Blurts & Spasms

As a caveat, I’m not an expert in economics. Yes I’ve read a bit, researched a lot, written some…but one thing I’ve learned (so far) is that economics is pretty vast. Lots of different schools of thought. Lots of different angles - a lot of which I don’t have deep knowledge about. But that’s never stopped me from having an opinion before. First off I’d like to say I appreciate Austin Middleton's post here. Understanding the specific methodology being discussed or evaluated is absolutely critical. All of which brings me to my first point: I don’t think it is possible to generalize with confidence about “the most misunderstood thing” regarding this particular topic. It’s just too wily of a beast to pin down in that way. Of course that was a generalization…but I’m sure you get my drift.
That said, I’ll share some of my own personal misunderstandings about economics - or at least how my understanding has evolved over time. I suspect that others - perhaps many people - have begun with similar initial assumptions to my own. So here goes:

1. Initial assumption: Macroeconomic models and analysis have fully understood and expressed how economies function. Current conclusions: not by a long shot; there remains a level of mystery and complexity to macroeconomic interdependencies that no one has penetrated.

2. Initial assumption: the time for Keynesian approaches is long past. Current conclusions: Keynes is, thus far, one of very few theorists who seems to have made consistently accurate predictions about cause and effect at the macroeconomic level.

3. Initial assumption: game theory is a cool and sophisticated mathematical way to go about evaluating and modeling economic interactions. Current conclusions: game theory is an almost silly, tail-chasing exercise that is mainly relevant only to itself.

4. Initial assumption: It is possible to intuit or deduce the economic dynamics of a given micro or macro situation from a consistent ideological standpoint, prior to collecting empirical data. Current conclusions: Freakanomics.

5. Initial assumption: the Austrian School has something viable to contribute to economic theory. Current conclusions: the Austrian School is a silly, absurd tail-chasing exercise predicated on flawed assumptions about human behavior.

6. Initial assumption: Authoritarian State socialism is the only kind of socialism widely implemented. Current conclusions: there are nearly as many variations of socialism as their are hairs on a cat, at least half of which focus on diffused, democratic, highly distributed models without central controls, and many different models have been tested - or have occurred organically - in the real world.

7. Initial assumption: Milton Friedman was vehemently opposed to crony capitalism. Current conclusions: Milton Friedman’s entire life’s work was spent engineering the tools and techniques crony capitalists use to manipulate markets and maintain their power…and Friedman both knew this and actively participated in it.

8. Initial assumption: Adam Smith was the forefather of neoliberalism. Current conclusions: Neoliberals consistently disrespect the insights and principles Adam Smith championed (especially regarding the dangers of monopolies, the corrosive influence of business on government, the need to regulate business, etc.).

9. Initial assumption: Marx’s conceptions of the flaws of capitalism were simplistic and quickly overtaken by the evolution of modern industrial, informational and financial economies, but his ideas about historical materialism seemed to be compelling. Current conclusions: Historical materialism is probably Marx’s greatest error and has contributed to the worst possible outcomes for socialism, but Marx’s understanding of the flaws of capitalism were spot on, and are still being vindicated today in nearly all of capitalism's global manifestations.

10. Initial assumption: That the “tragedy of the commons” is an actual real-world inevitability. Current conclusions: The tragedy of the commons is more of a thought experiment that has been overapplied, and is contradicted by empirical studies such as Elinor Ostrom’s common pool resource management research.

As you can see…there are lots of facets here. We could pick any one of them to launch a lengthy discussion on what misunderstandings exist, why they exist, who seems to have them, etc. And then we would probably disagree. So, returning to my initial point: economics is a wily beast.

One last thing I would bring up is that the battles over various schools and methodologies in economics seem to be almost tribalistic or religious in nature. Like whether PCs or Macs are better computers, or whether Democrats or Republicans have better sex. It’s almost as if economics was intended to be vociferously ranted about late at night, over several beers.

My 2 cents.

(I may come back and add more topics as I think of them, just for fun…)


From Quora: https://www.quora.com/What-is-the-most-misunderstood-thing-about-economics/answer/T-Collins-Logan