| | Eva:
35 years ago, I was wrestling with
\rho \left(\frac{\partial \mathbf{v}}{\partial t} + \mathbf{v} \cdot \nabla \mathbf{v}\right) = -\nabla p + \mu \nabla^2 \mathbf{v} + \frac{\mu}{3} \nabla (\nabla \cdot \mathbf{v}) + \mathbf{f}
..applied to relatively -simple- complex systems, in order to calibrate elements of atmospheric models.
For largely comic relief, I would stroll into an Economics course and be entertained by things that looked like your
C+V+P = R
or
GNP = P + G + Inv + (Exp-Imp)
..that claimed to actually represent something far more complex. It always struck me as a glaring example of Feynman's 'Cargo Cult Science.' I pictured economists sneaking into the math or physics tower, hurriedly scribbling the form of something, and then scurrying off to build their grass hut control towers to wow the tribe.
Occasionally, a practitioner of the art would put more symbols into a blender and come up with a pygmy grass hut that looked more like a real control tower: Here is a glaring recent example of exactly such pure nonsense:
http://www.princeton.edu/~pkrugman/debt_deleveraging_ge_pk.pdf
Now, the point is, neither you nor I nor most of the intended audience for this show are expected to work through the math. But what any reasonable person should be able to do is, read the paper's assertions, assumptions, and conclusions.
Assertions: "We argue that this approach sheds considerable light both on current economic difficulties and on historical episodes, including Japan’s lost decade (now in its 18th year) and the Great Depression itself"
Front and center on the very first page.
Assumptions: "Imagine a pure endowment economy in which no aggregate saving or investment is possible, but in which individuals can lend to or borrow from each other. Suppose, also, that while individuals all receive the same endowments, they differ in their rates of time preference."
Not too much later on.
Before we get to the conclusions, let's make sure we understand the assertions and the assumptions:
A] The author purports that the approach in the paper in some manner reflects the realities of our economies, and
B] Those economies consist of trust fund babies that wake up everyday and receive a check(in fact, the same amount to each actor in the economies) from the trust, and no savings, production, work, or effort is required, merely a desire to lend to or borrow from each other.
If one read and comprehended that much, then is it really necessary to examine the conclusions? Because they either modeled their assumptions correctly, in which case, they've modeled a lost episode of Star Trek, or else they did not, and in either case, there is no correlation with anything going on in our economies.
But if you do plow ahead and get to the conclusions, you find posted there aggregate (ie, the economies as a whole) supply and demand curves that both have the same positive sign, and this, the author purports, represents our economies during a 'liquidity trap' (a period when the economies do not respond to the normal carrot-whip of interest rate gyrations from afar.) In words; supply-demand curves are static curves, representing a snapshot condition(not a change in conditions.) The author is saying that, at higher prices, suppliers will tend to want to supply more quantity of everything(these are aggregate supply curves.) So far, no 'topsey turvey' economics. But since the demand curve also has a positive slope, what the author is also saying is that at higher prices, consumers will tend to want to purchase more of everything.
This 'topsey turvey' result is crucial to the author's conclusions-- that lowering taxes during a liquidity trap will shrink the economies. But it is exactly that conclusion that the author -- Paul Krugman -- went out on the hustings with and beat people senseless over the head with. Nobel Prize winning Paul Krugman...pushing absolute nonsense.
And, few in this America said boo, or questioned his assertions or assumptions, or did anything other than nod along.
His results aren't -arguably- nonsense; they are nonsense. And anyone denying that is saying that "well, sure, our economies are made up largely of trust fund babies who wake up everyday to their equal daily endowment, where no savings or investment is possible, where no production or work or effort is required, and where the only factor to consider is, the relative 'eagerness' of trust fund babies to loan to or borrow from each other."
And so, to the real point; economics is not science. Economics is cargo cult science. Economics is voodoo doctors making political arguments using stolen symbology.
It is gibberish, meant to appear as math or science, seldom if ever calibrated, like real science. It is borrowed authority, meant to browbeat Math Nation into submission. State of the art economics can't even tell us what already happened or why it happened, much less, what is happening or is going to happen and why it is happening or going to happen.
There are either conservative economists, or liberal economists. The closest thing to a neutral 'economist' might be an accountant, but accountants are all about the what, not the why. Economists claim to be about the why, and ultimately, their why's are political in nature.
Where is the first shred of evidence that our government is 'running the[sic] Economy?'
Look, even something as simple as
GNP = P + G + Inv + (Imp-Exp)
isn't 'math', it is a political assertion, masked as a 'definition' of Gross National Product.
At the very least, the equation should be written as:
GNP = c1*P + c2*G + c3*Inv + c4*(Exp-Imp)
It is a -political assumption- that c1=c2=c3=c4=1.0.
It is even a political assumption that the signs of c1 and c2 are the same.
Political arguments, masquerading as mathematical 'equations' and 'definitions.'
Where has it ever been shown that c1=c2=1.0?
Where has it ever been shown that c1 and c2 have the same sign?
regards,
Fred
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