[governance] [Dewayne-Net] REINHART AND ROGOFF: 'Full Stop,' We Made A Microsoft Excel Blunder In Our Debt Study, And It Makes A Difference

Thu Apr 18 04:23:29 EDT 2013

Key words: "one form of knowledge."
It's a pity that philosophy --not an established, authoritative corpus of
philosophical works, but philosophy as a discipline of the mind, yes,
nurtured by exposure to and engagement with exemplars-- that such
philosophy has ceased to be the mother of all sciences. Thanks, Riaz.

mc

On Thu, Apr 18, 2013 at 6:28 AM, Riaz K Tayob <riaz.tayob at gmail.com> wrote:

>  Michael and David
>
> This is tangential, but goes to the important economics edifices of many
> public policy arguments.
>
> From one of many Third Worldist perspectives, there is often deception in
> dealing with the rich countries. And it is well known that domination is
> easier to manage with 'ideology'. Free trade and neoclassical economics
> shapes much of the discourse causing much trouble and problems. So this is
> tangential but related.
>
> If anyone is familiar with effectively the family business of the doyens
> of economics (Paul Samuelson, Kenneth Arrow and nowadays Larry Summers),
> they would know the significant influence they have had in the profession
> and on public policy discourse. The interview between the Chief Economist
> of the Financial Times (not a radical by any means!) with Larry Summers which
> can be found here<http://ineteconomics.org/video/bretton-woods/larry-summers-and-martin-wolf-new-economic-thinking>is instructive (it really is worth the time!). As some would have it, the
> Queen of the Social Sciences, by his own admission is not very helpful in
> real life. In other words, modern scholastics.
>
> In Europe they are going for austerity (pro-cyclical) whereas John Dewey's
> American pragmatism rules more in the US with spending (Bernanke is pushing
> Congress, but there is little traction) with marked differences between the
> performance of these regions. So even Bernanke is more taking reality more
> into account, rather than relying on failed models which cannot account for
> crisis adequately nor deal with reality very well (but banks are still
> allowed to use them for capital adequacy calculations!).
>
> On the paper, it was one of many of the planks used to argue for
> austerity, as David points out. But it was very influential. The reasons
> for eccentric formulae for averages and exclusion of New Zealand data will
> need to be backed up. So let us see where this goes. Why is it that we
> accept self-interest as the guiding force in neoliberal economics, but
> exclude economists from this equation? After all, they would  sell their
> ideas to the highest bidder - and neoliberal ideas pay. In fact it is quite
> consistent. Even the oracle Alan Greenspan said to Congress that he found a
> flaw in his theory. If he read outside of his Randian economists he might
> have known, but there is confirmation bias here too. The Oracle was a
> charlatan.
>
> So I think first principles distinctions between schools of economics is
> very important to be differentiated. Mainstream economics says it is a
> science based on its physics based methods. That is correct. But its
> problem is concordance with reality. When the Queen asked the London
> School of Economics <http://www.britac.ac.uk/news/newsrelease-economy.cfm>why they did not see the crisis coming they said,
> *"So where was the problem? Everyone seemed to be doing their own job
> properly on its own merit. And according to standard measures of success,
> they were often doing it well. The failure was to see how collectively this
> added up to a series of interconnected imbalances over which no single
> authority had jurisdiction. This, combined with the psychology of herding
> and the mantra of financial and policy gurus, lead to a dangerous recipe.
> Individual risks may rightly have been viewed as small, but the risk to the
> system as a whole was vast."* Translation: there is no systemic
> understanding.
>
> The problem for scientifically valid observations, as David argues for and
> to which I agree, is that a science that starts of from unrealistic
> assumptions and deduces what logically should happen without ex post
> validation is only one form of knowledge. There are other forms of
> knowledge on the economy, like the American Institutionalists, that are
> simply marginalized and ignored, primarily because they do not serve the
> interests of the large powerful corporations in the US.
>
> So do please engage in these matters as neoliberal type economic views
> still hold political sway, but are increasingly becoming untenable because
> of the social costs and suffering they impose. The difference with crises
> in the South (Mexico, the Tequila crisis, as if they were drinking too
> much; Argentina; SEA Asia - spawned crony capitalism) and the North is how
> it is dealt with. In the South it is internal factors, but for the North
> the tenor of the major finance houses is now systemic problems.
>
> One would have thought Americans would have taken their cue from Enron,
> WorldCom, Tyco, etc *this is not anti-Americanism, btw - happy to be guided
> on these formulations! On or offlist!). Or now from the fraud on
> foreclosures and lack of regulatory ability to prosecute known crimes. It
> is a terrible situation for the 99% and we hope that the more sensible
> forces prevail in America otherwise the situation for us Africans
> downstream will be terrible.
>
> Riaz
>
>
>
> On 2013/04/18 03:55 AM, michael gurstein wrote:
>
> David,
>
> My reference was overall to Economists' work as Economists (but I see where
> there was probably an ambiguity in what I wrote... and yes, evidence based
> policy is certainly a good idea if the evidence is accurate, appropriate,
> unbiased i.e. not ideologically driven etc.etc. But there should always be a
> caution and a modesty concerning linking policy particularly to theory in an
> area as inexact as Economics and that's where the hubris comes in...
>
> M
>
> -----Original Message-----
> From: David Conrad [mailto:drc at virtualized.org <drc at virtualized.org>]
> Sent: Wednesday, April 17, 2013 5:02 PM
> To: michael gurstein
> Cc: governance at lists.igcaucus.org
> Subject: Re: [governance] [Dewayne-Net] REINHART AND ROGOFF: 'Full Stop,' We
> Made A Microsoft Excel Blunder In Our Debt Study, And It Makes A Difference
>
> Michael,
>
> On Apr 17, 2013, at 4:03 PM, michael gurstein <gurstein at gmail.com> <gurstein at gmail.com> wrote:
>
>  Economists of course, are split on the "scientific" validity of their
> work especially as it interfaces with the real/policy world
>
>  Well, no.  As far as I can tell Economists, by and large, weren't split: the
> vast majority considered the correlations R&R drew tenuous at best.  It was
> politicians, policy makers, and pundits that used the R&R paper as a
> justification for positions they already held to the exclusion of evidence
> and arguments to the contrary (seehttp://en.wikipedia.org/wiki/Confirmation_bias).
>
>
>  and the above should
> if nothing else, suggest modesty and caution before we go around
> flaunting and drawing policy directions from the supposed "scientific"
> validity of this or that set of observations or conclusions.
>
>  Actually, I'd argue basing policy direction on _scientifically valid_
> observations and conclusions (which wasn't done for policies based on the
> R&R paper) is far better than alternatives such as anecdotes, appeals to
> emotion, over generalizations, accusations of hubris, etc.
>
> Regards,
> -drc
>
>
>
>
>
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