Chicago drivel — a sure way to get a ‘Nobel prize’ in economics

19 September, 2016 at 17:38 | Posted in Economics | 6 Comments

In 2007 Thomas Sargent gave a graduation speech at University of California at Berkeley, giving the grads “a short list of valuable lessons that our beautiful subject teaches”:

1. Many things that are desirable are not feasible.
2. Individuals and communities face trade-offs.
3. Other people have more information about their abilities, their efforts, and their preferences than you do.
4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.
5. There are trade offs between equality and efficiency.
6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well meaning outsiders to change things for better or worse.
Lebowski.jpg-610x07. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.
8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.
9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).
10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.
11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).
12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.

Reading through this list of “valuable lessons” things suddenly fall in place.

This kind of self-righteous neoliberal drivel has again and again been praised and prized. And not only by econ bloggers and right-wing think-tanks.

Out of the seventy-six laureates that have been awarded ‘The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel,’ twenty-eight have been affiliated to The University of Chicago. The world is really a small place when it comes to economics …



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  1. It seems the only way you can explain why economists such as Lucas and Sargent teach a hard edged and a sometimes dogmatic economics is because of their underlying values. They rationalize and motivate their economics with their personal values and ideology – of course these values aren’t articulated as such when they offer their economic theories. They pretend these economic theories are self evident and stand alone. It’s no wonder they vehemently rail against any form of Keynesanism. Lucas and Rapping had a close professional relationship in the late 1960s. Reading some of the personal memoirs, it is clear they fell out over opposing views on the US involvement in the Vietnam war. No guessing who went which way. Ideology always wins out. Personally, I think Sargent’s sentiments do speak some truths but they are over exaggerated and leave out others that offer balance. Economics has always been about values no matter how much proponents of a particular line protest otherwise.

  2. more than drivel, it’s a spectacularly incoherent list of drivel

  3. A level of naivety only an economist could get away with.

  4. Scientists and science actors
    Comment on Lars Syll on ‘Chicago drivel — a sure way to get a ‘Nobel prize’ in economics’
    Personal experience is only a tiny part of what every human knows about the world/universe and other humans, the greater part stems from myth/religion/philosophy/science. Myth/religion/philosophy is storytelling and does not satisfy the scientific criteria of logical and empirical consistency. Storytelling is easy, to establish consistency is hard. From the history of the last 5000 years we know that stories sell well, the absurder the better. The average person prefers belief/opinion (= doxa) to knowledge (= episteme) and thinks more about natural/supernatural persons/personifications and less about the universe and its sub-systems. Because of this, nearly 100 percent of human communication consists of gossip.
    A case in point is economics. What Thomas Sargent tells his students boils down to: (i) humans respond to incentives, (ii) one cannot always get what one wants, (iii) in equilibrium economic agents are satisfied, (iv) sometimes people/governments keep their promises, sometimes not, (v) people try to get more out of the social pot than they put in, (vi) it is difficult/impossible to know other peoples’ motives/preferences and to forecast their actions. (See intro)
    This is folk psychology and folk sociology — PsySoc for short. The economist Sargent tells his students how humans work but not how the economy works. The main reason is that Sargent and his fellow economists at Chicago, Berkeley, Harvard and elsewhere do not know how the economy works.
    This would not be a big issue, after all, people talk most of the time about nonentities and things they know nothing about. To believe in standard economics is in no way different from the belief in the myths of ancient goat herders. The real trouble with economics begins here: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.
    The key word is science[s]. Why not simply “Bank of Sweden Prize in Economics”? The original title clearly communicates the claim that economics is a science. This claim is as old as Adam Smith/Karl Marx. But economists never lived up to the claim.
    Science is well-defined by the criteria of formal and material consistency: “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994)
    Neither orthodox nor heterodox economics satisfies the criteria of formal and material consistency. Worse, economists violate scientific standards since the founding fathers. There is no exception: Walrasian, Keynesian, Marxian, or Austrian economics is provable inconsistent.
    There is political economics and theoretical economics. The founding fathers were straightforward people and called themselves political economists, that is, they left no doubt that their main business was agenda pushing. Economists never got out of political economics. In other words, theoretical economics (= science) ultimately could not emancipate itself from political economics (= agenda pushing). And this is how economics became one of the most embarrassing failures in the history of scientific thought.
    Economics is not a science, but what Feynman famously called a cargo cult science. Accordingly, economists are not scientists but science actors. The difference is this: “A genuine inquirer aims to find out the truth of some question, whatever the color of that truth. … A pseudo-inquirer seeks to make a case for the truth of some proposition(s) determined in advance. There are two kinds of pseudo-inquirer, the sham and the fake. A sham reasoner is concerned, not to find out how things really are, but to make a case for some immovably-held preconceived conviction. A fake reasoner is concerned, not to find out how things really are, but to advance himself by making a case for some proposition to the truth-value of which he is indifferent.” (Haack, 1997, p. 1)
    Not only the Chicago version but economics in all its orthodox and heterodox variants is unacceptable proto-scientific stuff. The first thing to do is to rename the most prestigious economics prize into “Bank of Sweden Oscar for the best science actor.”
    Egmont Kakarot-Handtke
    Haack, S. (1997). Science, Scientism, and Anti-Science in the Age of Preposterism. Skeptical Inquirer, 21(6): 1–7. URL

  5. This is not surprising if you consider market economics. Chicago supplies the right-wing economic theories which rich people and companies demand to justify their desired regulatory policies. Thst is just straightforward supply and demand.

  6. We are all taught that the Enlightenment University is the pinnacle of human intellectual achievement. Yet it houses economics and seems to be structurally designed to protect and maintain economic wrongness.

    The persistence of academic economics refutes every claim academia makes to justify the existence of the academy.

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