economics - where to begin?

not surprised to see sanpaku use it tbh.

Ed yes that video has a suspicious goldbuggist undercurrent to it, but I think it does a good job making sense of things

agreed. I prefer "unit of exchanged" or "shared fiction" to "fiat money". Money only has value with the content of the people, otherwise they stick it in Gold or other assets.

...

what on earth does that mean?

http://www.threadbombing.com/data/media/2/paulownsmccain.gif

i don't entire understand ed's second sentence either: does "content" mean "that which is contained" or "happy approval" -- it's true that value requires a big element of agreement, including the explicit agreement to agree, but it also includes necessarily disagreement -- if people didn't want things in different degree, "they" (ie we) wouldn't need to explore systems of exchange, and ways to stabilise how these exchange rates operate (should a beer costs more than a potato etc), and also to render them fluid when needed too

i think it means: when everyone is too anxious to negotiate about value in good faith, relative to their immediate situation, on an assumption of shared givens and (moral) values, they flee to hoarded piles of value-that-never-changes (which gold has long been a symbol of): but actually its value does change, so this is a phantom

actually most of the issues we face relate ultimately to predictions made -- and how they get made -- about what people WILL want: and how to facilitate, or indeed not facilitate, this

haha we are all mccain now :\

i think it's a typo and he means "consent".

basically people who aren't comfortable using "fiat money" and "money" as synonyms tend to be nuts.

WRT the OP, I started the last decade largely ignorant of academic economics, but made my way through a std text (samuelson?) with the aid of Steve Keen's Debunking Economics. Being aware of the numerous unjustified assumptions behind neoclassical microeconomics will make the parlous state of mathematical econ as a predictive tool evident.

On a similar debunking note, I've just started Ian Fletcher's Free Trade Doesn't Work: What Should Replace It and Why, which, while a serious work for laymen by a proper academic, is just $0.99 on Kindle.

lex, galbraith's more famous dad has written some very accessible books about modern economics which are actually great fun to read. The Affluent Society is probably my favorite but there's also The Great Crash, about 1929.

http://www.amazon.co.uk/Affluent-Society-Updated-Introduction-Business/dp/0140285199

"Money: whence it came and where it went" <-- best title evah, and jgk is an extremely funny writer, but i still think you have to be ready with a notepad to look stuff up quite often (and be aware that there's a reason such a lucid writer stopped being someone mainstream economists read and believed)

(i'd say that reason isn't that he was wrong; but THEY would -- and the technicalities of this disagreement have to be understood, as well as the politics)

Attempting to explain the causes of the financial crisis to the Lex in the pub was really frustrating but also illuminating because he kept asking really pertinent questions like "why were they doing that? Isn't that really stupid? What happens when these people can't pay?". Clearly knowing nothing about the subject is an advantage.

nothing wrong w/ a neophyte asking neophyte questions. esp. since the folks "knowledgeable" about economics are the ones who got us into the economic pickle we're in and are incapable of getting us out of it.

i'd recommend an Intro to Econ. textbook -- Samuelson and Nordhaus was standard when i was an undergrad during the late 80s/early 90s, so if they still use that that would be the one i'd get. also, seek out robert heilbroner's the worldly philosophers for a readable synopsis of economists from Adam Smith up to John Maynard Keynes.

heilbroner's book is devoid of math, BTW, if anyone has a phobia about math in economics.

tad llamasfur! you said exactly the same eight years ago on this very thread

it's still true, though!!

heilbroner book has nothing to say about Milton Friedman, rational expectations or neo-Keynesianism though.

If we're posting videos, Chris Martenson's 3 hour Crash Course is a useful primer on the absurdity of limitless economic growth on a finite planet.

https://www.youtube.com/watch?v=XnXZzx9pAmQ

I've seen that before, its a good video

oh wait that might be something else

Chris Martenson, or Chris Martenson PhD as he prefers to be known, seems like a crank tbh. this from his about page...

First of all, I am not an economist. I am trained as a scientist, having completed both a PhD and a post-doctoral program at Duke University, where I specialized in neurotoxicology. I tell you this because my extensive training as a scientist informs and guides how I think. I gather data, I develop hypotheses, and I continually seek to accept or reject my hypotheses based on the evidence at hand. I let the data tell me the story.

is the classic "now i admit i have no training in this area in this but i am better than all the experts and here's why" flase humility of the crank.

but regardless of that, and FAO lex, neo-malthusianism is really not a good place to start for someone to learn about macroeconomics.

lol "fiat currency"

seriously.

i'm a non-expert in economics, too. but i have some knowledge of crackpots ... and very strong evidence that one is dealing with a crackpot is when one encounters someone ranting about "fiat money."

if youre only interested in economics as it pertains to policy why not just find a couple of good economic/policy blogs whose writing you like and just follow along? over time im sure youd get enough of the 'basics' to achieve something like fluency imo w/o having to try to 'get' models and most of those dudes are p good about linking stuff for further/deeper reading

fiat money is the new pimp towncar

fiat money cars look like something out of a 1950s Fellini movie ...

http://www.philseed.com/images/fiat-600-1956.jpg

Criticism noted. I still think Martenson is OTM WRT resource constraints being the most important economic change for the rest of our lifetimes. Even The Economist is hedging here.

what if Mr Ehrlich had taken up Mr Simon’s 1990 offer to go “double or quits” for any future date? All five have risen in price since the rematch was proposed. Furthermore, Jeremy Grantham of GMO, a fund-management group, points out that Mr Ehrlich would have won the original bet were it recalculated today (he is still alive; Mr Simon died in 1998). An equally weighted portfolio of the five commodities is now higher in real terms than the average of their prices back in 1980 (see chart).

The Cornucopians might argue that today’s metals prices are due to the buoyancy of demand in the developing world rather than any cataclysmic shortages in supply. But the Malthusians might retort that man’s famed ingenuity has not stopped prices from rising in real terms over an extended period. Place your bets.

i don't think you have to be a malthusian to argue that the standard "growth model" of constant 3% year-on-year increases in output is unsustainable

Thermodynamics indicates our skin will boil in about 400 years at just 2.3% growth.

Also, FWIW, I'm amused that Morgan Stanley's economics dept under Stephen Roach requires new hires to have spent at least 3 years in the real world to help overcome academic "brainwashing".

economics - where to end?

if youre only interested in economics as it pertains to policy why not just find a couple of good economic/policy blogs whose writing you like and just follow along?

because i don't understand them! the "basics" have eluded me over a decade of trying, including a year spent studying them at oxford. i think part of the reason is that i'm not very trusting of what i read, and i can't take ANY economics specialist at face value because they all argue opposite things. how the fuck do i know which ones are right?

i'm appreciative of all the book suggestions but i think at this point some actual hand-holding is required. let's just take the opening para of the galbraith article

In early January 2009 two White House-bound economists — Christina Romer and Jared Bernstein — predicted that if the stimulus bill were passed, unemployment would peak at 8% by midyear and then start coming down. If there were no stimulus, they said, joblessness might hit 9% and not peak until 2010.

- what actually is a stimulus? is it printing more money? if it's so helpful why don't we do it all the time? if it's so helpful why wait til now to do it? surely printing more money devalues the currency? I DON'T UNDERSTAND

- why is it helpful? why would it stop unemployment? why didn't it? are the 8% and 9% figures plucked out of thin air? given that those figures are apparently wrong, might they as well have been plucked out of thin air? why did anyone believe them in the first place?

"fiscal stimulus" means the government spending money in an effort to get people working and to get money flowing around the economy (because those newly hired people are now making wages and will spend that money in stores. there is a knock-on effect also: when those newly employed people spend money they will also be paying taxes on it, which allows the govt to make some of its money back.)

if it's so helpful why don't we do it all the time?

good question. short answer is that governments are already overloaded in debt.

the 8% and 9% figures were guesses based on past recoveries. people believed them because past recoveries made those number seem sensible. the main point galbraith is making in this article is that this recession is not like past recessions, so those predictions didn't pan out.

A stimulus is anything that might stimulate economic growth, so yeah it might be printing more money or it might be tax cuts or it might be an increase in public spending.

surely printing more money devalues the currency?

You don't literally print money, central banks will put more money into the financial system that can be borrowed by other banks and used to free up the amount of money they can use for other things. This may or may not lead to inflation and devaluation of currency, but economists are divided on whether or not that's actually the case.

Any stimulus that leads to economic growth should, theoretically, lead to increased business confidence and increased consumer confidence, "we're coming out of a recession" etc. So businesses are more likely to invest and employ people. Doesn't always work out that way.

are the 8% and 9% figures plucked out of thin air? given that those figures are apparently wrong, might they as well have been plucked out of thin air? why did anyone believe them in the first place?

Part of the problem is that economics isn't an exact science but people act like it is.

Too much of this stuff is wrapped up in mystification and insider jargon, and it doesn't have to be, unless you are trying to set up shop as an economist. Some day I will have to write a simple 30 page pamphlet, or the website equivalent, that breaks down the fundamental concepts of economics in terms so simple that it will allow ordinary people to read the financial news and figure out what parts are worth paying attention to and what's just pure shite.

so it's creating jobs out of nowhere rather than creating money out of nowhere? those don't sound like very...real jobs. like surely a job corresponds to whether there's work to be done, not anything else.

so this sounds like a vicious cycle - a stimulus is only needed when the economy's gone shit, but isn't govt debt the reason it's shit, and govt debt is the reason a stimulus isn't usually possible?

xps to tracer

You don't literally print money, central banks will put more money into the financial system that can be borrowed by other banks and used to free up the amount of money they can use for other things.

the entire concept of an economy based on everyone apparently borrowing money off each other terrifies me. isn't this, like, the opposite of good personal finance.

Any stimulus that leads to economic growth should, theoretically, lead to increased business confidence and increased consumer confidence

i've noticed economists throw around the word "confidence" like it's a quantifiable, meaningful thing that can be measured, like the amount of water i have in my glass here. but that's bollocks! surely spending confidence goes up and down from day to day and also totally randomly? or is that just mine?

i don't think you have to be a malthusian to argue that the standard "growth model" of constant 3% year-on-year increases in output is unsustainable

also tracer what on earth does this mean

(i know about malthus, the rest of it)

I don't know, most jobs are only "real" for as long as an employer decides they're necessary. A lot of jobs aren't really very concrete unless you're something that's absolutely necessary to the country like a doctor or a street cleaner, and even then they might need different numbers of them at different times.

Government debt isn't usually the reason an economy's shit though - economic problems tend to start in the private sector, as it the case in what we're going through now. If governments save money during the boom, then they're in a better position to a) cope with declining tax revenues without cutting spending and b) actually raise public spending to offset declining business or consumer spending. Obviously our governments spent a lot of money during the boom, some on worthwhile things, others less so (like killing loads of people in foreign countrie, which is kinda expensive). And of course we ended up borrowing and spending a fuckton of money to bail out failing banks.

not out of nowhere, out of public investment. projects that congresspeople have been trying to push through for years, desperately needed infrastructure improvements, regulatory agency staff, military bases, dams, whatever. as galbraith notes in an earlier article about the US fiscal stimulus, 'The bill tilted toward "shovel-ready" projects like refurbishing schools and fixing roads, and away from projects requiring planning and long construction lead times, like urban mass transit.'

yes, this increased the budget deficit. but no, govt debt wasn't the reason the economy went to shit in the United States, predatory lending practices and sheer duplicity by banks is why it went to shit.

xpost

xxp the basic idea is that, whatever the starting point, 3% growth every year quickly adds up to growth so rapid that you use up all the resources available.

the entire concept of an economy based on everyone apparently borrowing money off each other terrifies me. isn't this, like, the opposite of good personal finance.

There's nothing wrong with borrowing money as long as you can pay it off. Problems arise when you lend to people or countries that can't, and the western world built a ridiculous edifice allowing them to offload the risk of lending to those people. Except it didn't work, and the edifice collapsed.

But actually if people stopped lending money altogether then no more money would be created through interest, so there'd be the same amount of money among a growing population (ie less to go round).

money isn't just created through interest, it's created every time somebody asks the bank for a loan! if you want a £2000 loan, that's £2000 that just magically appears from nothing, right into your bank account. then the £2000 (plus interest) appears in the bank's balance sheet as an "asset" (though really just a promise) that can be traded, sold, etc. i agree with lex that there is somethign fundamentally frightening and wrong-feeling about this.

i just don't see the logic behind a stimulus being needed most when the government is least able to afford it? why weren't these "desperately needed" projects done when the govt had money? also how does the debt get paid off?

There's nothing wrong with borrowing money as long as you can pay it off

but you don't know who'll be able to pay it off. if they don't have the money now why would they have it in the future.

is macro-economics actually the OPPOSITE of personal finance????

ssshh! Don't tell any of the GOP candidates running on the concept that taming the economy is like balancing a checkbook.

so it's creating jobs out of nowhere rather than creating money out of nowhere?

lex, you must clear your mind of cant, as Dr. Johnson was fond of saying. A job is just a person engaging in some kind of presumably productive activity. If you have a person with a few skills and something useful that needs to be done, then you have everything needful for creating a job "out of nowhere".

Both of those two elements for jobs exist out there in massive quantitites. They are almost as common as air. What's missing in most instances is the money to compensate the workers for doing that work. Because money, rightly considered, is just a marker for productive activity, then the very fact of one's being productive in some sense calls money into being, "out of nowhere", if you like.

The real trick is figuring out what anything is worth in terms of money. That's where the real smoke and mirrors come into play.

okay so it IS creating money out of nowhere

this is a conceptual hurdle for me

Actually I really do recommend reading Galbraith's "Money", because the history of banking as a technical craft is pretty relevant: including the extent to which it's always the most recent problem but one that everyone is overcompensating for.

but you don't know who'll be able to pay it off. if they don't have the money now why would they have it in the future.

not in absolute sense. but that's why banks have loan examiners and such ... if they're doing their job correctly, they check to see what the borrower is going to use the money for, if it (and other economic activities the borrower is engaged in) are sufficient to pay off the principal, the borrower's past history (any defaults or bankruptcies or delinquencies), etc. and if they determine that the borrower is creditworthy, they add an interest rate commiserate to the level of risk involved in lending the money. even then, of course, some creditworthy borrowers can go bust.

hee, lex sounds like a republican