While often on Mondays at the Washington Post, Robert J. Samuelson is spouting VSP lines about how we must be responsible and cut Social Security benefits. However, today he has written on "What economists don't know," which comes across as a pretty big spanking for economists, among whom he does not make much differentiation. We are all pretty much as ignorant as each other and just plain not willing to admit it, given that we are also all (actually here he admits not all) trying to "gain and retain political relevance and power." Shame on us! (or at least some of us)
OK OK, before digging into his more specific complaints, of course I and others here at Econospeak agree that there is a lot that economists do not know, pretty much all of us, and there is also an Establishment that poses as knowing much more than it does that has fallen on its face on quite a few occasions, but nevertheless just keeps putting itself forward as knowing more than others, in many cases indeed apparently out of a pursuit for "political relevance and power." Indeed, we like to think that we have exposed this Establishment for its high crimes and misdemeanors, at least on a few occasions, even if we ourselves sometimes make erroneous remarks as well on various matters (and, of course, we get visited by good old Egmont from time to time, whose denunciations of all economists except for himself and maybe one or two others makes Samuelson's complaints look like high praise).
Also, it must be admitted that RJS does say complimentary things about most economists he deals with as being "extremely smart" and "public spirited" and "generous with their time," albeit "with a few exceptions." But then there is the bottom line that "many economists (and this applies across the political spectrum) often don't know what they are talking about." Ouch.
Which brings us to his specific complaints, with some of them valid and some of them not so much. It is curious that what he starts out with, taking up the first two paragraphs of the column, is just plain silly, not a worthy complaint at all, quite silly actually. He lambastes us for job growth in the last month in the US being 49 percent higher at 263,000 rather than a reported consensus forecast by economists of 190,000. He goes on to say that in general economists have been doing a terrible job of explaining job growth and why and how it has gone on for so long and more. I am sorry, but this is a joke.
To the extent economists messed up on forecasting what happened economically this past month, it was on the larger matter of GDP growth, with most forecasting a rate in the 2-2.5 percent range, which if if that had come to pass in the middle of that, would be consistent with the forecasted job growth. Instead we had a growth rate of 3.2 percent, which was consistent with the actual job growh. So the problem was the with the GDP forecast, with the basic model of relations between GDP growth and job growth holding up reasonably well. As it is, while one does not hear about this from some sources, the main sources for the unforecasted higher growth are events likely to be temporary and disappearing in the next month, most notably a 0.7 percent increase in inventories, with another 0,2 o 0.3 percent of similar one-shot items. Unsurprisingly these brought the unforecasted extra job growth, although somehow RJS misses that.
As for explaining the long run of job growth, well, it is the same matter. GDP has been steadily growing for nearly a decade now since the Great Recession bottomed out. The job growth that has gone along with that GDP growth has been about what was expected. Again, if there is a mystery, it is why the economy has continued to grow, but despite some ruffles and bangs, nothing has hit it hard enough to knock it off its momentum. Indeed, while the unemployment rate has reached a half century low, the employment rate still remains below previous highs as labor force participation has not recovered from its declines in the Great Recession. And the real mystery, unmentioned by RJS at all, is why real wages have been so slow to increase, although they have begun to pick up somewhat more recently, at least nominal ones.
In short, Samuelson's big charge out the door pretty much falls flat in a pile of nonsense. Really not much to see here in terms of bad economic forecasting.
The next variable he gets worked up about is interest rates, declaring that they have "plunged to historically low levels," with, of course, economists failing to explain this. As it is, if one looks at real interest rates this is just plain wrong. Real interest rates in the US have bounced around quite a bit over time, even going into negative territory during several periods of time in the past. However, since 2015 real interest rates in the US have been nearly steady at about 2 percent, about the longer run average. Not much to see on this.
Of course, nominal rates are lower than we have seen for a long time, but again RJS has missed the boat. The mystery is low inflation, although he does get to this, except not so much to wonder about low inflation now, but instead to claim economists failed to forecast the high inflation of the 1970s. He may be right about this in general, although I know that I personally back in 1973 when the first oil price shock hit forecast very publicly that this would lead to higher inflation, which indeed did arrive. But then, I was just a grad student then, not someone whispering in RJS's ear.
Samuelson then moves on more into territory where he has more grounds for complaining, forecasting and explaining productivity trends. I shall grant him on this one. I have never made any effort to forecast that one, and I think few economists try too hard, although many of us have made efforts to explain such changes ex post, more or less successfully. Yes, this is important, but this is an area where I do not think lots of economists are strutting about too pompously claiming they are really good at this, although I know some do.
He finally gets to the Big One, the one that had Queen Elizabeth upset: the crash and Great Recession. Yes,most economists did indeed fall on their faces forecasting that, with the explanations also taking a long time getting made in reasonable ways. Yep, he has grounds on this one.
Of course this is now an area where I and some others here will puff up and say, ah ha! there were some who saw it coming and tried to get attention to it, only to be ignored by The Establishment as well as pompous economic journalists like Robert J. Samuelson. But most of these were heterodox, often Post Keynesian, characters like Dean Baker and Steve Keen and Robert Shiller and, well, me, along with quite few others as well. On this one, Samuelson should look at himself as a partly guilty party. He may be a victim of listening to these erroneous Establishment VSPs that he regularly listens to, but maybe he could have paid a bit more attention to the other voices? I mean, once the housing bubble peaked it became increasingly obvious that there was trouble in River City, and more attention should have been paid attention to it, especially by Robert J. Samuelson himself.
Aside but critically important:
Mark Weisbrot @MarkWeisbrot
This is the kind of response that anyone who aspires to the presidency, and indeed every elected US official, should shout when confronted with this kind of insanity.
Bernie Sanders @SenSanders
NO WAR WITH IRAN! This would be an unmitigated disaster. We must stop Trump and his national security advisor, John Bolton—someone who likes endless wars.
9:17 AM - 14 May 2019
Tulsi Gabbard @TulsiGabbard
Trump says he doesn't want war with Iran, but that's exactly what he wants, because that's exactly what Saudi Arabia, Netanyahu, al-Qaeda, Bolton, Haley, and other NeoCons/NeoLibs want. That’s what he put first--not America.
Trump--Eager for War with Iran
6:30 AM - 14 May 2019
I know you are concerned and hope you will write on American sanctions and threatening militarism.
I did so 6 days ago. I do keep pretty close track of it, but not every day. This one is about economics, which is, after all, supposedly the main topic of this blog. But, I shall keep track.
My most immediate observation, aside from that escalation is happening as I forecast, Pompeo just made a fool of himself "crashing" a European foreign ministers meeting to try to convince them to get on board with US policy on Iran. A complete flop. Do these guys not realize how far out of synch they are aside from this handful of countries near Iran they are so wired into?
What is frustrating to me is that so many Americans really do not know what is going on here. Even the MSM semi-praised Trump when he pulled out of the nuclear agreement last year because he "had fulfilled a campaign promise." That the campaign promise was awful was somehow not mentioned, or only suggested way down in the stories.
Economists’ silly kindergarten games
Comment on Barkley Rosser on ‘Robert J. Samuelson Denounces Economists’
Barkley Rosser refers to a Washington Post article: “However, today he [Robert Samuelson] has written on ‘What economists don’t know,’ which comes across as a pretty big spanking for economists, among whom he does not make much differentiation. We are all pretty much as ignorant as each other and just plain not willing to admit it, given that we are also all (actually here he admits not all) trying to ‘gain and retain political relevance and power’.” and “Indeed, we like to think that we have exposed this Establishment for its high crimes and misdemeanors, at least on a few occasions, even if we ourselves sometimes make erroneous remarks as well on various matters (and, of course, we get visited by good old Egmont from time to time, whose denunciations of all economists except for himself and maybe one or two others makes Samuelson’s complaints look like high praise).”
Under the headline ‘What economists don’t know’, Robert Samuelson criticizes the profession for bad forecasting performance. This, indeed, is a silly game which economists play with great enthusiasm in order to entertain their audience. This only proves that economists do not understand what science is all about. Genuine scientists do not participate in the prediction game because they know “The future is unpredictable”. (Feynman) Prophesy, the forerunner of pseudo-scientific forecasting, is known since time immemorial to be a tool of social programming/manipulation/psycho-terror.
Scientific ‘prediction’ does not predict the future but the observable empirical consequence of a theory.#1, #2, #3 If successful, the theory is corroborated, otherwise, it is refuted. The bottom line of the prediction brouhaha is: scientists do not predict the future, only charlatans do, and only morons take them seriously.
The second point to note is that Egmont does NOT denunciate economists but refutes their approaches. More specifically, Egmont proves that Walrasianism, Keynesianism, Marxianism, Austrianism, MMT is axiomatically false, materially/formally inconsistent, mutually contradictory and that all approaches get the foundational concept of the subject matter ― profit ― wrong. In brief, it is demonstrably true that economics is proto-scientific garbage and that economists are scientifically incompetent.#4, #5, #6 This includes, of course, the political agenda pushers Robert Samuelson and Barkley Rosser.
#1 Scientists do not predict
#2 Prediction does not work? Try retrodiction first
#3 Predictably confused
#4 Economists: scientists or political clowns?
#5 Economics a science? Surely you are joking, Mr. Cochrane
#6 Economics: The greatest scientific hoax in modern times
I read all your writing, and also use your work in class. As for economics, sanctions are all about economics and as for, say, Iraq how much has that cost? Iran is all about economics as well, sanctions and beyond. Yes, I discuss this.
I always appreciate your work.
Also, Paul Krugman was writing about the housing bubble from August 2002 on, but Dean Baker was foremost.
Samuelson has been repeatedly wrong in economic analysis or discussion for years, so I just stopped reading him.
I am not aware of Krugman being on top of the housing bubble as far back as 2002. He is not generally included by anybody as being on the lists of those who "called it" back then. I am aware that he has made claims to have at least sort of done so. And indeed he at times mumbled sort of about how maybe there was a housing bubble. But, no, he is not on the list, and certainly nowhere near someone like Dean Baker.
BTW, I appreciate your comments, but I would urge you to adopt a moniker, as some of our official folks here have done (Sandwichman, pgl). Personally I prefer people to use their real names, but I recognize that this simply is now just, well, most people do not do it, even though me dinosaur does. But the problem is that many Anonymouses show up here, and at least you make to my mind intelligent remarks, and, hey, you can be Mickey Mouse or whatever. I note that some Anonymouses here are hostile and critical, and perhaps you would like to differentiate yourself from them, at least.
Oh, Egmont, of course you have showed up, since I mentioned you. But for me you have run out of steam. There is simply nothing in your post even worth commenting on. Goodbye.
August 16, 2002
Mind the Gap
By PAUL KRUGMAN
More and more people are using the B-word about the housing market. A recent analysis * by Dean Baker, of the Center for Economic Policy Research, makes a particularly compelling case for a housing bubble. House prices have run well ahead of rents, suggesting that people are now buying houses for speculation rather than merely for shelter. And the explanations one hears for those high prices sound more and more like the rationalizations one heard for Nasdaq 5,000.
If we do have a housing bubble, and it bursts, we'll be looking a lot too Japanese for comfort....
August 8, 2005
That Hissing Sound
By PAUL KRUGMAN
This is the way the bubble ends: not with a pop, but with a hiss.
Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.
So the news that the U.S. housing bubble is over won't come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.
Of course, some people still deny that there's a housing bubble. Let me explain how we know that they're wrong....
August 25, 2006
Housing Gets Ugly
By PAUL KRUGMAN
Bubble, bubble, Toll's in trouble. This week, Toll Brothers, the nation's premier builder of McMansions, announced that sales were way off, profits were down, and the company was walking away from already-purchased options on land for future development....
August 25, 2006
The Bubble Bursts
By PAUL KRUGMAN
Just a wonkish note about how bad the macroeconomics of all this * could be:
If you look at the most leading of the indicators on housing, stuff like new home sales and applications for permits, they're off more than 20 percent from a year ago. If that translates into an equivalent fall in residential investment, we're talking about a fall from 6 percent of the G.D.P. to 4.8 percent. And this may be only the beginning; I wouldn't be surprised to see housing investment drop below its pre-bubble norm of 4 percent of G.D.P. at least for a while.
Add to this the likely effect of a housing bust on consumer spending and you've got a direct hit to G.D.P. of, say, 2.5 percent or more. That's bigger than the slump in business investment that led to the 2001 recession. And the main reason the 2001 recession wasn't as deep as some feared was that the Federal Reserve was able to engineer... a housing boom. What will the Fed do this time?
Maybe rising business investment and a declining trade deficit will soften the blow. But it's remarkably easy, playing with the numbers, to come up with scenarios in which the unemployment rate rises above 6 percent by the end of 2007. That's not a prediction, but it's well within the range of possibility.
"I am not aware of Krugman being on top of the housing bubble as far back as 2002."
From August 2002 on, Paul Krugman wrote and spoke of the housing bubble. Krugman expressly credited Dean Baker's work on the bubble in August 2002; this in the NYTimes.
Since Paul Krugman is so widely read, and since he began writing of the housing bubble in August 2002, referring to the work of Dean Baker, and since Krugman was writing of the hissing sound from the bubble by August 2005, there is no excuse for Federal Reserve leaders not to have known and understood. By August 2006, Krugman was warning in the New York Times of a recession resulting from the bursting of the housing bubble.
Housing prices peaked in March 2006:
January 30, 2018
Case-Shiller Composite 20-City Real Home Price Index, 2000-2018
(Indexed to 2000)
The Run-Up in Home Prices: Is it Real or Is it Another Bubble?
By Dean Baker
August 16, 2002
Mind the Gap
By PAUL KRUGMAN
[ We find Paul Krugman immediately reading and explicitly reporting on the work of Dean Baker on the housing bubble, both reports coming in August 2002. ]
Robert Samuelson has been repeatedly, critically addressed on economics by Dean Baker and Paul Krugman through the years:
April 22, 2013
Building a Mystery
By Paul Krugman
Jared Bernstein shakes his head at what he calls “weirdness” at the Washington Post, citing an editorial and a commentary by Robert Samuelson. I second his views, but I’d like to point out something else about Samuelson’s piece....
Fair enough. You win, Anonymous. Krugman picked up on it from Dean as early as 2002 and commented on it reasonably intelligently later.
I would note that at the Fed, Janet Yellen was warning about the housing bubble as of 2005, but was ignored by her colleagues then.
Of course, I have put up many posts criticizing Robert J. Samuelson on many issues, although most frequently on Social Security, which Dean has also gone after him on frequently.
Also, for the record, the much broader, but much less publicized FHA data series on US housing prices has them peaking in January, 2007. It seems that between July, 2006 and January, 2007, there was really a plateau, although such things as slowing sales were happening, a phenomenon Krugman predicted.
I know, I know only reasonably intelligently because, well, what can you expect from such an uneducated economist. Try to be fair and considerate. Drawing at first from and crediting the excellent Dean Baker, Krugman wrote properly and well on the housing bubble.
As for BR, you write splendidly.
Barkley Rosser is pleased about Robert Samuelson’s civility: “Also, it must be admitted that RJS does say complimentary things about most economists he deals with as being ‘extremely smart’ and ‘public spirited’ and ‘generous with their time,’ albeit ‘with a few exceptions’.”
Another silly kindergarten game economists play is the peer-recommendation/mutual-hype/self-congratulation game. Reality is different: economists are either stupid or corrupt or both. For details see
There is NO such thing as “smart, honest, honorable economists”
Does this absolute statement you make that there are "no" smart or honest or honorable economists apply to you as well? Or are you not an economist?
You ask: “Does this absolute statement you make that there are ‘no’ smart or honest or honorable economists apply to you as well? Or are you not an economist?”
When I deal with how the economy works and prove that Keynes’ macroeconomic proposition I=S is false because Keynes got macroeconomic profit wrong, I am an economist. When I deal with how the economics profession works I am a sociologist.
You are right in pointing out that absolute statements may lead to paradoxes. An issue that has been dealt with under the heading of auto-reference by Luhmann and recursion/self-reference by Hofstadter and Russel’s Paradox by mathematicians.#1 Not to forget this ‘extremely smart’ Crete philosopher Epimenides. The finer points of logic, though, are a moot point among the confused confusers of economics.
To this day, both the microfoundations and macrofoundations of economics are provably false but economists have not realized it. So, Robert Samuelson’s self-referential characterization of economists as ‘extremely smart’ and ‘public spirited’ and ‘generous with their time’ only confirms what is long known, i.e. that economists are not scientists but stand-up comedians in the political Circus Maximus who senselessly repeat their ridiculous prophesy stunts.
If Robert Samuelson (and the rest of his ilk including Barkley Rosser) is an economist I am NOT an economist and vice versa. There is nothing paradoxical here.
#1 “In the foundations of mathematics, Russell’s paradox (also known as Russell’s antinomy), discovered by Bertrand Russell in 1901, showed that some attempted formalizations of the naïve set theory created by Georg Cantor led to a contradiction. The same paradox had been discovered in 1899 by Ernst Zermelo but he did not publish the idea, which remained known only to David Hilbert, Edmund Husserl, and other members of the University of Göttingen.” (Wikipedia)
Oh, Egmont, I was not going to comment on this, but it is so hilarious that in an effort to justify allowing yourself to be an honest economist in a world where supposedly none exist you drag out logical paradoxes and logical foundations of mathematics. As a matter of fact this is a family specialty, with me writing papers on these, such as "On the Foundations of Mathematical Economics" that appeared a few years ago in New Mathematics and Natural Computation, with a couple more in the publication pipeline (with yours probably still empty I gather).
However, my late old man was one of the major players on this stuff back in the 1930s. You can google "Rosser sentence" or "Rosser's trick" to get an idea.
Anyway, dragging in Bertrand Russell to justify contradicting yourself is really quite hilarious.
You proudly present your ancestors: “As a matter of fact this is a family specialty, with me writing papers on these, such as ‘On the Foundations of Mathematical Economics’ that appeared a few years ago in New Mathematics and Natural Computation, with a couple more in the publication pipeline (with yours probably still empty I gather).”
Obviously, you still have not realized that the foundations of mathematical economics are false. See
Barzilai and the crumbling of the unsafe citadel
See, in particular, the Open Letter to the President of the American Economic Association
For the proof that people who call themselves economists are too stupid for the elementary mathematics that underlies macroeconomics see
There is political economics and theoretical economics. Political economists are agenda pushers, theoretical economists are scientists. Political economists are fake scientists and have to be expelled from economics. See
Who is really a scientist?
There is no contradiction. You are a P-economist and I am a T-economist. It is absolutely correct to say that an [T-] economist is NOT an [P-] economist and vice versa. It sounds only paradox for people who have not realized that economics has been captured long ago by useful political idiots and is a cargo cult science since Adam Smith/Karl Marx.
But you said NO economists were honest or honorable, not just the "P" ones. You made no exceptions when you made that statement for the supposedly virtuous "T" economists, a set that appears to contain only you, Egmont.
It remains hilarious that you dragged in Bertrand Russell in a silly effort to justify you contradicting yourself.
Why don’t you simply read the post There is NO such thing as “smart, honest, honorable economists”
Excerpt: The fact of the matter is that the four major approaches ― Walrasianism, Keynesianism, Marxianism, Austrianism ― are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the pivotal concept of the subject matter ― profit ― wrong.
For 200+ years now, economists do not know what profit is. Because of this foundational blunder, economics is scientifically worthless. And because of this, economic policy guidance NEVER had sound scientific foundations. And because of this, economists are the major cause of economic crises. By default, every economic mess is econogenic unless proven otherwise.
Economics is for 200+ years at the proto-scientific level. What is long overdue is a Paradigm Shift. This cannot happen with the given personage. Economists’ modus operandi is to simply ignore scientific standards and to imperturbably recycle falsified theories: “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern)
Krugman, for example, who is on the list of “smart, honest, honorable economists” has not realized to this day that Keynes’ I=S is false for 80+ years and still recommends IS-LM as a useful model.
Economists are not smart because they have not figured out to this day what profit is and how the monetary economy works. They are neither honest nor honorable because what they are doing for 200+ years now is NOT science but political agenda pushing.
Post a Comment