HN Books @HNBooksMonth

This is good as an alternative take: https://www.amazon.com/Debunking-Economics-Revised-Expanded-...

⬐ nickik

Yeah maybe don't start with some snake-oil anti-everything guy. Read the actual literature first and then go to those claiming to know better.

⬐ RobertoG

Or better, read some review of the actual literature before investing in a book, to see if it's snake oil. For instance:

https://www.sciencedirect.com/science/article/pii/S105752191...

From the cited text: "The question is considered why the economics profession has failed over most of the past century to make any progress concerning knowledge of the monetary system, and why it instead moved ever further away from the truth as already recognised by the credit creation theory well over a century ago. The role of conflicts of interest and interested parties in shaping the current bank-free academic consensus is discussed."

⬐ nickik

My 100 year old theory is better then your 100 theory. Even if it has no support form most people who have spent their whole lives studying it.

Convenient non-ref link: https://www.amazon.com/Debunking-Economics-Revised-Expanded-...

⬐ jerf

I don't think that's a referrer link, since I'm not in the referral program. It was just search junk.

smile.amazon.com itself is a general charity program, but you have to set it up for your account. I have a plugin that autoredirects me there, since Amazon won't do it for you. I'm going to leave that; probably some people don't know about it.

I'm sorry: I shouldn't have said you were cherry picking in that case. You were misinformed by the limitations of the datasource you were looking at.

Given the performance of academic economics over the last fifty years and the scandals in peer-reviewed academic journals, studying hetrodox economists is well worth your while if you are interested in truth rather than tenure. But I can save you the trouble, having looked into many of them: Keen is the one to read.

https://www.amazon.com/Debunking-Economics-Revised-Expanded-...

He's genius-tier, maybe our era's Keynes.

Steve Keen is a very interesting hetrodox economist that I highly recommend to HN.

He is very difficult to categorize: he is a liberal Australian academic who is an admirer of both Keynes and Hayek, and has built upon and synthesized both of their work. He does a lot of computer simulations of economies using real-world behaviors (e.g. mark-up pricing) and has generated results and opinions that are guaranteed to annoy pretty much everyone.

He blogs at Forbes (which is funny, given his politics):

http://www.forbes.com/sites/stevekeen/

And has a great book out that takes on classical economics:

http://www.amazon.com/Debunking-Economics-Revised-Expanded-D...

⬐ latj

I had never heard of him but the title of this article is beyond a literary device- it is bait-and-switch. It is dishonest. You expect this from from shifty clickbait websites hawking beauty tips and lists of top 10 ___ "they" dont want you to know about. But you cannot take anyone serious who writes an article like this.

⬐ dang

Yes, clearly a baity title. We changed the HN title to better reflect what the article argues.

The argument itself is interesting, so let's all focus on that now.

⬐ carsongross

The title is a joke. Yes, it's provocative, but give the guy a break: he's a small time economist at a second-tier university in an island nation who is saying some of the most interesting things about economics in the world today.

You would be doing yourself a disservice not reading his stuff based on a blog post title.

⬐ latj

Well, your description of him hits a little too close to home so I guess I have to give him a second chance.

Also I wrote "hawking". haha.

⬐ dredmorbius

If you're going to mention Keen, you should note that his true hero and influence (reflected in the name of his analytic software) is Hyman Minsky, a rather underappreciate 20th century economist (not to be confused with the AI researcher Marvin Minsky, whom I'd initially referenced, since edited):

https://en.m.wikipedia.org/wiki/Hyman_Minsky

Yes, Keen does abstract from both Keynes and Hayek (who's among the less-strident Austrian School types), but neither are his primary focus.

⬐ carsongross

Thank you for mentioning that, I should have pointed it out in my initial comment.

⬐ dredmorbius

To be fair, Keen neglected to mention it in the entry as well. Interesting, as he frequently does.

And he did conspicuously mention Hayek.

http://www.amazon.com/Debunking-Economics-Revised-Expanded-D...

Just going to leave this here. Its a real helpful read for any kind of economics debate.

The current and long-running debt and capital gains driven financial asset market has made everyone insane. If valuations were based on tangible cash flows (dividends paid out of profits) then the question of how much stocks are worth becomes far less insanely self-referential.

Real markets work on markup-based pricing and cash flow from profits. See Steve Keen's work[1]. In a world where the banking system can introduce nearly infinite leverage into any financial transaction (see student loans) what's the price of anything?

[1] - http://www.amazon.com/Debunking-Economics-Revised-Expanded-D...

⬐ grandalf

That is true, but I think the counter-argument is that the Fed does much of what it does to create price stability, not price accuracy.

Prices should be generally stable in the face of everything but supply and demand shifts brought upon by technological change and competition. If the price of a car rose/fell 20% "accurately" (per your comment) every few years people would have to hedge against the risks that those price fluctuations would cause. Our system reduces the need to worry about such risks b/c they are viewed as unnecessary noise.

In other words, when prices are generally stable we can plan for the future rather than hedging against the impact of random (though market-based) price volatility.

⬐ vasilipupkin

valuations are based not just on current cashflows, but future expected cashflows. That's why leverage is so crucial - it allows us to borrow against future cashflows so as to finance projects today. One way to think about, on this forum, we can agree that at some point in the future, we will have self driving cars, automated medicine, low cost energy etc. So, what we can do is borrow against that future to build stuff today

⬐ carsongross

Yes, I understand productive debt and I have no beef with it (so long as no one is coerced into bailing out bad loans, which, of course, is constantly happening in the name of "systemic stability.")

If you think this has anything to do with the huge debt overhang in western societies... Well, I have an efficient market to sell you.

Read Keen. He explains it very well.

⬐ JimboOmega

I agree with your complaint, generally.

One thing I often wonder about is the value of Facebook stock. It has effectively no voting rights (Because of Zuckerberg's control), and I can't imagine Facebook issuing a dividend... so what rights does it really have? How do you value something like that?

⬐ meric

In the future when Zuckerberg is finally willing to pay a dividend or he is replaced by a board willing to pay a dividend when he retires. It's hard to value that's why the value of Facebook stock is so volatile.

⬐ carsongross

Exactly. It's the modern world's equivalent of debating the number of angels capable of dancing on a pinhead. You have these chumps talking about future cash flows and dividend yield equivalents, all the while the board and executives march off with the actual cash.

The right thing is to eliminate the tax bias towards capital gains and make dividends tax-deductible for corporations, so they have incentive to pay profits out to, you know, the owners. Basically make them act like big LLCs, which is the fair thing: why should Grandma Jones pay the same corporate rate as Mitt Romney on her investments in Coca Cola before she sees a dime?

At some point it'll reverse, but it's been a good forty years, so... who knows?

>> You talked about market clearing and I'm not sure the concept makes any sense in the absence of a marginal cost of production.

> I would respectfully disagree. Market clearing is I think technically the price for the next unit of production, but even in a world of zero marginal cost (not quite true) then the capital cost still needs to be paid back (laptop, time spent coding flappy up and flappy down). So perhaps the clearing price is the expected number if sales divided by capex?

This is closer to reality (and further from economic theory but that is a different rant[0]).

The trouble is to decide whether to make the investment of that capital cost you need to rely on that other economics assumption: perfect information. The real world doesn't provide perfect information of future customer behaviour so you don't know at the start if you are making Flappy Bird or Floppy Bird. Once you have made it your aim is to maximise your income from it (given the zero marginal cost in the App store). That maximisation needs to occur at a time when the capital cost has already been spent so the capex doesn't actually affect the price you charge. Even if you are making a loss increasing the price doesn't help as less people will buy it (you were already at the profit maximisation point) and if you were making a profit cutting the price reduces the profit.

Note that even the information at the time to set the price isn't available so you are guessing again there without the economists perfect information assumption.

Free markets are good but especially in the real world they are not always optimal and market failure isn't unusual. I think app review (at least the keeping malware out, not necessarily the Apple payment lock in part) is a public good but one that would be hard to get people to voluntarily pay for separately and some of the benefit is communal (you benefit from me not having a malware infested phone). We might end up in agreement here.

Yeah, regulation is a balancing act.

[0] http://www.amazon.co.uk/Debunking-Economics-Revised-Expanded...

I agree with you main point but I do think I should pick you up on the use of 'efficient' which I think is wrong in a technical way.

In an 'efficient' market all future risk is included in the analysis of current value meaning that if it was an 'efficient' market this would actually not be a problem. However it is just one of many* ways that markets are not in reality 'efficient' in the economics sense as the assumptions required to prove them just do not match up to the real world.

* http://www.amazon.com/Debunking-Economics-Revised-Expanded-D...

⬐ jacques_chester

You need to avoid lumping all economists into a single heading. It's easy to debunk abstract models by saying "they're not a model of the real world!"

Well, yes. The economists know that.

⬐ josephlord

The book is worth a read. Alarming large numbers of economists base work working up from these models and theories based on them.

You might have noticed a little recent global credit crunch which was not predicted by most economists but was predicted and modeled by the author of the book I linked who is an economist (so I don't lump them all together) but the overall level of the state of economics is so poor as a discipline at understanding the overall economy it should be embarrassing to them.

I am genuinely interested if someone has a critical analysis of the Debunking Economics book that points out how and where it wrong but when I last looked I couldn't find any serious attacks online (minor nitpicks only) but I think it is largely being ignored by those who disagree so I haven't found their counter arguments.

⬐ jacques_chester

Economists don't predict most events, because most events in economics are unpredictable. It's a subject of complex, chaotic systems.

If you take this as your starting point for critique (the weathermen didn't predict Weather Event X!!!), you will always win the argument because you're beating up a strawman. No economist has ever seriously claimed specific predictive power.

All an economist can give you is generalised statements of causality, most of which will be unobservable. Steve Keen was not the first to point this out. Quite a few economists from various schools have picked flaws with general equilibria models of macroeconomic phenomena (ie, using calculus to describe people, markets and countries).

⬐ josephlord

The weathermen can give you probability ranges for various events and their models include the possibility of storms. Many widely used economic models do not have the capability to model crashes at all. Many models don't cover banks, debt or money at all.

I don't expect a model to tell me that the markets will crash tomorrow but I would have expected widely use models to indicate that we were in dangerous period in 2005-2007 and that the upwards path was impossible to sustain over a 10 year period.

⬐ jacques_chester

Economists can give probabilities too; it depends on the type of model used.

Predicting a crash immediately before it happens is not so difficult. Lots of economists were clanging the alarm bells all through the mid-00s. Predicting exactly when and exactly what the trigger would be? Basically impossible. Economists don't do that (it's left to advisors, pundits and newsletter salesmen).

⬐ josephlord

Agree exact timing is not identifiable but the amount of warnings before 2007 was really pretty low. Maybe there are some that can be added to this list and it would be interesting to see if there were any with very different approaches:

http://www.debtdeflation.com/blogs/2009/07/15/no-one-saw-thi...

So there were a few but they generally weren't in the mainstream of economics (from Krugman to the Chicago School) which generally did a very bad job. Roubini did call it but none of the others on the list I linked to were people I had heard of before 2008 (but I haven't formally studied economics).

Many of the common models taught and used never indicate crashes, this sort of thing should just be thrown out. Most of them also don't really include the financial industry (including debt).

⬐ yummyfajitas

In an 'efficient' market all future risk is included in the analysis of current value meaning that if it was an 'efficient' market this would actually not be a problem.

The EMH claims that all future time discounted risk known to market participants is included in the analysis of current value.

If you want to show the markets are not efficient, go achieve excess risk-adjusted returns. The sole claim of the EMH is that you can't do that. The EMH doesn't claim that market participants will not take risks, nor does it claim that investors/customers will not apply time discounting to those risks.

Try Steve Keen for an economist who predicted the credit crunch. http://www.debtdeflation.com/blogs/

His book basically declares war on most other economists too: http://www.amazon.co.uk/Debunking-Economics-Revised-Expanded...

I'm very impressed but I'm always looking for counter arguments to my current understanding so if you know of any good critiques of his stuff I would be very interested.

⬐ bubbleRefuge

Steve Keen is a heterodox economist(Circuit-ist I think) with close ties to MMT Modern Monetary Theory (born and raised on blogs). MMT intellectuals predicted the great recession, the European Crisis, and the Recession of 2001. I've become a believer. They are basically hyper-keynesians. The basic Tennats are 1) As a point of logic Government must spend dollars into existence(or loan out) before they can tax them back. 2) Therefore Fed Government funding is independent of taxation. 2) Taxation creates demand for currency and unemployment in the currency of record by definition. 3) Government is not funded by borrowing either. 4) Because of 1) 2) 3) Policy should be to proactively spend counter-cyclicly until economy reaches full capacity. 5) Banks create money ex-nihilio 6) Banks are effectively agents of government because of deposit insurance and membership in the Federal Reserve System.

Its pretty fascination stuff b/c MMT says that the mainstream has everything backwards.

http://moslereconomics.com http://neweconomicperspectives.org http://www.amazon.com/Currency-Economics-Modern-Monetary-ebo...

⬐ josephlord

I think Keen would link himself to Keynes (the person and what he actually wrote) but disassociate himself from Keynesianism (the twisted version that is commonly discussed). He is a greater follower of Minsky though and trying to put a mathematical basis under his theories.

I don't recognise items (1), (2) or (3) or even (4) as such in his writing although I'm not sure they contradict it. (5) is very important and I think that he might say that (6) is the wrong way round and that the government is the agent of the banks at the moment!

His key issue is that debt (public and private) matters and that the rate of change in total debt is the main source of the booms and busts that we see.

His prescription for the current crisis is printing money but then to give it to the people not the banks or government (both of which we are doing now). People with debts would then be required to pay down the debts with the printed money and people without debts could keep and spend the printed money.

He also has some proposals for limitations on limitations on borrowing for property purchases (PILL) and one intended in preventing share speculation getting out of control too although I have my doubts about that one really as it seems impractical, abusable and has some potential negative effects too (Jubilee Shares). http://www.debtdeflation.com/blogs/manifesto/

⬐ bubbleRefuge

Absolutely Agreed. One of the MMT founders ( Randal Wray) was a student of Minsky who himself was very anti-finance. My understanding is Steve Keen has changed some of his views based upon MMT literature. In these Video's you've got Steve Keen and MMT professors in the same room presenting to each other.

On point 6) the government has statutory control of the banks. Its just that the banks have captured the government. War-hawk generals getting control of our foreign policy would be the analog.

edit: video of steve keen with MMT profs http://www.youtube.com/results?search_query=steve+keen+scott...