NationStates Jolt Archive

I'm not professionally involved, but economics is a subject that interests me and that I make a point to read about whenever I can. Recently, I read an article arguing against the "F-twist," Milton Friedman's claim that unsound assumptions are okay if the theories still make correct predictions because scientists assume stuff all the time, e.g., there is no air resistance. I can't find the article on the Web (although a summary is here (http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-6435.1981.tb01195.x)) but am more interested in the bigger question: is economics a science? If not, is it the fault of economists, or something inherent in the subject? Discuss.

Science =/= assumptions. In all reality, it's the anti-thesis of assumptions, though to a lesser extent than philosophy.

Economics, on the other hand, comes across is what happens when Philosophy meets Math in a dark alley with no one else around. Take that as you will.

Economics is slightly less of a science than Psychiatry and slightly more of a science than feng shui. *nod*

It is a discipline that attempts to use scientific methods to address a field that is cannot entirely be addressed by scientific methods, if that makes any sense.

What about heterodox economics? That's a fairly motley grouping, but do you think there is any economic school that is more scientific than the mainstream? (Neoclassical, I guess.)

Economics claims to be the science of human behaviour--or, more specifically, the science of how humans allocate resources. Its a science insofar that it can derive predictable, rational rules to describe markets. It's not a science insofar that the markets economists model are cultural constructions. Physics is physics; the rules governing the behaviour of an atom or the trajectory of a cannon ball are universal, or at the very least beyond the scope of human influence. The "ironclad rules of the market", whatever the pretensions of economists, are only as strong as the social fabric of the culture they were observed in. If you alter the cultural bedrock the "science" of economics has to be remolded to understand the new institutions.

If you alter the cultural bedrock the "science" of economics has to be remolded to understand the new institutions.
Which is the Institutionalist view. Of which Veblen was part, was he not? :)

Which is the Institutionalist view. Of which Veblen was part, was he not? :)

Guilty. :D

Yes, yes it is.

Oh sure it may not be the same as your Physics and Biology and Chemistry, but IT is still a science damn it *Bangs table* bloody elitists.

It...depends, I guess. Andaluciae nailed it on the head, I think. Personally, though, as an adherent to the Psychological school, I see it less of a branch of a physical science but instead as a "social science," more along the lines of psychology or sociology rather than astronomy or biology.

Economics is a science, in that it can accurately predict, through empirical methods and research, actions within the sphere it claims to study. I think the majority of problems with economics come about due to confusion as to what exactly IS the subject of economics.
Economics can predict the actions of a mass of intelligent, rational agents acting in their own self-interest with little to no external forces to muddy up the mix. Given these conditions, economics can, with relative accuracy, predict reactions.

I'm not professionally involved, but economics is a subject that interests me and that I make a point to read about whenever I can. Recently, I read an article arguing against the "F-twist," Milton Friedman's claim that unsound assumptions are okay if the theories still make correct predictions because scientists assume stuff all the time, e.g., there is no air resistance. I can't find the article on the Web (although a summary is here (http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-6435.1981.tb01195.x)) but am more interested in the bigger question: is economics a science? If not, is it the fault of economists, or something inherent in the subject? Discuss.

Economics is what you might call a soft science, like International Relations subfield of Political Science. The central trait of any scientific theory is falsifiability: your prediction of future events, based on reasoning and available evidence, has to include conditions that would disconfirm the hypothesis. The problem for economics with respect to science, however, is isolating each variable in something as complex as a national economy and determining 1) whether the variable you predicted has the effect you predicted, and 2) whether something else didn't accidentally confirm/disconfirm your hypothesis. When you combine the complexity of the subject under study by economists with the fact that many hypotheses offer predictions testable over decades rather than minutes and economics has only kept excellent data for the last hundred years or so, we've had very little time to test iterations of our theories. As such, like international relations, it's an interesting field with numerous fascinating predictions, but the effort required to disconfirm those hypotheses conclusively hasn't occured yet.

Science =/= assumptions. In all reality, it's the anti-thesis of assumptions, though to a lesser extent than philosophy.

Economics, on the other hand, comes across is what happens when Philosophy meets Math in a dark alley with no one else around. Take that as you will.So not science, since math is based entirely on assumptions?

Economics is a science. Not a natural science and inhibited by its inability to perform empirical experiments, but science nonetheless.

So not science, since math is based entirely on assumptions.I don't think math is based on assumptions; it's not like we could be wrong about what 2+2 means... and if we say someone IS in error on a mathematical problem, the only reason we could give is that they're not doing it the way we do it. If there is an appeal to anything, it's an appeal to a method of acting mathematically (one block, add another is two blocks). It's hard to assume something when you're defining it.

Economics is a science? Sure, you can gather evidence and make theories and do everything that other sciences do. What's interesting is that people think that economics is less of a science than physics because its predictions are less precise, yet there's no necessary fundamental difference in methodology.

I don't think math is based on assumptions;
You're correct. Math is based on the collective assertions of a bunch of people who couldn't go outside as children.

Economics is slightly less of a science than Psychiatry and slightly more of a science than feng shui. *nod**seconds* It certainly qualifies as a social science.

Economists are born when mathematicians have sex with psychologists. This is, for obvious reasons, a very rare event.

I don't think math is based on assumptions; it's not like we could be wrong about what 2+2 means... and if we say someone IS in error on a mathematical problem, the only reason we could give is that they're not doing it the way we do it. If there is an appeal to anything, it's an appeal to a method of acting mathematically (one block, add another is two blocks). It's hard to assume something when you're defining it.That 1 + 1 = 2 is true and holds true is the fundamental assumption of mathematics. There's no way to prove it, mathematically, without running into a tautology, so it's assumed it's correct.
Economics is a science? Sure, you can gather evidence and make theories and do everything that other sciences do. What's interesting is that people think that economics is less of a science than physics because its predictions are less precise, yet there's no necessary fundamental difference in methodology.You could say the same of biology. Especially population biology.

That 1 + 1 = 2 is true and holds true is the fundamental assumption of mathematics. There's no way to prove it, mathematically, without running into a tautology, so it's assumed it's correct.I agree that we can't prove it, sure. More accurately, I don't think there's any such thing as proving something like 1+1=2.

Saying that such mathematical propositions are "assumed" carries connotations that don't exist here; it's as if we could be wrong about what we're doing, even though there is no possibility of being wrong (since we're defining it). That's why I dislike saying that it is an assumption. It's not like 'assuming' a theory in science is correct in order to test it; there just isn't any testing to be done.

I agree that we can't prove it, sure. More accurately, I don't think there's any such thing as proving something like 1+1=2.Exactly. It can't be proven, hence it is assumed that it is correct, because math wouldn't work otherwise.
Saying that such mathematical propositions are "assumed" carries connotations that don't exist here; it's as if we could be wrong about what we're doing, even though there is no possibility of being wrong (since we're defining it). That's why I dislike saying that it is an assumption. It's not like 'assuming' a theory in science is correct in order to test it; there just isn't any testing to be done.See, all of this "connotation" and "dislike" stuff is completely irrelevant, though. It's still an assumption.

More accurately, I don't think there's any such thing as proving something like 1+1=2.
Actually there is, the entirety of mathematics is based on inane proofs - all the way down to 1 = 1. And, just to prove my point that math is all made up, most of those proofs are based upon questionable implications of truth - ie, a false statement implying any statement means the statement is true: the grass is blue implies the sky is red. That statement is true, which seem innocuous without an entire argument based around the "fact" that the sky is now red that would proceed that statement.

Exactly. It can't be proven, hence it is assumed that it is correct, because math wouldn't work otherwise.

Actually it can be, and has been.
"From this proposition it will follow, when arithmetical addition has been defined, that 1+1=2." – Principia Matematica, Volume I, 1st edition, page 379 (page 362 in 2nd edition; page 360 in abridged version).

Yes. Over 300 pages of defining addition and proving that 1+1=2

Actually there is, the entirety of mathematics is based on inane proofs - all the way down to 1 = 1. And, just to prove my point that math is all made up, most of those proofs are based upon questionable implications of truth - ie, a false statement implying any statement means the statement is true: the grass is blue implies the sky is red. That statement is true, which seem innocuous without an entire argument based around the "fact" that the sky is now red that would proceed that statement.

Which makes us wonder if logical truth is the same as truth as we think of it.

See, all of this "connotation" and "dislike" stuff is completely irrelevant, though. It's still an assumption.Well, if it can't be wrong then it is somewhat misleading to call it an assumption. Perhaps a "mathematical assumption", then.

Which makes us wonder if logical truth is the same as truth as we think of it.If something were different, it wouldn't be truth.

Well, if it can't be wrong then it is somewhat misleading to call it an assumption. Perhaps a "mathematical assumption", then.
Well, they're not really assumptions. It's not assumed that addition and multiplication and so on work the way they do. We've defined them to work that way.

If something were different, it wouldn't be truth.

wat

Social Science of course

Economics is just as much of science as physics. It's simply not as precise, and not as well understood. But then it's not like some fields of physics are well understood either.

If something were different, it wouldn't be truth.
Logic states fiction implies everything.

Economics is many things, it can be ethical, concerning what you ought to do with the economy, or it can be mathematical, concerning how something will affect the economy. In that sense, the latter is scientific since it can be falsified by actually observing what effect such a policy does have on the economy. People moan about it assuming that people will always try to maximise their utility, but this is not a problem at all unless you treat every economic prediction as 100% accurate without a margin of error, which you never do in statistics, you approximate, nothing unscientific about that.

Well, if it can't be wrong then it is somewhat misleading to call it an assumption. Perhaps a "mathematical assumption", then.
It could be wrong, though. Imaginary numbers is an even better example. It assumes that the square root of -1 exists.

Logic states fiction implies everything.

Logic ignores the subject matter.

*seconds* It certainly qualifies as a social science.

Social Science of course
Thus, it's not a science at all.


Economics can predict the actions of a mass of intelligent, rational agents acting in their own self-interest with little to no external forces to muddy up the mix. Given these conditions, economics can, with relative accuracy, predict reactions.
Thus, it can't predict human reactions in any way, shape or form.

(Noting that not all economists are nutty game theorists.)

Actually there is, the entirety of mathematics is based on inane proofs - all the way down to 1 = 1.

The Reflexive Property of Equality!

A=A!

I think it's a split thing, the part where trends in the economy are followed is science, however acting upon that is business, no science.

It's sort of like Meteorology, it's sort of science but the predicting part is...sketchy.

The Reflexive Property of Equality!

A=A!

I've been waiting for an Objectivist to point to this, and state that this means Objectivism is the one truth philosohphical system.

I've been waiting for an Objectivist to point to this, and state that this means Objectivism is the one truth philosohphical system.

You get all that from the Mathematical property that a given number equals itself?

You get all that from the Mathematical property that a given number equals itself?

What if A is a transvestite and likes to go out in public as a D? Does D = A then?

Thus, it's not a science at all.


Nonsense, it uses mathematical models to predict a hypothesis, the hypothesis can be falsified, it is scientific.


Thus, it can't predict human reactions in any way, shape or form.

(Noting that not all economists are nutty game theorists.)

Where do people get this crap? Why on earth would economists not allow for other factors? In fact they do, all the time. And of course they acknowledge there are other factors which cannot be modelled, which means they leave a margin for error and make an approximation, it doesn't have to be perfectly accurate to be scientific.

It's sort of like Meteorology, it's sort of science but the predicting part is...sketchy.

I think that's a good analogy. So many unpredictable elements and influences that making accurate predictions is often very difficult. On the other hand, it's a very good at analysis after the event.

That's not to say that economics isn't useful for making policy decisions but just remember that economists are always muttering "ceteris paribus" under their breath with every piece of advice they give.

What if A is a transvestite and likes to go out in public as a D? Does D = A then?

If A = T, and T = D. Then A = D.

Transitive Property, bitches.

If A = T, and T = D. Then A = D.

Transitive Property, bitches.

What if D doesn't particiularly like A because A lives in South London?

Then we have a bit of an identity crisis on our hands. :(

Nonsense, it uses mathematical models to predict a hypothesis, the hypothesis can be falsified, it is scientific.
Only if said mathematical models genuinely describe the world around us. A problem with much economic theory (not all), along with the social 'sciences', is that it constructs ridiculous, albeit mathematical, models of society and predicts an equally hypothesis; completely devoid of any attachment to the real world.

Thus we get the madness of dialectical materialistic economics, or the equally nutty Austrian School (heck, the whole neoclassical branch of economics), which declare themselves not only to be correct, but scientifically and mathematically proven.

Where do people get this crap?
Observance of the history and trends of 20th century economics.

Why on earth would economists not allow for other factors?
Because some of them are crazy-ass atomists.

In fact they do, all the time. And of course they acknowledge there are other factors which cannot be modelled, which means they leave a margin for error and make an approximation, it doesn't have to be perfectly accurate to be scientific.
But making large-scale economic decisions based on generalised and a priori faulty predictions, while claiming them to be 'scientific', is fairly screwy.

Thus, it's not a science at all.Social sciences are sciences, so if something qualifies as a social science then it is a science (hence the name).

Science =/= assumptions. In all reality, it's the anti-thesis of assumptions, though to a lesser extent than philosophy.

Economics, on the other hand, comes across is what happens when Philosophy meets Math in a dark alley with no one else around. Take that as you will.

I think "assumptions" could use some context here.

Scientists do not ideally make assumptions about the nature of things. But the models that they construct to explain things will often employ assumptions in those explanations.

e.g. An object in motion tends to stay in motion unless acted upon by an outside force. The assumption there would be "not acted upon by an outside force." Or in a highly specific case, the OP's example, "there is no air resistance."

The problem is, economists tend to assume things like "when minimum wages go up, inflation and unemployment rise." If you can't ever demonstrate that it is the case, no matter how well you can demonstrate that it would be the case, you are not engaging in scientific inquiry. You're pontificating.

Dunno. What about Home Economics?

Social sciences are sciences, so if something qualifies as a social science then it is a science (hence the name).
That's fucking backward. So if I declare painting a social science it's suddenly a science?

The long a troubled history of the humanities during the twentieth century has, if nothing, shown that the label of 'science' needs to be applied very carefully (if at all) to fields of research which deal in such chaotic and unpredictable subjects as human beings.

That's fucking backward. So if I declare painting a social science it's suddenly a science?Does painting employ the scientific method?

The long a troubled history of the humanities during the twentieth century has, if nothing, shown that the label of 'science' needs to be applied very carefully (if at all) to fields of research which deal in such chaotic and unpredictable subjects as human beings.Certainly, one must make sure that when labeling something a science that its practitioners adhere to scientific methods and principles.

You can think of it in layers:

There's the most basic truths of economics, which are true regardless of the society in which they occur. For example, you can't choose a resource allocation that is beyond your budget constraint. I don't care whether we live in utopia, in so far as there still is a budget constraint, you can't go beyond it. That's because it is axiomatic, and a lot of the assumptions people talk about when they think of economics really are such restatements of logical identities in mathematical form.

From there economists have abstracted to come up with things like general equilibrium theory. With each step you progress up the ladder, you generally have to choose a likely case in order to sacrifice some generality for a bit more predictive power. Of course, if you ask me the things assumed to derive the welfare theorems for example aren't particularly outlandish. They're still extremely basic assumptions, where the case against them is weaker than the case for them. A market equilibrium is pareto optimal regardless of whether we're talking about the US or some pacific island community, unless there is something in the way of price development (which is actually more likely in the US than on that island...).

And once you have things like the general equilibrium model, you can use it to answer real-life questions by modifying it and adding the things we actually know about the real world. That's where the economists come in: some are more rigourous than others, and this is also where most of the debates within the field happen.

As Xenophobialand pointed out, the lack of conclusive verifiability due to the lack of experimental economics (though (http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=11535592) it has (http://www.bsfrey.ch/) been done (http://en.wikipedia.org/wiki/Experimental_economics)) is a problem, which seperates economics from the "hard sciences". Nonetheless, the methods are rigourous, the debates scientific, the predictions usually correct. Even though many economic findings can't be generalised universally, within the area they were researching they generally find the truth.

Note however, that some schools of economics reject some of this, and are to that degree less scientific. The Austrians reject the use of empiricism in economics completely, and the old Keynesians over-relied on empirical studies and didn't do enough behavioural modelling.

That's not to say that economics isn't useful for making policy decisions but just remember that economists are always muttering "ceteris paribus" under their breath with every piece of advice they give.
So does every other scientist. A physicist will tell you that a given piece of mass will move towards the centre of the earth, because that's an implication of the law of gravity, which had been empirically observed, then described, then explained and generalised.

If a table happens to be between the mass and the centre of the earth, that prediction is faulty though. The physicist can correct for that by making an experiment in which the table is not there. The economist usually can't do that, and in the interest of scientific accuracy and validity he or she must therefore attach a ceteris paribus at the end.

Fact of the matter is that the world is such a complex economic system that we don't yet understand it in its entirety. Economics is a young science, it's barely 200 years old. Some of the other disciplines have many hundreds or thousands of years advantage. Go back to the time of the ancient Greeks, and you'll find that a physicist from then relied on a whole bunch of qualifiers and assumptions as well.

Only if said mathematical models genuinely describe the world around us. A problem with much economic theory (not all), along with the social 'sciences', is that it constructs ridiculous, albeit mathematical, models of society and predicts an equally hypothesis; completely devoid of any attachment to the real world.


Totally subjective and flippant opinion.


Thus we get the madness of dialectical materialistic economics, or the equally nutty Austrian School (heck, the whole neoclassical branch of economics), which declare themselves not only to be correct, but scientifically and mathematically proven.


Neoclassical economics itself includes all kind of different schools of thought, and mainstream economic thought is constantly evolving and changing when other factors and complexities are considered (sounds kind of like, science!). I've read a few articles rubbishing economics, but they're always based on shallow interpretations of the very earliest economic schools of thoughts of the 20th century, and then generalising from that.


Observance of the history and trends of 20th century economics.


What exactly can you observe that would show you that? Because the trend in the west, where mainstream economic approaches have been applied, is a general trend to more prosperity, of course with peaks and troughs.


Because some of them are crazy-ass atomists.


Thats such a vague description.


But making large-scale economic decisions based on generalised and a priori faulty predictions, while claiming them to be 'scientific', is fairly screwy.

No, it's not all a priori, and is often based observation of markets over time when different things are tried. And, like all sciences, its becoming less and less generalised all the time as the mathematical models are becoming more and more complex to take into account all different types of complications. And how the hell can you make a decision on the economy without predicting what will happen? Any method of predicting what will happen is economics.

Does painting employ the scientific method?
No, and neither does sociology, politics, economics and most other of the humanities. Sure, some in those fields do, incorrectly, call their field a 'science', and occasionally they do use scientific methods in certain aspects of some of the fields, but calling the entire field a 'science' is disingenuous.

I might use the scientific method to look at population increases that inform my political thesis, but then going on to call the entire of my political view 'scientific' is simply barmy.

Certainly, one must make sure that when labeling something a science that its practitioners adhere to scientific methods and principles.
Or, more prudently, confirm whether that field can adhere to scientific methods and principles in any meaningful way before running ahead and calling said field a 'science' all because we're still reacting to the Enlightenment.

The number of times, on here and in r/l, I've had to defend the view that science is not the be-all and end-all of human knowledge is frankly stupefying. There's an incredibly unhealthy attitude which pervades modern Western society that for something to be intellectually valid, it must conform to the scientific method; indeed that it must be 'a science'.

No, and neither does sociology, politics, economics and most other of the humanities. Sure, some in those fields do, incorrectly, call their field a 'science', and occasionally they do use scientific methods in certain aspects of some of the fields, but calling the entire field a 'science' is disingenuous.


Again, it depends on what aspect. If you're focusing on merely what you ought to do (which is mostly what politics is) then its not scientific. If you're focusing on what WILL happen and WHY things happen (something that can be verified and falsified) then that is scientific, economics mainly does this and can be a large part of sociology.


I might use the scientific method to look at population increases that inform my political thesis, but then going on to call the entire of my political view 'scientific' is simply barmy.


Yes but as I said economics is mainly making predictions on what will happen if you do something, regardless of whether you ought to do it or not.


There's an incredibly unhealthy attitude which pervades modern Western society that for something to be intellectually valid, it must conform to the scientific method; indeed that it must be 'a science'.

What other methods of verification do you support?

What if D doesn't particiularly like A because A lives in South London?

Then we have a bit of an identity crisis on our hands. :(

Ah, but you're forgetting the Angle Bisector postulate.

Dunno. What about Home Economics?

You want science?

K.

That's the best class for a guy to take. Why? Simple: Because it's the "gay" class to take.

I hear you heterosexuals saying, "What? Gen, I'm a hetero. I don't take no gay classes!" True. I'll explain.

I hear you homosexuals saying, "That's such a stereotype, Gen!" Also true. I don't believe that it's valid, but it's a stereotype, which is what makes this work.

See, if people think it's a gay class, then most guys won't take it for fear of being considered gay and belittled by the jocks. This of course leaves two kinds of people to take Home Ec:

1. Chicks (all kinds)
2. You (S'right)

Well, you might also find a couple of effeminate and openly gay men, but they're not a threat to your goals and, barring some kind of miscommunication on someone's part, unlikely to bother you. In fact, they tend to get along with women better than heterosexual men do, since they tend to lack the desire to spend time in their pants (IfyouknowwhatImean) Also, being that this is High School, you're probably not going to find that many.

Big Brother likes to nip that sort of thing in the bud.

Bow-chicka-bo...whoops. Wrong line.

Anyway, this leaves pretty much you in a class with women. Alone. Well there's also the teacher, but if you're paying attention to him/her then you have other problems.

Now go and do that voodoo that you do do, oh so well.

Bow-chicka. Bow-wow.

That's a scientific fact.

Totally subjective and flippant opinion.
Woes is me.

What exactly can you observe that would show you that?
History books. Modern economic textbooks critical of such theories. The internet. Etc.

Thats such a vague description.
Yeeessss...

Would you prefer: 'because some economicists of the twentieth century believed that human beings are individualistic, completely rational and always self-interested beings, with no conception of society and the chaotic nature of genuine human interaction'?

And, like all sciences, its becoming less and less generalised all the time as the mathematical models are becoming more and more complex to take into account all different types of complications.
Get back to me when someone invents a program which can calculate every single possible decision of every single human being on this planet, and every single possible ramification of any one of the possible combinations of these decisions.

(Hint: stay away from John Nash.)

And how the hell can you make a decision on the economy without predicting what will happen? Any method of predicting what will happen is economics.
Fine, just don't claim it's 'scientific'; unless you want to claim that when I go into the bookies and place a fiver on the 5:15 at Epsom, I'm doing science.

Ok Chumbly, lets get down to the crux of the issue. You think that that economics is unscientific essentially because human nature is chaotic and unpredictable. I don't anything in the universe can be infinitely unpredictable, but that's neither here nor there. Do you know what else is usually described as inherently chaotic and unpredictable? The climate, are you now going to claim that climatology is not a science? Because look how many god damn times the weather forecast is wrong.

*do Home Economics and you'll get super shagged*
Aye well my French set was me and 16 girls. Occasionally excellent times, but lots of problems regarding peer support etc., dunno if it really paid off in the end.

If you're focusing on what WILL happen and WHY things happen (something that can be verified and falsified) then that is scientific
But how could you ever come up with any meaningful, useful and truly scientific theory?

If we are examining human society, one of the most amorphous, changeable and chaotic things imaginable, what are we ever going to predict? As I said above, unless you've got some magical method for examining the thoughts and actions of every single human being on the planet at one time (and the environmental factors around them) then aren't we simply resorting to massive, and mostly unhelpful, generalisations?

What other methods of verification do you support?
Why must something be empirically verifiable to be intellectually valid?

Ok Chumbly, lets get down to the crux of the issue. You think that that economics is unscientific essentially because human nature is chaotic and unpredictable.
I think a large amount of twentieth century economic theories were unscientific because they did not accept, let alone factor in, the chaotic and unpredictable reality of human social life; in particular, many assumed that humans were always rational and self-interested, while many others assumed humans could be grouped into a few economic classes which acted in predictable manners.

I am not too familiar with modern economics, but I have not seen anything that moves too far away from the above. I'd be pleased to learn differently.

The problem is, economists tend to assume things like "when minimum wages go up, inflation and unemployment rise." If you can't ever demonstrate that it is the case, no matter how well you can demonstrate that it would be the case, you are not engaging in scientific inquiry. You're pontificating.

Except that's not really an economics "assumption", it's a prediction based on the theory of supply and demand. The assumptions at work in that prediction are:

1) Labour is a commodity

2) The eternal, implicit, ceterus paribus.

Granted, its not a terribly sophisticated prediction, (crude model) and relatively easy to cast doubt on empirically. Also, the assumption that labour is a commodity only holds because we treat labour as a commodity....see my institutionalist rant above.

Granted, its not a terribly sophisticated prediction, (crude model) and relatively easy to cast doubt on empirically. Also, the assumption that labour is a commodity only holds because we treat labour as a commodity....see my institutionalist rant above.
I very much agree.

It's a problem that ceteris paribus is very rarely in effect; usually, all things aren't equal.

It's a problem that ceteris paribus is very rarely in effect; usually, all things aren't equal.

That's true. I think economics is best applied historically: it's a useful tool in explaining what already happened, not so good at forecasting the future.

I think economics is best applied historically: it's a useful tool in explaining what already happened, not so good at forecasting the future.
I've come to think that of much of the humanities; that they are all, taken together, a wonderful tool for dissecting our past, but singularly unhelpful in predicting what will happen tomorrow.

The problem is, economists tend to assume things like "when minimum wages go up, inflation and unemployment rise." If you can't ever demonstrate that it is the case, no matter how well you can demonstrate that it would be the case, you are not engaging in scientific inquiry. You're pontificating.

Taking your minimum wage example, some economists would assume that but not all. The UK Labour government used a neoclassical model of the labour market to justify the introduction of a minimum wage that they argued would not cause an increase in unemployment. The basic labour supply and demand model is too simplistic and takes on a new dimension when you factor in things like the marginal product of labour etc,.

Aye well my French set was me and 16 girls. Occasionally excellent times, but lots of problems regarding peer support etc., dunno if it really paid off in the end.

Pssh. Foreign languages are hard work, maaan. Cooking? Not so much. Well, it can be. But it's a lot more fun.

At any rate, when it comes to cooking, that super-shagging's all the peer support you're gonna need. Wink wink nudge nudge.

Thus, it can't predict human reactions in any way, shape or form.

Untrue, a lot of economic theroy is based on human reaction.

That's fucking backward. So if I declare painting a social science it's suddenly a science?

He didn't say if he declares it he said if it qualifies.

What have you got against ecomomics and economists Chum?

One example was the original concept that became the Phillip's Curve in simplified terms it stated that when unemployment rises inflation falls and when unemployment falls inflation rises. Now this was made up by somebody this didn't just pop into someones head it was derived by observation of real life data this had happened over a long period of time and a conclusion was drawn from what actually happened. Now then let us take gravity that was observed and actually happened in real life and then the concept of gravity was developed.

Pssh. Foreign languages are hard work, maaan. Cooking? Not so much. Well, it can be. But it's a lot more fun.

At any rate, when it comes to cooking, that super-shagging's all the peer support you're gonna need. Wink wink nudge nudge.
Aye, I can cook pretty well already. And aye, it's handy.

Aye, I can cook pretty well already. And aye, it's handy.

I hear baking is tougher than cooking. Any truth to that?

Untrue, a lot of economic theroy is based on human reaction.
I'm not saying it isn't, merely that much past economic theory has worked from some badly flawed assumptions about human rationality and action.

One example was the original concept that became the Phillip's Curve in simplified terms it stated that when unemployment rises inflation falls and when unemployment falls inflation rises.
It's my understanding that Philip's Curve is a very generalised, vague understanding of the relationship between unemployment and inflation; it's hardly a scientific law. (Moreover, it only works in certain circumstances; think of inter-war Germany, massive unemployment and inflation.)

This is the heart of the problem. I'm not claiming that economics is useless and can never tell us anything useful; far from it. But up until now it's been nowhere near a science.

And that's not necessarily a bad thing.

I think a large amount of twentieth century economic theories were unscientific because they did not accept, let alone factor in, the chaotic and unpredictable reality of human social life; in particular, many assumed that humans were always rational and self-interested, while many others assumed humans could be grouped into a few economic classes which acted in predictable manners.
I think you fundamentally misunderstand what these models are about.

There is nothing about social life that isn't covered in these models. Even a really old-school Nash-type game has everything it needs to cover any but a completely insane person. The model, the description of how choices are made and what effect they have on the outcome of the entire system, is economics. The inputs into the model, for example what pay-off is associated with a given outcome (and it doesn't matter whether this is "I get $50" or "I get X as a girlfriend" or "your political philosophy Y is now implemented") firstly isn't given by the model itself (it is exogenous rather than endogenous) and secondly isn't really important for what the model is trying to do. The economist uses what the discipline has established so far in order to create a tool to help you make a decision. It is the user of the tool who specifies pay-offs and therefore makes specific assumptions about the specific persons at hand. I encourage you to actually grab yourself a few current academic papers on game theory and you'll see what I mean. They are constructions of behavioural equations and of the dynamics of what happens when these are combined to produce equilibria (or not). And the second kind of article is the one that then tries to apply these models to real-life examples. That's where the assumptions come in.

Now, of course there are no economic models that can cater for the irrational. That is because their behaviour is unpredictable by real-life measures. Psychologists can develop ways of describing the disabilities that make a person neglect what he or she knows to be the pay-off that will make them happiest (and once this is done, economics can again take over), but where this isn't possible and a person is truly unpredictable, yes, economics breaks down. So does every other form of explanation for their behaviour. Face it: all an economic model really says is "people do what they think will make them happy". If you think that's a stretch too far, I'd love to see an alternative. Here, the only person I've seen to do so is Soheran with his obsession for moral imperatives and Kant (:p).

And of course, or so the argument goes, such an irrational person is also going to disappear over time. If I act as anything other than a profit-maximiser (whatever that means in the specifics of the case), others will be able to take advantage of this and I will voluntarily trade away everything I have to them. Moral judgements obviously come into it at this point, but if all you're after is creating a model that describes an equilibrium that is stable over time (or not, depending on how advanced your model is) then such a temporary impact as an idiot who trades away everything for cheap and starves to death usually wouldn't have much of an impact on the ultimate outcome.

I'd say bourgeois economics is unscientific, the dialectical method however is not.

Also just a quick question to the bourgeois economic advocates here:

Think about this, how do you get more money? With C-M-C equation exchange only happens if people agree to trade things for equal value. People measure the value of commodities with money and exchange them for money. If I sell something I’ve made for $10 and then go spend that $10 on stuff I am essentially trading $10 of my labor for $10 of other people’s labor. An equal exchange has taken place with the aid of money as a measuring of value. The value that is being measured corresponds to the amount of labor that has gone into making the commodity.

But if we are going to do M-C-M we need an unequal exchange. We need to end up with more money than we started with. How is this possible?

I'd say bourgeois economics is unscientific, the dialectical method however is not.

Also just a quick question to the bourgeois economic advocates here:

Think about this, how do you get more money? With C-M-C equation exchange only happens if people agree to trade things for equal value. People measure the value of commodities with money and exchange them for money. If I sell something I’ve made for $10 and then go spend that $10 on stuff I am essentially trading $10 of my labor for $10 of other people’s labor. An equal exchange has taken place with the aid of money as a measuring of value. The value that is being measured corresponds to the amount of labor that has gone into making the commodity.

But if we are going to do M-C-M we need an unequal exchange. We need to end up with more money than we started with. How is this possible?
So it's unscientific just because you lack the political neutrality to understand it?

There is nothing about social life that isn't covered in these models. Even a really old-school Nash-type game has everything it needs to cover any but a completely insane person.
Does 'irrational' equate to 'insane', according to these models? I believe they claim it does, which is a major problem in trying to map the often 'irrational' and non-self-serving behaviour of human beings.

Now, of course there are no economic models that can cater for the irrational. That is because their behaviour is unpredictable by real-life measures. Psychologists can develop ways of describing the disabilities that make a person neglect what he or she knows to be the pay-off that will make them happiest (and once this is done, economics can again take over), but where this isn't possible and a person is truly unpredictable, yes, economics breaks down.
Then we have a major problem, for doing the irrational is often a preferred choice of an individual, while neglecting a pay-off for oneself is rarely a 'disability'. Models of human behaviour, economic or not, that ignore or factor these facets of human behaviour out to madness or illness are muddied and sorely wrong; as many faulty philosophic theories which make the same assumptions have shown. (That's probably the main sticking point of Kant's thesis of the Categorical Imperative.)

So does every other form of explanation for their behaviour.
Only if those explanations try to dismiss 'irrational' and/or non-self-serving behaviour as aberrant or wrong.

Face it: all an economic model really says is "people do what they think will make them happy". If you think that's a stretch too far, I'd love to see an alternative.
I think with some clarification on the term 'happy', I'm happy (:p) with that summation. But it hardly amounts to a scientific field of study.

And of course, or so the argument goes, such an irrational person is also going to disappear over time. If I act as anything other than a profit-maximiser (whatever that means in the specifics of the case), others will be able to take advantage of this and I will voluntarily trade away everything I have to them.
Only if we run from the model that certain people are always self-serving, and that 'irrational' people are always altruistic, which is, of course, ludicrous.

No, and neither does sociology, politics, economics and most other of the humanities. Sure, some in those fields do, incorrectly, call their field a 'science', and occasionally they do use scientific methods in certain aspects of some of the fields, but calling the entire field a 'science' is disingenuous.

I might use the scientific method to look at population increases that inform my political thesis, but then going on to call the entire of my political view 'scientific' is simply barmy.I agree that there are some economists who do not act via scientific methods or hold scientific opinions. This does not mean the field as a whole is unscientific. If some biologists are also Young Earth Creationists, does this invalidate biology as a science?

Or, more prudently, confirm whether that field can adhere to scientific methods and principles in any meaningful way before running ahead and calling said field a 'science' all because we're still reacting to the Enlightenment.

The number of times, on here and in r/l, I've had to defend the view that science is not the be-all and end-all of human knowledge is frankly stupefying. There's an incredibly unhealthy attitude which pervades modern Western society that for something to be intellectually valid, it must conform to the scientific method; indeed that it must be 'a science'.I'm not suggesting that everything that is intellectually valid is a science. (I'm not sure if I believe this or not.) What I am saying, though, is that economics can be considered a science for the reasons I gave earlier.

Dunno. What about Home Economics?

Great Science, or Greatest Science?
The nation decides.

I agree that there are some economists who do not act via scientific methods or hold scientific opinions. This does not mean the field as a whole is unscientific.
True, and I have not claimed otherwise.

With C-M-C equation exchange only happens if people agree to trade things for equal value. People measure the value of commodities with money and exchange them for money.
No. People measure the value they attach to commodities with money.

Marxist economics just isn't very good. Get over it, there are way better justifications for statist intervention than that stuff. May I suggest Joe Stiglitz, sad old man though he may be?

Does 'irrational' equate to 'insane', according to these models? I believe they claim it does, which is a major problem in trying to map the often 'irrational' and non-self-serving behaviour of human beings.
No, rational, according to basic economics, only means "do what gives you the most 'utility'", which just means "do what makes you happiest". As a way of modelling behaviour, that can cover anything but a very clear-cut of the irrational. It can include non-self-serving behaviour. It doesn't really matter whether we say "I do it because it makes me happy", or "I do it because it makes me happy because someone else is happy". Whatever qualitative difference there may be, there is no quantitative one, so the model can cope with it.

Truly irrational behaviour is one that does not seek to maximise happiness. In other words, an agent sees different options to take, can see the happiness they might bring her for at least some of them, and this doesn't affect the decision she makes at all. So she knowingly chooses to behave in a way that she knows will not make her as happy as she could be, where the source of happiness is not really constrained by the model itself.

So yes, that's either insanity, or the sort of self-denial that a Kantian hero might be subject to.

Then we have a major problem, for doing the irrational is often a preferred choice of an individual...
Really, an economist would just be confused by that sentence, as you can figure out from what I wrote above.

What exactly do you define "irrational" to be?

...while neglecting a pay-off for oneself is rarely a 'disability'. Models of human behaviour, economic or not, that ignore or factor these facets of human behaviour out to madness or illness are muddied and sorely wrong; as many faulty philosophic theories which make the same assumptions have shown. (That's probably the main sticking point of Kant's thesis of the Categorical Imperative.)
Yeah, but I've been trying to point out that this doesn't apply to economic theory and modelling as a tool. If there is a function U(x) that denotes the fictional thinking aid of utility for a given situation x (which can be dollars, or goods, or my family's welfare, or world peace), then the model can be used regardless of what x is, as long as U(x) is specified correctly.

I think with some clarification on the term 'happy', I'm happy (:p) with that summation. But it hardly amounts to a scientific field of study.
Why not? Economics is the study of allocating resources. Those resources can be time, or effort, or love (if it happens to be scarce). Regardless of what they are though, there are certain facts about resource allocations and their relations to people that have been established over time. There were empirical observations, certain logical identities, and attempts to formalise and generalise.

Ultimately, that's the same process as the one you get in hard sciences, except without the ability to do experiments. I think the problem you have is seeing the reach of economics. In hard sciences, you might have physics on one hand, which deals with generalisations, and engineering, which might use the general rules developed by physicists to solve specific problems subject to certain inputs and constraints. Economics does both - there are theoretical economists who develop things like the general equilibrium model and game theory, and practical economists, which seek to apply these principles in specific cases by making use of the specific parameters and constraints present at this point.

Where does your problem sit? Is it in the work of theoretical economists, in the work of those who apply its findings, or in the process of going from one to the other itself? And if it is the latter, how is it really different from the gap between physics and engineering?

Only if we run from the model that certain people are always self-serving, and that 'irrational' people are always altruistic, which is, of course, ludicrous.
Irrational =/= altruistic. Indeed, an altruistic person can't be irrational, because one could be more altruistic by putting one's resources to an optimal use - regardless of what your ultimate purpose is.

But yeah, there is an assumption that people at least try to use their resources as well as they can. Part of that comes from the necessities of life itself (at some point you have a choice between rationality and death), part from the sharing of knowledge about resource allocations, and you can probably think of some other scenarios yourself. But do you really think it's that bad an assumption?

Yes, economics is a science. By necessity, it just isn't as rigorous as some other sciences.

(That's probably the main sticking point of Kant's thesis of the Categorical Imperative.)

That's a poor argument, because rationality for Kant is not positive, but normative. Human beings may be (in fact are) routinely irrational, but they should be rational; there is an element of "rightness", of "correctness", to rationality.

No, rational, according to basic economics, only means "do what gives you the most 'utility'", which just means "do what makes you happiest". As a way of modelling behaviour, that can cover anything but a very clear-cut of the irrational.

The irony of this is that it gets practical rationality exactly the wrong way: it can cover most kinds of irrational behavior, but it can't cover rational behavior.

Truly irrational behaviour is one that does not seek to maximise happiness.

Nonsense. If we are rational, we see that "This action maximizes happiness" and "This action is right" have nothing whatsoever to do with one another... and that "right" is the relevant standard for action (by definition).

So yes, that's either insanity, or the sort of self-denial that a Kantian hero might be subject to.

No, not just a Kantian hero, though Kantians rightfully make this explicit. That sort of "self-denial" is fundamental to rationality itself.

Of course, economics is also much more than a science, because it tends to make a variety of assumptions that can't be remotely tested by its empirical methods.

The "hard" sciences can claim neutrality regarding the "real" world: they can claim that their theories are purely predictive, are intended not to describe reality but just to generate accurate results. The trouble with applying that reasoning to economics is that its "results" are, in and of themselves, sometimes irrelevant or meaningless. Most trivially, something like "This policy results in increased economic growth" is hardly useful to us without some knowledge of what that growth signifies--say, increased happiness or freedom. But this "knowledge" can itself be contested, and economic science can hardly decide for us one way or the other. Economic theory can attempt to with somewhat more credibility, but it has its own problems.

Is it science when Alan Geenspan used to sneeze and the market would drop?

Also -- and this is a question I've asked time and again in NSG, and nobody has yet answered it with anything but chicanery and legerdemain -- how is it possible for any economic system to predicate itself on the need to continually grow? We hear in news reports that the economy is "in a slump" because it only grew by 1% or some such. I am nobody's economist, but how can it be possible for the world to keep growing when most of the resources it trades in are finite? And doesn't that kind of growth for one part of the world almost mandate a stagnation or regression in other parts?

Soheran, you're a rational bloke -- any help here?

Is it science when Alan Geenspan used to sneeze and the market would drop?

Well, economic science is particularly difficult because unlike in, say, physics, its objects of study are human beings, and they are capable of changing their behavioral patterns in response to changes in policy.

I am nobody's economist, but how can it be possible for the world to keep growing when most of the resources it trades in are finite?

Even keeping the quantity of resources used constant, if you continually discover new ways to use them more efficiently, you can continue growth. The crucial "resource", if you will, is human knowledge, and we have no reason to believe that that is finite.

Which is not to say that magical solutions to our resource problems are going to suddenly materialize. There are plenty of major problems when it comes to sustainability.

Here, the only person I've seen to do so is Soheran with his obsession for moral imperatives and Kant (:p).

Yeah, instrumental rationality being rationality as such is a pretty common notion in our culture; I bought into it myself for a very long time.

But most human beings are still pretty stubbornly anti-determinist when it comes down to it, so....

No, rational, according to basic economics, only means "do what gives you the most 'utility'", which just means "do what makes you happiest". As a way of modelling behaviour, that can cover anything but a very clear-cut of the irrational. It can include non-self-serving behaviour. It doesn't really matter whether we say "I do it because it makes me happy", or "I do it because it makes me happy because someone else is happy".
But, again, we need to further define 'happy' if we are to explain motivations of duty and the like. I may have a choice between doing an activity I enjoy, which would make me (emotionally) happy, and one that I do not enjoy, but which I feel I must do due to a sense of duty, and still pick the unenjoyable activity over the enjoyable one; arguably making me less happy but more 'content'. Of course, we could substitute 'content' for 'happy' in your thesis above; I'm just saying we need to be careful of our terms here.

Moreover, I'm disinclined to say that performing an action which makes me less happy than another action is necessarily irrational; that seems to me a rather confused way of thinking about human motivation and rationality. My Kantian friend below would probably disagree.

Truly irrational behaviour is one that does not seek to maximise happiness. In other words, an agent sees different options to take, can see the happiness they might bring her for at least some of them, and this doesn't affect the decision she makes at all. So she knowingly chooses to behave in a way that she knows will not make her as happy as she could be, where the source of happiness is not really constrained by the model itself.
So, according to this model, acting out of a sense of etiquette, duty, love or some other motivation, when that diminishes happiness, is irrational behaviour?

Really, an economist would just be confused by that sentence, as you can figure out from what I wrote above.

What exactly do you define "irrational" to be?
My apologies, I should have put the word in quote marks, for I disagree somewhat with your (the "economist's") sense of 'irrationality'.

My sense of 'irrationality' is, however, quite similar to the above, but I would not use words such as 'happiness' or 'pleasure' (or perhaps even 'desire') to describe irrationality, as I believe this mislabels a large amount of human behaviour as 'irrational'.

Perhaps an example would illustrate: I want to get home to dinner and I can go by bus or train (which is quicker). Ideally I would want to get home as soon as possible.

Now, deliberately getting on the wrong bus or train, going away from my home, would be irrational (as long, of course, as there were no other motivations at play), as it defeats the goal I wish to achieve. So too would it be irrational to get on the bus or train if I changed my mind about wanting to go home for dinner. So far, very simple

However, getting the slow bus instead of the quick train because (for the sake of argument) it is more ecologically sound to get the bus would not be irrational, but not necessarily because it would make me more happy. I might actually feel less happy about taking the slow bus, and gain no genuine happiness from my knowledge that I am 'saving the planet', only a grudging acknowledgement that I am doing the right thing. (Again, I might not get genuine happiness from doing the right thing, merely a sense of duty fulfilled).

I realise I'm playing semantics here, but I believe these semantics are important.

Where does your problem sit? Is it in the work of theoretical economists, in the work of those who apply its findings, or in the process of going from one to the other itself?
The former two.

If economics is merely an application of theory of human motivation to resources then, although it may well stem from empirical observation of human behaviour, it does not seem to qualify for the title of 'science', any more than politics or sociology does. I would be much more content if we delineated between 'economics' as a whole, and 'economic science' as a part of economics; and similarly 'political science' as a part of the field of politics. I certainly do not deny that certain aspects of economics use the scientific method and are based on empirical data, but this does not make the whole field a science.

But do you really think it's that bad an assumption?
I think if there's a further assumption that 'using resources as well as they can' is equatable to 'being self-serving', then I think the assumption is flawed. I'm not saying it is always assumed like this, but much economic theory I have read seems to do so.

I hear baking is tougher than cooking. Any truth to that?

Depends on the person.
Try each one out.
Cooking and Baking both take constant effort, just cooking has it spread out longer whilst baking has the effort at the start with less when it is in the oven.

Both, imo, are easy. My Food Tech teacher was a complete sexist, garish and annoying posh stuck up tart who thought she was attractive despite having a leather-like face daubed in fake tan. She was generally always prejudiced against the boys in my class, despite we were better at cooking and food design than the girls, its just they could do those fancy "analysis" posters and other stuff like that and make them look really good. Most of them were good at cooking but unfortunately practicality went out of the window for some >.<
She said I was bad at Food Tech itself, yet I was good at cooking itself, I always got straight A's for my practical work. I guess I'm not cut out for the competitive business side of it. At least i'll be able to make some smashing dishes for when i have guests.

Well, economic science is particularly difficult because unlike in, say, physics, its objects of study are human beings, and they are capable of changing their behavioral patterns in response to changes in policy.

Even keeping the quantity of resources used constant, if you continually discover new ways to use them more efficiently, you can continue growth. The crucial "resource", if you will, is human knowledge, and we have no reason to believe that that is finite.

Which is not to say that magical solutions to our resource problems are going to suddenly materialize. There are plenty of major problems when it comes to sustainability.

Thank you for not using obfuscation. Excellent answer.

Depends on the person.
Try each one out.
Cooking and Baking both take constant effort, just cooking has it spread out longer whilst baking has the effort at the start with less when it is in the oven.



Baking is more precise than cooking. You can't guesstimate a recipe for, say, scones, the way you could for mulligatawny or braised lamb shank. If your proportions of baking soda to flour to liquid are off even a little, your dough just won't work; and there's no way to readjust once it's started cooking. Patisserie (ie: professional baking/pastry) involves detailed, artistic, flowery stuff that demands a lot more patience and attention than "regular" cooking.

Is it science when Alan Geenspan used to sneeze and the market would drop?

Also -- and this is a question I've asked time and again in NSG, and nobody has yet answered it with anything but chicanery and legerdemain -- how is it possible for any economic system to predicate itself on the need to continually grow? We hear in news reports that the economy is "in a slump" because it only grew by 1% or some such. I am nobody's economist, but how can it be possible for the world to keep growing when most of the resources it trades in are finite? And doesn't that kind of growth for one part of the world almost mandate a stagnation or regression in other parts?

Soheran, you're a rational bloke -- any help here?The reason that economies need to grow is because the population grows.
Until more people are dying each year than being born/immigrating, the economy needs to grow at at least the rate of the population increase.

The reason that economies need to grow is because the population grows.
Until more people are dying each year than being born/immigrating, the economy needs to grow at at least the rate of the population increase.

Economic growth is usually measured in GDP per capita, though. A 0% increase per capita means that an economy is sustaining a level of production relative to its population, but anything less than a 1-2% increase is considered a cause for worry.

Economic growth is usually measured in GDP per capita, though. A 0% increase per capita means that an economy is sustaining a level of production relative to its population, but anything less than a 1-2% increase is considered a cause for worry.

Actually, what you will usually hear about is gross economic growth, not growth per capita - although per capita obviously says a lot more about the state of the country - consider this article (http://www.economist.com/finance/displaystory.cfm?story_id=10852462).

Actually, what you will usually hear about is gross economic growth, not growth per capita - although per capita obviously says a lot more about the state of the country - consider this article (http://www.economist.com/finance/displaystory.cfm?story_id=10852462).

Interesting. There I go again, underestimating the sloppiness of 95% the business press.

I'm not saying it isn't, merely that much past economic theory has worked from some badly flawed assumptions about human rationality and action.

Hence why we have new schools of thought.

It's my understanding that Philip's Curve is a very generalised, vague understanding of the relationship between unemployment and inflation; it's hardly a scientific law. (Moreover, it only works in certain circumstances; think of inter-war Germany, massive unemployment and inflation.)

This is the heart of the problem. I'm not claiming that economics is useless and can never tell us anything useful; far from it. But up until now it's been nowhere near a science.

And that's not necessarily a bad thing.

When we have both high unemployment and high inflation that is known as stagflation, the Phillips curve I described was the basic original model, there is a much more complex model that takes these things into account and scientifically explains them. As I said the Phillips curve wasn't just made up it was based upon previous experience that was recorded over a few decades and the effects noticed.

Please Chum, define what a science is.

Yeah, instrumental rationality being rationality as such is a pretty common notion in our culture; I bought into it myself for a very long time.
Well, culture or no, economics at its core doesn't really decide on the ultimate ends of a person. Those are decided by the rankings people make themselves, and only if we make the general models more specific do we have to make assumptions on those in order to make some predictions. In practice, most of the time, that works quite well. If you want to model the market for petrol in your state, moral imperatives don't really enter into it as far as behaviour is concerned. At any rate, a model that has consumers trying to maximise personal welfare will probably make better predictions than one that has consumers trying to act according to moral imperatives.

Really, economics is a science of choices and the effects they have. Granted, once you establish that certain choices are superior in certain ways (for example, pareto optimality) one can easily be led to make the jump and say that these choices are superior in all ways that matter. That's when economics comes into conflict with thinks like moral philosophy and when the idea of rationality in values comes into play.

I for one am not one who seeks to overemphasise the fact that markets just happen to work better than other forms of resource allocation. It's true, and it's a nice side effect, but I don't think that alone should be enough to convince anyone of an inherent superiority. I'm not utilitarian, and neither should anyone else be.

In short, economics shouldn't seek to talk about rationality in any other way than purely instrumentally. There are those who wander the boundaries in economic philosophy and areas like the economics of law, and they're doing all disciplines a service by doing so, but I don't think anyone should judge the whole of economics by them.

But, again, we need to further define 'happy' if we are to explain motivations of duty and the like.
I think I partly covered that above. Duty is a thing that economics doesn't do very well, and doesn't really seek to do. Most of the time, that's not really a problem, and sometimes it may be.

Of course, it would still be possible to rank alternative choices people have by using duty rather than happiness as the yardstick. In that case, game theory would still work fine. But the derivation of the general equilibrium model might change somewhat. Without thinking much about it, I don't think there are many reasons to suspect that the basic idea of maximising the pay-off (which now is "being morally good") subject to the constraints one has to deal with couldn't still work. Nonetheless, there may be some differences in there and I'm not committing either way.

But the important thing is: economics doesn't seek to explain morality, and no one should tell you otherwise. The only form of moral philosophy that squares up perfectly with economics is utilitarianism, and I for one think it's the wrong way to go. And as a result, economics is a tool. It allows us to rank choices and outcomes according to certain criteria - but it doesn't follow automatically that those are all that matters. It's just that when economists predict your policy will reduce economic growth and make everyone less wealthy in real terms, that must be acknowledged and there has to be some argument for why that is acceptable. "Economics is based on false assumptions" is not a valid argument unless it's justified in a lot more depth than anyone here has tried.

Moreover, I'm disinclined to say that performing an action which makes me less happy than another action is necessarily irrational; that seems to me a rather confused way of thinking about human motivation and rationality.
As long as you acknowledge that "happy" doesn't have to mean physical or even emotional pleasure but is a stand-in for "would be preferred according to your own criteria, which can take any form whatsoever", I don't think it's really confused. Not many people willingly and knowingly do what is wrong, whether it be wrong for their wallet, wrong for their happiness or against their idea of morality. And those that do are ultimately best described as irrational.

So, according to this model, acting out of a sense of etiquette, duty, love or some other motivation, when that diminishes happiness, is irrational behaviour?
See above.

My sense of 'irrationality' is, however, quite similar to the above, but I would not use words such as 'happiness' or 'pleasure' (or perhaps even 'desire') to describe irrationality, as I believe this mislabels a large amount of human behaviour as 'irrational'.
Well, you can blame me as much as anyone for this. An economics textbook would likely talk about "utility", but that's a very specific and usually misunderstood term. On the plus side, it is also flexible enough to incorporate virtually any form of motivation one might have for preferring one action to another.

The problem is that if you widen the net too far, the model loses predictive power. Usually we don't know a priori the motivations, desires or moral imperatives of the agents we are looking at. If we did, command economies would probably work a lot better than they do. That's why when we apply utility, we often make assumptions not because we think that's how people always behave, or that's how people should behave, but because given our constraints and empirical as well as logical observations about people's behaviour, they give us the best predictive power. When people say "agents try to maximise the dollar value of the goods they consume", then that's not simply plucked out of thin air. The model might be even better without that particular assumption, but we simply don't have a way of getting all the information, and statistical analyses show that the model with this assumption does a better job than any alternative one we can think of, predicting outcomes that are not significantly different from real outcomes at, for example, a 95% confidence interval.

There is a lot of technique behind this, and that's the scientific rigour that people were talking about. Economists do try to be as scientific and as accurate and honest as they can be about a subject matter that is very difficult to understand.

If economics is merely an application of theory of human motivation to resources then, although it may well stem from empirical observation of human behaviour, it does not seem to qualify for the title of 'science', any more than politics or sociology does.
But that's not really what it is. I never finished this thread (http://forums.jolt.co.uk/showthread.php?t=524908), but it already covered all the basics of what a simple general equilibrium model needs in assumptions to derive it. If you think about it, you'll see that other ideas of human motivation can be accounted for in the derivation, for example in the idea of ranking commodity bundles.

So yeah, this does assume that people do as well as they can when they choose, according to whatever criteria they use. But I maintain that this is not an unreasonable assumption.

I would be much more content if we delineated between 'economics' as a whole, and 'economic science' as a part of economics; and similarly 'political science' as a part of the field of politics. I certainly do not deny that certain aspects of economics use the scientific method and are based on empirical data, but this does not make the whole field a science.

Well, you wouldn't really call politics an academic discipline. And similarly, I suppose economic policymaking isn't necessarily one either.

This of course isn't new to economists either. The question of whether economies are machines that you can tweak to work a bit better using academically derived knowledge has been debated for some time, and of course there hasn't been a clear winner. The Austrians, as an example, maintain that it's much more complex, dynamic and organic than that, and point out that governments always produce unintended side effects, regardless of how smart an economist is planning their policy.

Now, whether you would come to the same conclusion and suggest the same solution as they do, I don't know...

I think if there's a further assumption that 'using resources as well as they can' is equatable to 'being self-serving', then I think the assumption is flawed. I'm not saying it is always assumed like this, but much economic theory I have read seems to do so.
I think you haven't read the right books, if that is the case. First year textbooks for example don't go into enough detail in the derivations, for understandable reasons. But rest assured that a lot of thought has gone into these supply and demand curves, and people have been honest enough in this to keep the assumptions to a minimum.

Again, there is nothing in the theory that says that we can't have something like this:

U1(x1, x2, ..., xn, U2, U3, S, M), where U1 is my utility, xi is the quantity consumed of good xi, U2 is the utility of person 2, U3 that of person 3, S is some indicator of society's, or nature's, wellbeing and M is some indicator of how well I think I comply with my moral imperatives.

I am still maximising my utility, and I'm still behaving rationally.

True? Then yes. There're true economics claims. Demonstrable? Yes. Causality can be shown between production and gov. intervention. Testable in a lab? No. Neither are sociology or psychology but they've foundational principles that get "no" for the first two questions anyway.

http://www.xkcd.com/435/

Is it science when Alan Geenspan used to sneeze and the market would drop?

Also -- and this is a question I've asked time and again in NSG, and nobody has yet answered it with anything but chicanery and legerdemain -- how is it possible for any economic system to predicate itself on the need to continually grow? We hear in news reports that the economy is "in a slump" because it only grew by 1% or some such. I am nobody's economist, but how can it be possible for the world to keep growing when most of the resources it trades in are finite? And doesn't that kind of growth for one part of the world almost mandate a stagnation or regression in other parts?

Soheran, you're a rational bloke -- any help here?

The economy can't grow exponentially and constantly. But growth in one country doesn't require an equal loss elsewhere; production isn't a zero sum game.

Fiat/debt-based or asset currencies are methods of theft. If I want to tax you directly I have to go (or send someone in my stead) to you and steal your stuff. If I beat dissenters often enough you may be sufficiently sissy to come to a tax-office to drop off your gold -or whatever I want. But there's an even better way for me to rob you. If I get you to use my standard as legal tender then all your wealth is mine. As fast as I create new units after those you and other people are using I drain the worth of your money to buy whatever and fund whoever I want. That scenario may sound absurd b/c of how unjust it is and how much power I'd have but it is the position Americans have been in since Woodrow Wilson and some congressman agreed to the formation of the Federal Reserve:sniper:. Will you fight America's armies to redeem the worth of your money the Fed. has taken? JFK's the only President who opposed the Fed.

www.archives.gov/federal-register/codification/executive-order/10289.html

True? Then yes. There're true economics claims. Demonstrable? Yes. Causality can be shown between production and gov. intervention. Testable in a lab? No. Neither are sociology or psychology but they've foundational principles that get "no" for the first two questions anyway.

http://www.xkcd.com/435/

Testable in a lab, you mean a controlled enviroment Yes but it would be unethical to do so, economists look at what has happened in real life.

Good eve,

I personally believe economics is -not- a science, after reading the book "Small is Beautiful", by E. F. SCHUMACHER.

Quite an awe inspiring read.

-Rafe

Good eve,

I personally believe economics is -not- a science, after reading the book "Small is Beautiful", by E. F. SCHUMACHER.

Quite an awe inspiring read.

-Rafe

Well done Rafe, you read an outdtated book, perhaps you can read to me a science textbook writtern in 1905 and tell me that Nuclear power is impossible.

Except that's not really an economics "assumption", it's a prediction based on the theory of supply and demand. The assumptions at work in that prediction are:

1) Labour is a commodity

2) The eternal, implicit, ceterus paribus.

Granted, its not a terribly sophisticated prediction, (crude model) and relatively easy to cast doubt on empirically. Also, the assumption that labour is a commodity only holds because we treat labour as a commodity....see my institutionalist rant above.

Yes, but in science when you make a prediction like that you then let events play out, or arrange to have them play out, and you look at the results. If they go counter to the prediction multiple times then people stop predictingo that. That's why no one ever predicts a rise in phlogiston levels of the gas tank after dephlogisticating your gasoline, or that women will lose the ability to menstruate if they learn to read. The "if's" happened and the "then's" didn't.

Economists keep on predicting the same stuff that their biases tell them will happen, but they can never spot the "then's" while the "if's" are still going on. They don't predict or explain real-world events any better than religion does.

Taking your minimum wage example, some economists would assume that but not all. The UK Labour government used a neoclassical model of the labour market to justify the introduction of a minimum wage that they argued would not cause an increase in unemployment. The basic labour supply and demand model is too simplistic and takes on a new dimension when you factor in things like the marginal product of labour etc,.

I didn't mean to say that all economists believe that. My point was that in the case of those who do, it's not because they've ever seen it happen. Economists will treat opinions as facts or the equivalent of a scientific theory or rule, when they are really no more well developed than a hypothesis, and possibly nothing more than idle conjecture.

It reminds me of the medieval scholars who tried to figure out how many teeth were in a horse's mouth based on their readings of Aristotle. It means nothing unless you then go open the horse's mouth and count. And after the count has been done, anyone who argues should be ignored. They shouldn't become commentators on FOX.

Yes, but in science when you make a prediction like that you then let events play out, or arrange to have them play out, and you look at the results. If they go counter to the prediction multiple times then people stop predictingo that. That's why no one ever predicts a rise in phlogiston levels of the gas tank after dephlogisticating your gasoline, or that women will lose the ability to menstruate if they learn to read. The "if's" happened and the "then's" didn't.

Economists keep on predicting the same stuff that their biases tell them will happen, but they can never spot the "then's" while the "if's" are still going on. They don't predict or explain real-world events any better than religion does.

As I've said elsewhere in the thread, I think economics is best applied historically; it's a handy toolkit to help explain past events and processes, but not so great at forecasting the future.

I do feel the need to point out, though, that you've cherry-picked a crude example from a first year economics course and taken it as proof that all economics is rigid and dogmatic. That's just not the case; even a cursory survey of the literature will show you empirically-grounded studies, peer-review, debate and revision. There is a critical process going on.

Economists keep on predicting the same stuff that their biases tell them will happen, but they can never spot the "then's" while the "if's" are still going on. They don't predict or explain real-world events any better than religion does.

Quit while your ahead Domici, you obviously know little on how economic theory has been derived.

And after the count has been done, anyone who argues should be ignored.

Good advice which will be why I will ignore what you have to say on this topic.

Hmm... I got to page 4 before I stopped reading, so pardon me if I'm repeating anything.

I think economics, whilst employing scientific methods, will never have the predictive power of the natural sciences and the like. For instance, there are 6,000,000,000,000 fold more molecules of water in a single millilitre of water than there are humans on this planet. Hence, statistically, a chemist's prediction is more likely to hold true. It's like tossing a coin. There's a 50% chance of heads or tails, yet if you toss the coin twice you only have 50% of getting both one head and one tails. However, if you throw the coin a million times you have an even lower chance of getting an exact split, but have a much higher chance of getting a distribution that is only slightly off a 50% split.

That, and I think an economist's own preconceptions about the world are much more damaging to the scientific method than they are for a chemist or a physicist -- though the natural sciences are not immune themselves. One such physicist to fall by the wayside was Hugh Everett. He thought the Copenhagen interpretation (which allows for experiments like Schroedinger's Cat) to be flawed in that it requires an observer for things to happen -- that is the cat is both dead and alive until observed. Everett proposed the 'many worlds' theory in his PhD dissertation where the universe splits into two every time something happens. The theory was completely rejected by Bohr, one of the biggest names in quantum mechanics at the time. Everett was devastated and left the field. Some believe Everett to be one of the greatest minds of his generation -- up there with Einstein.

Ok, I'm done.

edit: Woah, you can kinda tell I've done Social sciences. I have only two simple points yet I've managed to flesh that into over 250 words. >.<

Quit while your ahead Domici, you obviously know little on how economic theory has been derived.

It's derivation is not what I'm concerned with here. It's the application.

As was pointed out, it's best applied historically than as a forecast.

Just like religion. If you want to argue that Hurricane Katrina was caused by God's wrath, it's kind of tough to argue (except to point out that the French Quarter was left relatively unscathed). But every time that Pat Robertson tries to argue that "if you do this God will cause a disaster" his predictions fall flat and he looks ridiculous. Then the only people who take him seriously are the people on FOX. Also the only people to listen to the economist who argued that New Orleans should be abandoned.

Economics is NOT a science.

They can NOT accurately predict SHIT!

Im looking for the reference of the mathematician that made a study coparing an economist predictions to those of an astrologer. The astrologer won.

Economist hold their "laws" like if they were dogma.Schools of economics are like christian denominations. They use mathematical models WRONG then alter the results to check with what they wanted to prove and call it science. Just like creationist they have the conlcusions first and then go to look for evidence to prove their claims.

Economist are the only "scientist" that will take 6 months of the year explaining whats going to happen and the next 6 months explaining why it did NOT happen.

Social sciences are a bad idea.
Economics is a bad joke.

I'm not professionally involved, but economics is a subject that interests me and that I make a point to read about whenever I can. Recently, I read an article arguing against the "F-twist," Milton Friedman's claim that unsound assumptions are okay if the theories still make correct predictions because scientists assume stuff all the time, e.g., there is no air resistance. I can't find the article on the Web (although a summary is here (http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-6435.1981.tb01195.x)) but am more interested in the bigger question: is economics a science? If not, is it the fault of economists, or something inherent in the subject? Discuss.

Discuss? Just read about the scientific method and decide whether economists use it. I don't know anything about economics myself, but I doubt they follow the scientific method.

It's derivation is not what I'm concerned with here. It's the application.

As was pointed out, it's best applied historically than as a forecast.

Just like religion. If you want to argue that Hurricane Katrina was caused by God's wrath, it's kind of tough to argue (except to point out that the French Quarter was left relatively unscathed). But every time that Pat Robertson tries to argue that "if you do this God will cause a disaster" his predictions fall flat and he looks ridiculous. Then the only people who take him seriously are the people on FOX. Also the only people to listen to the economist who argued that New Orleans should be abandoned.

*Yawn* It didn't take long for religon to enter this thread. And I presume you mean the magazine when mentioning the economist, yes Domici you are right that one magazine out of all the journals and all the publications is the bible well done. :rolleyes:

Discuss? Just read about the scientific method and decide whether economists use it. I don't know anything about economics myself, but I doubt they follow the scientific method.

Tell us what is the scientific method?

Funnily enough, no one has been able to answer my economic question yet.

But if we are going to do M-C-M we need an unequal exchange. We need to end up with more money than we started with. How is this possible?

Opportunity cost.

If I use a certain quantity of money to purchase capital, and keep it there for a while, I'm not doing other things with it. That's an implicit cost I pay, one that doesn't show up in that monetary quantity. The profit I make is compensation for that: exchange of equivalents.

Funnily enough, no one has been able to answer my economic question yet.

Probably because your terminology is from Capital. I've read it, but I don't think most people here have.

Probably because your terminology is from Capital. I've read it, but I don't think most people here have.
Certainly not all three (unfinished) volumes of it!

Certainly not all three (unfinished) volumes of it!

Oh, I haven't read all three either.

This M-C-M business is actually fairly early on the first, though, if I recall my reading of it correctly, anyway.

Oh, I haven't read all three either.

This M-C-M business is actually fairly early on the first, though, if I recall my reading of it correctly, anyway.
Righty-ho; I've got an in-depth study of that to look forward to next term.

Actually, the point I was trying to make is that that money cannot resolve the contradiction between being a measure of value and a medium of circulation.

In this day and age, when our paper money is no longer backed by the gold commodity we forget that for the vast majority of human history money has been a tangible commodity. This further distorts and indeed reveals the difference between money circulation and money as a measurement of value.

The current credit crap in the US is actually pretty relevant to this kind of discussion.

Actually, the point I was trying to make is that that money cannot resolve the contradiction between being a measure of value and a medium of circulation.

Maybe my memory is faulty; it's been a long time. Clarify your point.

Funnily enough, no one has been able to answer my economic question yet.

A few people already have.
No one is yet to answer my two questions.

Maybe my memory is faulty; it's been a long time. Clarify your point.
Hold on, I will write up a sizable explanation shortly, hang on.

I'd say bourgeois economics is unscientific, the dialectical method however is not.

Also just a quick question to the bourgeois economic advocates here:

Think about this, how do you get more money? With C-M-C equation exchange only happens if people agree to trade things for equal value. People measure the value of commodities with money and exchange them for money. If I sell something I’ve made for $10 and then go spend that $10 on stuff I am essentially trading $10 of my labor for $10 of other people’s labor. An equal exchange has taken place with the aid of money as a measuring of value. The value that is being measured corresponds to the amount of labor that has gone into making the commodity.

But if we are going to do M-C-M we need an unequal exchange. We need to end up with more money than we started with. How is this possible?
"Bourgeois economics" sounds kind of silly, as I can think of very few proletariat theorists. Actually, I can't think of any.
As to your question, my initial reaction is that labor is not the only source of value for something. The machinery, raw materials...any and all of it determines the value of a good. As for where the extra money comes from, kind of the same answer: modern economies almost always are growing, with more people, more investment in machines, more services, etc.
Those are just initial impressions, though. If you have a rejoinder, I'd like to see it. I'm not being sarcastic; I'm sincerely interested in Marx.

Maybe my memory is faulty; it's been a long time. Clarify your point.
Bourgeois economists say money is a “measure of value” and a “medium of circulation”. It measures value because it is a commodity itself, made by human labor, and thus has a labor value. Because money represents a clear labor value it is safe to use as a measure of value. In contrast, if we used something without a labor value- maple leaves, or dirt, we would have no guarantee that this money would be valued by anyone else. If you sell a pair of shoes for a handful of dirt, you are screwed because nobody else wants your handful of dirt because they could just go get their own handful of dirt. Similarly, if the value of the paper dollar was to fall tomorrow, we’d all be screwed because paper has very little value. So what makes a money strong is its ability to represent the value of commodities in the economy, and this is usually a result of money being a commodity with a high value itself.

But money isn’t just used to measure value, its used to circulate commodities (it’s second property as a medium of circulation.) This means that it takes on an exchange value different from its labor value. Money expresses the value of all commodities as they relate to each other. Thus it becomes worth “what it will buy” instead of “what it took to make it.” We call this its reflex value, because its a reflection of the value of all commodities in relation to each other.

The reflex value is formed by the relation of the supply of money to its demand. If there is less of the money commodity than is needed to circulate goods in the economy then the price of the money commodity goes up (deflation). If the supply of the money commodity rises above the amount needed to circulate commodities then the price of the money commodity goes down (inflation).

In order for money to do its job it needs to have a stable supply so that disasters like this don’t happen. If we used potatoes for money we’d be screwed because potatoes go bad after awhile, and every time there was a bad harvest there’d be a shortage of money, etc. Gold works well because it is a stable commodity with a stable supply.

But the demand for money is constantly changing. Production and consumption change pace as an economy grows and shrinks over the course of years, months and weeks. And so the reflex value is shifting. This destabilizes money, makes it less dependable, unable to send appropriate signals, or measure value over time. Thus the two aspects of money- that it is a measure of value and a medium of circulation- or, that is has a labor value and a reflex value- are in conflict with each other. Now, if the reflex value fluctuates only slightly above and below the basic labor value, then we don’t have much of a problem. This fluctuating value allows money to make quick adjustments to changes in production and consumption. But if the two values start to diverge radically from each other they express serious economic problems.

Bourgeois economists say money is a “measure of value” and a “medium of circulation”. It measures value because it is a commodity itself, made by human labor, and thus has a labor value. Because money represents a clear labor value it is safe to use as a measure of value. In contrast, if we used something without a labor value- maple leaves, or dirt, we would have no guarantee that this money would be valued by anyone else. If you sell a pair of shoes for a handful of dirt, you are screwed because nobody else wants your handful of dirt because they could just go get their own handful of dirt. Similarly, if the value of the paper dollar was to fall tomorrow, we’d all be screwed because paper has very little value. So what makes a money strong is its ability to represent the value of commodities in the economy, and this is usually a result of money being a commodity with a high value itself.

But money isn’t just used to measure value, its used to circulate commodities (it’s second property as a medium of circulation.) This means that it takes on an exchange value different from its labor value. Money expresses the value of all commodities as they relate to each other. Thus it becomes worth “what it will buy” instead of “what it took to make it.” We call this its reflex value, because its a reflection of the value of all commodities in relation to each other.

The reflex value is formed by the relation of the supply of money to its demand. If there is less of the money commodity than is needed to circulate goods in the economy then the price of the money commodity goes up (deflation). If the supply of the money commodity rises above the amount needed to circulate commodities then the price of the money commodity goes down (inflation).

In order for money to do its job it needs to have a stable supply so that disasters like this don’t happen. If we used potatoes for money we’d be screwed because potatoes go bad after awhile, and every time there was a bad harvest there’d be a shortage of money, etc. Gold works well because it is a stable commodity with a stable supply.

But the demand for money is constantly changing. Production and consumption change pace as an economy grows and shrinks over the course of years, months and weeks. And so the reflex value is shifting. This destabilizes money, makes it less dependable, unable to send appropriate signals, or measure value over time. Thus the two aspects of money- that it is a measure of value and a medium of circulation- or, that is has a labor value and a reflex value- are in conflict with each other. Now, if the reflex value fluctuates only slightly above and below the basic labor value, then we don’t have much of a problem. This fluctuating value allows money to make quick adjustments to changes in production and consumption. But if the two values start to diverge radically from each other they express serious economic problems.

This is when inflation comes into effect.

<snip>
Oh, Andaras...

You'd get a lot more respect from myself, and others I'd imagine, if your 'write-ups' didn't just consist of plagiarism (http://kapitalism101.wordpress.com/what-the-hell-is-money/).

Okay, first, don't pass this off as yours.

http://kapitalism101.wordpress.com/what-the-hell-is-money/

Bourgeois economists say money is a “measure of value” and a “medium of circulation”. It measures value because it is a commodity itself, made by human labor, and thus has a labor value.

Actually, they don't--not in that sense, anyway.

"Bourgeois" economists do indeed say that it is a measure of value, but not because of any quantity of labor invested in it--simply because it is recognized as such, because it can purchase goods. If I know that my $100 can buy 50 sandwiches, then I know that something that costs $100 is worth 50 sandwiches.

The only external conditions of this are a stable, or at least a controllable, supply, and a reasonably scarce medium. That's why we can't use dirt and maple leaves--but gold and paper money are perfectly effective.

So what makes a money strong is its ability to represent the value of commodities in the economy, and this is usually a result of money being a commodity with a high value itself.

Not at all. As a matter of fact, if money's "intrinsic" value is equal to its value as currency, then real problems arise: instead of using it as currency, people will use it as a commodity. The supply ceases to be stable.

For something to function as currency, its value as currency has to significantly higher than any "intrinsic" value. The two must be separate.

Production and consumption change pace as an economy grows and shrinks over the course of years, months and weeks. And so the reflex value is shifting. This destabilizes money, makes it less dependable, unable to send appropriate signals, or measure value over time.

Not if the changes are regular and predictable--as they usually are, more or less, at least in developed economies, especially with competent central banking.

Thus the two aspects of money- that it is a measure of value and a medium of circulation- or, that is has a labor value and a reflex value- are in conflict with each other.

Only if you completely misinterpret what it means to say that money is a measure of value.

But if the two values start to diverge radically from each other they express serious economic problems.

To the contrary, for reasons I've already noted, if the two values are close, they cause serious economic troubles.

It has to be worth it to use currency as currency.