see how many are confirming or not. It ain’t rocket science, but you just have to know where to look, and seperate your political views from your economics and eliminate that bias.
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