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Why is there disagreement between economic predictions?
Posted: 16 January 2011 11:29 PM   [ Ignore ]
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I’m a little bit confused.  Assuming all economists have access to the same pool of data, wouldn’t predictions made for specific changes in an economy, such as a tax cut or increase in spending, be roughly the same across the board?  I mean, one could feed everything into a computer and apply statistical testing to see what variable(s) correlate best with the outcomes, and then make deductive predictions from the relationships, right?  So why do some economists say X, therefore Y, and others say X, therefore Z (and Z≠Y)?  How is one supposed to know which prediction is most likely?  And if one can know, why aren’t “economists” who say otherwise out of a job?  Or is there really not much disagreement at all, and the media just portrays all the views as if they were on equal footing, like what was sometimes done with intelligent design vs real biology?

I normally wouldn’t ask so many questions in a row, but I really want to know what the deal is.  After all, this is the Center for Inquiry forum :p

[ Edited: 16 January 2011 11:36 PM by Mingy Jongo ]
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Posted: 16 January 2011 11:49 PM   [ Ignore ]   [ # 1 ]
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Well considering most of what economists believe is delusion there’s little wonder they disagree.
Heck what good is a discipline that enshrines a studied disregard for “externialities?”
Their grand predictions comes down to their socio-psychological pre-dispositions… and what their particular employers want to hear.

Economics seems to me as flaky a “science” as psychology

not that i’m any judge.

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Posted: 17 January 2011 03:44 AM   [ Ignore ]   [ # 2 ]
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Mingy Jongo - 16 January 2011 11:29 PM

I’m a little bit confused.  Assuming all economists have access to the same pool of data, wouldn’t predictions made for specific changes in an economy, such as a tax cut or increase in spending, be roughly the same across the board?  I mean, one could feed everything into a computer and apply statistical testing to see what variable(s) correlate best with the outcomes, and then make deductive predictions from the relationships, right?  So why do some economists say X, therefore Y, and others say X, therefore Z (and Z≠Y)?  How is one supposed to know which prediction is most likely?  And if one can know, why aren’t “economists” who say otherwise out of a job?  Or is there really not much disagreement at all, and the media just portrays all the views as if they were on equal footing, like what was sometimes done with intelligent design vs real biology?

I normally wouldn’t ask so many questions in a row, but I really want to know what the deal is.  After all, this is the Center for Inquiry forum :p

Almost all the “experts” have a personal axe to grind. Most of them are invested and if their investment is profitable, there is no incentive to change the status quo. Each niche of the financial world has their own interpretation of what the future will hold. Perhaps there are some “objective” analysts, but more than likely, their voices are obscured in the din of conflicting predictions.
The actual people who are hurt by the financial manipulations are the non-experts. Witness the stock market is close to an all time high, in direct proportion to the record numbers of home foreclosures and unemployment in the manufacturing industries.

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Posted: 17 January 2011 06:28 AM   [ Ignore ]   [ # 3 ]
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Mingy Jongo - 16 January 2011 11:29 PM

I’m a little bit confused.  Assuming all economists have access to the same pool of data, wouldn’t predictions made for specific changes in an economy, such as a tax cut or increase in spending, be roughly the same across the board?

Several reasons. To name a few:

- the basic assumptions are incomplete, e.g. people do not act not just on optimizing their own gain. There are many more psychological and psychological traits at work
- a lot of ‘experts’ just plead for their own gain, their company, state, or ideology
- a methodological hammer, until now hidden under above: a prediction would have influence on what happens afterwards, so based on on this a new prediction must be made etc. If this iteration of predictions would lead to a stable and (therefore?) correct prediction, I have no idea. I think it will not

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Posted: 17 January 2011 12:54 PM   [ Ignore ]   [ # 4 ]
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Mingy Jongo - 16 January 2011 11:29 PM

I’m a little bit confused.  Assuming all economists have access to the same pool of data, wouldn’t predictions made for specific changes in an economy, such as a tax cut or increase in spending, be roughly the same across the board?  I mean, one could feed everything into a computer and apply statistical testing to see what variable(s) correlate best with the outcomes, and then make deductive predictions from the relationships, right?

What do you mean by EVERYTHING?

Stand by an 8-lane highway during rush-hour and just watch cars go by for 15 minutes.

Then ask yourself, “Are those cars wearing out as they are being used?”

The answer is obvious.  How many cars have Americans thrown on the junk heap since 1959?  Have you ever heard an economist discuss that?  The number of cars in the US passed 200,000,000 in 1995.

How much have American consumers lost on the depreciation of automobiles since then?

But it is not just a matter of things wearing out.  But a new computer for $2,000.  Leave it in the box and stick it in a closet.  How much will it be worth in 3 years even if it is in perfect condition?  $500?  Buy a $500 computer and a $1500 oriental rug instead.

So when consumer goods are purchased they get added to GDP.  When they wear out they must be replaced for the consumer to maintain the same quality of life.  Forget standard of living, that is cash flow crap.  So our economists are running numbers games on us which do not correspond to reality.  You can wonder if they are doing it deliberately to maintain confusion.

http://discussions.pbs.org/viewtopic.pbs?t=28529

I think Galbraith’s The Age of Uncertainty is one of the best overviews of economics.

http://www.youtube.com/watch?v=BQEV47wfbgE

psik

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Posted: 17 January 2011 05:43 PM   [ Ignore ]   [ # 5 ]
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Mingy Jongo - 16 January 2011 11:29 PM

I’m a little bit confused.  Assuming all economists have access to the same pool of data, wouldn’t predictions made for specific changes in an economy, such as a tax cut or increase in spending, be roughly the same across the board?  I mean, one could feed everything into a computer and apply statistical testing to see what variable(s) correlate best with the outcomes, and then make deductive predictions from the relationships, right?  So why do some economists say X, therefore Y, and others say X, therefore Z (and Z≠Y)?  How is one supposed to know which prediction is most likely?  And if one can know, why aren’t “economists” who say otherwise out of a job?  Or is there really not much disagreement at all, and the media just portrays all the views as if they were on equal footing, like what was sometimes done with intelligent design vs real biology?

I normally wouldn’t ask so many questions in a row, but I really want to know what the deal is.  After all, this is the Center for Inquiry forum :p

“Capitalism is a cultural system rooted in economic practices that rotate around the imperative of private investors to turn a profit.  . . . Because capitalisms is a cultural system and not simply an economic one, it cannot be explained by material factors alone.”      Relentless Revolution A History of Capitalism -  Joyce Appleby     Pg. 25-26

Adam Smith’s economic man may be useful but is not a complete explanation for human behavior even human economic behavior.

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Posted: 17 January 2011 08:29 PM   [ Ignore ]   [ # 6 ]
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One problem is that people have the mistaken idea that economics is a science.  Every living person must use value to survive, and many of them produce value, often in excess of what they need.  When you have going on seven billion people using and producing value, each making his/her own choices about these, and most of those choices not available for analysis, it’s extremely doubtful that anyone would even know how to write a computer program to handle these or how to feed which data into the computer. 

In a way economics is similar to religion.  First, you decide what answer you want, then you work to choose and manipulate data to generate that result. 

Occam

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Posted: 18 January 2011 03:08 PM   [ Ignore ]   [ # 7 ]
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Occam

In a way economics is similar to religion.  First, you decide what answer you want, then you work to choose and manipulate data to generate that result. 

That seems to be the way it works.

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Posted: 18 January 2011 05:33 PM   [ Ignore ]   [ # 8 ]
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Geez, doesn’t anyone here appreciate economics and all the understanding it has given us? Would we be able to do banking without an understanding of economics? Or large scale business? Or make intelligent choices when it comes to global economies?

The way I see it, economics is a soft science, like sociology. Since we don’t yet have a formula that can predict human behavior, we have to form theories and just wing it, and at some point look back and reasonably conclude whether or not our theory was right. What we have learned since classical economics is that people are not perfect “economic humans”, and so human decision making must be taken into account, and that is not an easy thing to codify and understand, hence economics has a level of uncertainty.

But there is the new field of experimental economics that is more empirical, but the problem with that field is how closely they can model real-life situations in their experiments.

So in short, we just don’t have a way to predict what exactly people will do in an economy - hence the multitude of theories and uncertainty.

But I wouldn’t believe in Austrian economics, cuz they eschew experimental research.

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Posted: 18 January 2011 05:54 PM   [ Ignore ]   [ # 9 ]
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Occam. - 17 January 2011 08:29 PM

One problem is that people have the mistaken idea that economics is a science.  Every living person must use value to survive, and many of them produce value, often in excess of what they need.  When you have going on seven billion people using and producing value, each making his/her own choices about these, and most of those choices not available for analysis, it’s extremely doubtful that anyone would even know how to write a computer program to handle these or how to feed which data into the computer. 

In a way economics is similar to religion.  First, you decide what answer you want, then you work to choose and manipulate data to generate that result. 

Occam

Yes, I’ve pretty much decided that economics is a faith based philosophy.

Whatever theory that you can get people to believe they’ll work to support it. It’s that work that makes the economy go ‘round.

Slavery works, Capitalism, Socialism, supply-side economics, whatever, as long as you get enough people to believe in it.

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Posted: 18 January 2011 07:43 PM   [ Ignore ]   [ # 10 ]
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Domokato, I agree that there are some economists who’ve helped us understand what’s going on monetarily, John Maynard Keynes, Adam Smith, etc.  But how in hell a Milton Friedman with his trickle down economics could win a Nobel prize is beyond me.

Occam

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Posted: 18 January 2011 10:21 PM   [ Ignore ]   [ # 11 ]
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Occam. - 18 January 2011 07:43 PM

Domokato, I agree that there are some economists who’ve helped us understand what’s going on monetarily, John Maynard Keynes, Adam Smith, etc.  But how in hell a Milton Friedman with his trickle down economics could win a Nobel prize is beyond me.
Occam

domokato a voice of reason while the rest of us were blowing off steam.

don’t like that friedman guy though, I heard him talk, sounds like a .... never mind

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Posted: 19 January 2011 07:32 AM   [ Ignore ]   [ # 12 ]
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Occam. - 18 January 2011 07:43 PM

Domokato, I agree that there are some economists who’ve helped us understand what’s going on monetarily, John Maynard Keynes, Adam Smith, etc.  But how in hell a Milton Friedman with his trickle down economics could win a Nobel prize is beyond me.

Occam

Because the Nobel Prize committees aren’t unbiased?

Or maybe because Keyne’s theory isn’t actually what the “trickle-down economics” is that the government is trying to promote?

I agree that economics is a kind of “soft science.” Just because two weather prediction programs can make different predictions doesn’t mean that all weather prediction is useless.  Similarly with economic predictions.

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Posted: 19 January 2011 12:00 PM   [ Ignore ]   [ # 13 ]
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Thanks for the replies!  It seems to me that there are really two distinct ways to practice economics.  If one makes falsifiable predictions using inductive reasoning from previous observations, then economics is being used as a science.  However, if one starts with presumptions on how economics works or should work and derives everything else from those “axioms”, then I find it no different than a dogmatic religion.

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Posted: 19 January 2011 04:22 PM   [ Ignore ]   [ # 14 ]
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Economics is called the dismal science for a reason.  Disregarding all of the different schools of economic thought
such as Chicago, Keynesian, etc, you have a subject with such a vast array of variables that it is easy to arrive at different
conclusions.  Linear regression is more an art than a science.

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Posted: 19 January 2011 04:31 PM   [ Ignore ]   [ # 15 ]
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TeachScience - 19 January 2011 04:22 PM

Economics is called the dismal science for a reason.  Disregarding all of the different schools of economic thought
such as Chicago, Keynesian, etc, you have a subject with such a vast array of variables that it is easy to arrive at different
conclusions.  Linear regression is more an art than a science.

Adam Smith talked about enlightened self interest but I have never heard of any school of economic thought saying that accounting should be mandatory in the schools.  It looks like the social engineering is really designed to train people to be losers.

psik

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