Why does anyone pay attention to people that study "economics"?

[The One]

What would be the most efficient and effective way to allocate the island's resources and ensure that goods and services are fairly exchanged between the island's seventy inhabitants?

Well as you started this new twist (and that's perfectly fine) can you give us your idea for how to do that (i.e. how are you going to make the choices)?

To start, I would propose dividing up the island into 70 equal "pie slices" and then designate each sector's owner in some random manner such as drawing numbers from a hat.

I also think that we should have a form of money/currency with a fixed supply.

I think I would propose that we all pool all of our physical fiat coins together, distribute them as evenly as possible and then use that as the island's currency.  I think fiat would work in this situation because no one has access to a mint to inflate the money supply.

For the sake of argument, let's suppose the total value of the coins on the island is $210.00 which comes out to 300 cents per person.  I would propose we start using that as the island's money.

With 70 people on an island............there is no need to build an economy. Just work together and make the the most intelligent and wise person the chief of the tribe.

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[Nicolas Dorier]

I am not against keynesian on the fact that infinite growth is impossible.
Just on the fact that I don't want to let someone decide whether my money is worth something, nor being forced to consume and invest.
I don't believe "it is in your own good" bullshit, because it it not. People are better informed about how to spend money for solving their own problem than a central planner.

But I believe that growth is infinite. Maybe it will not grow as fast as the Keynesian system want, but I don't agree with the "there is limited resource so it will stop" argument.

Humanity always expanded, we have more and more goods, we can feed more and more people.
At no point of history we were so materially rich nor numerous, why would it stop now ?

People seems to forget that "Oil" did not existed before the human mind learned to harness its power, as much as uranium.
If we have no "Oil" left, then we will find other sources.
Human knowledge is the source of our abundance, natural resources are only a mean that will vary over time.

Any discovery permits humans to make more with less or with something else, and as long as we don't stop innovation it will continue on the same way. (throwing dollars to the problem don't make a mind more productive, getting rid of the chains is)

"What happen when there will be no oil left" ? well, oil will be very expensive, making the economy shift to alternative. (that already exist but are currently economically not profitable)
"What when there will not be enough space" ? well, except if you live in small country like japan, you know that it is not going to happen anytime soon. (and even japanese are very creative for stacking anything to gain more room)
"What happen when there will be not enough food" ? well, better techniques of breeding and agriculture will be created, or regulations that artificially stifles the production will be relaxed. (sterile seeds and quotas)

Human mind is the source of all this abundance, and as knowledge is exponential, this growth will continue, not as fast as keynesian would expect though, as we are starting to see.

[2112]

No it won't. Even if you did collect data then use any statistical model, it is useless. The economy is based on subjective behaviour of the consumers and consumers are fickle, changing their mind, dithering whether to buy, die......so any data becomes out of date within 5 seconds or less.

Ha ha, we went through this argument (about not begin able to step into the same river twice) about 2000 years ago. I actually had to consult the Wikipedia, it was 2500 years ago. http://en.wikipedia.org/wiki/Heraclitus

Both philosophy and science made significant progress since then.

I'll now repeat what I've said before: an admiration for the founders and faculty of my Alma Mater who forced on us 2 semesters of general philosophy and 1 semester of philosophy of science. It seemed so useless then, when I was young. Now that I'm older I can just laugh out at the naives getting snared into the bazaar sophistry. This type of argumentation must have been ancient Greek bazaar equivalent of the three-card-monte of the modern swap-meet.

Next time I'm going to visit my Alma Mater I'll propose adding one more semester of "philosophizing for profit (with fun optional)". This should teach the future graduates how to profitably exploit the knowledge that e.g. quantum mechanics is both demonstrably false and fruitful area of scientific research. With Bitcoin as a bait it will be as easy as shooting fish in a barrel.

[johnyj]

I am not against keynesian on the fact that infinite growth is impossible.

The resource has been occupied, that's the main problem now

Imagine on an island that have only 100 people, where all of them is extremely productive and occupied all of the island, what should their children do? They don't need to work, since their parents already can produce everything they need. They could only consume until there is nothing to consume, which might never happen due to their parents' improving productivity

Or another extreme, in a world that most of the worker has been replaced by robots, how could people get their income?

[Nicolas Dorier]

Imagine on an island that have only 100 people, where all of them is extremely productive and occupied all of the island, what should their children do? They don't need to work, since their parents already can produce everything they need. They could only consume until there is nothing to consume

No need to imagine, I think we are not far from this.

until there is nothing to consume, which might never happen due to their parents' improving productivity

their parent are not here forever. Also the resources needed of the old technology would finish to be depleted (=become too costly), making it a need for the children to find substitutes and innovate.

Or another extreme, in a world that most of the worker has been replaced by robots, how could people get their income?

A robot can only do manual tasks, they are not the one that know how to pivot once market condition is changing (either on supply, like depletion, or demand part), and they don't know how to innovate, they can't maintain themselves.
The robot can't adapt. If the world would be fixed, demand and supply predictable then it would be possible to have a "robot only, no workers" economy.
But this can't happen when human are constantly changing the supply and demand by creating new technology, and depleting old resources, making old technology unprofitable.
And technology is only one unpredictable part of the equation that impact supply and demand. Geo-political condition is another, and I'm sure there are other variables.

You can think "when IA is developed enough, it will adapt and be self sustainable", but this happens only in sci fiction.

In summary, I don't believe in neither "we can't continue to grow because no resource is left", nor "nobody will have to work". The unpredictability of supply and demand, because of multiple variable, will always need humans to adapt.
I am not keynesian, but I won't deny them the "increasing growth" part.

[CIYAM]

It is this thinking that somehow we'll work out a way that has led to climate change and cities like Beijing now being literally dangerous places to live in if you happen to breath air (seriously check the air quality readings).

But sure - let's just keep on building more and more and consuming more and more because "we're confident it'll all work out without even needing anything more but a belief in just that" (despite the very vast majority of scientists telling us all the time it won't without now drastic action).

[Nicolas Dorier]

It is this thinking that somehow we'll work out a way that has led to climate change and cities like Beijing now being literally dangerous places to live in if you happen to breath air (seriously check the air quality readings).

Been in Beijing, it is horrible. This is the only city I have seen like that (with maybe mexico ?). Tokyo for example is clean.
Taking this marginal case and extrapolating is not right. Also, I believe that city concentration will slow down due to most knowledge job that can be done at home. (country side will become repopulated, because if the polution of concentrated area is a problem the loss of health will make people move somewhere else)

despite the very vast majority of scientists telling us all the time it won't without now drastic action

Leveraging fears to get their own ways, so it would justify Big Brother taking control of our well being.
That aside, not all scientist agrees on this problem, only the mainstream one.

If I was a factory owner I would not acknowledge a bureaucrate restriction on the basis on "experts said you were harmful to society", especially when those experts are paid by the one in power. (But this is another debate, unrelated to keynesians)

How can you say "I actually think it is rather funny that we have people that are awarded Nobel prizes and given high status at universities (and in governments) when their pseudo-science is really no different to a cult or a religion." ?
While supporting nobel prize climate scientists that are of the same essence. (financed by those in power, and producing nothing that is proved to improve someone life)

[CIYAM]

While supporting nobel prize climate scientists that are of the same essence. (financed by those in power, and producing nothing that is proved to improve someone life)

I find that quite a stretch and think you should back that up with some very hard evidence as the *vast majority* of scientists in the world are in agreement that we have huge problems that we have created ourselves due to our lifestyle (no matter how some people want to spin things).

Also which Nobel prize laureates are you referring to specifically (and saying that I supported any of them is a bit odd as I didn't name any - did I)?

If you think Beijing is just one overly extreme example then try living in most other major cities in China also (whilst Shenzhen was a lot better it still ain't clean and where I live now isn't much better either).

They are switching on new coal fired power plants virtually every day of the year in China - how can things possibly not get worse in every city anywhere near them?

Also the city I was born and grew up in (Melbourne, Australia) has had to implement severe water restrictions for nearly 20 years now (even if they have managed air pollution much better than cities in China which is mostly because the coal fired power plants in Victoria are a long way away from the city and they have created very few new power plants in the last 30 years there).

[Nicolas Dorier]

While supporting nobel prize climate scientists that are of the same essence. (financed by those in power, and producing nothing that is proved to improve someone life)

I find that quite a stretch and think you should back that up with some very hard evidence as the *vast majority* of scientists in the world are in agreement that we have huge problems that we have created ourselves due to our lifestyle (no matter how some people want to spin things).

Which Nobel prize laureates are you referring to specifically?

If you think Beijing is an extreme example - try living in most other major cities in China also (whilst Shenzhen was a lot better it still ain't clean and where I live now isn't much better either).

Also the city I was born and grew up in (Melbourne, Australia) has had to implement severe water restrictions for nearly 20 years now (even if they have managed air pollution much better than cities in China).

The difference between religion and science can be illustrated with the blockchain.
The majority can tell me that 1239493875398798367e3ce64898e6d1d1b50997287f8da053eed7e0c2f523e1 is the block 340303, I can still prove it is wrong.

You can tell me that climate is going worse ? I can't proove nor disproove it, so it is religion.
I can still point out dissenters, but I will not able to proove them right. http://en.wikipedia.org/wiki/Global_warming_controversy
And as soon as we start debating if X or Y is more legitimate, instead of pointing out the flaws in their messages, we are in religion, not science.

If there is controversy at all, it is that some people do not suffer from global warming but are still forced to pay for it.
If it was an uncontroversial problem, the private sector would finance it, not the taxpayer.

If some people (beijing) suffer about it, it does not justify a policy change with governmental intervention in my city several thousand miles farther.
These cities are polluted because of local reasons, not global one.

Saying : "growth will stop in the world because Beijing can't become more polluated than what it currently is" is wrong. We are not all producing coal, and we are not all living in such concentrated cities.
And, most country, except small country like japan that lack of space, have way more room to expand. (despite space restriction, Tokyo is not very polluted)

Global warning is a false problem that only justify big brother intervention.
So I don't consider global warning as valid reason to dismiss keynesian theory.

And even if there is global warning, a Keynesian will tell you that by printing money, we can finance alternative technology that have less impact on the planet.
(My response : there would be no need for financing by printing money, if it was a real problem in the first place)

[CIYAM]

And even if there is global warning, a Keynesian will tell you that by printing money, we can finance alternative technology that have less impact on the planet.
(My response : there would be no need for financing by printing money, if it was a real problem in the first place)

And this is exactly why I felt that I needed to create this topic.

[CIYAM]

Quick note on climate change disagreement, if it can't be proven on either side then we should be doing everything in our power to avoid it until it can.

Finally - a voice of reason.

[dinofelis]

How about an answer through a negative?

Q: Why it is so easy for everyone in academia to dismiss the so called "austrian economics"?

A: Because the Austrians propose that mathematical modeling and statistical methods do not apply in the real world economy.

This is right, and they are (of course) correct in that.

Now, you can argue, they are visibly wrong in that, because there is a lot of economic modeling going on, and there is a lot of econometry, and although that doesn't always work out, it does give some right information.

The point is: this can work maybe in the short term.  Economic activity can probably be modeled in the short term, by some or other Kalman-type filter on past time series.  If you take as input sufficiently relevant time series of macro-economic parameters, you may be able to have some model that will extrapolate small perturbations in the near future.

However, such models will allways end up failing in the longer term, and the reason is exactly that given by the Austrians: "human action".

The problem with any economic model is that it is the result of many human decisions, and that those human decisions not only change according to the whims of people (that could potentially still be modeled), but also because these humans themselves LEARN and use the economic happenings and to modify their behavior to their perceived advantage.

For instance, the first time you print money, the economy will react in a specific way.  That will be to the advantage of some and to the disadvantage of others.  Next time, the economy will not react the same way anymore.  People will have learned from the first time.  People will anticipate you printing money, and will take *different actions*, and as such, the economic dynamics will have changed.

In other words, the economic dynamics is not time-invariant, because there is this learning function.  And the states also have learning functions.  if the first time they react to a crisis in a specific way, and that doesn't bring in the hoped-for results (on electoral or economic side), next time that state (which is part of the economic dynamics) will do something else.

So: same situation, different response.  By definition, that cannot be modeled.  Because a mathematical model gives you the same response to the same input.

Human action, which includes learning, makes that economy is *in principle* not following a mathematical model.  Because it is not time invariant.
And because people learn.

[Nicolas Dorier]

Quick note on climate change disagreement, if it can't be proven on either side then we should be doing everything in our power to avoid it until it can.

Who are "we" ?
If I don't consider it to be a problem should I be forced to pay for it ?
If you think I should, then printing money is a freaking great idea ! It is the best way to force society to pay for something, without any political consequences.
And it would help to finance alternatives energy sources, and scientist nobody wants to pay for now, a good thing !

Well... no. Such alternatives will be financed anyway when current resources will be depleted, and the global warming will be felt, without the need of the central banker.
If it becomes a real problem, given the alternative to build a solar panel at low cost and paying fuel that became very costly (either because of pressure done by the local population or because of depletion), I will build a solar panel, even if I don't care about global warming.

[CIYAM]

It is a bit like the people who thought that the Titanic could not be sunk - one section too much and look what happened (and how quickly).

This is exactly what is happening with the earth (but it is always the economists that say it is "unsinkable").

By the time you have built your solar panel - it will be too late (i.e. "wake up").

[BillyBobZorton]

Quick note on climate change disagreement, if it can't be proven on either side then we should be doing everything in our power to avoid it until it can.

Who are "we" ?
If I don't consider it to be a problem should I be forced to pay for it ?
If you think I should, then printing money is a freaking great idea ! It is the best way to force society to pay for something, without any political consequences.
And it would help to finance alternatives energy sources, and scientist nobody wants to pay for now, a good thing !

Well... no. Such alternatives will be financed anyway when current resources will be depleted, and the global warming will be felt, without the need of the central banker.
If it becomes a real problem, given the alternative to build a solar panel at low cost and paying fuel that became very costly (either because of pressure done by the local population or because of depletion), I will build a solar panel, even if I don't care about global warming.

The gov will start taxing on your solar panel generated energy.

[CIYAM]

I'm guessing you don't have kids. Neither do I but I have consideration for the future of others.

I do think this is the problem - those who support the non-scientific "pseudo-science" of economics would rather see us all asphyxiate in pollution than admit there is anything wrong with their theories.
 

[Nicolas Dorier]

...

I'm guessing you don't have kids. Neither do I but I have consideration for the future of others.

And so I. Which is why I'd like they learn to judge with their own brain and eyes, and not believe what they are told blindlessly.

The gov will start taxing on your solar panel generated energy.

No doubt about that, but despite the tax, the fuel will become more costly than a solar panel.

I do think this is the problem - those who support the non-scientific "pseudo-science" of economics would rather see us all asphyxiate in pollution than admit there is anything wrong with their theories.

So what is not mainstream is considered "pseudo-science", while the rest is science... The "hockey stick" is definitely a piece of science. (http://en.wikipedia.org/wiki/Hockey_stick_controversy)
Global warming is not science, nor economic.

When you have no way to proove or disprove, you are not dealing in science.

Why does anyone pay attention to people that study "economics"?

You know the response to your own question : why do you pay attention to people that study "global warming"?
I am an austrian not a keynesian, but would not consider any of them science. And can't point any incoherence in the keynesian model. I am only arguing the violation of property that it morally justifies.

[twiifm]

I'm guessing you don't have kids. Neither do I but I have consideration for the future of others.

I do think this is the problem - those who support the non-scientific "pseudo-science" of economics would rather see us all asphyxiate in pollution than admit there is anything wrong with their theories.
 

Strawman arguments.  Economics isn't a pseudo science or a hard science - it's a social science.

Economics don't a have theory about pollution.  What an economist can do is do cost analysis of renovating or updating coal burning plants vs cost of healthcare or some other associated costs and present the study to policy makers.  Then policy makers decide about legislation.

Not only you are ignorant about economics,  it appears you are ignorant about politics as well

[worldinacoin]

You can put ten economists in a room and they can come up with ten different answers, I won't really trust economists.

[twiifm]

How about an answer through a negative?

Q: Why it is so easy for everyone in academia to dismiss the so called "austrian economics"?

A: Because the Austrians propose that mathematical modeling and statistical methods do not apply in the real world economy.

This is right, and they are (of course) correct in that.

Now, you can argue, they are visibly wrong in that, because there is a lot of economic modeling going on, and there is a lot of econometry, and although that doesn't always work out, it does give some right information.

The point is: this can work maybe in the short term.  Economic activity can probably be modeled in the short term, by some or other Kalman-type filter on past time series.  If you take as input sufficiently relevant time series of macro-economic parameters, you may be able to have some model that will extrapolate small perturbations in the near future.

However, such models will allways end up failing in the longer term, and the reason is exactly that given by the Austrians: "human action".

The problem with any economic model is that it is the result of many human decisions, and that those human decisions not only change according to the whims of people (that could potentially still be modeled), but also because these humans themselves LEARN and use the economic happenings and to modify their behavior to their perceived advantage.

For instance, the first time you print money, the economy will react in a specific way.  That will be to the advantage of some and to the disadvantage of others.  Next time, the economy will not react the same way anymore.  People will have learned from the first time.  People will anticipate you printing money, and will take *different actions*, and as such, the economic dynamics will have changed.

In other words, the economic dynamics is not time-invariant, because there is this learning function.  And the states also have learning functions.  if the first time they react to a crisis in a specific way, and that doesn't bring in the hoped-for results (on electoral or economic side), next time that state (which is part of the economic dynamics) will do something else.

So: same situation, different response.  By definition, that cannot be modeled.  Because a mathematical model gives you the same response to the same input.

Human action, which includes learning, makes that economy is *in principle* not following a mathematical model.  Because it is not time invariant.
And because people learn.

Austrians use a logical deduction called "praxeology" which is more suited to trolling or soapboxing

Keynesians tend to build models to explain collected empirical data, so it's more suited to academics