The importance of economic history

This post was written by Kevin O’Rourke

Paul Krugman is upset about some pretty fanciful accounts of what supposedly happened during the Great Depression, and I don’t blame him. He also wonders whether economics is a progressive science (I am using the word ’science’ in its German sense). Well, one of the things that philosophers of science have argued about in the past is whether, when you have a paradigm shift, you end up losing knowledge, and it’s pretty clear what has happened in this instance.

I recently came across this quotation from Mark Blaug’s 1980 book on the methodology of economics which seems worth quoting, given when it was written:

At this point, it is helpful to note what methodological individualism strictly interpreted…would imply for economics. In effect, it would rule out all macroeconomic propositions that cannot be reduced to microeconomic ones, and since few have yet been so reduced, this amounts to saying goodbye to almost the whole of received macroeconomics. There must be something wrong with a methodological principle that has such devastating implications.*

Now, as Krugman points out, this ain’t necessarily so. (See his point 5 in the last of the three links, and see this paper for an example of how you can have all the theoretical bells and whistles these days and still make a sensible argument.) But there is no doubt that a lot of people have been more than happy to say goodbye to the whole of received macroeconomics — for example, I have been reliably informed that a well-known department stopped teaching its undergraduates IS-LM just before the crisis hit in 2008. And the result is that you had people seriously peddling the line that austerity would be expansionary in the wake of the biggest downturn since the 1930s — and these claims were influential in Europe, it seems clear, in the fateful spring and summer of 2010.

One lesson is that it is one thing to play counter-intuitive intellectual parlour games in order to get tenure at a fancy university, but another thing entirely to say something about the real world. For that you need a little common sense.

Another lesson is that economists need at least some training in economic history. No-one with the slightest feeling for historical reality could believe that the Great Depression was due to supply side forces, for example. I observe that Krugman, along with such luminaries as Maurice Obstfeld and Ken Rogoff, did his graduate work in MIT, and I surmise (without having any inside knowledge on the matter) that all three were exposed to Charlie Kindleberger and Peter Temin. They are all distinguished theorists, but also have a historical sensitivity, and this makes them better economists — if your definition of a good economist includes the ability to say sensible things about our very messy real world.

One of the most important things that a bit of history gives you is a sense of the importance of context. A model will work very well in some technological or institutional contexts, but not in others. For example, the Reverend Malthus devised a model that did a pretty decent job of describing the world up to the point that he started writing, but which soon became essentially irrelevant in the century that followed, at least in the richer countries of the world. (He had an economist’s sense of timing.) Sometimes the world is well-described by Keynesian models, and sometimes it is not. And so on.

If the only thing that economic history did was protect us from one-size-fits-all merchants, it would still be worth the price of admission.

*I am looking at the 2nd edition, published in 1992, but I am betting that this sentence dates from the 1980 edition.

192 Responses to “The importance of economic history”

  1. Colm Harmon Says:

    Kevin - I am reminded of your blog post on this topic from earlier in the year - http://www.irisheconomy.ie/index.php/2011/01/14/history-of-economic-thought-back-from-the-brink/ and having also just finished the pop-econ hist book by Sylvia Nasar (Grand Pursuit - brilliant by the way!) it makes me all the more sad that we are looking at losing economic history (and history of thought) due to movements such as your own and retirements etc.

    I am going to force all my grad students to read Nasar, or David Warsh’s wonderful Knowledge and the Wealth of Nations, or even better the oldie by Lord Roll (http://www.amazon.com/History-Economic-Thought-Eric-Roll/dp/0571165532) as I am confident that if I asked them to tell me Marshalls contribution to economics, they most likely could not (go ahead folks, prove me wrong!)

  2. colm mccarthy Says:

    Kevin,

    Your invocation of ‘common sense’ reminds of Roy Geary. He used to intone, as if it was a secret, that ‘….common sense is not common…’.

    He was not just talking about Ireland either.

  3. grumpy Says:

    1. Derision of “common sense” is evidence of an intellectually insecure “science” trying to ape some of the “hard sciences”. Physicists for example ditched common sense in order to embrace quantum mechanics and relativity. It’s a delusions of grandeur sort of thing for economists.

    2. “Another lesson is that economists need at least some training in economic history”

    Shouldn’t that be “knowledge and understanding of”?

  4. Brian O' Hanlon Says:

    Victoria Stodden’s work, in relation to modern mathematical models, and use of computers to do research - and the scientific method. Very interesting stuff. I listened to one of her talks by podcast over the summer. Well worth looking at her work some time. Her argument is that scientific method as we know, may be breaking down fast, in terms of its applicability to the modern day context. Scientific method served us well, for a long time. But as you rightly point out, contexts can and do alter. BOH.

  5. Brian O' Hanlon Says:

    A lot of what Stodden found, in terms of problems for modern research, is that researchers patch together tools, or models, from various providers of such tools. However, when it comes to releasing the models later on, for verification purposes by others, it involves a complex legal process, to find out if it violates any agreements for use etc. Hence, why the scientific method becomes unwieldy and can break down etc. One of the biggest problems, is where software with licenses of different types are combined in the same research. This has the effect of spoiling the broth. One license’s terms can conflict in strange ways, with that of another. Making it impossible to release primary research models, for verification by a wider community. Apologises if I am not explaining this well, or getting it incorrect - best thing, is to go directly to Stodden’s work and take a look. BOH.

  6. ObsessiveMathsFreak Says:

    Economics is not a science. It doesn’t generally make testable predictions, and almost all predictions made are generally wrong, with the correctness of a prediction being generally inversely proportional to its acceptance among economists. Economics is an academic discipline, just not a scientific one.

    There’s even a “theorem” in economics to describe its complete lack of predictive power even in theory(This is from Econned)—The A-prime/C-prime theorem:

    For each and every set of assumptions [in economics] A implying conclusion C, there exists an alternative set of assumptions, A’, arbitrarily close to A, such that A’ implies an alternative conclusions, C’, arbitrarily far from C.

    That is, economic theories behave like essential singularities; (e.g. f(A)=C, and f(z)=e^(1/(z-A)), for z=/=A), and the conclusions can take on any possible value infinitely many times for any alternative assumptions in the neighbourhood of the original ones. The question of whether f(A) is ever 0 is left as an exercise to the reader.

    Sure, as a branch of history or social studies, economics can be a useful qualitative discipline. But as a quantitative scientific discipline? With predictive models and data analysis? Not a chance. Economists: Stick to your history books and social studies, because the maths is not with you.

  7. The Dork of Cork Says:

    Economic history is easy once you understand credit institutions are in a constant state of war against you and your family - they may use a “sovergin” state as a proxy to wage war on another - but now that symbiotic stuff is getting obsolete in the new market states - the game is even more obvious -indeed no more nationalist fairy tales is quite refreshing really - its hard to get beyond the programming but it is worth the effort.

  8. Desmond Brennan Says:

    I’m not sure that given the loosening of capital controls, monetary changes and globalisation , that the experience of the 30’s can be readily applied to today. Certainly however the alternative / historical theories can and should be examined.

    Krugman in particular at times comes across as more of a normative ideologue than objective economist, his rants against Irish austerity being a case in point. Those polemical pieces lacked figures, and had no even putative value of what the fiscal multiplier would be in a small open economy( subject to EU tendering rules to boot).

    That said the German Finance Minister sounds decidedly demented when he claimed public debt was at the heart of even the 2008 crisis. And ironically in the current business cycle, because the US and EU politicians destroyed confidence…this means some stimulus is likely merited (that is once the US makes a long term deficit reduction plan, and the fudge fiends in the EU are forced to rejoin reality)

    A huge problem with either Keynsian or monetary intervention will be the lag….and classical Keynsian stimulus, would seem to have a very long lag to me…but at this stage the monetary toolbox may be empty

  9. Michael Hennigan - Finfacts Says:

    Ben Bernanke is an interesting case, given his research on the Great Depression.

    He has been praised (and vilified) for his bold leadership in the aftermath of the collapse of Lehman Brothers and commentators often attribute his actions to his intimate knowledge of the policy failures in the early 1930s.

    However, despite the disclosure by HSBC Bank of multi-billion losses on US subprime mortgages in Feb 2007, the enemy was at the gates when the Fed chairman realised that there was a serious problem.

    It’s the old story of the consensus being a dominant factor and today, what chances would a young iconoclast have against the older fogies running the show?

    What chance did Hyman Minsky have of being taken seriously by the peacocks of the Ivy League universities?

  10. disgruntled observer Says:

    @ Kevin O’Rourke,

    Excellent post. Thanks.

    @ Desmond Brennan,

    “…Irish austerity being a case in point. Those polemical pieces lacked figures, and had no even putative value of what the fiscal multiplier would be in a small open economy…”

    What would be the point. Michael Burke, Michael Taft, et al. have repeatedly pointed to the ESRI’s paper by Benetrix and Lane (2009), showing positive fiscal multipliers. More precisely government investment over the period 1970 - 2006 showed a positive multi-annual multiplier effect. It is also demonstrated that it raised competitiveness by lowering the real effective exchange rate, that variable we are most trying to influence at present. Further, the presence of spare capacity served to increase the multiplier.

    This has been pointed out ad absurdum, but has been roundly ignored.

    “A huge problem with either Keynsian or monetary intervention will be the lag….and classical Keynsian stimulus, would seem to have a very long lag to me…but at this stage the monetary toolbox may be empty”

    Looking at the impact of fiscal spending in the New Deal, there was no lag. The term shovel ready comes to mind. Furthermore, as the Dork likes to point out the monetary toolbox is never empty. It may run up against zirp, but that’s why fiscal policy is so important.

  11. Enda H Says:

    @Colm Harmon

    I am confident that if I asked [graduate students] to tell me Marshalls contribution to economics, they most likely could not (go ahead folks, prove me wrong!)

    “I remember when all this was fields!”

    Last week when giving a tutorial in Econ 101, I concluded the supply and demand homework questions by asking what they thought of “Marshall’s model”; clarified that other models exist; briefly showed them the idea of Edgeworth box; gave them two sentences about Longford; and explained that I think they’re not taught this material because the interpretation of the tangent to the marginal rates of substitutions as price is less intuitive than Marshall’s model.

    I then told them that pretty simple but useful economic models are still being developed and, in the hope of giving them some perspective, I very briefly outlined the idea of the Melitz model. Next I speculated that this model may be what’s taught to undergrads in 100 years. Of course I was biased in my choice because I got to finish with “…and just so you know, Prof Melitz developed this model while he was a grad student in this building, about ten years ago.” But that’s neither here nor there.

    So g’wan outta that “the kids have no perspective” lark :)

    @Kevin O’Rourke: excellent post.

  12. FT Alphaville » Further reading Says:

    [...] - In praise of economic history. [...]

  13. David O'Donnell Says:

    Methodological individualism is ontologically flawed - worse, it spawned agency theory - worser, it spawned so called moral hazard - worsest of all, so many still think it is real.

    As 7_of_Nine puts it to me in her regular moments of exasperation - ‘You humans, you are such a backward species’.

    @KO’R
    Interesting links - early in the morning, bit like economics.

    @all
    As a human science, economics has great potential - but presently infested with ideology and dodgy power relations.

  14. Edward Says:

    @disgruntled observer

    That is a one-eyed view of Benetrix and Lane (2009). They also note that government wage consumption - a key element of austerity - is associated with a negative multiplier and real exchange rate rises. Therefore, it is not so easy to say that austerity affects positive-multiplier spending.

  15. Thrifty Says:

    Is it that the cult of austerity was bought wholesale in Europe, or is it that this message suits a large swathe of the voting population, the baby boomers, who are hitting retirement and have much more interest in deflation boosting their savings, than inflation eroding them. Theory just being peddled out to justify practice.

  16. Brendan Quinn Says:

    I wish Krugman would actually go back to the 20’s, 30’s and 40’s and actually study all the data so he would see that the theories of keynes, policies of Fed, hoover, Roosvelt actually extended the depression. He would also see that it was the adoption of a german currency in 1948, which introduced price stability that brought about the german economic miracle and not just the Marshall plan. We’ve adopted fanciful economic history that is so full of holes it’s a swiss cheese of history. Go back to all the data, not just the data that you want to see…

  17. Brian Woods Snr Says:

    @KO’R: “Another lesson is that economists need at least some training in economic history”.

    Yep! And some exposure to Thermodynamics (the writey stuff, not the math!) and some modelling of exponents; those ski-slope plot lines, and maybe a little geology about finite resources - the deeper you go the harder it gets, and what money REALLY is!

    Yep! Note the refs. Thanks.

    Brian Snr.

  18. Gavin Kostick Says:

    @ Kevin O’Rourke

    I recently found myself at the monument of Richard Whatey (1787 - 1863), at St Patrick’s Cathedral, Dublin, where I learned that not only was he the C of I Archbishop of Dublin, but endowed the first chair of political economy in TCD. He also taught his dog to climb trees.

    Apparently he was ahead of his time In Ireland, for example in supporting endowments for Catholic clergy, non-sectarian education and was busy attempting to relieve suffering during the famine years.

    There’s lots of works of his (mainly religious) from the dubious but seductive google books, and I link to his introductory lecture series, which I haven’t read, on Political Economy in Oxford.

    So, on the subject of history, is he still remembered?

    http://books.google.com/books?id=KYZTAAAAYAAJ&printsec=frontcover&dq=inauthor:richard+inauthor:whately&lr=&num=10&as_brr=1&hl=de&cd=56#v=onepage&q&f=false

    Also, if you have a chance, what solid work would you recommend on the Great Depression for the general reader?

  19. Gray Says:

    “I am using the word ’science’ in its German sense”
    Wissenschaft?
    I’m German and it comes as a surprise to me that there shall be a difference between “science” and “Wissenschaft”. Could you provide more detail about this, pls?

  20. Kevin O'Rourke Says:

    @Gavin, this is the book to read

    http://www.amazon.co.uk/Golden-Fetters-Depression-1919-1939-Development/dp/0195101138/ref=sr_1_1?ie=UTF8&qid=1317202186&sr=8-1

    or you could try this

    http://www.amazon.co.uk/Lessons-Depression-Robbins-Lectures-ebook/dp/B002YK4UWS/ref=sr_1_3?s=books&ie=UTF8&qid=1317202244&sr=1-3

  21. Gavin Kostick Says:

    @ Kevin O’Rourke

    Many Thanks

  22. Paul Hunt Says:

    Er, are we not confusing economic history with the history of economics here?

    The Great Depression occured in one cycle of history; this Great Recession is occuring in a cycle that has followed. The economies theories developed then and what worked (or didn’t work) on the policy front then may have some relevance now, but it is neccesary to take account of the fact that the current crisis is the culmination of a cyclical reaction over 30 years to the economic policies pursued for more than 30 years in the post-war period.

    Keynes naively assumed that governments would finetune aggregate demand in a countercyclical manner. He famously took little account of the long run. The national accounts (whose development he played a major role in prompting) took little or no account of the depreciation of long-lived infrastriucture assets or of the depletion of natural resources. And the post-war Keynesian settlement relied to a considerable extent on financial repression, capital controls, closed shops (in all professions and trades) and high marginal tax rates (even if politically astute tax expenditures were embedded).

    So when the wheels started to come off in the 70s it was not surprising that the right-wing, neo-conservative, neo-liberal (whatever) world view, that the Keynesian settlement had supplanted, experienced a resurgence and came to dominate global economic policy until the wheels on this project started to come off in 2007/08.

    So now we are at a point where we have to re-think the role of the state, the role of markets and the boundaries of the state. Ed Miliband’s speech to the UK Labour Party Conference yesterday signalled the start of this re-thinking by a major EU social democratic party. He has some freedom to do so because so much of the infrastructure and utility sectors is in the private sector. Other EU social democratic parties are constrained because they have so many ‘insiders’ to protect in these industries and they retain ante-deluvian views about ’strategic’ industries. US politics is so polarised that the Democratic Party is incapable of providing any intellectual or policy insights. But the tide will turn - and is beginning to turn.

    But policy-oriented economics and most economists, deluded by the belief they practise a discipline and not a science and ensnared by the Neo-con fantasies many aided and abetted, have very little of use to contribute to this re-thinking - until they wake up and smell the coffee.

  23. KJMClark Says:

    “For that you need a little common sense.”

    No, no, no! Geez, we should ban putting those two words together. Einstein had it right: “Common sense is the collection of prejudices acquired by age eighteen.”

    The vast majority if the electorate in the US, at least, is using “common sense” to conclude that austerity is *exactly* what should happen. The argument goes, “All of us are having to tighten our belts in these hard times, so government should be doing the same.” The right harps on this nonsense constantly, and people find it appealing.

  24. Pete Says:

    As a non-economist, I can only judge how “scientific” or otherwise economics is based on results.

    So, who sucessfully predicted the financial crisis? In order of predictive success (best first):
    Journalist economists.
    Academic economists.
    Economists employed by international bodies (IMF, ECB etc.)
    Economists employed by national bodies (central bank)
    Economists employed by banks.

    If I wrote a list of which economists stood to personally gain the most (or lose the least) by predicting a crash, it would be the same list.

    I conclude that as a science, economics was perfectly capable of predicting the crises, but individual economists put their own personal financial, career or political interests ahead of scientific objectivity.

    If that is considered ok in the economics profession , then it will never be respected as a real science.

  25. Simpleton Says:

    Well said Prof O’Rourke. For an economics blog this site has been curiously silent on the elephant in the room: economics has made zero progress since the 1930s. The same debates with exactly the same arguments are being rehearsed all over again. Shame. All that stochastic calculus gone to waste. A kind of Darwinian process in reverse?

  26. Brian Woods Snr Says:

    @GK: Books to read?

    The so-called Great Depression (1933 - 1941) is one of a few. The 1870s downturn was pretty bad. You could start there but be wary, its also about ‘western, developed economies’, whereas the current mess has a definite non-western dimension as well. Pay particular attention to refs to changes in technology, increased productivity, changes in employment and unemployment (and not in workforce). There are lots of simplistic arguments, conclusions and inferences about the 1933 - 1941 economic downturn. “Its the politics - silly!”.

    To properly understand any ‘depression’ - or whatever, you must attempt to get a rough overview of what Permagrowth (the physical embodiment, in a finite world, of capitalism) is, and what has and what will constrain it and what will eventually put it into decline.

    Try: “The Long 20th Century: Money, Power and the Origins of our Times”
    Giovanni Arrighi. The book was re-published in 2010. You can order it from Amazon. Cost would be 27 USD for courier delivery.

    Brian Snr.

  27. Sean Lyons Says:

    @ Gavin Kostick,

    Rev. Richard Whately is also remembered as the first President of the Statistical & Social Inquiry Society of Ireland. You can see his picture on SSISI’s website: http://www.ssisi.ie/journals.php, and his obituary by W. Nielson Hancock is at http://www.tara.tcd.ie/bitstream/2262/6699/1/jssisiVolXXVI_0913.pdf.

  28. seafóid Says:

    Psychiatry is very like economics innit.

    http://www.nybooks.com/articles/archives/2011/aug/18/illusions-psychiatry-exchange/

    “Dr. Angell makes much of the fact that we do not understand the mechanism of mental illness, nor of the drugs we use to treat it. While this is true, it does not mean that the drugs are ineffective—only that as psychiatrists, we should stop overselling ourselves as possessors of a sophisticated neurochemical knowledge of our craft

    There is no question that among the medical professions, psychiatry is the most scientifically primitive. We have no more than the most rudimentary understanding of the pathophysiology of mental illness and we have resorted to tenuous and ever-shifting theories of how our treatments work. Dr. Angell’s review highlights these truths well, but at the same time gives short shrift to the very real benefits that we still provide our patients.”

  29. ObsessiveMathsFreak Says:

    Yep! And some exposure to Thermodynamics (the writey stuff, not the math!) and some modelling of exponents

    Absolutely not. Economists need to move away from all quantitative models. This type of thinking was largely responsible for the creation of complex financial and economist instruments of vapid justification which caused the systemic crisis we now find ourselves in. Economists need to stick to their history books.

    Personally, I recommend an extended study of the protestant reformation and the events which brought about this revolution of dogma and established order across a continent.

  30. Paul Hunt Says:

    OK. Sorry. I get it. It is about the history of economics. And the history of economics in Ireland. Heaven forfend that there should be any engagement about the extent to which economists on this Island of Saints and Scholars succumbed to the Neocons’ fantasies and, by omission or commision, contributed to the economic policy fiasco that has landed us in this mess.

  31. disgruntled observer Says:

    @ Edward,

    Fair comment, for honesty whilst quoting Benetrix and Lane I should have included that, however…

    In the policy paper, A New Fiscal Strategy for Ireland, (2009) Philip Lane makes a case, largely based on Benetrix and Lane (2009). In part IV, Elements of an Optimal Fiscal Strategy, he makes a compelling case for a large investment program… “In relation to the composition of government spending, the evidence suggests that a high level of productive government investment is both stabilising in the short run and helps to improve external competitiveness over the long run.” The self evident nature of this can be determined by the brevity of his argument in its favour.

    However, when arguing for wage reductions, he employs five arguments, of which only the fourth directly relates to macroeconomic theory. The rest include the constraints of EMU, industrial relations, the driving force of government wage setting in the private sector, etc. The relevant piece: “Fourth, nominal wage reductions may actually be helpful in boosting aggregate demand in the economy. If pay cuts help to stabilise the public finances, a major deterrent to spending plans is removed in that decision makers can better forecast the future tax burden. In addition, the improvement in external competitiveness will give confidence that economic recovery will be based on a sustainable foundation of expansion in the tradables sector.” Note the language difference, “If pay cuts help…” “…may actually be helpful…” “…give confidence…”

    He says, “To this end, it is better to front load the nominal wage reduction. In particular, aggregate demand is better supported by a sufficiently large initial cut in wages that can be followed by a rising path for wages in subsequent periods. Such a positively-sloped wage profile promotes current consumption, in the same way that expected exchange rate appreciation effectively reduces the consumption-based real interest rate.” This is the front loading argument in a nutshell, and contains a large dose of the confidence fairy to boot. But what’s good for the goose…

    He says, “By contrast, Blanchard (2007) shows that slow wage adjustment in Portugal amplified the economic slowdown there, since expectations of further wage cuts in the future acted to increase the effective real interest rate there.”

    With all that said, I would argue that in the current economic situation, the fiscal multipliers relevant to government consumption spending may not even be valid. He cites Galstyan and Lane (2008, 2009) “where public investment boosts productivity and thereby drives down the relative price level, whereas government consumption squeezes the export sector by reducing the availability of labour to the private sector.” Who believes the latter is relevant now?

    He notes some important caveats. “First, the model is estimated over the 1970-2006 period, such that the fiscal multipliers are average effects across the range of economic conditions faced by Ireland over that interval.” When in that time period have we ever suffered such a demand shock? Whilst the investment potential is greatly increased due to slack, I would say the wage channel is quite possibly impossible to follow, at least any further than now, in large part due to the debt dynamics of private finances. I refer to Steve Keen’s work where he demonstrates the tendency to disequilibrium in a high debt economy. In other words, if you start cutting and without some compensatory investment you have to keep cutting until demand collapses. This is Fisher, Minsky, etc.

    And second: “In particular, the size of the fiscal multiplier surely varies with the level of slack in the labour market and, as indicated above, the perceived sustainability of the fiscal position.”

    You’ll note “…perceived sustainability…” “May…” “If…”

    I concluded from that paper that the only certainty we had was investment. I’m sure other’s will read it differently.

    @ OMF

    What do you make of Steve Keens disequilibrium models? Being not a maths freak myself I’d be interested to know. They can be found at his blog debt deflation.

  32. tull mcadoo Says:

    Simpleton,

    does that make economics a cult?

  33. Kevin Donoghue Says:

    …I have been reliably informed that a well-known department stopped teaching its undergraduates IS-LM just before the crisis hit in 2008.

    What exquisite timing. Can you tell us what took its place? Did they just go straight to the Solow growth model or something like that?

    I’m sure the answer is depressing but I’d like to know just the same.

  34. Brian Woods Snr Says:

    @OMF: Jeeze, and I thought I was a bit behind that 8 ball!

    I am def not advocating more math for those suckers, just an understanding that - “Its a finite world, silly!” The math models are very pretty - as math models go, but the real world is populated by very quirky folk who are basically, irrational, illogical and very attached to dogma and other items of religious sentiment. What did Galbraith pere say? :lol:

    The specific exponent I had in mind was that of bacterial growth in a closed container. 8)

    Brian Snr.

  35. Chris Says:

    I find historians seem to have a strong grasp of the crisis, people like Niall Ferguson and Morgan Kelly. They understand the constant dynamics of power and influence in the global economy, its importance and just how unfair global leaders have always been. The Germans don’t believe that austerity is expansionary, just they are more powerful and want their money back. They can dig up some economic theory to back it up, wheter its right or not doen’t really matter. Fair play to Krugman though for continually calling them out on the theories.

    Some prominent academic economists in ivy league universities got carried away by the de-regulation and free-market argument and supported it in their papers. It didn’t work and you have plenty of respected economists with egg on their face.
    On the other hand there are other prominent economists in ivy league universties who presented papers at the time sayingthings like incentives in the financial system were messed up.
    The US government chose to listen to the former group and ignore the latter. Why? The power and influence of the financial industry.

  36. Liam Delaney Says:

    With departures, retirements and upcoming retirements there will be a huge depletion of serious economic historians teaching in Irish universities very soon. One of the most worrying aspect of various HEA and government university takeover attempts is the pigeon-economics that has accompanied government strategy documents potentially making its way into how universities actually prioritise hiring. Economic history and related fields may not be sexy when viewed through a “smart economy” lense but they are critical to the formation of intelligent economic debate.

    One benefit of the crisis worldwide has been to kill the dominance of the nonsense that economics can be taught meaningfully without economic history and the history of economic thought. Really important that particularly either UCD or TCD hires a good economic historian and/or historian of economic thought or we will be dumbing down the country as a whole.

  37. MP Says:

    somebody out there who is looking at IGB yields today?
    10yrs below 8% now.

  38. Eureka Says:

    @ Kevin -
    Really Great post

    I don’t think economists should be so hard on themselves. Knowing what we don’t know is the most important part of knowledge. People have much sooner believed the person who is wrong with conviction than the person who is right with circumspection. People have foisted this need onto the economics profession. The profession should be clear about being uncertain - (if only they were less certain of soft landings during the boom).

  39. Graham Brownlow Says:

    Let me second Liam’s sensible plea. As one of the last of an endangered species (i’m an economic historian in Belfast) it’s great pity that Irish universities (north and south) have gone down the anti-intellectual “smart economy” route. Those running HE seem to not think about the long-run implications of their choices.

  40. Kevin Donoghue Says:

    Cole and Ohanian have posted a reply on Stephen Williamson’s blog. The weather is excellent so I’ll read it later.

  41. Tom Lines Says:

    This applies to banking crises and bank regulation in spades; and Rogoff has written about their history, of course. For a discussion of this as applied to the UK, see my paper, ‘The Dog That Didn’t Bark: When banking crises did not occur and what we can learn from that’, at http://www.greenhousethinktank.org/page.php?pageid=recentpublications.

  42. Ludwig Heinrich Edler Says:

    The mass reading on Sunday encouraged Christians to be humble by looking upon others as superior to themselves. Or, as the Americans might say

    Got humility?

    For me, history is a dubious discipline at best, and expressions like “historical reality” are almost completely devoid of meaning when we consider history as a finite collection of records, some subjective, some less so, which derive from an infinite (and largely unobserved) reality.

    Even if these records are all accurate (and there is little to suggest this to be so) the fact that they are chosen without anything to ensure they are a random sample of the total population of ‘facts’ suggests the history they construct is a pure case of sampling bias.

    To think why, just imagine what the world would be like now if Hitler had won the Second World War.

    What recorded history would we base our theories on? What view of the market and society? Who the esteemed bloggers? Who the malfaiteurs?

    Claiming a monopoly on common sense for your view of history is nothing more than a cheap rhetorical device.

    My common sense, for instance, tells me that government indebtedness, excused and justified by Keynesian Multipliers, has bankrupt the nation states and the fiat currencies their sovereign stamps guarantee will fail because of that, leading the world into an economic chaos which will dwarf the Great Depression and make Malthus’ theories seem eerily prescient.

    This is obviously very different to what your common sense tells you.

  43. Joseph Ryan Says:

    @Brendan Quinn

    I wish Krugman would actually go back to the 20’s, 30’s and 40’s and actually study all the data so he would see that the theories of keynes, policies of Fed, hoover, Roosvelt actually extended the depression.

    I have seen this argument made by Kevin Myers also as well a commentator on this blog. I simply do not agree with it. Unemployment in particular decreased from depression highs as a result of New Deal policies. I doubt there are many serious economists or economic historians that would support your view.

    On the second point re the Marshall plan not being hugely important to the German economic miracle, I would also disagree. If other European countries, particularly the French body politic as distinct from Bidault their minister, had got their way even during negotiations on the Marshall plan, Germany would have remained a wasteland after the war with the production of industrial goods restricted as a matter of policy.

    I am currently reading a book on the Marshall plan but I have not got as far as a new German currency in 1948 so I cannot comment on its importance to post 1948 Germany.

  44. cm Says:

    @Gray Says:
    September 28th, 2011 at 10:13 am

    “I’m German and it comes as a surprise to me that there shall be a difference between “science” and “Wissenschaft”. Could you provide more detail about this, pls?”

    I think Kevin relates to the English distinction between (natural) sciences, “Naturwissenschaft”, and arts “Geisteswissenschaft”/humanities with the social sciences somehow inbetween according to individual/departmental preferences and traditions. So with science as ‘Wissenschaft’ he probably wants to overcome this dichotomy in a rather pragmatic fashion.

  45. seafóid Says:

    It isn’t just economic history that needs a push. The whole narrative of history that the general citizen is equipped with is a joke. World War 1 just happened because that’s the why.

    People also need to understand the system we live in. Because it’s going through an existential crisis and is in danger of break down.

    It would be nice to think that a future generation of Irish people would be able to call a future Michael Neary on a future Prime Time as a spoofer on the spot.

  46. History Roolz - NYTimes.com Says:

    [...] Roolz Kevin O’Rourke follows up on some of what I’ve been writing, and argues that doing good macroeconomics depends crucially on knowing a fair bit about economic [...]

  47. hoganmahew Says:

    @disgruntled
    “I refer to Steve Keen’s work where he demonstrates the tendency to disequilibrium in a high debt economy. In other words, if you start cutting and without some compensatory investment you have to keep cutting until demand collapses. This is Fisher, Minsky, etc.!”
    Er, you’re being a bit one-eyed with Steve Keen too. His point is that you can’t cure debt with borrowing. Once you reach an excessive debt level, down is the likely path until debt levels are cut or debt is restructured. This has more in common with Herr Schauble than Mr. Bernanke or Mr. Krugman.

    http://www.debtdeflation.com/blogs/2011/09/26/inet-and-my-minsky-model/
    is as good a place to start on his recent posts as any.

  48. hoganmahew Says:

    PS Mr. Keen’s ’solution’ is to increase inflation by boosting wages. This seems to me the only sensible approach. The how to do it is the difficult bit. I agree with you that investment must be a part of it, but in a globalised marketplace (for labour as much as for materials), the response needs to be transnational. A country like Ireland attempting to stimulate its way out (or even just soften the blow) would be better off putting the money to debt relief directly rather than inefficiently stimulating someone else’s economy.

  49. seafóid Says:

    @ Liam Delaney

    where is the push for the mercantile “smart economy” university coming from? It’s not like the corporate world couldn’t do with some historical awareness and context. Imagine if AIB had been run like a company that knew its past history included a failure once every 15 years.

    The corporate V is a curse - negative growth last year turns into permagrowth from this year on into eternity.

  50. vinny Says:

    Most economists are like accountants - ‘after-the-event merchants’ - except the economists cannot even agree on what the ‘event’ was and whether the ‘event’ is even over yet!
    Most definitely not a ‘Science’ - ‘dismal’ or not!
    But entertaining to observe you all playing and tinkering with your ‘models’ or at least each individual economists perspective of the ‘models’………or maybe its fiddling while Rome burns?

  51. Gavin Kostick Says:

    @ Kevin O’Rourke

    Paul Krugman agrees with you.

    ‘History Roolz’

    http://krugman.blogs.nytimes.com/

  52. Gavin Kostick Says:

    @ Kevin O’Rourke ‘n’ all

    In case I’m being too subtle there and you don’t hit the link - his latest post is a response to this post, and includes:

    “By the way, he’s [KO'R] right that Obstfeld, Rogoff, and yours truly all had the benefit of studying with Charles Kindleberger and Peter Temin. But that’s not all. The late Rudi Dornbusch, who I’m pretty sure advised all of us, was big on the usefulness of studying history.

    “I still remember his advice when I began searching for a thesis topic. He urged me (and presumably his other students) to take a break from reading recent economics literature, and looking for twiddles on the currently fashionable models. Better, he said, to read a lot of economic history for a few months, plus reading up on current events, in search of real issues and real experiences that needed explaining.”

  53. Mike Says:

    “In effect, it would rule out all macroeconomic propositions that cannot be reduced to microeconomic ones, and since few have yet been so reduced, this amounts to saying goodbye to almost the whole of received macroeconomics.”

    So should we have thrown out the entirety of Newtonian mechanics because we didn’t yet understand how atoms interact?

    It seems to me that economics is not even a science. Neoclassical theory is consistently held up without any supporting evidence (aside from inapplicable mathematical “proofs”) and in spite of all contradictory evidence. Supporters of Keynes and/or Marx, on the other hand, were quickly and efficiently barred from academic journals, along with all scientific (fact-based) economics.

  54. bartholomew Says:

    @Gavin Kostick,

    Whately is studied in many colleges in the US, but in rhetoric departments rather than economics ones, since he wrote a standard book on rhetoric in about 1830 which is still used. There is a biography by Donald Harman Akenson, ‘A Protestant in Purgatory’ but as you can judge from the title, it’s more concerned with Whately as a clergyman in Ireland and with his role in the formation of the National Schools, of which he was a very influential early commissioner (Akenson also wrote the standard account of the origins of the schools). For Whately’s economics and role in establishing the Trinity chair, ‘Political Economy and Colonial Ireland’ by Tom Boylan and Timothy Foley is fascinating. One of the chapters concerns an economics textbook for children that Whately wrote for the Irish national schools. And as if that wasn’t too much information already, Whately’s daughter published a ‘Life and Letters’ of her father in 1860 which you can read in full on Googlebooks, and there’s also a pretty unsympathetic picture of Whately in Peter Gray’s recent book ‘The Making of the Irish Poor Law’.

    On topic – an I right in thinking that the two Irish economists mainly thought of as foreseeing the crisis did so partly from a historical perspective: Morgan Kelly’s study of housing crashes over the last half-century, and McWilliams’ little sketch of Uruguay’s rise and fall in the 1920s-30s in one of his TV series?

  55. Paul Hunt Says:

    @Gavin,

    I don’t think economists dealing with public policy issues failed to make any useful contribution in the run up to the current Great Recession (or that Irish economists failed similarly in the run up to our own more virulent variation) simply because they were not aware of Dornbusch’s advice or, if they were, failed to heed it. It’s that they were either paid (or it profited them) to look the other way or they were paid as cheerleaders for the NICE world Alan Greenspan had engineered.

  56. Gavin Kostick Says:

    @ Bartholomew

    Thanks very much for that.

    This is wildly speculative, but I also think that Morgan Kelly’s background as a Medievalist has something to do with it - as Georges Duby in France, where there was also a cross-over from his work as a Medievalist and his position as a public intellectual.

    On Whately I knew about the Ntional School as I did a little history project for a museum in Baltinglass, Co Wicklow, where there was one.

    Pace Paul Hunt’s comments, what I was really thinking was what economic history and structures came about as a result of the period of much greater human and national catastrophe, in and around the Famine. Now I know a few more things such as the Statistical & Social Inquiry Society of Ireland, which is new to me.

    If there isn’t one: time for some long-sighted patron to fund a Chair of Economic History in TCD perhaps?

  57. Gavin Kostick Says:

    @ Paul

    Apologie - cross posted there.

  58. hoganmahew Says:

    @Seafoid
    They might call out Patrick Neary too…

  59. ObsessiveMathsFreak Says:

    What do you make of Steve Keens disequilibrium models? Being not a maths freak myself I’d be interested to know. They can be found at his blog debt deflation.

    I’ll be damned. An actual system of differential equations modelling credit flows. Might be useful for macroeconomics I suppose, assuming that the model’s assumptions are actually valid. (Since their creator claims they are based on the rules of accountancy, I’m inclined to think they are not).

  60. Paul Hunt Says:

    @Gavin,

    The establishment of the Queen’s University Colleges (three of which subsequently became the original colleges of the NUI) and of the National Schools system (which the English didn’t really adopt until the 1980s) were landmark developments. But in terms of what seems to be bothering Prof. Krugman, it was perhaps inevitable that the rightwing/Neocon/Neoliberal reaction to the previous Keynesian settlement and its subsequent hegemony had to run its course.

    So there is probably little point berating the economists who were swept along - either willingly or unwittingly. But we are now the beginning of a new departure - at least on the other island. Unfortunately for Prof. Krugman, rational politics and economic policy-making will not return to the US until the redistricting powers of state legislatures are curtailed or replaced by independent commissions.

  61. seafóid Says:

    @Hogan

    him too .

  62. Shay Begorrah Says:

    @desmond brennan

    Krugman in particular at times comes across as more of a normative ideologue than objective economist, his rants against Irish austerity being a case in point.

    Discuss: Self awareness - is it no longer necessary in the Internet age?

  63. Kevin Donoghue Says:

    The blogfight continues. All we need now is for Roy Edroso to pick it up.

  64. Adrian Kelleher Says:

    Most interest in economics derives from individuals’ interests in politics and whatever interest they posses in economic history is secondary again. People’s political beliefs are notoriously inflexible, and when they do incidentally encounter an episode from history they have a ready-made rigid narrative to shoe-horn it into. This applies to political leaders here and abroad as well as to nearly everybody else.

    Events since 2008 (and earlier) have exhibited a determined refusal to learn from history. In 1907, JP Morgan got the banks together to stave off financial meltdown (and themselves). In 2008-2011, *public* money was injected into healthy and unhealthy banks alike and much of that part which wasn’t uselessly employed shoring up cash reserves was immediately consumed by bonuses, one of the central mechanisms of the whole disaster in the first place.

    After what can fairly be described as a litany of financial panics in in the run up to WWI followed by the mother of all shocks in 1929, many financial controls were put in place. The period 1980 to the present was then taken up by dismantling all these restrictions once more. South East Asia? A blip. Russia and Latin America? An unfortunate coincidence. LTCM and Enron? A few bad apples. No amount of evidence is so compelling it can’t be waved away.

    Where stimulus takes place, the current immutable creed dictates it take the form of tax cuts even though common sense dictates that this will only result in nervous employees squirreling away more savings. Public works are unthinkable.

    One of the most extraordinary events in economic history was the incredible expansion of US industry in WWII. It was in fact one of the most remarkable events in history in its own right; nothing similar has happened in human history. Industrial production rose 300% in less than three years, production of raw materials rose by 67% etc. Many particular areas of activity, e.g. shipbuilding and aircraft manufacture, were remarkable in themselves. All this was achieved with price controls, wage controls, currency restrictions etc. in place.

    Of course it would be foolish to ascribe the results achieved solely to the financial and other measures in place (though comparison with the US in WWI suggests they were pivotal). This is hardly the point, however, because these events are the economic equivalent of water running up hill as far as the Washington consensus is concerned: something that should simply be impossible. Naturally the central component was the upsurge in patriotism the war created, a factor that can be bracketed alongside Keynes’ animal spirits.

    For modern economists to ignore these events is like an artist ignoring the Mona Lisa, yet many manage it somehow because the lessons it teaches are inconvenient. Concrete events of monumental significance can be ignored so long as one can reach for a textbook and list off the (theoretical, conditional) dangers of altered inflationary expectations.

    “Prime Minister! The situation is grave. The world financial system is on the verge of collapse, economies are stalling everywhere, there is mass unemployment, several countries look like they could implode politically and the European Union is on its last legs.”

    “Then we shall keep our minds on the important things, young man. We shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of moderate inflationary expectations!”

  65. ObsessiveMathsFreak Says:

    Those Steve Keen models are actually fascinating. This is the very first economic model I’ve ever come across which makes any sense mathematically, and it actually appears to have predictive power. I especially liked his model of the runaway bank with an incentive to both lend and to make people pay less interest on their loans.

    If nothing else, I think his model will become a classical example in Ordinary Differential Equations, the next step up from the predator/prey equations. (This usually means that the model is correct by the way)

  66. Yobbah Says:

    Almost brought a tear to my eye this post. I had thought economists and the media had completely forgotten the New Deal aand the Great Depression. Mention of it is rarely if ever made unless it is Mac the Knife in the 80s completely forgetting the stimulus provided by EEC grants to improve our infrastructure.

    It has also been forgotten the Bank Crisis of 1820 whereby banks were allowed to fail. A commission in on how to improve the economy in1826 recommended subsidising landlords rejecting a proposal by a Scot that increasing wages for labourers would be a better solution to an economic revival, reducing crime (a major factor at the time that hindered investment) and improving living standards. Instead, the country continued to suffer from underinvestment, wages reduced, population expanded, increasing reliance on a single cheap source of food well we know what happened next.

  67. Eureka Says:

    There is only one danger in looking out the rear view mirror - it’s that you can’t see what’s ahead.
    In particular you can’t see that giant slice of Toast in the middle of the road - it’s Europe.

    We need to get real here. America is going protectionist, Ford already bringing jobs back from Mexico and Romney is a really shrewd operator. Irish people need to buck up and stop all the naval gazing

    Time to build a decent society that will compete in the real world. Time to de-prioritize remaining members of a really crappy club

  68. joel bernard Says:

    Your sensible remarks about the importance of studying economic history in order to formulate economic policy include one unfortunate old chestnut of the type you bemoan: the relegating of old economic insights to the dustbin of history, after a change in intellectual fashion.

    You write:
    “For example, the Reverend Malthus devised a model that did a pretty decent job of describing the world up to the point that he started writing, but which soon became essentially irrelevant in the century that followed, at least in the richer countries of the world.”

    Perhaps in the century that followed — M. died in 1830 — but maybe not today. Even apart from his well-known theory about the pressure of population on resources (climate change?), Malthus had very important insights into the potential problems of de-industrialization in advanced economies:

    “In the actual state of things in this country, the population and wealth of Manchester, Glasgow, Leeds, &c. have been greatly increasing; because, on account of the extending demand for their goods, more people have been continually required to work them up ; but if a much smaller number of people had been required, on account of a saving of labour from machinery, without an adequate extension of the market, it is obvious that these towns would have been poorer, and more thinly peopled. To what extent the spare capital and labour thrown out of employment in one district would have enriched others, it is impossible to say; and on this subject any assertion may be made, as we cannot be set right by an appeal to facts. But I would ask, whether there are any grounds in the slightest degree plausible for saying, that not only the capital spared at any time from these manufactures would be preserved and employed elsewhere; but that it would be employed as profitably, and create as much exchangeable value in other places as it would have done in Manchester and Glasgow, with an extending market? In short, are there any plausible grounds whatever for stating that, if the twenty millions worth of cottons which we now export, were entirely stopped, either by successful foreign competition or positive prohibitions, we should have no difficulty in finding employment for our capital and labour equally advantageous to individuals in point of profit, and equally enriching to the country with respect to the exchangeable value of its revenue?” (Principles of Political Economy, Bk. 2, Sec. 7)

    It was only the triumphalism of believers in the immaculate dispensation of the Industrial Revolution that made Malthus “outmoded,” or relevant only to a pre-industrial economy.

    Reality comes full circle to reveal unsuspected truths in outmoded theories. Including, perhaps, Marx. The early initiators of a discipline (e.g. economics) have the advantage of not having to wade through so much literature — much of it false starts — to come by the insight that the world around them is very like our own.

  69. Oliver Vandt Says:

    It is very worrying that unemployment does not get much direct focus from Irish economists (for the second year running):

    http://www.irisheconomy.ie/index.php/2011/09/13/kenmare-conference-programme/

    This would seem to be against common sense but I suppose it has a strong theoretical basis…

  70. Kevin Walsh Says:

    @Ludwig Heinrich Edler

    Governments in general are not bankrupt, and of those that are, recent history suggests that stimulus is not even a cause, since the relevant governments practicsed austerity. In other words, your ‘common sense’ is totally ahistorical.

  71. David O'Donnell Says:

    Mairt_een Feldsteen has applied for the medical card. All is changed - changed utterly … history has been made.

  72. Ordinary man Says:

    @CMcC

    ‘….common sense is not common…’.

    Spot on.

    More of an oxymoron

    http://www.oxymoronlist.com/european-community/

  73. Brian O' Hanlon Says:

    Adrian Kelleher wrote,

    LTCM and Enron? A few bad apples. No amount of evidence is so compelling it can’t be waved away.

    In the context of what happened in 2008, what we can say today is that LTCM in the late 1990s, and Enron in the early 2000’s were exactly the same as what finally out-ed in 2008. Except, somehow the lid stayed on the can, just long enough, for things to really fester. The lid literally exploded off the can then in 2008, when we had almost resigned LTCM and Enron to the anals of history.

    The main end result of keeping the lid on the can back in the late 1990’s and early 2000’s, seems to have been, it allowed some guys such as Greenspan and others, a long enough opportunity to shuffle off the stage, and make their get away, before the contents of the can, all ended up on their face.

    You have to consider our own former Taoiseach Mr. Ahern, former ministers for finance McCreevy and Cowen, in this vein also. I think we will have a much more clear picture of Ireland, of the figures that I mention, after a decade has passed away. Then we will be able to see all of the recent events, more in context of the wider picture.

    It will be very interesting to see how economic historians will join the dots between the late 1990s economic events, those of the early 2000’s, and those of the late 2000’s. Things have settled enough yet, to allow economic historians to get their hear around it, but does anyhow care to make a stab at it now? BOH.

  74. Brian O' Hanlon Says:

    . . . correction . . . not settled down enough.

  75. Brian O' Hanlon Says:

    Adrian Kelleher wrote,

    One of the most extraordinary events in economic history was the incredible expansion of US industry in WWII. It was in fact one of the most remarkable events in history in its own right; nothing similar has happened in human history. Industrial production rose 300% in less than three years, production of raw materials rose by 67% etc. Many particular areas of activity, e.g. shipbuilding and aircraft manufacture, were remarkable in themselves. All this was achieved with price controls, wage controls, currency restrictions etc. in place.

    I will reference you to north American socialist writer, Mike Davis, to this. He did an interview for the Bill Moyers show on PBS, which I found of great interest. What Davis seemed to infer, was that in the 1930’s a deal was struck between industry, capital and labour. That is, that labour became a part of the process, and rowed in behind capital, behind industry, to allow what you mentioned above to work. But that without, the benign involvement of labour in the whole process, then the American economy could not have turned a corner.

    Mike Davis commented on the present situation in the 2000’s, that labour is NOT getting involved in the process. It is not making itself a part of the solution. In other words, that solutions are having to be found, which go around the labour section of society. This is what David reckons is sub-optimal about current policies and approaches to re-growth and renewal in north America. Obviously, his views are a lot more complex than I can summarise here, but I refer you to Mr. Davis for some interesting views on it. BOH.

  76. Barry Says:

    Chris: “people like Niall Ferguson”

    Krugman has had repeated columns showing that Niall Ferguson is close to a perfect anti-indicator.

  77. billyblog Says:

    ObsessiveMathsFreak says some really silly things.

    For example:

    “Economics is not a science. It doesn’t generally make testable predictions, and almost all predictions made are generally wrong ….”

    Paul Krugman has recently been fairly successful at using model-theoretic reasoning to predict that the bond vigilantes would not walk away from Treasury sales, that inflation would stay low despite large deficits and debt, that austerity plans would not jump start the economy in Ireland and similarly beset countries, etc.

    “But, but, but,” we can expect OMF to sputter, “He didn’t really predict these things the way a scientist might. He just made some ‘inspired’ guesses.”

    Sez who? The guy who appears not to have a clue about what at least some economists do, and do well?

    And am I right in guessing that OMF is still entrapped in an outdated ideological model which maintains that scientific methodology, and the scientific truths which flow from the successful application of that methodology, can only be accounted “scientific” if they presuppose methodological and/or ontological atomism?

    The philosophers, though some of them used to talk like OMF – and some unreconstructed betas still do. But they got over it in the face of the application of their own particular subject matter/methodology, i.e., critical reasoning.

    Even modern physics has long since moved on from where OMF is intellectually parked – back in a Laplacean universe it would seem.

    Psst, OMF.

    Geisteswissenschaften are here to stay, and they are just as much Wissenschaften as are Naturwissenschaften. Don’t ontologize your ignorance and embarrass yourself in public by saying that because you can’t – or wouldn’t – do it, it can’t be done.

  78. SalahMaker Says:

    Whine about collapse, why don’t you.
    -NewRich

  79. Brian Woods Snr Says:

    @billyblog: ““Economics is not a science. It … … it can’t be done.”

    Could you possibly re-write this in an intellectually, meaningful way. Thank you - and leave out the ad hominems.

    Brian Snr.

  80. Eureka Says:

    Economic history tells us that colonies never thrive. The proposed financial transaction tax will cost us jobs.
    Enough of the history we need to get out of the failed union now.
    Why don’t economists analyze this kind of thing?

  81. David O'Donnell Says:

    @all

    Importance of Economic & Poltical History for Today - especially Germany

    http://www.notre-europe.eu/uploads/tx_publication/2011-08-26-habermas-en.pdf

    Based on a discussion on a speech by Jurgen Habermas in April.

    [h/t ..er.. DOCM ?]

    @Dr Merkel

    Good morning Dr Merkel!

  82. David O'Donnell Says:

    Europe and the New German Question

    Christian Calliess, Henrik Enderlein, Joschka Fischer, Ulrike Guérot, & Jürgen Habermas

    http://www.notre-europe.eu/uploads/tx_publication/2011-08-26-habermas-en.pdf

  83. Michael Hennigan - Finfacts Says:

    One relevant point is when does history end and the contemporary begin?

    Irrespective of the time span, it’s common for individuals to pick examples to suit their arguments. Then there can be a case of real success such as the post 1945 rise of Japan as a global export powerhouse but that same consensus model is now a failure

    The first years of Ireland’s boom were a successful example of a small economy leveraging FDI during the American high tech boom; the second part under the direction of Ahern/Harney/McCreevy, using the benefits of the FDI boom to fuel a property bubble, was an apparent success but a disastrous failure.

    In the US, Cheney told Bush in 2001 that Ronald Reagan showed that deficits didn’t matter.

    No matter how irrational the recent obsession with debt has been in the past two years, the Republicans won control of the House and all but seized the Senate but for some poor Tea Party candidates.

    As for Great Depression examples, modern economies with economic stabilisers look quite different.

    Psychology, culture and understanding structures of accountability are key to positive change. Paying attention to successful models with more than a cursory knowledge of the context, is an essential aspect of this process.

    For example tarring bankers and developers as greedy and egotistical may bring some satisfaction but how do most people behave in a system with limited accountability; the absence of concern for conflict of interest and weak/selective enforcement of rules?

    Four years after the onset of the credit crunch, has Ireland embraced change or is it more satisfying to focus on failures elsewhere?

  84. David O'Donnell Says:

    @Minister Noonan, Angela Merkel

    ‘.. finally the question of how far the German government deliberately kept quiet about the role of our regional banks in the Irish crisis. As so often in life, we shouldn’t assume some kind of master plan behind this: it’s not as if the German government was deliberately trying to damage Ireland. But reality is ignored to an extent. Ireland could have made thinks simple for itself if prime minister Cowen and his cabinet had said: We’ll take on the debts of the Irish banks, but the British, French and German banks’ debt aren’t our problem. The Irish national budget would now be in a much better state. And the truth about the German banks would have come to light over here pretty clearly.’

    Joschka Fischer (link above)

    @MH
    Has Ireland embraced change? NO.

  85. Garry Says:

    @Ludwig Heinrich Edler

    Keep posting.

    Theres a huge amount of groupthink in Ireland at present; a popular narrative is being developed among the governing classes to explain their failure.

    It is always good to get a different perspective.

  86. Eamonn Moran Says:

    History is written by the Victor’s
    Including Victor Meldrew. I don’t believe it!

  87. Eamonn Moran Says:

    @ Garry
    The group think in Ireland that annoys me is the one among the media, about the intelligence levels of politicians and business leaders.

    The latest intellectual heavyweight seems to be Michael Noonan. The last genius was Brian lenihan. I can remember John Drennans article lauding the intellect of the whole FF Cabinet.

    I think the reason that the media bestow such high levels of respect is down to having to rely on groupthink due to their own lack of economic knowledge.

    In my experience the media constantly overestimate the intellect of our leaders and often confuse luck and waffle with cute hoorism and intellect.

  88. Joseph Ryan Says:

    Just read the Krugman rebuttal of Cole & Ohanian view which came up on another thread here a few a weeks ago.
    Excellent rebuttal by Krugman.

    It seems as if US economics is going to be influenced by the make me up various doctrines of conservative right. This kind of rubbish need to confronted head on.

  89. Eamonn Moran Says:

    @ Joseph Ryan
    If you think that kind of stuff is bad you should look up how they measure GDP growth.
    The words hedonics and substitution are very important.
    Also the US took half the people out of income poverty this week. How?
    They changed the way it was measured.

  90. hoganmahew Says:

    I think this is a useful contribution on the role of understanding history in policymaking from Richard Fisher (Dallas Fed. President):
    http://www.ritholtz.com/blog/2011/09/explaining-dissent-on-the-fomc-vote-for-operation-twist/
    (if only for the Jan Mayen island anecdote).

  91. hoganmahew Says:

    @Eamonn Moran
    “If you think that kind of stuff is bad you should look up how they measure GDP growth.
    The words hedonics and substitution are very important.”
    Even worse is that hedonics are (is?) used to understate inflation (in the same way that “actively seeking work” is used to understate unemployment).

  92. Tim O'Halloran Says:

    @Eamon Moran

    The link you might be looking for Drennan’s ludicrous paean to the ‘intelligence’ of our politicians is :

    http://www.independent.ie/national-news/a-few-just-a-few-kind-words-about-our-tds-124546.html

    He writes about “The fierce, if occasionally self-satisfied, intelligence of Brian Cowen mingles with the charm of FF’s Lovely Girl (and future leadership dark horse), the earthy Mary Coughlan. ” Pass the sick bag.

    ‘Intelligent’ is an epitet that was always applied to Cowen , on the basis of no political achievement at at all. He spoke the most awful business-speak and this was accepted as ‘intellect’ when it was clear proof that the man had no clue about anything.

    Its like a kind of grade inflation. The average TD is so utterly moronic that the word ‘intelligent’ is devalued constantly. We are culturally part of the anti-intellectual Anglo-Saxon Calvinist world, for all our Catholic nationalist protestations, we only retain a Catholic tolerance of corruption.

  93. seafóid Says:

    Some recent economic history that merits a reread

    Recession is not the worst possible outcome
    By Wolfgang Münchau

    Published: July 6 2008

    http://www.ft.com/intl/cms/s/0/8362b1d0-4b59-11dd-a490-000077b07658.html#axzz1ZKjKinQx

  94. hoganmahew Says:

    Thank you seafoid, given what we have seen, the last paragraph makes for alarming reading.

  95. DOCM Says:

    @ All

    A bit off topic but Gordon Brown is inviting Europe to make history. He is, in effect, inviting the international community to take the Euro Area under its wing - through the IMF - as it showing itself incapable of looking after itself.

    http://www.nytimes.com/2011/09/29/opinion/29iht-edbrown29.html?pagewanted=1&_r=1

  96. Ceterisparibus Says:

    Trichet e Draghi: un’azione pressante per ristabilire la fiducia degli investitori
    NOTIZIE CORRELATE
    Il documento segreto
    della Bce: ridurre gli stipendi pubblici di Mario Sensini
    (29 settembre 2011)

    Frankfurt/Rome, 5 August 2011 .
    D ear Prime Minister,
    The Governing Council of the European Central Bank discussed on 4 August the situation in Italy’s government bond markets. The Governing Council considers that pressing action by the Italian authorities is essential to restore the confidence of investors.
    The Euro area Heads of State or Government summit of 21 July 2011 concluded that «all euro countries solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms». The Governing Council considers that Italy needs to urgently underpin the standing of its sovereign signature and its commitment to fiscal sustainability and structural reforms.
    The Italian Government has decided to pursue a balanced budget in 2014 and, to this purpose, has recently introduced a fiscal package. These are important steps, but not sufficient.

    At the current juncture, we consider the following measures as essential:
    1. We see a need for significant measures to enhance potential growth. A few recent decisions taken by the Government move in this direction; other measures are under discussion with social partners. However, more needs to be done and it is crucial to go forward decisively. Key challenges are to increase competition, particularly in services to improve the quality of public services and to design regulatory and fiscal systems better suited to support firms’ competitiveness and efficiency of the labour market.
    a) A comprehensive, far-reaching and credible reform strategy, including the full liberalisation of local public services and of professional services is needed. This should apply particularly to the provision of local services through large scale privatizations.
    b) There is also a need to further reform the collective wage bargaining system allowing firm-level agreements to tailor wages and working conditions to firms’ specific needs and increasing their relevance with respect to other layers of negotiations. The June 28 agreement between the main trade unions and the industrial businesses associations moves in this direction.
    c) A thorough review of the rules regulating the hiring and dismissal of employees should be adopted in conjunction with the establishment of an unemployment insurance system and a set of active labour market policies capable of easing the reallocation of resources towards the more competitive firms and sectors.

    2. The government needs to take immediate and bold measures to ensuring the sustainability of public finances.
    a) Additional-corrective fiscal measures is needed. We consider essential for the Italian authorities to frontload the measures adopted in the July 2011 package by at least one year. The aim should be to achieve a better-than-planned fiscal deficit in 2011, a net borrowing of 1.0% in 2012 and a balanced budget in 2013, mainly via expenditure cuts. It is possible to intervene further in the pension system, making more stringent the eligibility criteria for seniority pensions and rapidly aligning the retirement age of women in the private sector to that established for public employees. thereby achieving savings already in 2012. In addition, the goverment should consider significantly reducing the cost of public employees, by strenghtening turnover rules and, if necessary, by reducing wages.
    b) An automatic deficit reducing clause should be introduced stating that any slippages from deficit targets will be automatically compensated through horizontal cuts on discretionary expenditures.
    c) Borrowing, including commercial debt and expenditures of regional and local governments should be placed under tight control, in line with the principles of the ongoing reform of intergovernmental fiscal relations.

    In view of the severity of the current financial market situation, we regard as crucial that all actions listed in section 1 and 2 above be taken as soon as possible with decree-laws, followed by Parliamentary ratification by end September 2011. A constitutional reform tightening fiscal rules would also be appropriate.
    3. We also encourage the government to immediately take measures to ensure a major overhaul of the public administration in order to improve administrative efficiency and business friendliness. In public entities the use of performance indicators should be systematic (especially in the health, education and judiciary systems). There is a need for a strong commitment to abolish or consolidate some intermediary administrative layers (such as the provinces). Actions aimed at exploiting economies of scale in local public services should be strengthened.
    We trust that the Government will take all the appropriate actions.

    Mario Draghi, Jean-Claude Trichet
    29 settembre 2011

    Will this be classified as historical.

  97. Ordinary man Says:

    @ Ceterisparibus

    ‘..un’azione pressante per ristabilire la fiducia degli investitori
    NOTIZIE CORRELATE
    Il documento segreto..’

    If it wasn’t so serious…….

    http://www.youtube.com/watch?v=OMDTgaEIi-Q&feature=related

  98. pumpkineater Says:

    @grumpy —I beg to differ , it wasn’t common sense that was left behind by QM , it was common logic and common mathematics. As to common sense, one must define the universe of discourse to which it is common. QM, grounded in an operational empiricism, was “read off” a newly emerging common “sense”, that being the sense common to those observing phenomena that was of growing interest and accessibility to the instrumental technology of the times. So today , you peer at a opto-electronic image on a screen driven by semiconductor technology that provides our contemporary common sense and which is accounted for by quantum mechanics. This nonsense about abandoning common sense is promulgated by the usual suspects –mathematical idealist , who have been fighting a rear guard action against quantum mechanics all along. The economist would to well to learn the distinction between the mathematical idealist and quantum mechanicians , to coin a phrase.

  99. Jesper Says:

    A professor in art knows the theory of art well, is the professor a good artist?

    A professor in physics knows the theory of physics well, is the professor a good physicist?

    A professor in economy knows the theory of economy well, is the professor a good economist?

    Who is better off? The country with a trade surplus but doesn’t get paid or the country with a trade deficit but doesn’t pay?

    Which is worse, rent-seekers impeding economic growth or cutting spending (austerity)?

  100. David O'Donnell Says:

    The law locks up the man or woman
    Who steals the goose from off the common;
    But leaves the greater villain loose
    Who steals the common from the goose.”

    What Can We Learn From the Policies That Spurred the Industrial Revolution? Rick Bookstaber

    http://www.economonitor.com/blog/2011/09/what-can-we-learn-from-the-policies-that-spurred-the-industrial-revolution/

    And all of our villains run free …

  101. Paul Hunt Says:

    @Jesper,

    “Which is worse, rent-seekers impeding economic growth or cutting spending (austerity)?”

    Reducing rent capture and cutting public spendng aren’t mutually exclusive. A lot depends on what spending is cut. Cutting public spending in those areas where rents are captured and going after the rent capture in other areas is the most effective combination. But, as I suspect you are well aware, it is politically much easier (not in the democratic sense of responding to the weight of numbers, but in response to those who have the ability to exercise power and influence over politicians and policy-makers) to cut spending where hardly any rents are being captured (and even negative rents are experienced) and to avoid curtailing the capture of rent in every other area.

    Nobody will concede that any income they receive might contain some rent. All income received, irrespective of the source, is perfectly justifiable and legitimate. And it is a fact of life that those who capture the most rent are those who have the greatest ability to exercise power and influence to prevent any attempt to reduce this rent capture.

    Conveniently for the politicians (and perhaps conveniently for them also) the macroeconomists who pronounce and advise on public spending cuts are not very adept at identifying the impacts of cuts in different types of public spending. And the microeconomists tend to go to ground when there is a requirement to identify the potential to reduce rent capture in other areas. When a few are flushed out they wring their hands and talk about the difficulty of implementing the reforms, or how it would be a ’slow burn’ in terms of generating meaningful benefits in relation to the effort expended, or how there could be serious unintended consequences.

    The cowardice and hypocrisy stink to high heaven.

  102. Michael Hennigan - Finfacts Says:

    @ David O’Donnell

    Theodore Roosevelt reputedly said: “A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad.”

  103. Gavin Kostick Says:

    @ David and Michael

    “It is easier to rob by setting up a bank than by holding up a bank clerk” - Bertolt Brecht

  104. PR Guy Says:

    @Ceterisparibus

    “Will this be classified as historical.”

    The ECB has always rejected outrageous suggestions that its bond-buying programme was linked to demands for austerity cuts and emphatically continues to deny this. The comments in this irresponsibly leaked letter were merely suggestions from the ECB to Silvio, made after he had sought their counsel and, being a man of probity who takes the welfare of his country seriously, he was already considering such actions as were laid out in this letter.

    Sorry….. I can’t go on and keep a straight face.

    The only thing that’s (hopefully) history around here is Silvio.

    I would like to know what was in the letter JCT sent to Brian Lenihan last year.

    He sends these kind of “I’m going to hold a gun to your head” letters out all the time. The guy is a power-crazed psycho.

  105. Brian O' Hanlon Says:

    Michael Hennigan wrote,

    For example tarring bankers and developers as greedy and egotistical may bring some satisfaction but how do most people behave in a system with limited accountability; the absence of concern for conflict of interest and weak/selective enforcement of rules?

    Four years after the onset of the credit crunch, has Ireland embraced change or is it more satisfying to focus on failures elsewhere?

    The distinction which should be made here, is the areas where change is forced upon individuals - and other areas of the economy - where change is something folk only have to deal with in the abstract sense. That is, change, is used as a word in a title of a brightly coloured cover of a new official policy strategy document. When you mention McCreevy, Ahern, Harney, what springs to mind automatically is the notion of these brightly coloured, shiny, policy documents with McCreevy’s big huge set of teeth barred beside it for a photo shoot on the steps of some government department.

    It really became politics as celebrity. The cult of personality. The cult of the Sunday morning radio chat show panel, about the glossy new brochure, and how it all fitted into the news cycle. The payment to public relations companies to dovetail together, the news cycle, the public launch, the logo that costed a million bucks, and yeah, the minister for ‘X’s’ set of big white teeth in the picture. The coffers full of over flowing cash reserves, to pay back into the private sector consultancy sector for the same glossy pictures and covers, and policy making titles with words like change, in them.

    Then at the end of it all, we discover that what happens in the chamber of the Oireachtas on Kildare street is hardly anything at all. That the entire amount of change management, is that which can be facilitated between different people sitting on different stools in the pub in Kildare Street. The question I have to pose to the readers here of the Irish Economy blog site is: was the major end result of all the policy document pushing about, and photo opportunities during the Ahern/McCreevy/Harney years, simply to dilute the basic meaning in the mind of Irish society, of words like change? Did we end up in a situation, that we had this word targeted at us so often, and in so many ways, that we as a society simply developed an immune system, to shut it out? BOH.

  106. Rothbard Says:

    “I have been reliably informed that a well-known department stopped teaching its undergraduates IS-LM just before the crisis hit in 2008.”

    What? The loss of one undergraduate macroeconomics course in one university department caused the crisis of 2008?

    Come back Brian “Lehmans” Cowen, all is forgiven!

  107. Gavin Kostick Says:

    As he keeps getting mentioned I was just reading Steve Keen’s Debtwatch and this bit jumped out:

    “INET grant recipients [George Soros funded Institute for New Economic Thinking] already include Barry Eichengreen, a professor of economics at the University of California….

    “Professor Eichengreen is using the grant to “ramp up” production of economists with an understanding of history who can contribute to public policy debates.”

    Could the same happen here?

    http://www.debtdeflation.com/blogs/

  108. Barry Says:

    Eureka Says:
    September 29th, 2011 at 7:34 am

    “Economic history tells us that colonies never thrive.”

    Huh?

    ” The proposed financial transaction tax will cost us jobs.

    Bullsh*t; it’s not honestly deniable that letting the financial elites
    do as they will has and will cost us jobs. They need to be reined in, by a choke-chain.

    “Enough of the history we need to get out of the failed union now.
    Why don’t economists analyze this kind of thing?”

    Have you honestly not been reading Krugman?

  109. Barry Says:

    Jesper Says:

    “A professor in art knows the theory of art well, is the professor a good artist?

    A professor in physics knows the theory of physics well, is the professor a good physicist?

    A professor in economy knows the theory of economy well, is the professor a good economist?

    Who is better off? The country with a trade surplus but doesn’t get paid or the country with a trade deficit but doesn’t pay?

    Which is worse, rent-seekers impeding economic growth or cutting spending (austerity)?”

    I don’t know what you’re getting at here, but perhaps I’m reading it wrongly looking for logic.

  110. The Dork of Cork Says:

    Watched Adam Curtis latest piece about the Hayek Freaks - its a much watch - he ripped the mans beliefs into shreds.
    Am enjoying quoting his very dangerous & subversive denationalisation of money treatise on Zero hedge which is the mother of the Euro creature from the lagoon.

    Americans are so damn naive - put another belief system in front of the old belief system and they believe everything - even after all these years they want more of this shit but with a different colour.
    So they had Friedman who was a nationalist who ignored the role of his credit buddies and now they want Hayek who ignored the role of power dynamics completly - brillant just brilliant.
    You just can’t make this stuff up - the only problem is Europeans are just as dumb as the Americans……. its bad for the ego really.

  111. ObsessiveMathsFreak Says:

    And am I right in guessing that OMF is still entrapped in an outdated ideological model which maintains that scientific methodology, and the scientific truths which flow from the successful application of that methodology, can only be accounted “scientific” if they presuppose methodological and/or ontological atomism?

    A wild Philosopher of Science appeared!

    Even modern physics has long since moved on from where OMF is intellectually parked – back in a Laplacean universe it would seem.

    Philosopher of Science used “Paradigm shift”!

    …It wasn’t very effective.

    Philosopher of Science became confused.

    Geisteswissenschaften are here to stay, and they are just as much Wissenschaften as are Naturwissenschaften. Don’t ontologize your ignorance and embarrass yourself in public by saying that because you can’t – or wouldn’t – do it, it can’t be done.

    It hurt itself in its confusion!

  112. Jesper Says:

    @Barry,

    a professor in modern art isn’t necessarily a great modern artist. Would you agree? Or would you hire a professor to do modern art?

    My point is that most, if not all, in positions of authority in economy has lots of knowledge in economic theory and yet many seem completely at a loss in economic practice.

    Physics is science. Economy is more similar to art.

    As for the trade deficit/surplus: I’d be happy to let people work for me for a promise that I’d pay them. I’d have a trade deficit, they’d have a trade surplus. Not paying them would leave me with lots of work done for free. Who would be better off, me or the people who worked for free?

    Rent-seekers starve the economy, yes?
    Cutting spending starves the economy, yes?
    Which is worse?
    The answer is: It depends.

  113. billyblog Says:

    I’m puzzled by:

    Brian Woods in his September 29, 2011, 7:20 am response to my post of September 28, 2011, 2:24 am on ObsessiveMathsFreak post of September 29th, 2011 at 12:33 pm

    “@billyblog: “Economics is not a science. It … … it can’t be done.”

    Could you possibly re-write this in an intellectually, meaningful way. Thank you - and leave out the ad hominems.”

    To exhibit the entire sentence which Woods apparently has a problem with:

    “Don’t ontologize your ignorance and embarrass yourself in public by saying that because you can’t – or wouldn’t – do it, it can’t be done.”

    Contextually this was preceded by a sentence which invoked a fairly mainstream discussion which has gone on since the pre-Socratics though the specific German terminology used below only began appearing in the later 19th century in, duh! Germany:

    “Geisteswissenschaften are here to stay, and they are just as much Wissenschaften as are Naturwissenschaften.”

    And apart from this specific framing, the majority of the blog post was clearly – I would even say intelligibly — making the point that it seemed a bit jejune for anyone to makes sweeping claims about the predictive failures of Economics – apparently because economists don’t know how to use mathematics the way OMF thinks is proper – when the starting point for the Kevin O’Rourke blog post as a whole had been some comments by Paul Krugman.

    That would be the Paul Krugman who appears to have recently made some stunningly accurate – and vitally important for policy makers, though possibly not for obsessive mathematicians – macroeconomic predictions, all with the aid of what most people would not hesitate to call quantitative models.

    To preempt a sophomoric objection: There is no such thing as a “pure” quantitative model. Intuitions of a “qualitative” nature support every model to one degree or another. Otherwise the model couldn’t be built in the first place, and couldn’t even be communicated. Sorry, we don’t live in a Pythagorean universe. BTW, from his other remarks in the discussion, I think Woods would agree with what I’ve just said.

    So why am I getting my knuckles wrapped by the censorious Mr. Woods in this case?

    Is Woods perhaps unfamiliar with the millennium old Geisteswissenschaften/Naturwissenschaften discussion? If that’s Woods’ problem, I can recommend that he Wiki the terms to see if he finds the explanation there “intellectually meaningful,” and do a bit of brushing up on the pre-Socratics, Plato, and Aristotle as well.

    Or maybe his problem that he’s not familiar with enough philosophical terminology to grasp the admittedly quippish use of the phrase “ontologize your ignorance”? Let me try a rephrase on this:

    To ontologize one’s ignorance is to conclude that because I do not understand or accept something as being true it cannot be true.

    Any clearer Mr. Woods?

    And darned if that doesn’t sound a whole lot like “because you can’t – or wouldn’t – do it [i.e., quantitative model-based economics à la Krugman, and a few others], it can’t be done.”

    And double darned if that doesn’t sound like a pretty precise characterization of the “tone” in OMF’s voice when he said:

    “But as a quantitative scientific discipline? With predictive models and data analysis? Not a chance.

    Not to mention the unvarnished claim:

    “Economics is not a science.”

    But let me guess. Despite the attack on my comment’s intelligibility, would I be correct to conclude that the comment about “intellectually meaningful” was just a head fake for what really concerns Woods, namely, that to his ears at any rate, the gravamen of his complaint is that my remark is unacceptably “ad hominem,” in particularly because I talked about someone “embarrass”ing himself in public by ontologizing his ignorance.

    But, if that’s it, I am led to wonder why Woods doesn’t have a problem with what I just (accurately, and not at all out of context) quoted OMF as saying?

    “Economists: Stick to your history books and social studies, because the maths is not with you.”

    Oh, what a perfectly decorous way to put the matter.

    ObsessiveMathsFreak clearly has no problem pillorying the intellectual shortcomings – in his case vis-à-vis mathematics – of an entire class of homines. My comment at least had the virtue of not implying that every mathematician – or whatever it is that provides OMF with his soi disant obsessiveness about maths – thinks the use of mathematics in the practice of Geisteswissenschaften is condemned to be otiose.

    And, By Jesus and By Golly, look what OMF himself said less than five hours later in this same blog:

    “ObsessiveMathsFreak Says:
    September 28th, 2011 at 5:05 pm

    What do you make of Steve Keens disequilibrium models? Being not a maths freak myself I’d be interested to know. They can be found at his blog debt deflation.

    I’ll be damned. An actual system of differential equations modelling credit flows. Might be useful for macroeconomics I suppose, assuming that the model’s assumptions are actually valid. (Since their creator claims they are based on the rules of accountancy, I’m inclined to think they are not).”

    And, again, just three hours later, having overcome his initial purist sniffiness and actually looked at the Keens models:

    “ObsessiveMathsFreak Says:
    September 28th, 2011 at 8:41 pm

    Those Steve Keen models are actually fascinating. This is the very first economic model I’ve ever come across which makes any sense mathematically, and it actually appears to have predictive power. I especially liked his model of the runaway bank with an incentive to both lend and to make people pay less interest on their loans.

    If nothing else, I think his model will become a classical example in Ordinary Differential Equations, the next step up from the predator/prey equations. (This usually means that the model is correct by the way).”

    Gosh, that zero probability OMF had announced with his “not a chance” obiter dictum at 12:33 pm on September 28, 2011 had, a mere eight hours later evaporated and been replaced by a veritable benediction from OMF for an acceptable, quantitatively-based, predictive economics model.

    Well, thank you OMF for now giving us permission, after all this suspense, to entertain the possibility that you may have been wrong (embarrassingly wrong, you think, maybe?) when you said, just eight hours before, “not a chance”?

    So all we need wait for now is OMF’s lapidary explanation for why Paul Krugman was able to fool the Nobel Prize committee in 2008 into thinking that he was constructing quantitatively based models that could predict interesting forms of economic behavior when it came to trade and economic geography, and why today’s austerian inclined policy makers would do well to consider why the, clearly, only qualitatively based lucubration on economic policy in, say, the editorial pages of the Wall Street Journal, is not very helpful, and that they would be better off paying attention to Krugman’s much more quantitatively based – not to mention data observant – models. After all, they only appear to have predictively been nothing but right about most of what he has written about in terms of the macroeconomics of a liquidity trap situation, among other aspects of the financial crisis which had its original Big Bang on September 15, 2008.

    Let’s have some analysis, and not an – there is no other word for it – embarrassing sneer.

    And I sure hope his ad hominem sniffing “enforcer,” Brian Woods, gives him permission to delve into such matters.

    BTW, somehow I don’t think that the person who could say flat out, with no apologies,

    “Economists: Stick to your history books and social studies, because the maths is not with you.”

    has any problems with a robust and lively discussion.

  114. David O'Donnell Says:

    @billyblog

    .

  115. David O'Donnell Says:

    Today’s history … tomorrow’s crisis

    Tension Mounts Over Bank of Italy Nomination
    President Napolitano concerned to safeguard central bank’s independence

    http://www.corriere.it/International/english/articoli/2011/09/28/verderami.shtml

    Lorenzo sitting and praying by the phone .. sitting and praying … waiting .. waiting for Godot … sad.

  116. Ordinary man Says:

    DoD

    +1

    ‘To preempt a sophomoric objection……’

    Living proof that an education can be wasted in narcissism as opposed to enlightenment and the common good.

  117. Eureka Says:

    @ Barry
    “huh”
    Huh back at you?

    The financial transaction tax would be fine if it was introduced globally by everybody. The British won’t bring it in and all our financial services stuff will go there.

    The only way of reining in the elites is through a co-ordinated global effort. Piecemeal stuff just won’t work.

    What I really would like economists to do is to do a war-room for the citizens (the elites already have done theirs) where ideas like defaulting (when and by how much and with whom) and exiting the Euro (when and with whom) can be teased out in terms of pros and cons. THey don’t seem to be doing that.

    But still…it’s good to talk!

  118. seafoid Says:

    Shamrock rovers are still going unlike the country’s financial sector. And they were 1 up against Spurs. But now it’s 1-2.

  119. hoganmahew Says:

    @Eureka
    Well, offshoring could be avoided if there is a higher transaction tax to and from the eurozone than the one within it. Countries that also levy a transaction tax could partake of the cheaper rate.

    @seafoid
    So 1-2 up now? They still have Neutrino at number 9, right?

  120. The Dork of Cork Says:

    @Eureka
    We are 20 years into this post Maastricht phase and just like the last time during the act of union our consumption is declining per person - by this time line withen another 20+ years we will have a famine in this country.

    We need to break now whatever the cost - as the longer we wait the more they will extract.
    Its not a time for academics - enough with them - its a time for men of action - we have been at war for 20 years and have not known it thanks to our precious euro fed academics

    When Albert Reynolds came back waving that piece of paper it should have clicked - I know I did and I was only a teenager at that time - we have been sold a pup.
    No more appeasement no matter what the cost - The ECB has been bombing us with credit weapons of mass destruction for nearly 20 years we cannot just sit there and take this new phase of war - money deflation.
    We need to respond whatever the cost.
    We need to defect and stuff their greedy mouths with punts - they will of course respond with a trade war but so be it.
    I want no more part of this silent takeover.
    Listening to that Pseudo - Cardinal Barroso is already to much for me - he uses every crisis as a excuse for his sick federalist ambitions.
    Europe is not the US - it has no common belief system - it is a collection of tribes - completly different from the US - as they were all puritanical rejects until industrialisation.
    ENOUGH WITH THIS TALK……….lets identify & expose the cuckoos , print tokens and move on whatever the cost.

  121. Ordinary man Says:

    Here is one for Namawinelake

    One acre of development land in Ballygowan Co. Down purchased by developers in 2007 for £1.7m.

    Sold last night at Public Auction in Belfast for £94k

    http://www.osborneking.com/siteFiles/resources/auction%20pdf/catalogue.pdf

    A history lesson if ever there was one - read it and weep?

  122. Eureka Says:

    @Hogan
    Good point - though not entirely convinced.

    @ Dork
    On the same page of that crazy book. Borrosso vs the markets - always gonna be one winner there. With generals like these it’s foolish to be cannon fodder in their fight. Just leave them to it. Ireland needs to get out of this doomed enterprise. Time to stop fighting other people’s battles. German unemployment drops at our expense - no thanks

  123. Ordinary man Says:

    Regarding previous.

    http://www.bbc.co.uk/programmes/b0156fcg

    About 40 seconds in to the introduction.

  124. CMK Says:

    Do any women post here (aside from Sarah Carey)? Is economics the ultimate boys club? I’ve read through the entire comment section and apart from a handful of posters it’s clear that the rest are men? Are women barred from irisheconomy.ie?

  125. grumpy Says:

    Economic history eh!

    Does this sound vaguely familiar?

    http://www.ft.com/cms/s/0/587c4d0a-e8ef-11e0-ac9c-00144feab49a.html#axzz1ZNqNlXiF

    “According to government data, Chinese property prices have risen 60 per cent since the end of 2006. However private sector estimates suggest that in many areas the jump in prices is several multiples of the official figures.

    Partly as a result of the dearth of accurate, comprehensive data on supply and demand for housing in China, there is a wide array of opinions about whether the market is a bubble, and if it is, whether it has started to burst.

    What is without doubt, however, is that Chinese property developers took on enormous amounts of debt in recent years as they pursued aggressive expansion plans, leaving them little room for manoeuvre if property sales do fall.

    Making matters worse, developers are losing access to funding, having been frozen out of public bond markets for the past three months. Meanwhile, state-owned banks are following government orders to rest­rict lending to all but the most powerful developers. “

  126. aiman Says:

    Stop worrying, Grumpy, it’s probably a newish paradigm. It might even be just a backwash from the French revolution, if Zhou is to be believed.

  127. Desmond Brennan Says:

    Brad deLong quite correctly points out that there is a MASSIVE FREE LUNCH available for the US:
    http://www.project-syndicate.org/commentary/delong118/English

    It would set the cat among the pigeons were they to eat it…with I reckon China threatening to nuke them ;)

  128. Ordinary man Says:

    @ Grumpy

    The Chinese will cover the banks as they did in 2008.

  129. The Dork of Cork Says:

    Talking about recent History … listening to the VB show tonight and God help us all Eamonn Ryan.
    I always thought a PRIME MINISTER & not a President must legally consult with cabinet before major decisions such a that faithful guarantee - but I can kind of understand why he did not bother when Eamonn could waffle on for hours about something completly tertiary.
    I can see why Browne let the fool waffle on ( so that he could let something slip ) but Jesus - to think that the likes of that was running a energy department !!!!!!!
    Every time I listen to the man I cringe.

    @Eureka
    I have nationalist preprogramming but I would accept a run towards Sterling in return for a loss of sovereignty in a Hollyrood like Leinster house - I don’t see any other way other then outright trade war with the continent - whatever happens it will be tough - but I don’t want to give those Euro clones satisfaction anymore - other then if our taoiseach challenge the dwarf to a duel.
    Pay per view obviously in this monetory period of history.

  130. David O'Donnell Says:

    Cartoon of today ….

    Fingers chasing Angela … !!! Three years to the day … !!!

    http://www.presseurop.eu//en/content/cartoon/1005921-saved

  131. ObsessiveMathsFreak Says:

    Wild Philosopher of Science used “Wall of Text”.

    The Blog is fast asleep!

    Well, thank you OMF for now giving us permission, after all this suspense, to entertain the possibility that you may have been wrong (embarrassingly wrong, you think, maybe?) when you said, just eight hours before, “not a chance”?

    Philosopher of Science used “Contextomy”.

    It reveals it’s ignorance of the topic!

  132. Ordinary man Says:

    @ grumpy

    The security of the party and state (with apologies) ‘ uber alles’

    They, the banks, will do what they are told.

  133. veronica Says:

    The problem I tend to have with economists is that they don’t understand enough about history, Worse, they dont understand anything about philosophy either.

    They need to. Otherwise, common sense as they perceive it, becomes neither common, nor sense.

    On this thread, I’m with Michael Hennigan, I think. He combines ‘common’ and ’sense’. I m also usually with Philip Lane on this site because at least, he thinks about issues before going public and, consequently, much of his ideas are either nothing short of brilliant, or at least worthy of being considered further. He’s the least reactionary economist on the record.

    Im afraid I’ve come to believe that macro-economists have a limited contribution to make to the resolution of this present crisis. Events should only ever be judged in the context and culture of their particular time, in any case. Nineteenth and twentieth century political/economic philosophies have severely limited relevance to our current predicament. It’s time for radically new poltiical thinking.

  134. Enda H Says:

    I’d like to make an admittedly defensive point to the people complaining about economists not being good at maths, or focusing too much about maths, or not knowing enough history or philosophy, or being too politically motivated, or whatever: how would ye know?

    In much the same way as when ObsessiveMathsFreak complains that he’s never read an economic model that’s “made any sense mathematically” it’s clear that he just hasn’t seen that many economic models, I think most people here haven’t met that many economists.

    I’m in a PhD program in the States. I know about fifty people with (or who are close to obtaining) PhDs in economics. Within a group you’ll always have variety but there are general themes, and to the extent that there’s a “representative economist”, I think none of the offered critiques hold that much weight.

    The average economist from those I know can be summarized thus: fairly quiet, polite, male; cannot dance; drinks too much coffee; undergrad degree in maths approaching an A+ average; slightly left-wing, somewhere near Labour/the Democrats; bored by and completely cynical of politicians; spent a year or two working for a think tank or in consulting; thinks a lot of modern macro is a load of crap, but still admits that some good came from the approaches of Rational Expectations/DSGEs/Efficient Markets Hypothesis etc.; uninterested in the debate about whether economics “is a science” or not, far more interested in whether it’s useful; and, pretty importantly, most have an encyclopedic knowledge of the world. I’ve read the books by JJ Lee, RDC Black and Louis Cullen etc, but more than once I’ve been casually corrected on Irish or European history by an American. Essentially, the average economist is a nerd - I’d be slow to assume they’re ignorant of the broader context of their insights. Perhaps they simply weren’t able to make their models more mathematically complex, or with a deeper insight into the cultural context, etc; but that’s not to say they ignored it. Sometimes these questions are just very hard.

    I’ll grant you that quite a few economists I know don’t have much in the way of real-world experience of stacking shelves or starting a business, but nobody has mentioned that yet; nor do I think it’s a requirement to have good insights into e.g. what explains inflation.

  135. Brian Woods Snr Says:

    @ EH:

    I’m one of those who am wary of the use of so-called economic math models in an attempt to both understand and somehow ‘control’ (using vast mad, bad and dangerous social experiments) the part of this planet we humans inhabit. Math is most logical: folk are most quirky. Something will snap - and it has, quite a few time unfortunately. Now, seems to be the worst so far.

    My biggest gripe is that those economists of my aquaintenance, including those on this blog, never explain their physical model of the economy, not the ***ism they espouse, but how the ***ism will actually work in a real, finite world. If they fail to articulate a real economic Model-in-Use (eg. Permagrowth) then I can only assume (until they appraise me otherwise) that they have an inadequate, ill-structured and possibly, naive view of what economics actually is attempting to achieve - a genuine understanding of human development in a highly technological era, where we have an absolute dependence on an energy resource which is showing definite signs of faltering.

    Think of it like attempting to climb up a slope whose gradient is slowly increasing. The physics of this (which has real math models, that bite down real hard!) will do for you. This is the math I believe in.

    A little word of cautiion about very bright folk. They can be as thick as Yak shit! - whilst still being very agreeable folk to be in company with.

    Brian Snr.

  136. Paul Hunt Says:

    Thank you, Enda H, for presenting such a compelling description of the broad range of characteristics/interests/attributes of higher level graduate economists and the reality in which they operate to acquire their qualifications. Most of these graduates tend to go in three different directions - the larger private sector firms, the broad ‘government machine’ both nationally and internationally and academia/research.

    Those who join the larger firms are compelled to support and advance the interests of these businesses; irrespective of their capability (or indeed knowledge of economic history), they will have little to contribute that is in the public interest - unless by chance this happens to coincide with the interests of their employers. And we can never know when this might be the case, so it is wise to be sceptical.

    Those who join the broad ‘government machine’ may be able to apply their knowledge and skills in the public interest, but, unless they ascend to the top decision-making levels of these organisations, bodies or agencies, they will have little direct influence on public affairs. It is, of course, important to have intelligent, assertive critical-thinking economists within the machine, but the safer, more lucrative approach is to keep one’s head down.

    Only a relatively small proportion of those who enter academia or research will be working in areas with a direct public policy impact. But the nature of their funding and the milieu in which they operate tends to compel them to keep their heads down as much as those in the government machine and the extent to which they may be conflicted or compromised means that they may be even more constrained than those in the private sector. Some are absorbed by the government machine - which imposes its own constraints, while others, who might loudly proclaim their ‘independence’, struggle to couch their public utterances in a manner that will not attract the wrath of the ‘powers-that-be’.

    So the research conducted and reported and, for example, the posts on this blog, will all be carefully pitched and calibrated to convey the impression of an academic economic community actively engaged in the public policy discourse (particularly at this time when there appears to be a signifcant public demand for such a discourse and some enlightenment). But it is largely an optical illusion. Apart from the abortive anti-NAMA campaign, there is and has been no attempt to explore, expose, extract, dissect, contest or scrutinise the huge volume of government policy-making activity going on behind the scenes, but about which a great deal is known by the academic ‘insiders’.

    Policy decisions are always announced as a fait accompli. There is a splurge of media and blogosphere comment which will haveabsolutely no impact on the decisions made. The Oireachtas will be granted time for ‘debate’ before it rubberstamps whatever legislation is required.

    Why should anyone be surprised that we’re in the mess we’re in, when there is no effective scrutiny and contestation of public policy proposals prior to the decisions being made behind closed doors?

  137. seafóid Says:

    @ grumps

    Everyone is at it. This is from a consultancy in Switzerland
    Let’s play the music and dance.

    “For terms shorter than 14 years, the current yield curve is still lower than the minimum guarantees in Swiss group life business (legally set at 2.0% for 2011) and most individual life business. Despite the SST leading insurance companies towards lower-risk investment strategies, the combination of low interest rates and significant guarantees leaves a number of insurers, in particular life companies, invested in comparatively riskier asset classes such as real estate or mortgages.”

  138. zhou_enlai Says:

    I find myself wondering does it all come down to the difficult balance between money in circulation, credit, money multipliers and distribution of wealth.

    Is there anywhere I can look to find a basic exposition on how these factors interact? Although records may have been less detailed in the past one would think that the lesser complexity of the historical economy might make it easier to glean lessons from what has happened before.

    My instinct is that the more losses we can impose on the very wealthy, and the more we can redistribute stimulus to the average citizen, the more healthy the system will be.

    If that is the case, it seems perverse that we are seeking to make good the bad debts of the wealthy lenders (that is oensioners and investors) at the expense of the tax-payer, bank customers, and insolvent debtors. We are leveraging-up to make a bad situation worse.

    The only solution that might allow us to over-come this vicious cycle may be exit from the Euro. The greatest concern for Germans handing over their money is “will this work?”. I think we should feel some solidarity with them.

  139. TheBeantownCrier Says:

    Being a Yankee (from that part of the States where Harvard Square is but a stones throw), and a very sad one, I am full of empathy for my Irish friends here whom I’ve yet to meet.

    First, what a great post, and even greater communal sharing and outpouring of ideas, observations, knowledge and study! I thank you all for the time you’ve taken with your posts, and with your good faith participation in this dialog (you know who you are).

    First, to clear my mind: @ObsessiveMathsFreak if I didn’t know better, I’d brand you an outright troll on this blog. Your pronouncements on economics (and billyblog) remind me of nothing so much as a child, who, having once found a new toy they don’t yet understand, endeavors in a fit of self indulgent frustration to throw it on the ground in a futile effort at breaking it. Your inability to come to peaceful terms with economics, as practiced past or present, is a reflection on you and nothing else.

    It is a bit wincing for me to see your continued painful writhing, and apparently obsessive need to come back for more, in a vein attempt to wiggle free from a silly trap you intended for others, but have only ensnared yourself with.

    Your repeated retreat to sarcasm is always the last resort and hiding place of a man bereft of logical riposte or “responsa”. It is the mark of a child who can no longer punch above their weight class having roused a foe they could not possibly have anticipated.

    Your mind, education, and life experience are all together not yet equal to the facile task your overly ambitious sense of self sets for them. But as the Dalai Lama says, “Never ever give up.”

    The charge of narcissism against billyblog is misplaced. The fact is this: some youths, all of us at one time or another, and still, need firm correction, need to be humbled. That is in fact in service to the common good, and to the proper care and feeding of the intellectually curious but still “arrogant in their ignorance”.

    @Dork of Cork:

    I wish I did not feel it was true, but I think you are absolutely correct in your assessment of the likely and devastating continued thrashing of Ireland’s citizenry by the creditor class.

    I wonder if you are aware of, or have in mind, forms and venues for popular political action in Ireland of the kind you deem necessary for societal relief?

    What form would action take? What structures, political and public, exist to support action that does not have as its end and objective the continued bloodletting of Ireland’s people?

    I myself am of the same relative mind when it comes to my sick and on life support country. It is truly horrifying and deeply disturbing to me when I talk to peers, and the young of only a decade less years than I.

    There is a quality of complete and unexamined indoctrination, naiveté, anti-intellectualism, anti-data, anti-facts, and misinformation in the kinds of positions, both political and economic, I hear from the mouths of people I believe are essentially well-meaning educated people.

    And these are not the 1%, not the 2%, these are not even the top decile income earners I’m speaking of. These folks don’t even know which side of the bread is buttered, let alone who butters it.

    Perhaps there could be a way to foster cross-country political action?

    I am thinking even like “sister cities”, but of an “economically informed character”. Some kind of forum to gather and garner support for actual political change to mitigate, or at least slow down, the rentier class and their total devastation of the 98% of the population (the income break percentages in the US).

    Thoughts?

  140. Yields or Bust Says:

    @Paul Hunt

    I’m in violent agreement with you last comment and this is too often forgotten or simply explained away as ‘the system’ . I simply hate that phrase.

    As the VB programme thought us last night the level of policy debate in relation to even the most monumental economic decisions can at times be non existant. It makes me wonder why the Govt and the Govt machine actually bothers preparing report after report and hiring teams of people in their preparation when in the vast majority of cases policy decisions boil down to a chat around the Cabinet table and perhaps if we’re fortunate some meagre input from a Dail Committee.

    Surely the events of the last 10 years have thought us that policy decisioning making is not something to be left to well meaning primary school teachers.

  141. The Dork of Cork Says:

    @The beantowncarrier
    I am afraid I am a complete Dork in matters of poltical organisation and action , in a previous life at a very low level I tried to communicate with workers at the coal face but to be honest they thought I was living on a different planet at the time - I am sure many of the commentators on this site here still do.

    PS - I think you are being a bit hard on Obsessive - he wrote some good stuff recently about the atomisation of our culture because of the internet ,which has relevance to your above comments.
    The internet has paradoxically made us more aware individually but also made mass poltical action a impossibility.
    I just tell people now to make monetory & physical preparations for both the possibility of inflation & deflation and also try to divorce yourself from the matrix / brealdown crisis as much as you can.
    We are living in strange days.

  142. Eureka Says:

    @The Beantowncrier
    First off - interesting name and thought provoking post.

    It seems every generation needs its opium - it once was Religion - now it’s the Internet and mass media.

    The state of humanity is rarely happy. I’m slowly coming around to this (but often change my mind).

    I think physical hunger is the only thing that actually leads people to revolt. If MacD’s were to treble the price of the BigMac Meal then you’d see real trouble! But seriously people put up with a lot. I think misery is as much a natural state of humanity as prosperity (maybe even more so). I think I’m going to hunker down and protect myself. Much and all as it runs contrary to my instincts, self interest is the approach now. I hope I change my mind but alas I doubt it.

  143. ObsessiveMathsFreak Says:

    First, to clear my mind: @ObsessiveMathsFreak if I didn’t know better, I’d brand you an outright troll on this blog. Your pronouncements on economics (and billyblog) remind me of nothing so much as a child, who, having once found a new toy they don’t yet understand, endeavors in a fit of self indulgent frustration to throw it on the ground in a futile effort at breaking it. Your inability to come to peaceful terms with economics, as practiced past or present, is a reflection on you and nothing else.

    I have come to peaceful terms with economics, as a social/historical and qualitative discipline. In fact my position would be–as per the point of the original post–that economics needs to return to this currently neglected aspect of its discipline.

    My issues with economics as scientific/quantitative discipline are I can assure you not unique to myself, and certainly haven’t come about as a result of any lack of understanding of the subject. I’ve mentioned this before, but to repeat myself: Since Ireland has for the last three years been embroiled in one of the most remarkable, complex, and complete financial crisis in history, by now a very large section of the Irish population including myself is extremely well read in economic, financial, and in particular banking subject matter. Perhaps things are different in the US, but in Ireland, people are in fact intimately familiar with the failings of these respective professions.

    So on the matter of economics as a science, I do not accept it as such. A basic requirement of any science is to make accurate, testable predictions, and anyone who has paid attention over the last 10 years can see that economics has failed outright to do so.

    In the boom, we were assured that it was not a boom, that credit would forever be cheap, and that houses would forever increase in value, etc. In the bust, we were assured that it was not a bust, that there would be a soft landing, and that good times were just around the corner, etc. In the recession, we are being assured that it is over or almost over, indeed that it is not a recession, and that austerity is making things better all the time, etc. We are assured all of these things by argument certainly, but also by reference to “sophisticated” predictive mathematical models which quantitatively “prove” the speakers argument, and which of course are quantitatively proved to be complete nonsense within a few short years or even months. The failures of economics as a quantitative discipline are not in dispute–in Ireland at least.

    That of course is even without discussing the failure of economics as a discipline to come to any collective conclusions whatsoever, on any topic. Does government spending increase GDP? Does regulation increase productivity? Are markets rational? What is the price of a tulip? Is there a consensus in economics on the answer to any question? Is there even a consensus on number of possible answers? As a science, economics qualifies for Pauli’s critique of being “Not even wrong”; that is, it fails to make falsifiable predictions.

    Except of course when it comes to the grandest, most celebrated and most agreed upon conclusion of almost every economist in the world(at least in 2008); that free markets are the single best decision making apparatuses known to humanity. That no matter what the problem: stock trading, utility prices, public service efficiency, voting, social disparity, banking, education, etc, etc,… the methods of the market would find the most stable and efficient solution. As we stand in the ruins of the shattered and smouldering building that is western civilisation, many economists still believe it. This is why I recommended that many of them also read, not only about economic history, but also about the history of socio-ideological upheavals such as the protestant reformation.

    These are not my own personal pet peeves, but are increasingly known and acknowledged failings of economics as a scientific study. Over 30 years–whatever it was before–economics increasingly morphed towards a cargo cult science and PR profession in service to the financial industry.

    Personally, I would argue that economics became the analogous to an established church in modern liberal democracies; providing philosophical and “moral” justification to the actions of governments and their “Ancien Régime” of deregulation, globalisation, and the idea of GDP and growth as the primary aspiration of human civilisation.

    These are my views. Some are also the views of others. I haven’t happened by them overnight or in some childish bout of petulance as you seem to think. I’ve come by them over three years of nigh continuous study of the economic, banking, and political crisis, as it has unfolded daily in this country and across the world. I have come by them as history has unfolded, and have turned to history, science, and philosophy–economic and otherwise–to find parallels and answers to our problems. I didn’t waltz in here one day with a thesaurus of ten dollar words and the works of Schopenhauer and start ranting off against the economic zeitgeist just for the hell of it.

    I live in this country and I’m giving my opinion on how it, and its economy should be salvaged, and how it should be run in the future, and what kind of profession we need to do it.

  144. Paul Hunt Says:

    @Y or B

    It seems violent agreement is all the rage nowadays :-)

    And it mightn’t have been that bad if final policy decisions had been left in the hands of ‘well-meaning schoolteachers’. It’s the identity of those who influence them behind the scenes that worries me. I have never gone in for the idea that we need specialists and experts or superhero business bods involved as politicians. It is perfectly possible for quite ordinary people to make sound policy decisions, but only if they make these decisions after a fully contested public debate that draws on all the relevant expertise avaiable, have the ability to exercise political judgement to make that decision in the public interest and can communicate it effectively to citizens.

    And lest I be accused of drifting off-topic, I fully agree with Kevin O’Rourke that an understanding of economic history makes for better economists. But my point is that very few economists (irrespective of their understanding of economic history) have any role to play in the formulation or critique of public policy. And when a huge public demand emerged for economists to explain why we’re in this mess and what needs to be done to get out of it, the economics profession (both here and elsewhere) was at a total loss to provide the necessary supply. Ergo the ‘celebrity’ economists who seek to satisfy this demand.

    And when an attempt is made to provide a supply to meet this demand (such as this blog), most of the principal contributors are constrained, conflicted or compromised in some way and fail to rise to the occasion. Apart from the occasional contribution that proves the rule, most posts seek to conceal this failing by delving into historical events or policy decisions that cannot be undone or external policy or politcial developments over which we have no control or by drowning us in op-eds or international commentary or research by economists rapidly building their citiation record. Anything to avoid considering the public policy debates currently going on behind closed doors that, once final decisions are announced as a fait accompli, will impact on every citizen.

  145. Ordinary man Says:

    @TheBeantownCrier

    I don’t believe in ‘humbling’ anyone child, youth or adult, an arrogance in itself akin to bullying (except of course on a rugby pitch).

    As for my description of the poster as narcissistic - take your pick but I think some of the comments qualified it.

    http://daughtersofnarcissisticmothers.com/narcissism-definition.html

    Just my opinion, but, like economic solutions we may have to agree to disagree on that one - have a great weekend.

  146. Yields or Bust Says:

    @Paul Hunt

    The violence from me to you continues. Spot on.

    I think this issue deserves a separate thread on its own given the precarious state of affairs and the perceived limited options available. Perhaps with a more open debate the perception being peddled that there is only a limited number of options available to us may indeed be as hollow as the nonsense around the time of the Election that there was no need to even bother renegotiating the IMF/EU/ECB agreement

  147. Paul Hunt Says:

    @Y or B,

    Even of there were to be a separate thread (highly unlikely) it wouldn’t achieve much because the principal contributors wouldn’t engage. And even if they were to it still wouldn’t achieve much. That’s not what a blog like this is for. It’s here to allow selected academics to show-off their plumage and to let some of us among the great unwashed sound off - the ‘commenting contingent’ as we’ve been described.

  148. Eureka Says:

    Ro what extent is all history actually economic history. There never was a war that wasn’t driven to some extent by economics. Our famine was also an economic event. Narional socialism was borne out of a shattered economy, the Roman empire grew with conquest to support their economy. Its all economics isn’t it.

  149. On the Contrary » Blog Archive » Preface to “It Really is Just the Economy Part II” Says:

    [...] failure to expand (The Phony Fear Factor).  In a wonderful blog written by Kevin O’Rourke, The Importance of Economic History, he says: “I have been reliably informed that a well-known department stopped teaching its [...]

  150. "The Importance of Economic History" | FavStocks Says:

    [...] The importance of economic history, by Kevin O’Rourke: Paul Krugman is upset about some pretty fanciful accounts of what supposedly happened during the Great Depression, and I don’t blame him. He also wonders whether economics is a progressive science (I am using the word ’science’ in its German sense). Well, one of the things that philosophers of science have argued about in the past is whether, when you have a paradigm shift, you end up losing knowledge, and it’s pretty clear what has happened in this instance. … [F]or example, I have been reliably informed that a well-known department stopped teaching its undergraduates IS-LM just before the crisis hit in 2008. And the result is that you had people seriously peddling the line that austerity would be expansionary in the wake of the biggest downturn since the 1930s — and these claims were influential in Europe, it seems clear, in the fateful spring and summer of 2010. [...]

  151. Adrian Kelleher Says:

    @BillyBlog, TheBeantownCrier, Enda H

    Why anyone would object to a comparison between economics and, say, history is beyond me. Is history disreputable somehow? Or sociology, or psychology? Yet no members of these professions exercise levels of power remotely similar to economists. On those very rare occasions where they are involved in politics they merely inform the civil debate. They do not populate massive numbers of corrupt ‘think tanks’ or spout their paymasters’ propaganda and nor would they claim their views are scientific, only that their judgements have been informed as far as possible by scientific elements.

    If their interpretations of reality were demolished by painful experience their peers wouldn’t passively accept them concocting new rationales (call it retrospective accuracy), dusting themselves down and continuing as if nothing untoward had happened. Above all, if they held the position of deckchair arranger-in-chief on the Titanic, they wouldn’t have the brass necked arrogance to attack their critics for lacking their erudition on the finer points of deckchair organisation.

    The era up to 2008 was the era of the economist. Decades ago, economists served government; now, governments serve to enforce the ideas of economists, especially the central bankers who are without question the most powerful individuals in the world.

    Central banks can only function so long as their job is perceived as being one of technical expertise rather than political judgement. Nonetheless they have involved themselves in political disputes of increasing breadth and gravity for more than a decade now. If this had happened in the context of the mid to late 90s it would have been bad enough, but instead it follows on not just one but a neverending succession of disasters each of which are a direct result of the “modern” and “scientific” consensus of the so-called great moderation: meltdown in southeast Asia and then Argentina, Russia and Turkey, fiascos like LTCM and Enron (which have been far eclipsed since), the dotcom bust, the subsequent deliberate (Greenspan) inflation of a housing bubble and its ultimate collapse amid pervasive and routine fraud in the banking industry.

    A giant hole in the global orthodoxy has been charted by, e.g., Zygmunt Baumann, Dani Rodrik and Adam Curtis. By insisting the patchwork of details they work with is a unified whole, the economics profession obscures the big picture: the fact that the world of their creation has made political decisions of any sort impossible to achieve. Aggregated together, thousands of changes in regulation and law around the world have left governments pitifully impotent in the face of the markets.

    The central bankers have now filled this void by a sleight of hand, that is by insisting that the areas they’ve increasingly taken over aren’t really political at all. Ireland’s case is just an especially sharp illustration of this transformation. It’s not possible to claw back the wealth pillaged from the nation because the pillagers will simply move their money abroad and we have no more power over the new dynasties than medieval serfs. Productive capacity and human potential must lie idle for the same reason, and these policies are presented as scientific inevitabilities.

    What is never stated is the assumption that the only possibility is to accomodate ourselves to a critically flawed global system, a system very much of economists’ creation, that would have appalled Eisenhower or Macmillan as much as Roosevelt or Wilson. The situation is the same in every country, meaning that reinforcing and accelerating the destruction of social democracy is the new imperative.

    It might have been expected that those responsible for such disasters would lose influence forever but this has not been the case (and I invite defenders of the profession to provide a list of their peers who have abandoned it in shame since 2008, or indeed have accepted responsibility in any way for the disaster they engineered. That handful like Austin Hughes and Dan MacLaughlin that have gone to ground were victims of public outrage rather than the censure of their colleagues.).

    As Dean Baker of the CEPR put it in the Guardian: “remarkably, these economists never suggested the remedy that economists usually propose for bad performance: dismissal. There is a vast economics literature on the need for firing as a mechanism to properly motivate workers to perform. This report provides great evidence of the need for such a mechanism. … [Yet] whenever I have raised this point in conversations with economists, they invariably think that I am joking. When I convince them that I am serious, they think the idea of holding economists responsible for the quality of their work to the point of actually jeopardising their careers is outrageously cruel and unfair.” Baker’s point has been picturesquely demonstrated more than once in this thread.

  152. Jesper Says:

    Behavioural economists could and some did predict the crisis. Sadly it was & is impossible for them to quantify the costs of the crisis or when the crisis would break out.

    Mathematical model economists couldn’t predict the crisis. Black Swans is their explanation. Or in other words: The crisis couldn’t be predicted.

    As behavioural economics explains how the crisis could occur it is possible to use their knowledge to minimise the risk of the crisis happening again or at least minimise the impact of the crisis. Maybe some bonus-structures were bad? Maybe some deregulation was bad? Maybe some actions should be punishable?

    If nothing changes in the reward/punishment in the economy then a behavioural economist might find it likely that another crisis will happen.

    Believers in the Black Swans will on the other hand say as it is statistically impossible it won’t ever happen again so therefore nothing needs to change in bonus-structures or anything else & malus is definitely off the agenda.

  153. billyblog Says:

    @ObsessiveMathsFreaks, September 30th, 2011 at 12:27 am

    Thanks for the link to the Steven Keen piece. Interesting piece, though I’m not sure what it contributes to this debate other than to confirm, for anyone who has been following events and the literature, that any number of liberal policy oriented economists, Paul Krugman and Dean Baker, to name two, anticipated significant aspects of the 2008 financial crisis. Especially the coming implosion of the housing bubble which had quite a bit to do with the crash in the U.S., like at Lehman’s.

    And dare I say in Ireland?

    And keep in mind, the fact that Alan Greenspan is an economic hack, who is still lost in his juvenile Ayn Randian fantasies and who could not spell the word science if you supplied him with the first six letters – in sequence – says absolutely nothing about whether the discipline as a whole is a scientific discipline. And one that even makes productive use of quantitative models.

    (I gather you haven’t withdrawn your newly issued permission for us to ignore things you might have said at 12:33p on one day, only to countermand them at 8:41p on that same day, and it is still OK for us to agree that at least some economists use valid quantitative models? It would be so, well, embarrassing, if you did.)

    Consider also that philosophers of science, while perhaps using a more neutral term than “silly,” have long since pointed out the fallacy of saying that “unless you can predict events in advance, you ain’t doing science.” This would mean, among other things, that unless geological scientists could predict within a fairly tight range, and in advance, the next time Mt. Fuji will blow its cork, they can’t be said to be doing science.

    Is there anyone out there – in here? – who would bother with giving such a claim anything other than the Pauli shuffle: “That argument isn’t even wrong.”

    Let’s extend this a bit.

    Though we wouldn’t take away the Ph.Ds of those same geological scientists who didn’t manage to predict the day and hour of Hephaestus’ next fit through Fuji, we would raise our eyebrows a bit if, after diligent post-mortems, they were not able to provide us with a fairly plausible – and thoroughly scientific – explanation of why Hephaestus got upset when he did.

    In short, science often proves it’s mettle as much in retrodicting as predicting.

    You know where I’m going with this, OMF, don’t you?

    So I’ll let you complete the thought.

    And I look forward to your telling us why we should dismiss economics as a science, even after any number of economists, with quantitative models in tow, have provided fairly convincing retrodictive explanations of the what and why of the financial crisis.

    And while you’re working on that response, please provide your rationale as to why what Paul Krugman has been doing is not quantitative in nature and not science. That was what my original amusement with you was about.

    Use the Force, OMF. I’m sure it will help you out.

  154. Adrian Kelleher Says:

    @BillyBlog

    Geological scientists don’t go around making projections about Mt Fuji to two significant figures. They understand the limits of their methods and don’t mix in loads of methodologically unsound mumbo-jumbo. They don’t ignore inconvenient geophysical phenomena like economists do the evidence of anthropology and history, each of which throws up a multitude of examples from outside western experience of individuals behaving in ways that defy rules they act as if were universal truths. They don’t accept funding from manufacturers of lava protection gear. There aren’t geologists who specialise in dressing up systems designed to make sure all the lava hits one town and misses another as being designed to favour all equally. Above all, their profession isn’t riven by ideological divisions and they don’t wield immense political power. Jeez.

  155. Brian O' Hanlon Says:

    Adrian Kelleher wrote,

    Why anyone would object to a comparison between economics and, say, history is beyond me. Is history disreputable somehow? Or sociology, or psychology? Yet no members of these professions exercise levels of power remotely similar to economists. On those very rare occasions where they are involved in politics they merely inform the civil debate. They do not populate massive numbers of corrupt ‘think tanks’ or spout their paymasters’ propaganda and nor would they claim their views are scientific, only that their judgements have been informed as far as possible by scientific elements.

    Nice paragraph. BOH.

  156. Brian O' Hanlon Says:

    Adrian Kelleher wrote,

    The era up to 2008 was the era of the economist. Decades ago, economists served government; now, governments serve to enforce the ideas of economists, especially the central bankers who are without question the most powerful individuals in the world.

    That story, as the subject of a book, is something that aught to be written in the next ten years. It is a book, that I would read. BOH.

  157. David O'Donnell Says:

    Krugman continues …

    ‘Yet it seems to me that there is something different about the current state of economic discussion. Political parties have often coalesced around dubious economic ideas — remember the Laffer curve? — but I can’t think of a time when a party’s economic doctrine has been so completely divorced from reality. And I’m also struck by the extent to which Republican-leaning economists — who have to know better — have been willing to lend their credibility to the party’s official delusions.

    http://www.nytimes.com/2011/09/30/opinion/krugman-phony-fear-factor.html?src=recg

    @Yields or Bust

    Blind Biddy suggest you donate that £50 ould punts to the Merchants’ Quay crew - to buy a few more breakfasts for the victims of our roight_randite PD/FF policies in the noughties.

  158. Brian Woods Snr Says:

    @Billiblog: The correct and proper name for economics is Political Economy: the POL preceding the Econ. Political Economy may indeed be a social science, but that its limit. The inability of economists to predict this current mess is not factually correct: 12 did so, with dreadful accuracy. They left the models at the door. They made persistent and detailed enquiries. The (then) facts pointed toward a v-bad outcome. That’s not science, that’s just good detective work.

    Consider this: You wish to run a nutrient experiment on some monkeys. You will have a hard time getting a permit, and the vet wallas can come in un-announced to inspect the animals and ensure they are being properly cared for. Failure to comply with your permit code and you may face possible criminal prosecution.

    Our economists (and their political sychophants) propose, and implement, vast social experiments on us monkeys and the only vets we have are the SVdP, Merchants Quay, Simon, MABS, etc. And their current report cards are pretty grim reading. Prosecutions?

    I think some folk had better start paying close attention.

    Brian Snr.

  159. David O'Donnell Says:

    @all

    no need to repeat meself - have a little Hayek with a dash of Rand garnished with a hypocritical sauce …. served up by the brothers Grimm_Koch

    http://www.irisheconomy.ie/index.php/2011/09/30/three-and-a-bit-years-on-from-the-banking-guarantee/#comment-174786

  160. billyblog Says:

    @ Adrian Kelleher, September 30th, 2011 at 8:14 pm

    Economists come in all shapes and sizes, from frauds and hacks who are clearly driven by acritical ideology and mumbo-jumbo, to economists, such as Paul Krugman, who seem in what they do to evidence reasonable degrees of intellectual integrity, analytical thinking – and quantitatively based science. BTW, Krugman’s also a pretty good writer and does not score high at all on the mumbo-jumbo scale.

    If you think your implied jeremiad against economists – there I go backsliding into using a term Brian Snr said I shouldn’t use – applies to Krugman, I’d be interested in seeing some details — and documentation.

    Finally, I have no defense against your implicit claim that “harder” scientists never engage in intellectual fraud – for reasons of ideology and/or gain. I won’t even bother Googling the topic, as there would be no hits and it would be a complete waste of time.

  161. billyblog Says:

    @ Brian Woods, September 30th, 2011 at 9:04 pm

    One man’s detective work is another man’s science. Why you might even call it fiscal forensics. Hey, how about a concept treatment for HBO on “CSI Wall Street”?

    But have you checked with OMF on whether it might now be permissible to grant that there just might be a glimmer of valid quantitative modeling in economics – at least according to Pope OMF? I mean it only took him eight or so hours, and a bit of actual evidence, to modify his Shermanesque pronouncement on this particular matter.

    I do, of course, apologize for not understanding that somebody died and left you in charge of the disciplines lexicon. How silly of me — like the Nobel Committee — to use the term Economics rather than Political Economy.

    And thank you for your warning that I should be sure to protect my precious bodily fluids from the “economists (and their political sychophants [sic]).”

    BTW, it’s largely the other way around with the sycophancy, at least from where I write.

    http://tpmmuckraker.talkingpointsmemo.com/2011/07/mystery_solved_ryans_dinner_dates_ided.php

    Finally, though I don’t really care, as long as we’re on lexicography, “the correct and proper name” is billyblog.

  162. Brian O' Hanlon Says:

    Billy Blog wrote,

    If you think your implied jeremiad against economists – there I go backsliding into using a term Brian Snr said I shouldn’t use – applies to Krugman, I’d be interested in seeing some details — and documentation.

    Some fair points, and well made too I might add. But let’s get real. Lets turn this around a different way shall we? Let’s simply ask the question, how many visitors to the Irish Economy blog site, were indeed, readers of Paul Krugman’s work, prior to 2008? Lets ask another question shall we. Lets ask the question, how many visitors to the Irish Economy blog site, prior to 2008, would official claim to be avid readers of material by Paul Krugman, Joe Stiglitz, Roger Lowenstein, Michael Lewis, Kenneth Galbraith or many others. The fact is, quite few would openly claim to like reading an economics book, or an economics history book. What I mean is, the interest in that subject material was confined to a niche. Then what happened in 2008? Let’s ask that question shall we?

    I will try to posit and answer, and see how this flies. I would relate it to the subject of property investment. I recall as a young teenager in the early 1990s in Dublin city in Ireland, I began to study a course known as Architecture. At that time, it was no popular. Ireland had emerged into the decade of the 1990s, from a decade of the 1980s, which saw a lot of problems and very little solutions. But by the year 2000 and beyond in Ireland, it appeared that Ireland suddenly had a solution to everything. In fact, we were supposedly a shining example to all the world. I was personally shocked by the fact that so many young, intelligent graduates from universities in Dublin came out in the 2000’s and tended to believe in all the hype. I was suspicious. But what did that matter? I was old school, out of date, and not trendy enough. Not willing to take a chance. Reach for the stars. Ireland had all the solutions, and anything else was officially un-cool.

    Part of that idea, that a little country such as Ireland was invincible and possessed an solution to everything (even though it was all rotten to the core inside), was tied up in the subject of property investment. Guess what? Everyone was an expert in property investment. Everyone read newspaper articles, and watched programs on TV, and chatted in cafes and bars about property investment. Everyone had become an expert, and everyone had an iron in that fire. Or if they didn’t, they had some scheme to get an iron in the fire. It’s easy to criticise banking institutions in Ireland today, in the absence of the social context that led directly to the property development in Ireland. But the fact was, much of the demand for the same, arose from the aspirations, beliefs and ambitions of the youngest, brightest and most able graduates from the universities in this country.

    This leads me back to my point about Paul Krugman. Essentially what has happened in Ireland in recent years, is that group think of one kind, has been replaced by group think of another kind. The brightest, the youngest and most able people in Ireland today, are all experts on economics and on figures such as Paul Krugman. Where is that going to lead I may ask. I was a frequent visitor to the Paul Krugman, or economics section of the bookstores in Dublin city, over the period of the 2000’s, prior to 2008. However, I would say I was a lonely visitor to the same section. Not many folk in Dublin in that period when all the machinery of the Irish property boom was working full throttle, would even claim to have set foot in the Paul Krugman section of an Irish bookstores - much less, have an opinion about what he wrote. But suddenly, that has all changed in Ireland. Now, everyone wants to shout over everyone else, to claim how much of Krugman they have read, and understand, and can add to. Now, like in the days of property boom, we are in the days of an economics bookstore boom, and everyone wants a piece of it. BOH.

  163. Brian O' Hanlon Says:

    @ All,

    Former Taoiseach, Brian Cowen liked using the phrase, punching above our weight. I don’t know what we are to do about this overly competitive streak in the modern Irish psyche.

    My guess is that, by the time we are all done, it will have been the ruination of us as a people. BOH.

  164. David O'Donnell Says:

    @golbyllib

    .

  165. ObsessiveMathsFreak Says:

    Now, like in the days of property boom, we are in the days of an economics bookstore boom, and everyone wants a piece of it…… I don’t know what we are to do about this overly competitive streak in the modern Irish psyche.

    I take your point, but there’s a lot more going on than a simple urge among Irish people to become more erudite in economics for the sake of it. We’re becoming more erudite by necessity; the country is falling apart and people are trying to understand why, and how it can be fixed.

    The problems of Ireland are multiple and complex. Understanding them takes knowledge of a lot of areas; economics, politics, history, sociology, and sometimes even philosophy. If pub chats now come across as more academic or obviously informed than three years ago, it’s because people have had a lot to think and read about over that time.

    Three years ago, I and probably most other people on this blog and across the country hadn’t a blind bulls notion of how a bank worked, what a bond was, or what a currency actually was when you came right down to it. Today you can probably walk into any bar in the country and find a punter who could explain how fractional reserve banking to for the price of a pint. And it’s not because they would have known otherwise.

    During the second world war, with their sons abroad fighting, rural Irish farmers knew the names of every river, and army on the front, from the Dnieper to the North Sea. And now during the financial crisis, every dog on the streets of Dublin knows their ECB from their Federal Reserve, and their Goldman Sachs from their Deutschebank. Dominque Strauss Kahn was practically a household name in this country–before his run in with the New York maid.

    My guess is that, by the time we are all done, it will have been the ruination of us as a people.

    It was our ignorance which brought us to where we stand today. If Ireland is to escape ruination, we will need education. However your concerns are not entirely without foundation, in characteristic fashion, the Irish are inclined to waste their knowledge and ability writing Nobel prize winning literature about their misfortune rather than actually trying to deal with it.

  166. Mickey Hickey Says:

    For decades it was known as “political economy” a fairly accurate description. Then the practitioners succumbed to the urge to take it out of the social science category and make it respectable like the Applied Science and Science professions. Then with the advent of mini computers and later low cost high powered servers the obsession began with “models” and onward to the tweaking of models.

    I read a few days ago that a few eminent economists in the USA have come to the conclusion that the elimination of hundreds of thousands of manufacturing jobs by Chinese imports has damaged the US economy. The clownishness, foolishness and simple mindedness that hollowing out manufacturing is good for a country because the workers can get $8 an hour in a service job to replace $24-$30 per hour in manufacturing. Economists have a long way to go to regain the respect of the population. I can understand a few economists parroting the Walmart or Citibank company line but when the academic and think tank fraternity blindly adhere to the outmoded models then the profession is beyond redemption.

  167. Brian Woods Snr Says:

    @ BO’H: My Krugman [The Great Unravelling] is 2004 (Lewis I have not read). Now, if you had mentioned William Guider - [The Secrets of the Temple] - bone chilling stuff. I had a very bad sense about this manmade and politically sustained calamity a long time back - say 2005 or so. Tried, vainly, to get some folk to pay attention. But that’s life as they say.

    Brian Snr.

  168. David O'Donnell Says:

    @Mickey Hickey

    What do you think of Rodrik? Think K O’Rourke had a EuroIntelligence thread on this some time back … trying to find some ammo for Minister Noonan on tearing up a few Promissory Notes …. the Tongan/Samoan bodyguards are already booked by Blind Biddy

    Recasting Globalization’s Narrative
    Dani Rodrik
    Although economic globalization has enabled unprecedented levels of prosperity in advanced countries and has been a boon to hundreds of millions of poor workers in China and elsewhere in Asia, it rests on shaky pillars. Unlike national markets, which tend to be supported by domestic regulatory and political institutions, global markets are only “weakly embedded.” There is no global antitrust authority, no global lender of last resort, no global regulator, no global safety net, and, of course, no global democracy. In other words, global markets suffer from weak governance, and are therefore prone to instability, inefficiency, and weak popular legitimacy.
    ……..
    In particular, you begin to understand what I will call the fundamental political trilemma of the world economy: we cannot simultaneously pursue democracy, national determination, and economic globalization. If we want to push globalization further, we have to give up either the nation state or democratic politics. If we want to maintain and deepen democracy, we have to choose between the nation state and international economic integration. And if we want to keep the nation state and self-determination, we have to choose between deepening democracy and deepening globalization. Our troubles have their roots in our reluctance to face up to these ineluctable choices.
    ………
    So we have to make some choices. Let me be clear about mine: democracy and national determination should trump hyperglobalization. Democracies have the right to protect their social arrangements, and when this right clashes with the requirements of the global economy, it is the latter that should give way. [on this one +1 with Rodrik ….

    http://www.worldfinancialreview.com/?p=704

  169. Jesper Says:

    What has been learned from this crisis?

    The ‘Heads I win, tails you lose’ game is still around so I’m guessing the powers that be consider that game to be good (at least for them) and should indeed be left to continue as before.

    Mathematical model economists seem to think that what is needed is to increase the buffers for the losses resulting from the ‘Heads I win, tails you lose’ game.

    Human nature is the same. The same kind of behaviour still gets the same kind of risk/reward. Some (a few) people has been replaced. Seems like the anglo-saxons believe so much in the goodness and incorruptibility of the new people in power that this change is the only one that is needed.

  170. Brian O' Hanlon Says:

    Obsessive Maths Freak,

    I take your point, but there’s a lot more going on than a simple urge among Irish people to become more erudite in economics for the sake of it. We’re becoming more erudite by necessity; the country is falling apart and people are trying to understand why, and how it can be fixed.

    Actually, I don’t believe the problems of Ireland are that numerous or complex. I believe the problems are quite few and quite straight forward. Anyone who was capable of independent thoughts and mind, in the years 2000 to 2008, could easily see how the economy was changing, and the society was also. It was too fast, too loud and too vulgar.

    That is when I began to stock up on economics literature, and try to become more erudite about matters to do with economics. Because I took a personal interest in myself, and making the best decisions I could, for myself. By means of a book by Paul Krugman, or a history lesson by Kenneth Galbraith, I was hoping to make sense of my own times, my own situation, by reference to the descriptions by those great writers.

    My question is quite simple, and is worth repeating again perhaps.

    All the other Irish people were living in the same country as I was. All of them witnessed and experienced the same things as I did - many of them experienced and witnessed it in much more direct contact that I did. Through means of travel, and returning to home again, and drawing comparisons. To a certain extent, I think I used literature as a substitute for travel, and as an analogue of sorts, for meeting knowledgeable people, and holding a few words of conversation with them.

    What I don’t understand, is that in later 2008, why Paul Krugman’s greatest hits suddenly filled the bookshelves of top twenty sellers, in the fore lobbies of Ireland’s best bookstores. Titles, which previously had been resigned to the dark, distant corner of the economics section, where no one except odd types like me, would look. BOH.

  171. Brian O' Hanlon Says:

    @ All,

    I have an answer, I will share with you, to the above question. However, I would like to share the question, prior to my sharing with you, what I think, is an answer. I would like you good folk to digest the question for a moment or two, before we can look at answers in depth. BOH.

  172. grumpy Says:

    @Boh

    “What I don’t understand, is that in later 2008, why Paul Krugman’s greatest hits suddenly filled the bookshelves of top twenty sellers, in the fore lobbies of Ireland’s best bookstores. Titles, which previously had been resigned to the dark, distant corner of the economics section, where no one except odd types like me, would look”

    Its easier to sell people something they are interested in, while they are interested in it.

    Economies are black boxes to most people. Most things are black boxes to most people. If they appear to work few people see any utility in taking much interest.

  173. Brian O' Hanlon Says:

    Grumpy,

    I guess that is a relevant point, and well made. However, to counter your argument, I would ask as follows. If Irish people in the period 2000 to 2008, were so un-concerned about the workings of economics, then why did so many of them speak of the same, apparently with such an authority?

    My interest in the dark, lonely, remote economics section in Ireland’s best bookstores between the years 2000 to 2008 was not a pure coincidence. I remember, I would meet socially with people in Ireland during that time, and many of the Irish would lecture me about money, about buying and selling, about progress and mega projects they knew about or were involved with. I would often say, Wow! That’s wonderful. I’d love to know a lot more, like you do. Can you recommend any good reference?

    But very few Irish people I met, seemed to be working from any text, or any formal academic influence. Surprisingly, it seemed to me, that Irish society had suddenly gained an insurmountable understanding and grasp of highly complicated economic principles, without having ever read any authors. Because, I obviously wasn’t as intelligent as the general mass population in Ireland about money, and about development, and economic ideas, it prompted me to try and combat my ignorance, with some reading work.

    That is my point. I was prompted to read something about the subject, out of frustration, that I seemed unable to understand matters, that everyone else in Ireland seemed to be so deeply informed about. BOH.

  174. Brian Woods Snr Says:

    @BO’H: Re: Your question.

    “I was prompted to read something about the subject, out of frustration … ”

    Back of your frustration? Something was amiss?

    “… that I seemed unable to understand matters, that everyone else in Ireland seemed to be so deeply informed about”

    Ah! But did they really? I venture not.

    In the early lead-up to this mess (2004 - 2005) I was repeatedly taken aback by the low level of intellectual engagement (like, reading anything other than a newspaper or a blog) by many persons I met. In retrospect, it was shocking, but understandable. Its the short attention span, lack of curiosity, blind faith, and arrogance. Bad mix.

    My intense self-interest was sparked by an article I came across, accidently, on a blog. Asserted that Irl was headed for the s**t house. Poked about a bit. Sure enough, the author was ‘on-the-button’. Nasty shock.

    PK was on the shelves ’cause he was awarded that Bank Prize. William Greider (1987) had a much more devastating explanation of the coming mess: unknown. Frederick Soddy (1934) spelt it out in terrible detail (he was awarded the real thing by the way!): unknown outside the nuclear chemistry field. That’s life I suppose.

    Moral: Hit those shelves with monotonous regularity. And be most curious. :-)

    Brian Snr.

  175. Brian O' Hanlon Says:

    @ Brian Woods Snr,

    Just in case it comes up, and it usually does come up at some point. It is the obvious counter argument, and a very relevant one - if we were to hand the management of the Irish economy over to a collection of informed, highly qualified experts - would things have worked out any different?

    I would like to say, that I listened to Constantin Gurdgiev and Dan O’Brien discuss economics on radio last Sunday morning on the Eamon Dunphy show on Newstalk 106. I am quite sure in saying, it was some of the worst radio broadcasting I have heard in my live. That is saying something. It made the Joe Duffy show, at it’s most confusing, sound like a beacon of wisdom and light. But I guess, that does not prove anything, except that a collection of our greatest economic brains in one sound recording studio, does not, good a broadcast make.

    My personal opinion is, that such broadcasting serves only to reinforce the point of view I described in the first paragraph of this comment. I am not saying here, that one or other point of view is correct. But what I am saying is, we could try to maintain a level playing pitch, by not allowing our expert economists to come across on national radio, appearing so clueless. That is just a suggestion. But I am not a broadcasting professional. BOH.

  176. Brian Woods Snr Says:

    @BO’H: Experts ??? God forbid!!!

    We have - for better or worse, elected reps to do the business. We just need to be able to hold these bozoes by their testicles, which is somewhat difficult.

    “…we could try to maintain a level playing pitch, …”

    Never again! That is the classic mistake, ‘play fair’. It will be hijacked, abused and cheated on - and all the time the slimey so-in-soes will waffel on about productivity, competitivness, competitition, freedom of choice for the individual, the Market, and any other piece of PR crapola that they can muster up, such as, “Let’s create a level playing pitch here …” 8)

    By all means have a constitutional prohibition on deficits for current expenditure, (keeps the pols in check), full FoI (so we can get at the relevant briefing docs), and an unfettered Ombudsman free from Supreme Court challenge (put the fear of God in a few arrogant folk).

    Brodcasting professionals? Joseph Goebbles comes to mind. But, I take your point. You need good editorial skills, be as tuff as steel, have rat-like cunning and be willing to disconnect instantly, any waffler who moves off topic and starts an ideological rant. Advertisers might object! Esp if they were of the of the modern, mugging species (financials).

    Brian Snr.

  177. Brian O' Hanlon Says:

    Brian Woods Snr wrote,

    By all means have a constitutional prohibition on deficits for current expenditure, (keeps the pols in check), full FoI (so we can get at the relevant briefing docs), and an unfettered Ombudsman free from Supreme Court challenge (put the fear of God in a few arrogant folk).

    I applaud that spirit. But I still don’t think you have gone far enough.

    What I would add to the above, is that the Irish might cease to investigate the events (or crimes) carried out on the island, in the 2000’s using a police force - and instead establish a body of investigative talent - which could study the same events as acts of domestic terrorism. Freedom of Information will certainly help. Forensic financial accounting investigation will certainly help. But from a mentally point of view, I think we have to realize that many of the property developers, civil services, politicians and bankers were actually domestic terrorists, and nothing short of it.

    If you had known some of the people in question, you would come to the same conclusion. Like in many cases, around the world, we see that people who establish such a religion, believe intensely in their mission. That was the case with the Irish property developer also. They believed that their mission was going to establish Ireland as some kind of super born. That it would be re-born. I’m all for freedom of religion, but if one exists in a country, and it ends up causing as much damage as it has done, then questions need to be asked, and investigations carried out, along the lines I describe. It goes a bit deeper than forensic accounting investigation.

    You have to realize that property development in Ireland is a religion. It is a cult. It is a fanaticism. It is committed to visiting acts of terrorism on a people, until that same people, are able to protect themselves. How do you achieve that? BOH.

  178. Brian Woods Snr Says:

    @BO’H: Nice! Better vacate this site - its about Economics! Your blog or Politicalreform.ie KO!

    B.

  179. Brian O' Hanlon Says:

    @ Brian Woods Snr,

    Yeah, fair point. But explain something to me. When our employers in the construction industry were finally exposed as being bankrupt, and unable to pay their way, via the courts process in Ireland, do you know what our peers in the construction industry said to their employees? We were told, not to say anything about our employers, in case they came back from the dead.

    How do you write something like that into our economic history books? That a certain sub-class amongst society, not only were in control of land and property. They also regulated employment prospects and ability or not, to speak. Is that something that is relevant to the writing down of economic history, or not? BOH.

  180. Brian Woods Snr Says:

    To your last Q: yes! Economic history is,the chronolology of events, the outcomes and the key actors. But the causes and the causal mechanisms of the outcomes? Bit tricky. Arrighi’s “The Long 20th Century” might be an appropriate template, there are bound to be others.

    I think I might get an author who has a few good detective works under her hat. You would need to be very accomplished at dirt-digging, with rodent-like cunning, a steel neck and be comfortable in kevlar-lined underwear! Has to be written in next two-three years before the actors have forgetful episodes. Now all you have to do is ensure the thing gets cited in the historical version! Same authoress?? Looks like it!

    It was ‘good’ advice, though. 8)

    Brian Snr.

  181. Brian O' Hanlon Says:

    @ Brian Woods Snr,

    I notice doing a search for Giovanni Arrighi, he spoke along side David Harvey (in 20080, shortly before he passed away in 2009. I heard Harvey speak one or twice in podcasts I have listened to. Harvey is definitely a kind of author I would respect, in terms of his ability to piece together a story of events, that span over a long period of time. Agree or disagree with his version, it certainly deserves some attention. BOH.

  182. Brian O' Hanlon Says:

    @ All,

    I know it may seem like a rather silly comment to make - Irish builders that are able to rise from the ashes etc. I am firmly of the Robert Merton, MIT, school of thought about financial innovation. I like to think, it can have very deserving applications. But as it emerged in the court proceedings we saw in Ireland in the late 2000’s, a major focus of financial innovation in the decade prior seems to have been to make ‘immortals’ out of insolvent traders.

    An explanation perhaps for the almost spiritual level of devotion on the part of some of the weaker minds, who were involved with insolvent property companies, or banks, for too long. It doesn’t bother me so much, how financial innovation has been used, mis-used or otherwise in the past. I am more concerned today, with the potential applications. That is, how we intend to employ financial innovation, going forward. BOH.

  183. Mickey Hickey Says:

    @David O’D
    The model I see is a world with 200,000 tonne supertankers swamping the world’s 50,000 and 10,000 tonne tankers. The USA has dominated the world economically, militarily and politically since after WW!. The USA peaked in the mid fifties and it is becoming increasingly evident that the USA is in relative decline at an increasingly accelerating pace since the mid seventies. Globalisation has swept all before it in the past and then suffered sudden collapses when it did not suit the dominant powers at the time. I am not foolish enough to predict that the next collapse will occur in the next five years or twenty years but it will occur and it will be triggered by one of the dominant powers of the day. Today that would mean the EU, USA, Japan, Brazil, Russia, China are all capable of throwing a spanner into the works. Indeed Slovakia might be the fluttering wing of a butterfly that led to a major hurricane.

    I am also a firm believer in need, greed and opportunity as drivers of rational decision making and progress. Ireland is a cork bobbing in the wake of larger vessels and has to be wide awake at all times to prevent getting swamped. Indeed to fly in the face of the Dev doctrine we have proven we cannot go it alone. The EU was tailor made for us and the Monetary Union added silk ties, cashmere scarfs, custom made shirts, Canali belts, Rolex watches and let us not forget that nectar of the gods Hennessy VSOP. In my opinion the EU and the EZ have to be made to work because the alternatives for Ireland and the other little nations of Europe are horrendous. For the large units like De, Fr, It, Uk a world on their own would be a hostile place indeed.

    I see a world made up of trading blocs with populations over 500 million of which the EU would be one. This is not globalisation but rather a rational approach to countering the power of the other five or six blocs that are emerging presently.

  184. David O'Donnell Says:

    @Mickey Hickey

    Yes - your ‘power analysis’ has merit. A balance of power …

  185. Aidan R Says:

    Really interesting thread….

    I am in full agreement with ObsessiveMathsFreak. Economics is not a science (in the English speaking sense of the term). It is a sub-discipline of philosophy. Or, more precisely, logic. In the study of philosophical logic one can take any set of assumptions (such as the earth is flat, which is as close to reality as the ‘perfectly competitive market hypothesis’) and build a logical model. But, at least in philosophy they make explicit that deductive logic is not empirical analysis. This is the danger of economics. It is premised on deductive-logical models that claim to be an empirical analysis of a social reality. In turn, they become prescriptive. They prescribe policies to fit hypothetical-deductive models. So, the assumption of a perfect market is fine for playing with models and philosophy but it should be kept out of public policy. What is worrying about Ireland at the moment is that journalists and policymakers alike have fallen in love with the neat equations of economics, as though it were the technocratic solution to our economic problems. They are not. What we need to strategic planning. Every economist should read Galbraith before they flock to the seductive beauty of logic.

  186. David O'Donnell Says:

    @Aidan R

    There is a bit more to philosophy than the ‘analytic’ branch that you very neatly summarise here. Try a little Wittgenstein, who gave up on logic and mathematics after experienceing a ‘linguistic turn’ during a ferocious bender in Dublin in the mid 20th century - behavioural economics takes the post-bender Wittgenstein (and European interpretative traditon since Kant) on board, most of economics remains wedded to the earlier logico-analytical Wittgenstein [Google Wittgenstein's Poker] - and rabidly so in neo-positivist US academia. Philosophy is now much more modest - on a par, and a useful guide to other disciplines, but neither The European Interpretative Tradition nor the common sense inherent in American Pragmatism would claim any of these disciplines as ’sub-sets’ … ‘Critical Modernism’, as distinct from post-modernism, is not a bad position: I’d recommend it to the infant discipline of political economy.

  187. Enda H Says:

    @Aidan R

    So, the assumption of a perfect market is fine for playing with models and philosophy but it should be kept out of public policy.

    They teach how unrealistic the perfect competition model in LC Economics, which is the extent of the knowledge of the majority of our TDs. I assure you that (i) after the exposure to the standard first year micro classes, economics teaches that perfect competition doesn’t hold except in exceptions; (ii) as naive and brutish as the cabinets can be, they’re not quite thick enough to believe in perfect competition!

    What is worrying about Ireland at the moment is that journalists and policymakers alike have fallen in love with the neat equations of economics

    Nonsense, if only journalists could understand equations! I think a much bigger problem is that journalists or politicians haven’t the foggiest notion about economics. Look at Karl Whelan’s post on the “significant rise” in deposits; or Colm McCarthy’s rants at fairly objectively stupid policies; or Kevin O’Rourke’s bashing of the Irish Times PD chap (can’t think of his name) spinning the Great Depression as the result of left-wing politics; or seeing sentences like “Consumer prices fell 2.6 per cent in the year to March to reach levels last seen in the 1930s” and ending up crying at their confusion between levels and rates of change. I think saying the problem is that they’re fond of the neatness of economics (when in truth economics is very messy) is way off the mark.

  188. Brian Woods Snr Says:

    “The magnificant edifice, with all its disparate parts, is built of air, a mirage that misleads the seeker from his gaol. Its effects were at first powerfully progagandist, but the initial reasonings on which it was based - divine will, holy miracle or natural law - have long since been quitely interred. The foundations have been removed, but the edifice still stands, needing no foundations because it is without substance. It may still have some propagandist value, though this is open to doubt, but paradoxically, by paralysing attempts to reach a real understanding, it has preserved its own incapacity to help capitalism in its hour of need. Economists remain keen salsmen who sing the praises of the car but are quite incapable of telling when it is about to go wrong or of fixing it when it does. This is a defect made more serious by the fact that crisis, Sturm und Drang are not departures from the capatilist path: the are (emphasis in original) a necessary part of it.”

    Guy Routh: The Origin of Economic Ideas (1975)

    Anyone got the number for NAMA? Looks like we may a ‘property’ to dispose of - developers are busted.

    Brian Snr.

    ps:

    @Aidan R: I have copied your comment. Thanks.

    @BO’H: Harvey is OK. A taddish far to one side, but OK none the less.

    @Enda H: Kids (in my day anyhow) used to ‘play’ soldiers. All good fun until someone got a stick in the eye. These critters have ‘grown up’ - if such is possible, and now play God with other folk’s lives. “Austerity is good for you?” Sounds Inquisitional (sic) - “We’ll just do some stretching exercises, then a little barbecue - and you will go to Heaven a happy soul”. 8)

    B.

  189. billyblog Says:

    This thread appears tapped out and I’m sorry I didn’t take a look a bit earlier before that happened. But just to tidy things up for myself if for no other readers, let me comment on some critics, real and implied.

    1. ObsessiveMathsFreak, at least by his relative further silence on the matter, seems to have changed his mind and has now become a supporter of what some of us have known for some time, namely, that economics is a quantitatively expressible science. But he should feel free to backslide at any time he is having a bad hair day and needs to lash out at some imagined interlopers into the realm of “purer” science.

    2. @Mickey Hickey, October 1st, 2011 at 4:44 am has, however, obligingly jumped in with a comment that reflects an OMF-like (prior to his own epiphany) muddled understanding of what sort of science Economics is. Here’s MH’s money point, at least from my point of view:

    “For decades it [economics] was known as ‘political economy’ a fairly accurate description. Then the practitioners succumbed to the urge to take it out of the social science category and make it respectable like the Applied Science and Science professions. Then with the advent of mini computers and later low cost high powered servers the obsession began with ‘models’ and onward to the tweaking of models.”

    I will grant Mickey that some economists, by heading down the econometrics path (evangelized in particular by Otto Eckstein of Harvard and DRI in the late 1970s and early 1980s), made the mistake that scientistically minded folks have made with many of the social sciences, namely thinking that by adopting quantitative methodologies they were moving their disciplines over into the category of, at least in principle, Naturwissenschaften, and away from Geisteswissenschaften.

    But the fact that they – and even some philosophers of science – may have made this mistake doesn’t make it any less of a conceptual error. I’ve even happened upon a passing comment from two or three years ago by Krugman himself which suggests that he too, at least at one time, might have thought this path was open to validation in the future, again, at least in principle, much as Freud thought, at least at one time, that all his psychoanalytical constructs would, at some point, find “hard” correlates in neurophysiology. (I would guess that the Krugman of today would disavow such scientistic fantasies, especially for his own discipline; but I don’t really know.)

    But the reality is that economics, political economy, and/or whatever it is that the folks in the building across campus with the budget that is bigger than the English Department’s these days are doing when they teach Macro, Micro, et al is firmly embedded in Geisteswissenschaften — or social science for those of you who still, like Basil Fawlty, haven’t gotten over the Second World War.

    Why?

    Because economists seek causal explanations of particular forms of institutionally embedded human behavior. They more often than not settle for correlations in their quantitative models, correlations that that don’t fully exhibit all the functionally near-infinite causal links. But this feature of their methodology doesn’t change the basic conceptual point that they are engaged in science, i.e., bringing formal intelligibility, and even predictive power, to their proper object, the behavior of homo economicus.

    And the basic reason that economics – and the other social sciences – once having become infused with quantitative methods cannot be moved over into the category of Naturwissenschaften – even in principle — is that human behavior, while operating within the confines of all sorts of constraints, is fundamentally not deterministic behavior in the Naturwissenschaften sense of that term. This despite the sorts of question begging arguments you get from scientistically inclined philosophers, such as Daniel Dennett, who should really know better, but have apparently not been able to break their addiction to spouting provocative — but Pauli excludable — nonsense in public. Or as Wifrid Sellars used to say – though he was probably passing the apothegm on from some Oxbridge don – “That’s either true but trivial, or very exciting but false.” Though I hasten to add, Sellars himself never really rose above his own deeply rooted – learned at his father’s knee, by his own report – scientistic predilections.

    (Quantum Mechanics requires its own special treatment among Naturwissenschaften, of course. Some would even say that it hardly gives any aid and comfort to the scientistic reductionists, particularly along the axis of determinism vs. indeterminism. Though I would argue it provides no traction for molar indeterminists as well. It’s indeterminism is simply in a different category. But this is an argument for a different blog.)

    In summary, I would say in answer to Mickey Hickey: “Economists, succumb away to quantification in your science. It can actually help you illuminate the behavior of homo economicus in ways that were not possible before, well, the late great Steve Jobs. Just don’t nurture the illusion that this means that you’ll now have to start dressing in a lab coat and jeans, rather than a tweed jacket and jeans.”

    3. As for @Aidan R, October 3rd, 2011 at 11:33 am, who says:

    “I am in full agreement with ObsessiveMathsFreak. Economics is not a science (in the English speaking sense of the term). It is a sub-discipline of philosophy. Or, more precisely, logic.”

    I suggest Aidan check in with Diction Constable OMF on what is or is not permissible to say “in the English speaking sense of the term” about whether or not economics is a science. It took OMF, in the face of some evidence brought to his attention on this blog (thanks heavens that OMF is open to considering evidence), about eight hours to start, Emily Litella-like, walking back his initial obiter dictum pronouncement that economics is not a science.

    Aidan R apparently did not see that particular memo posted by OMF himself.

    Apart from his own day late and dollar short lexical policing — sort of like Brian Snr — about what we English language speakers are permitted or not permitted to say in such matters, Aidan R’s conception of what philosophy is reads like epigonish Wittgensteinianism.

    I won’t even bother trying to list all of the fallacies in Aidan R’s caricaturing of what at least some economists are up to when he says:

    “It [economics] is premised on deductive-logical models that claim to be an empirical analysis of a social reality. In turn, they become prescriptive. They prescribe policies to fit hypothetical-deductive models. So, the assumption of a perfect market is fine for playing with models and philosophy but it should be kept out of public policy.”

    This really has the whiff of something Aidan R read in a third rate, pre-Kuhnian philosophy of science textbook somewhere – I dunno, maybe Philosophy of Science for Dummies? So let me simply outsource the criticism of Aidan R’s overly strictured conception of economics to a post that Krugman put up on his blog just today.

    http://krugman.blogs.nytimes.com/2011/10/11/why-believe-in-keynesian-models/

    Not a whole lot of hypothetico-deductive nonsense being invoked there – and an awful lot of wisdom being proffered about policy based upon economic modeling – though it would appear that Jean-Claude Trichet will go to his retirement dacha still apparently not capable of grasping it.

    I’ll grant Aidan R that some of the Freshwater economists, and their own epigones, sometime sound like theocrats with their “efficient market hypothesis” and other such ideologically driven overreach. And complementing them there are no doubt the likes of GOP Senator Bloviate — and David Cameron — who, on the political side, can’t even get it straight about what Adam Smith said.

    Check out the following about what Adam Smith preemptively had to say in the 18th century to free market ideologues in the 21st century.

    http://krugman.blogs.nytimes.com/2011/10/09/financial-romanticism/

    And all of this returns full circle to one of the main points in this particular thread. Those who ignore history, whether it be the history of economics or the history of philosophy, will predictably end up repeating some of the worst mistakes of prior and current half-baked economics – and political hackery.

    And their behavior in this respect is predictable not because they are determined, in some Laplacean sense to repeat those mistakes, but because they simply aren’t well enough informed — or are resistant, for whatever reasons, to becoming well-informed.

    5. Which brings me to @Brian O’ Hanlon, September 30th, 2011 at 11:06 pm

    I thank him for his compliment. But I also would like to highlight the argument he appears to be trying to make. In his own words:

    “Let’s simply ask the question, how many visitors to the Irish Economy blog site, were indeed, readers of Paul Krugman’s work, prior to 2008? Lets ask another question shall we. Lets ask the question, how many visitors to the Irish Economy blog site, prior to 2008, would official claim to be avid readers of material by Paul Krugman, Joe Stiglitz, Roger Lowenstein, Michael Lewis, Kenneth Galbraith or many others. The fact is, quite few would openly claim to like reading an economics book, or an economics history book. What I mean is, the interest in that subject material was confined to a niche.”

    Leave aside the risibleness of listing the journalists, Roger Lowenstein and Michael Lewis, cheek-by-jowl with Paul Krugman and Joseph Stiglitz – reasonable people can differ about whether Galbraith is more economist or journalist. Let me charitably give BOH a do over on an argument apparently of the form:

    “Because we folks at the Irish Economy blog site didn’t read it, it belongs in a niche.”

    This gives new meaning to the term (Emerald?) insularity, and teeters perilously on the brink of the blowhard chasm that OMF tumbled into initially, and is only now possibly trying to claw his way out of, i.e., “ontologizing one’s ignorance.”

    And if you’re not sure what that might mean, go ask Brian Snr.

  190. Prof Hilda Myer Says:

    Nice post from Kevin.However most of the crisis is indirectly caused by Globalization and the recent protests in the developed western world are shifting the emphasis from where the debt ,banking worldwide crisis really came from,namely cheap credit paid for by the Chinese.Globalization and the democracy deficit in the EU governance has accelerated the crash and both of these are activley supported by Prof O Rourke who supported undemocratic decisions taken by EU technocrats and a Globalization which is a large cause of this crisis.Prof O Rourke talks of a lack of awarness of hIstory in his profession but its the interpretation of History which is the real problem, and I see that no where in his own work did he warn of a major crisis in the world economy in 2008.I have read much of his work .

  191. Two Articles on the Importance of Economic History | Economic Incubator Says:

    [...] From O’Rourke and Krugman. Posted by admin on Jan 5, 2012 in Economic History | 0 comments [...]

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