This shouldn't come as a surprise, but do not learn economics from the internet (not talking about books you may obtain, of course), politicians or political pundits.
Economics is widely misrepresented in the media, where hugely dumbed down debates on macroeconomics from the 50-60s are still commonplace. The criticisms from "economic schools" such as the Austrians or the Post-Keynesian, which have a heavy presence online, are either misguided or completely accepted by economists. These pass an image that economics is highly ideological, where, in fact it is not, and that economics is all about macroeconomics.
What is being currently done on economics in academia has nothing to do with these debates, is highly empirical and economists "destroy" each other with skepticism (as it should be in all sciences). It also has nothing to do with what is learned in undergraduate courses, unfortunately, even though many topics could be taught to undergraduates.
If you bother to read serious economics textbooks note that these books are largely outdated and mostly stuck in the 80s and 90s. If you truly want to learn what economics is, information is spread in a lot of papers mostly from the 90s onward. Economics is young, there has been a huge shift in rigor in the 80s and 90s and it hasn't been properly compiled in textbooks yet. This is the major reason why the undergraduate courses haven't kept up, as academic papers are not as digestible by undergraduates.
The major issues in economics are that of lack external validity (many variables), lack of statistical power in macroeconomics (small samples) and unobserved variables which require imperfect methods to be estimated (the biggest one, actually). The most common result in economics, which is not published due to publication bias common in all sciences, is "you can't conclude anything", even when "intuition" says otherwise.
>economics >or, how to overfit historical data to a hypothesis that is unfalsifiable and has no predictive power
Gabriel Allen
How do I take economics as a proper science when my cousin who is doing master at a top uni in the world asked me to do quantitative assignments for her which are just dumbed down versions of our statistical class assignments?
Henry Cook
How do we take you seriously when your cousin is retarded?
Brandon Cook
Probably the biggest thing keeping economics from being a proper science, at least for me, is the lack of replicability stemming from the impossibility of truly controlled experiments on a macro scale. For example, studying the 2008 financial crisis is certainly valuable in learning how not to fuck up that badly again, but we can't set up a financial crisis, tweak a few variables, and watch it happen again. Scientific experiments rely on the ability to precisely control as many variables as possible and repeat until we can make accurate predictions.
Michael Hernandez
>unfalsifiable hypothesis Hypothesis in economics are falsifiable. Find an empirical paper in economics with a model behind it and tell me where the unfalsifiable hypothesis is.
>predictive power First, there is a trade-off between forecasting and obtaining statistical significance. Economics has the tools to do both. Second, you need to realize that economics models stuff that reacts to the models. If you make a model with predictive power and make it publicly available, it will start steadily losing said predictive power. Third, most of the time you can't overfit historical data, even if you tried, if you are not doing obvious mistakes.
Economics at a higher level is just applied statistics with modeling behind it. If it is dumbed down or not depends a lot on the university and on the intent of the course. Statistics in macroeconomics are a great deal more complicated than statistics in labor or development economics, for instance. I don't know what you are considering a top university, so I won't say anything. But you shouldn't expect that the level of statistics in economics to be higher than that of statistics, just like the most complicated mathematics is done by mathematicians. The only exception are econometricians, which are, in every sense of the word, statisticians. Those, I guarantee you, do not do dumbed down statistics.
Matthew Reed
The goal of econometrics is to circumvent the necessity of controlled experiments. There are hundreds of methods to do that, each requiring a set of different stringent assumptions. Many can be used simultaneously, so you can test their robustness on a particular problem. Sometimes, they will contradict each other, which is unfortunate, but most of the time they do not if they are properly implemented. 80% of these papers are usually just convincing other economists that you did not screw up your implementation. Most importantly, when you can in fact have controlled experiments (very common in non-macro fields), these methods arrive to the same results.
The problem with the 2008 crisis is that there is no consensus on what caused it because you don't have any statistical power to conclude anything and you have many, many hypothesis. Realize, however, that there are plausible hypothesis claiming it was inevitable, as there are some which claim the opposite. Knowing which is which is not a possibility currently, despite what political advocates tell you (and some economists are political advocates). Note also not to suffer from hindsight bias. What often looks like an obvious issue that is going to screw your economy in the future might not be and policymakers and other individuals have to decide based on the information they hold now. That in the end some are going to say they "knew it all along" is a statistical certainty due to the large quantity of doomsayers. There were people predicting the collapse of the world economy in 2015. Did it collapse? No. What happened to these people? They are predicting a collapse for the next year.
Samuel Thomas
Ok, thanks
Joseph Russell
>circumvent the necessity of controlled experiments That's all well and good if you want to play around with your models, but don't call it science. Either 'circumvent' the scientific process or do actual science. You can't have it both ways. I'll accept many experiments in microeconomics and behavioural economics are genuinely controlled and scientific, but that's because they're essentially applied psychology.
Ayden Barnes
Not the person you are replying to, but consider that, in many branches of science, the validity of the theory is not dependent on controlled experiments. I think the problem comes from thinking economics can operate on the same practical and conceptual level as physics, for example.
I don't remember the exact quote, but Thaler says in one of his books something akin to 'Conventional economic theory is great at telling us how people should behave (in the sense of optimizing/finding equilibria), but terrible at making predictions.'. In a way I think that, until we develop more powerful tools both quantitative and social, Economics is going to be stuck on that quote.
Nicholas Hughes
You know if you Google "economists do it with models," the first website that pops up is owned by my high school English teacher's daughter? Her name is Jodi Beggs, graduated from Harvard, and her mom is Jan Beggs and teaches AP Lit at Nova High School. I never would have thought that she'd be so famous.
As for your post, I agree and disagree. I think economics is a difficult subject to teach and understand because the hardest part about it is that people think they already know economics. Everyone thinks they already know how the economy works but it's usually based on some faulty worldview that is so ingrained in them that it is difficult to unlearn. Moreover, Keynesian economics has done a great deal of damage to the field as a whole, but it should not tarnish the reputation of economics; most economic theory pre-Keynes is sound and logical, like other sciences. I guess you could say Keynes is to economics what Freud is to psychology, the only difference is that economists still haven't distanced themselves from Keynes the way psychologists distanced themselves from Freud. Another troubling aspect is that people think economists' work is similar to that of meteorologists, but the reality is that most economists have very little predictive capabilities and are usually split by political philosophies. Generally, though, they do agree that free markets tend to work best but Keynesianism is still a dividing factor, which is unfortunate because if economists abandoned his ideas, economics as a whole would be so much more scientific.
Alexander Moore
Seriously, look up on econometrics because you don't know what is being done. Controlled experiments are good because you guarantee that the covariance between your explanatory variable and your errors is 0. That is the main condition you need to guarantee you can find a (statistically) consistent estimator of the impact of an explanatory variable on your variable of interest. Thing is, you can assure that through other methods. Don't think controlled experiments are the only way to say to guarantee that an effect you found of X on Y comes only from X and not from any other confounding variables. I know scientists put a lot of emphasis on controlled experiments but that is mainly to prevent hacks from claiming crap that is utterly wrong. If the only standard you use for a good study is to have a good controlled experiment, there will be no hacks in your field, sure, but you are limiting yourself.
It's funny you mentioned experiments in micro and behavioral economics because they are usually pretty bad, suffering from every issue psychology studies suffer: small samples of a particular group of the population of interest (usually subjects are students and they infer about the general population); use of survey data; small stakes; it is impossible to guarantee anonymity; etc.
Lincoln Ramirez
Economics is a cross between Game Theory, Sociology, Psychology, Statistics and Trade. True, it's misrepresented in media, but Economics also masquerades itself as a Science when it's more in it's pre-science stage. The formulas are bullshit, but at least they're attempting to weed shit out... the only problem is how often shit ideas stick around due to circular reporting. It's like psychology in that sense.
Elijah Johnson
Practically all macroeconomists are Keynesian. A macroeconomist is Keynesian when the models he makes do not assume that prices adjust instantaneously to new information/shocks. That's all there is to it. You probably never heard of this. That's why I'm telling you economists are being completely misrepresented. Most macroeconomics nowadays integrate this with the models based on optimization initially developed in the 19th century (these models are called New Keynesian). Still, modern macro has nothing to do with either what Keynes did not with what those economists from the 19th century did. Do not confound being Keynesian with being a political hack that constantly advocates for expansion of government expenditures or something like that. That is exactly the misrepresentation in the media I'm talking about. Keynes did not believe that and generally economists who identify as Keynesians do not believe that.
Austin Rivera
Whoever told you that definition of Keynesianism is wrong and your guess about my knowledge of Keynesianism is just as wrong. Not only do you oversimplify and misrepresent ideas and arguments from both schools of thought, but you seem to conflate the two. You should get to the root of it all and read A General Theory and some critiques of it. I assure you that you will not think Keynesianism is what you think it is now after reading something like the Failure of the New Economics.
Matthew Butler
Keynes in his book introduces a lot of different concepts at the same time, some of which were accepted and some which weren't. In addition, he terribly communicated his ideas. Keynesianism as I defined comes from the mainstream interpretation of Keynes as did initially by Hicks. In fact, it is not really an interpretation, it is just a "Ok, this book is really complicated. Let me say these ideas and arguments seem to be the most important to me and model them". That's where the definition I gave you comes from. But its origins don't matter, really. What matters is how the term is used. If you look at actual economic papers and see what passes as Keynesian and what doesn't, you'll see that my definition is the one which will better discriminate what is Keynesian from what isn't.
I would like to know which ideas about Keynesians and Austrians I misrepresented and how did I conflate the two. Again, this puts too much emphasis on the idea that there is an ideological debate within macroeconomics, where there isn't. You don't see economists constantly trying to identify themselves as belonging to a turf and opposing to another. That's typical of political advocates distorting economics to support their views and is largely what gives economics a bad rep.
Hazlit was not an economist and what he wrote was not economics. He was a libertarian political thinker who believed in Austrian economics and used it in his arguments. His books are useful, at most, for beginner students to get a sense of how price theory works. Beyond that, they are not of much use to understand economics as his bias is everywhere. Also, price theory is learned in the undergraduate courses and, as people usually use it, is a huge simplification full of assumptions that are dangerous to apply to all markets.
Note that all ideas from Austrian economics have been already incorporated into mainstream models. Some became widely used, some didn't because some were useful and some aren't.
Ryder Robinson
In universities, when students are learning economics above the undergraduate level, nobody talks of "economist X said A, economist Y said B". That doesn't matter. What you actually do is: 1. Find a topic to study; 2. Read papers about said topic (whose authors are largely economists noone knows about). Note that you rarely need to read books at this point, just papers; 3. If the paper requires some background knowledge on either statistics, calculus, game theory, topology, or even microeconomic or macroeconomic theory, etc., you try to learn it using textbooks of reference. If what you lack is not available in a book, it means the paper is introducing a new method and it will bother to explain it to you; 4. (Optional) Try to replicate the results from the paper, either using the original data or obtaining new data and see if anything is different; 5. (Optional) Think of ways to expand the models you have read or apply the ideas you learned to novel situations.
Steps 1 to 3 are required for you to become learned about said topic. Steps 4 and 5 are only required if you really want to do something new on that topic.
As you can see, what matters is the model and how it is tested and not the modeler.
Julian Green
When you take an economic scale were Rothbard is 10 (ancap) and Marx is a -10. Then a mainstream "keynesian" like Krugman is still a 7
Noah Cox
Economics is not all about macroeconomics. Krugman has become a political advocate. On that regard, he's pretty much hated by many economists because he gives a bad image of that field. Think of him like a physicist who goes public about his personal view on the interpretation of quantum mechanics and many times gets things wrong. His specialization is on international trade and he usually writes about macroeconomics. These fields intersect (as all do in economics) but are mostly non-related. Also, the fact that you mentioned three economists who are very popular in the media but ignored in the academia (Krugman isn't on international trade) tells me a great deal about how you are being exposed to economics. And on that scale, I would say he would definitely not be a 7.
Juan White
Should I have mentioned a guy like Keen then?
Those 3 are well known. If I mentioned a guy like Steve Keen nobody would know
Connor Lopez
Keen is completely ignored in the academia but very popular online. Economists do not respect him, full stop, because he talks about the basic macro model taught to PhD students as a building block as if it were the cutting edge of economics. In doing so, he actively contributes to the misrepresentation of macroeconomics among the public. It's like if I told you that classical mechanics is bad because it assumes there is no friction or air resistance and is only one dimensional. Urgh. Then, most of his points are either misunderstandings or things every economist freaking learns in university. He mentions them like he is Copernicus or Galileo agaisnt the prevailing wisdom of the Church. Lastly, his economic models are utter shit. There is no nicer way to say this. He is modeling people like they were physical objects who always react in the same way when do X to them, a bit like they were physical objects who don't reason.
Asher Reyes
I've noticed that before.
Who would you say are respected economists in the academia?
I've read some stuff including that Ha-Joon Chang* bestsller, Friedman etc. mostly the better known by regular joes. But it mostly ends up with revionism from all sides and a 100 different definitions for capitalism, socialism, whatnot.
It's a little irritating just how much tunnel vission all these writers use. Like blaming the rising inequality on Reagan's deregulation (which may or may not be true) but completely "forgetting" to mention he increased taxes on the middle class, adding a regressive tax etc.etc.
*I have a feeling he's among the other ones not respected by the academia.
Jaxson Garcia
are there any statements in econ that are axiomatically true? espousing this set of beliefs (ie axiomatic economics) seems like setting yourself up for failure.
Justin Collins
The majority of economists are good. The majority of popular economists, however, are bad and that is my main issue. You have different incentives when writing for laymen compared to when you are writing for specialists. The former will often accept you, especially if you confirm their bias. The latter will destroy everything you say, if they care enough to do so, because they see right through your bullshit.
If you are really interested in learning more about economics and you have access to academic journals, check the Journal of Economic Perspectives. That journal is mostly non-technical and is aimed towards intelligent laymen or economists doing their first steps on a topic. From there, check the references that interest you and if you understand what is being said you are set to go from there.
Camden Bell
Most sciences have statements that are axiomatically true. Physics has the laws of thermodynamics, as the definition of energy it uses is in such a way that they are always true. Whenever they were apparently violated, physicists defined a new form of energy. Economics has those as well. The main assumptions are that agents face choice sets, that they have preferences and that they are rational. Rationality in economics is different from the typical meaning of the word. It means that people can compare every two possible choices and that they are consistent, in the sense that if X is preferred to Y and Y to Z, then X is preferred to Z. These assumptions can operate on any level of thought, meaning that this X or Y does not necessarily have to be a good but may be underlying brain processes. Without these assumptions, you cannot identify individual's action. Instead, you could only say "anything can happen". Empirically, you know that is not the case: people seem to follow patterns, the same people in the same environment seem to do similar things, etc. These are the fundamental assumptions of microeconomics. You can also argue that people follow patterns due to evolutionary pressures. Still, many times, economists set up models without having these assumptions in mind, so economics should be really seen as a toolkit of different models that are applied on different problems, depending on the nature of the problem. The take-home message, however, is that you always need assumptions. Every model needs an assumption, as you can't rest all knowledge on data.. Again, without assumptions, all you can say is "anything can happen" and in that case obtaining knowledge about anything would be impossible. Note that when identifying a probability distribution you are already restricting the set of possibilities, so you have gained knowledge. And sometimes you can't do anything more than that.
Hunter Sullivan
>econometrics is to circumvent the necessity of controlled experiments. So... Not a science, cool.
Cooper Hughes
Anyone have any recommendations for books to get into Economics?
Evan Edwards
Depends on what kind of economics you're interested in, really. Personally I'm most familiar with the rigorous, quantitative approach. Since this is Veeky Forums and these books are meant to be introductory, I'll assume that the math won't be a problem for you.
(Microeconomics) Microeconomic Foundations I -- Kreps (Econometrics, principles) Introductory Econometrics -- Wooldridge (Econometrics, applied, nontechnical) Mastering Metrics -- Angrist, Pischke (Macroeconomics) Fuck macroeconomics, read Ljungqvist and Sargent (Recursive Macroeconomic Theory) instead (Game Theory) Game Theory for Applied Economists -- Gibbons (Quantitative Finance) Asset Pricing and Portfolio Choice Theory -- Back
Colton Walker
It lends you no credibility to speak of subjects you clearly know nothing about. I even explained above why controlled experiments are good and why there are not the sole way to isolate marginal effects. They are still the best method, though, if you can use them. If you can't, you have to get by with the alternatives. Still, as long as you can isolate marginal effects, you can empirically test your hypothesis.
Those micro and macro textbooks are way too dry for a beginner. I'd recommend Romer (a tad bit difffor macro and Jehle for micro. Also, that Wooldridge econometrics book is really not a good representation of what econometrics is all about. It is like a prerequisite for actual econometrics. Unfortunately, to get into the new stuff in econometrics, you really have to read the papers. Still, there are some good books like the one by Hamilton on time series but it's becoming outdated fast, and Cameron and Trivedi on Microeconometrics (the big one, not the one about Stata).
Andrew Ortiz
*(a tad bit different from the recursive one)
Dominic Wright
>inb4 a bunch of shitposts about how economics is not a science I don't know a single person who thinks of it as a science, and that includes economics professors, economics grads, and economists I worked with during an internship at a think tank.
James Anderson
Thanks man, that's really helpful
Zachary James
Most think tanks do not do science. Most define an accepted policy conclusion and fudge the data and models until they get what they want.
Bentley Hughes
>someone already made reference to based Taleb
I guess there's nothing more to do in this thread...
Hudson Bell
>These pass an image that economics is highly ideological, where, in fact it is not Neoclassical economics is extremely ideological. The sheer amount of assumptions built into Neoclassical modelling is unbelievable. >Post-Keynesian, which have a heavy presence online, are either misguided or completely accepted by economists. Name something Post-Keynesians get wrong.
Post-Keynesianism is the ONLY legitimate school of economics.
Benjamin Brown
Read Marc Lavoie.
Or just go full MMT.
Dominic Cook
Is Principles of Economics by Gregory Mankiw a good book?
Nolan Lee
Thoughts on taking economics at uni?
David Reyes
If you don't know any theory yet, then forget all the other recommendations and read this: mcafee.cc/Introecon/
I believe it's the intro to Econ. textbook at Caltech. This is the only introductory level textbook I've come across that doesn't dumb down the math and doesn't treat you like a fucking retard while explaining things.
Sebastian Flores
Mankiw a shit; every explanation is oversimplified and theres no quantitative motivation of the concepts whatsoever. If you really want to learn something, get this:
Jason Foster
>things have to be complicated to be true
Andrew Martinez
I'd certainly recommend taking an intro micro and macro class. Not sure there's much point majoring in it, though.
Cameron Long
>basic calculus is complicated
Seriously, take a look at the book I referenced, the theory is not obscured by unnecessary mathematical 'rigor', it is after all an introductory textbook. Mankiw's book (and all freshman-level 'Principles of Whateverthefuck' textbooks, for all that matter) are really shit, they seem to be written literally for children with basic knowledge of Algebra. For an example, just take a look at how Elasticities are treated on Mankiw's book and how they are presented on McAfee's text.
This is not to indulge on some false sense of self-superiority, I truly believe anyone looking to get a basic introduction to mainstream economic theory could benefit greatly from reading something like McAfee's book. I guess it just really irks me that there are so many mediocre textbooks at that level; for fucks sake, even Krugman has a 'Principles' economics textbook: it's just an easy way to make a quick buck on the expense of the educational system.
Evan Hall
Kind of unrelated question but maybe you could help me, what do you think of forex trading? Is it possible for a retail trader to make money in it? Will reading economics books help me in it?
Nathaniel Young
>Game Theory, Sociology, Psychology See there's your problem.
Jaxon Turner
I have to be honest, beyond some very very basic stuff, my financial knowledge is non-existent. Although, I have to say that I strongly suppose that reading some stuff could definitely help you in the sense that, you will not gain direct practical methods, i.e. quantitative or applied, for the actual trading, but it should help you develop a better analytical mental framework.
I haven't been there since the board was opened, but maybe you could find some more guidance in >>Veeky Forums , I think some people there trade constantly; as always, just remember that you're on Veeky Forums and that everything you read here should be taken with a grain of salt.
Juan Fisher
If I've studied pure math at the graduate level, can I more or less open a graduate econ textbook and understand it without too many issues?
Austin Lewis
>economics
Not a science fag
Camden Wood
You could, but it's similar to opening a graduate physics textbook, say Landau's Course of Theoretical Physics', without having any physics background: you would certainly understand the math, but all the motivation of the concepts would be lost, for what I mean, take a look at this answer from MO: mathoverflow.net/a/51411
In my university, we use Mas-Colell et al. 'Microeconomic Theory' for upper-undergraduate Micro. courses, but this is basically the level expected for grad courses, so if you are still curious I suggest you take a look at this book, it's on gen.lib
Aiden Ross
Mathematical rigor doesn't mean anything. People forget that while Keynes never used Maths in his economics, HE WAS A MATHEMATICIAN AND WROTE A FAMOUS BOOK ON PROBABILITY. Keynes would literally shit on any of the mathematical economists you respect. He decided not to use maths on purpose (pic related) because the things he spoke of couldn't be perfectly modeled. A lot of maths in economics is just physics envy. Forex is a bucketshop, don't even bother trading an OTC market. Trade exchange listed products (stocks, options) or your broker will rip you off. Also, forex lacks volatility and predicting currencies is impossible.
Brody Morris
That's why there are quotes around the word rigor, I'm aware that most of the times the math in economics is just boring academic bullshit, I am talking about an entry level textbook though, and my motivation behind it was to offer an alternative to the shitty mainstream intro to econ texts. I know Keynes wrote a book on probability and was a brilliant economist, but you're barking to the wrong tree here, I'm not one of those guys that thinks economics is a mainly quantitative field and that economics, as a science, is on par with the natural sciences. After all, Economics is a social science.
Jeremiah Cooper
>Based NNT
thread should've ended here
Gavin Collins
The typical thing PKs get wrong is that they say "mainstream economics does not account for X, with their ridiculous assumptions", whilst a paper on that exact same issue was published on AER 10 years ago.
My main issue with many PKs is their refusal to acknowledge people as optimizing agents. Sure, people do not optimize consciously, the same way you are not thinking of spreading your genes when you have sex. And, sure, there are problems related to the sheer complexity and unfeasibility of processing information systematically like a computer would (even with parallel processing). Still, the underlying process is one of optimization. Also, people do learn and adjust themselves to novel situations, instead of keep on doing whatever they have kept on doing in the past. Whenever I hear a PK speak, a part of me is screaming "unintended consequences" because you do seem really naive about your policies.
Brandon Edwards
Math completely exposes what's your mind. The goal of using math is not to ape physics but to avoid sociology-tier arguments in economics. That's why people find it so easy to criticize mainstream economics. Whenever they read a paper or a book on it, the first thing they see in an argument is the economist clearly stating what he's assuming in it. Instead, if you read a book like Keynes' or Marx's, you have to delve into a mud of ambiguous text, with way too many non sequiturs. That is why, even today, there are idiots fighting over what Marx really meant.
