back to article Yes. Economists do love magical, lovely human selfishness

Over the weekend we were treated to the quite startling news that economists think that selfishness is just great. TheOtherHobbes had this to say in the comments section of a Reg opinion piece about consumerism: Economists actually believe – no really, they do – that if you allow people to be selfish then everything magically …

  1. John Smith 19 Gold badge
    Unhappy

    "No economist at all would insist that all problems can be solved in this manner."

    Unless of course they were working for a consultancy or think tank that was pitching that.

    Then they would.

    Psychopaths and Economics students.

    The only groups who always acted in their own self interest.

  2. xyz Silver badge

    Blimey!

    All I got out of that "piece" was all economists have small dicks

    1. Anonymous Coward
      Anonymous Coward

      Re: Blimey!

      Funny that. I was thinking the same about your comment.

      1. h4rm0ny

        Re: Blimey!

        I got from their comment that the poster thinks there are no female economists.

      2. Fungus Bob

        Re: Blimey!

        >Funny that. I was thinking the same about your comment.

        You think xyz has a small comment?

  3. Frankee Llonnygog

    Economics is like philosophy

    In as much as it lets you construct valid proofs for things that aren't true. Fascinating, yes. Useful .... ?

    1. I ain't Spartacus Gold badge

      Re: Economics is like philosophy

      No economics is a set of tools to look at various problems. Some are better and more well understood than others. Unfortunately quite a lot of them, particularly in macroeconomics are too controversial to be of precise use, but often give at least a guide, or rule-of-thumb.

      So for example, we know that if you put up the price of a good, demand will drop. Except in a few specific cases like Giffen goods (staple food in a famine). We also know this relationship is defined by the price elasticity of that good. Which tells us how strong the relationship is between price and demand. So food is quite price inelastic, you'll eat less if it costs more, but not too much less - as you're more likely to sacrifice other things from your budget first.

      But then the devil's in the detail. Do you know your price elasticity? If prices rise, we also know that supply will rise to try and cash in on the lovely extra moolah now on offer. But we don't know by how much, as you may have barriers to entry to the market (regulations etc).

      We also know that if you raise taxes too high, they start collecting less money. The good old Laffer curve. The problem is, no-one's quite sure what point on the Laffer curve they're ever at - or exactly what shape it is. So it's not very helpful to set specific tax rates. It can sometimes mean that you can lower a tax, and raise more income. But it's still nice to know the pitfalls when setting policy, and you may of course be deliberately setting a tax rate to discourage something, rather than to maximise revenue. In which case you may not care.

      As Keynes said, economics is very good at telling you what you did wrong in the past, but not so good at forecasting the future.

      On the other hand, it's the best we've got. And it's better to know more than less. And there are some obvious lessons to take. So governments should spend in recessions to help keep the economy on an even keel (and stop the unemployed starving). But there's another side to this equation, that in booms governments need to save. They need to spend a bit less than they take in tax, in order to stop the economy overheating, and so they're in a position to safely borrow lots in the bust. That's the hard bit of Keynesianism. The bit no-one ever remembers. Like the saying there are no atheists in foxholes, everyone's suddenly a Keynsian when the recession comes. Even when they were advocating massive over-spending in the boom *cough* Ed Balls *cough*.

      Oh yes, another rule we don't understand, can't accurately predict, but know is roughtly true. There'll be a recession every ten years or so. We don't really know why capitalism has to be broken in this fundamental way, but it seems to be unfixable. Put it down to people being rubbish. Free market economies work on the level of the average. On average everyone gets richer over time, but that doesn't account for the people who don't - or the odd ten year blip of falling wages. So in Tim's example rare earth prices are back to roughly where they were before, but not without several companies going pop first, and the shareholders of others losing their investment. It's a messy old system.

      A bit like climate change research, we only have really decent statistics starting in the 20th century. And even there, the quality is variable. And we don't have the ability to do controlled experiments. It's also bloody hard to try and forecast the future, because the accurate stats on our current economies usually take about 6 months to arrive. And even then we don't know all the inputs and outputs. But maybe as we build up a larger history of good quality data we can try and build better models, and we'll have more past scenarios to study, which is the closest we're ever going to get to experiments.

      1. Frankee Llonnygog

        Re: Economics is like philosophy

        I accept that economics is likely to become a science in the future. Right now, it's still in the phlogiston era

        1. I ain't Spartacus Gold badge

          Re: Economics is like philosophy

          I disagree. We have quite a good understanding of lots of things. It's just we are totally unable to be precise. Because we don't have good data. Or an ability to experiment.

          That's also going to continue into the future. However good our theories are, we'll never know the exact value of the various multipliers and exact price elasticities of particular goods. Nor is there any reason to suppose we can ever know where any specific tax is on the Laffer curve.

          We are unable to experiment, and the system is too complex to model accurately. Economics can only ever be a guide, we'll never be able to accurately work stuff out. That's one reason why free markets are often better than governments. Because if you're going to cock up anyway, better to do it with your own money. Or at least money you were given freely by investors. Rather than money that was taken in taxation. Much better for government to try and set fair and reasonable rules, and tweak them as required. Which is why a carbon tax is likely to work better than government attempts to try and cut CO2 emissions with subsidies. Although it's almost always worth subsidising research.

          1. kmac499

            Re: Economics is like philosophy

            OK Economists might not have good current data to help predict the immediate future but surely you have libraries full of historical data. If so you could do the same as real scientists, plugging old data into the theoretical models and see if the predictions fit the actual events. If not you're model and theory is wrong, simples. So it's back to the drawing board guys.

            BTW this approach is precisely the one used by the much maligned climate scientists. They know thay are working with aproximations and undiscovered processes, so they are continually testing their models.

            What tends to come across from economists is an apologetic attitude saying the system is and always will be too complex to accurately model. But don't wory we have the best possible description of the system just trust us and keep giving us the money and jobs.

            1. I ain't Spartacus Gold badge

              Re: Economics is like philosophy

              kmac499,

              Climate scientists only have to deal with one climate. So they can look at why it behaved differently over time, and try to theorise about it.

              Economists are having to look at different countries. Which all behave differently. They have different culture and different economies. So Germans save more than British people do given the same income. We both have welfare states, so they don't have the same reasons as why the Chinese save so much more than Europeans do. Is it cultural? Well their property is cheaper, because their market and history is different. But it makes the economies perform differently.

              The USA have different labour laws to Europe. They tend to come out of recession much more quickly, because companies can hire people and know they can sack them again with almost no notice. But then US states differ as to exactly how this works.

              So what can you compare? The UK economy is totally different to what it was 30 years ago, with completely different employment laws. So not only is it very hard to compare the early 90s UK recession with the equivalent French one, but you can't even compare it with the early 80s UK one. Without accounting for all the changes in the economy in the intervening period.

            2. Tom 13

              kmac499

              The one advantage economists have over Warmists is that they accept that the model is too complex to ever be able to accurately model. And some parts of the economy are well modeled. For instance, we know if you raise the minimum wage you lose jobs. Which is more than Warmists know about CO2.

          2. I ain't Spartacus Gold badge

            Re: Economics is like philosophy

            Frankee Llonnygog,

            I guess you do have a point. We'll maybe never get an over-arching theory of stuff. One theory to rule them all is pretty hard when the data is of such poor quality.

            Also politics doesn't help. The politicians need answers in order to run the economy. You can't blame them for that. But you get political orthodoxies. And plenty of economists willing to defend the party line. They've stopped being scientists and started being cheerleaders.

            Climate scientists should take a good long hard look at economics. And be very afraid. Then try to learn the lessons and avoid some of the pitfalls. They've got less excuse, as they don't have to try and model the sometimes irrational behaviour of markets and consumers.

        2. Tim Worstal

          Re: Economics is like philosophy

          I tend to think that macroeconomics is, yes. Micro, not so much. We do know at least a few useful things there.

          1. I ain't Spartacus Gold badge
            Happy

            Re: Economics is like philosophy

            Says the micro-economist...

    2. Janus

      Re: Economics is like philosophy

      "In as much as it lets you construct valid proofs for things that aren't true."

      I think you mean Continental philosophy:

      https://en.wikipedia.org/wiki/Continental_philosophy#cite_ref-6

  4. Roger Greenwood

    "she'll be right"

    Is also said in Yorkshire as "be reight".

    That's economy for you.

  5. h4rm0ny
    Thumb Up

    When Tim Worstall feeds the trolls, he gives them a full burger and fries, doesn't he?

    I thought *my* responses to stupid comments were lengthy. I've never got a full article on El Reg for one, though.

    1. Terry 6 Silver badge

      Bit unfair if you think that's a troll's comments.

      1. h4rm0ny

        >>"Bit unfair if you think that's a troll's comments."

        Okay, on reflection my comment was a bit mean-spirited and troll was not the right word to use. However, I find the comment ridiculously sweeping and it's also typical of the kind of view someone without any knowledge of a subject holds. In other words, very uninformed. All I was really doing was observing that some inaccurate comment on a thread had spawned an entire two page article rebuttal. It just amused me as a response. (Not that I didn't enjoy reading it).

        1. Tim Worstal

          "Not that I didn't enjoy reading it"

          Ah, good, that's OK then.

  6. Raumkraut

    What is this? A chart for ants?

    If you're going to put charts into articles, please make them a link to a full-size version. You know, one where the legend is actually legible.

    1. Anonymous Coward
      Unhappy

      Re: What is this? A chart for ants?

      What legend?

  7. P. Lee

    > "she'll be right"

    Well, unless she invested in the new rare earths companies. Then she might be destitute.

    That's the problem with large companies with cash. They could (like the Chinese) just drop their prices and send you bankrupt.

    We do care about the producers because the producers are funded by the rest of the financial system and in the end it always comes back to people. Companies are a fiction, only people matter.

  8. solo

    Rare earth

    Poor me, thinking it was about area in Hectares, greed for which is the reason of 100% of the world's wars.

    1. Irony Deficient

      Re: Rare earth

      solo, greed for which area in hectares was the reason for the War of Jenkins’ Ear?

      1. solo

        Re: Rare earth

        ".. greed for which area in hectares.."?

        Answer: "Area of the sea"

        Thanks for an educating reference. But, what I came to know after a little wiking is that the ear was cut on suspicion of smuggling (and essentially avoiding tax related to the passing country). Correct me if my conclusion is wrong but I hold my Ground on my original proposition.

        1. Irony Deficient

          Re: Rare earth

          solo, in my view, that war was fought over an economic privilege (British access to Spanish colonial markets), unrelated to greed for any area in hectares; neither side in this war had territorial expansion as a goal.

    2. Identity
      FAIL

      Re: Rare earth

      I disagree. Religion seems to have had an equal bad influence.

  9. Anonymous Coward
    Anonymous Coward

    That's what this is all about:

    http://www.disclose.tv/action/viewvideo/145347/The_Trap_Fuck_You_Buddy_BBC/

    ...Well worth a watch.

  10. Identity
    Megaphone

    Some quotes to consider in re all of this:

    "You can always count on Americans to do the right thing - after they've tried everything else." —Winston Churchill (though you can easily substitute those who rely overmuch on economics for Americans. As a side note, those who relied overmuch on Just In Time process were, when it all went wrong, known as JITheads.)

    "In the long run, we are all dead." —John Maynard Keynes

    "This gave a cosmetic boost to the economy, but his economic problems otherwise remained immense. Sir Humphrey, having majored in Latin and Greek, did not understand economics. Hacker, having majored in sociology, did not understand anything really. Sir Frank Gordon, the Permanent Secretary of the Treasury, was at an even greater disadvantage in understanding economics, for he was an economist." —Jonathan Lynn and Anthony Jay from Yes Prime Minister, p.390

  11. John Smith 19 Gold badge
    Unhappy

    5 Downvotes.

    I did not realize El Reg had so many economist readers.

    At least I'm presuming they were economists that I've upset.

    1. Michael Wojcik Silver badge

      Re: 5 Downvotes.

      Perhaps they were just readers who are tired of facile, insulting generalizations.

      Though it's hard to see how you could reach that state and still bear to read Reg comments. Or nearly anything else online.

  12. Stenetoppen

    re: we know that price determines demand...

    Price alone does NOT determine demand. Price obviously has an impact but it is not sufficient to explain varying demand for like goods. The dark art of setting the correct price for a good is a a key part of bringing a good to market successfully. This price may well be set higher compared to a like good, precisely in order to increase demand for the higher priced good vs the other. Cases in point: detergents, toothpaste, trainers, computers, USB cables, etc etc.

    My point being that one of the issues with economics is the insistence on vastly over simplified theoretical models, whether presumptions about human nature or the mechanics of supply and demand (such as price = demand) which far too often fail to match real world experience.

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