UK EU Referendum Aftermath

[sadmanbarty]

A somewhat related question; for those who are skeptical about the economics profession, how do you think economic policy should be decided?

 

[Mr. Tea]

i think thats too dumb to be what hes saying.

Oh I don't know then. I think my knowledge of economics is probably about on the same level as your knowledge of physics.

 

[luka]

A somewhat related question; for those who are skeptical about the economics profession, how do you think economic policy should be decided?

reasonable question.

 

[luka]

unfortunately its a bloodsport.

 

[luka]

but like anyone else i think i should decide what our goals as a society should be and the economists should do the sums to make that happen.

 

[luka]

another question worth asking is who does decide economic policy, and how? my feeling is that it is decided largely by the illuminati not by governments.

 

[vimothy]

There are moral arguments to be had about how to respond to climate change (loosing jobs in the fossil fuel industry for example), but that doesn’t mean that scientists shouldn’t be believed about man-made climate change.

No, but that's an analogy. The question is, to what extent are economists scientists?

 

[sadmanbarty]

No, but that's an analogy. The question is, to what extent are economists scientists?

I think we’ve been having a couple of conversations:

1) To what degree is economics a science and, by extension, how much should we trust the economic consensus?

2) Societies problems involve value judgements and moral questions that economics as a discipline isn't equipped to engage in.

My post was in response to the 2nd topic.

With regards to the 1st topic, though you can’t have controlled experiments in economics (as is also the case with areas of the natural sciences) there is a wealth (excuse the pun) of quantifiable, empirical data that makes economics much more reliable than other social sciences.

 

[sadmanbarty]

A general question:

Even if we take it as a given that economists get it wrong more often than I think, do you think that politicians, the electorate, the media or any other group should be trusted more than economists on economic questions?

 

[vimothy]

The analogy is only relevant to (part two of) the conversation to the extent it holds - otherwise it really is a non sequitur.

 

[vimothy]

I'm also not convinced that economics is "more reliable" than other social sciences. More reliable in what sense? How could you quantify this?

 

[sadmanbarty]

I'm also not convinced that economics is "more reliable" than other social sciences. More reliable in what sense? How could you quantify this?

Growth, employment, inflation, balance of payments, etc. are all quantifiable and measurable and thus you can objectively say if they've gone up or down.

The same can't be said for things like someones psychological condition, the stability of a regime, etc. and as such economics is more precise and reliable.

Can you give examples of when economists have got something wrong and another group such as politicians, the media or the public have got it right? Wouldn't these examples be dwarfed by the number of times economists have had a more accurate understanding of the economy than non-economists?

 

[vimothy]

Forecasting is not about saying whether a variable will go up or down. It's about probabilities after conditioning on some set of events. And economists basically have no idea about the data generating processes underlying those time series. The out of sample forecast accuracy of cutting-edge macro models is famously dire, incapable of bettering simple, a-theoretical extrapolation of past trends.

 

[sadmanbarty]

The specific numbers in economic forecasts should be taken with a pinch of salt, but the forecasts do tend to give the correct general assessment on how something will impact the economy. This is case with the '81 budget, Brown's fiscal stimulus and post-2010 austerity; economists gave the correct general assessment on how these policies would effect jobs and growth.

 

[sadmanbarty]

Another general question:

Would the UK economy have done better, worse or the same if policy-makers gave more credence to economists consensus?

What if they had given less credence?

 

[vimothy]

Forecasts (of the type we are discussing) do not aim to get things "generally right", but to predict the time-path of important macroeconomic aggregates, conditional on some relevant information. A priori, this ought to be quite hard to do since the set of conditioning information you also need to predict is large. This does indeed seem to be the case, as state of the art economic models (e.g., Smets & Wouters 2007) perform no better than atheoretical VARs or old school sectoral curve fitting (and worse by some measures). Noah Smith has loads of posts on this subject with links to academic studies. For example, the top-rated DSGE model is almost useless at predicting inflation and growth one quarter out, and completely useless at larger intervals (Edge & Gurkaynak 2011). The top-rated DSGE is worse at predicting inflation and growth than a simple univariate autoregressive process (Gurkaynak, Kisacikoglu & Rossi 2013).

 

[sadmanbarty]

Vim, I completely agree with your last post, but its not quite addressing the point I was making.

I'm saying that the economy would (and does) perform better when British government policy is in accordance with the economic consensus.

 

[sadmanbarty]

Climate science isn't a real science. Climate scientists should be ignored on issues of public policy:

http://www.telegraph.co.uk/news/ear...dmit-global-warming-forecasts-were-wrong.html

http://www.washingtontimes.com/news/2016/apr/7/climate-change-models-wrong-predicting-rain-drough/

 

[droid]

Lets not be obtuse regarding the differences between the social sciences (those primarily concerned about the behaviour of people) and the physical sciences.

 

[vimothy]

You're making two related points, aren't you, Sadmanbarty? One is that the government is better off taking the advice of economists. The other is that economics is a science, more or less - or at least something close to a science (and so should be trusted by the government, etc, etc).

The first is debatable. To debate it, we'd need to know what the alternatives are. We'd also need to to disaggregate "we" (since it's likely that some people would be better off and some worse off under any economic regime change). Then there's the question of non-material benefits.

The second is pretty obviously not true, I'd say.