When it comes to economics, I want more than theories, generalities, and commonly wrong wisdom. I want to know the numbers. And I want to know how those numbers were generated.
Hidden inside some computers somewhere there are mathematical models and equations. I know it. You know it. I want to see them. Show me the equations! Package them in a spreadsheet program and give me access. And when you want to convince me of something, point to the spreadsheet to prove it.
I’ve been listening to politicians, economists, talking heads, analysts, and political operatives trying to sell their agenda. All make vague claims of what will happen next if this happens now. I know they’re BSing and obfuscating worse than Professor Irwin Corey or Glenn Beck, but they won’t let me see their models so I can’t prove it.
Like many of you, I went to school and took subjects like economics and calculus and physics and chemistry. Of course, I don’t remember diddley about most of them. But once upon a time I was smart enough to pass them, well most of them, so I could get out into a real world that rarely seems to use math beyond numerators and denominators.
I’m trying to figure it out. So I’m reading papers by Nobel Prize winners like Paul Krugman, who appears to be a saltwater economist, and who blames the meltdown on non-Neo Keynesians. The fresh water economists seem to think Paul is full of salt. But in no learned papers I saw on the web or the New York Times did either side show me why? Sure, they told me why — in big words in long paragraphs. But no quantitative analysis. All qualitative of dubious quality.
I am here to announce that I’m not accepting that anymore. If you, Mr. Politician, are correct, show me why by running the numbers. And if you on the other side, Mr. Talking Head disagree, show me where your arch enemies went wrong.
The catalyst that started this oxidation-reduction analysis in my brain was the G20. Hey, I know it ain’t an oxidation-reduction process, but I just wanted to prove I really took courses and graduated from Purdue, which my dad never did believe because all us hippies skipped graduation. Oh, and I remember pv=nrt which is Bernoullie’s principle and demonstrates just how much things suck, which when it comes to economics is bigger than Avogadro’s number. QED.
I also remember a thing called a “multiplier effect” which showed that the more money you put in the economy now, the more it grows the amount you get out in GDP later. And the sooner you put the money in, the more the multiplier would make the economy grow, like compound interest rates.
It seems to me Obama’s stimulus is based on the concept of the economic multiplier effect. The stimulus seems to be working, but it would have worked better if the money was spent faster. But nobody says anything like this. Not the people who are defending the spending. Nor the people who want to blame the administration for spending so much money.
I know that the Republican screams that we are saddling future generations with debt is too simplistic. It assumes the economy would have grown at the same rate without the stimulus, which is patently false. I want to know what would be projected as the GDP and national debt with and without the stimulus. And I’d like know if inflation would make it all moot.
I'd like to go back to concepts like a "marginal propensity to spend" and compare the effect of a tax cut on the rich with the spending of those on welfare. And I'd like to see the final numbers, and the assumptions, and equations in the economic model being used.
Nobody out in the communications world seems to talk like that to regular folks like me. And it does not make me want to give them credit that they really do know, and just aren’t telling. Maybe they know. Maybe they are totally ignorant. I think it is possible Minority Leader Boehner is as dumb as Senator “No Global Warming” Inhofe, but how am I to I know for sure.
Anyway, back to the G20 which lit my fuse. I believe this may be a milestone of the most important economic meetings of the decade. The current process and decisions may determine the future, not of one economy, but the world’s economy.
The only numbers I could glean from my research is that 20 is bigger than 8. And now that half the world’s population is represented, it’ll be better for people in emerging countries. Other than dropping another billion in the World Bank, I learned zero, which by the way isn’t really an integer. (See how all this good stuff almost comes back to a person when you dust off your brain and use it.)
According to e-wonks on PBS, the important fact of the G20 is that they agreed that decisions will involve all 20. The fact that there are no real implementable decisions isn’t so bad, because 20 is bigger and better than 8. WTF!
Quit doing your Professor Irwin Corey imitations! Show me the numbers. Show me the equations. Show me some intellectual respect. Show us all you have some clue that you understand why you’re saying what you’re saying. And prove it by running the numbers.
Show me the numbers!
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David Price
cartouche
Lyn LeJeune
fernsy
Dr. Strangemom
Amanda Brooks
Salon.com
Comments
Worse, physics has a "working theory" that all scientists largely work within to examine specific questions that theory asks. Pretty much every particle physicist doing any REAL work is working inside that theory, and that theory is well-confirmed by empirical evidence. Economics has no such "working theory" ... instead it has several, none of which is all that well-confirmed by empirical evidence. Each "kind" of economist builds their models based on their own working theory, which can include radically different ideas from the economist next to her. There is no real hard data that confirms one theory over the other ... each economist can point to data that supports their ideas and seems to contradict the other. But they can ALL do that, and thats the problem.
You want to see the equations, and the numbers ... there AREN'T any, and that a fundamental part of economics as it is practised today. There are a bunch of educated guesses, some of them obviously more educated than others. And each different guess produces different answers because it uses a different working model and different inputs to the other models.
One final point that has eluded me in all this. As consumers go into a recession, and government income drops as well, how is that a good time to spend more money. If you lose your job in the real world, is that REALLY the best time to look for a new car? Or does losing your job mean it's time to cutr back on luxuries, reduce what you spend overall, and weather the storm till your income recovers? Does adding debt to your already decreased income REALLY make sense then?
Why does it make sense on the macro level? Creating massive debt and spending more, when you are making less, seems to me the perfect recipe for bankruptcy. Yet thats just what economists, pretty much across the board, suggest for us ... we need to spend MORE now, and even go into debt to do it. Maybe I am just naive, but going into more debt and increasing your spending just as you lose your job doesn't seem the best way to plan your financial future, and I can't see any reason that would change on a macro level.
Good post though ... I rated :)
There is a tool called multiple regression analysis that tracks how close to reality a computer model is. It uses real world data and gets better and better. Just because we don't have a perfect model yet, does not mean we shouldn't start tracking the data and improving the model.
And finally, I agree that a jobless person shouldn't spend more money, but I think the government should.
If you and I had access to such a model, this wouldn't be an exchange of opinions between to almost-economic-geniuses. The model would indicate, if not prove that one of us isn't as much a genius as the other. And I'd like to know for sure.
I know about regression, but the competing models all go through that, and reflect reality based on their initial assumptions. The trouble is, neither can give us an accurate prediction because the variables involved are far too complex to model, in reality, and in making the models, economists are forced to make assumptions about that complexity. The problem is, there is less objective evidence which models are right than there is in a field like particle physics.