Learning about the Economy

[Dr_Noface]

Where/what do you guys read about economics? Any recommended texts?

[Taishan]

Atlas Shrugged

[Username17]

Where/what do you guys read about economics? Any recommended texts?

You can certainly do worse than to read Krugman's Blog. He updates it daily and runs through economic news and economic theory at a very accessible level. If you want a more thorough grounding, I suggest starting in the 19th century and moving forward. So you'd probably grab Marx for Beginners and then grab something about Keynes.

You really don't have to read the Austrians like Hayek or Mises, because they didn't have anything interesting to add to economic theory at the time and still don't. If you want to understand sane right wing thought, you should read an abridgment of Friedman. And I mean Milton, not Thomas.

The big argument in modern economics is about "multipliers". That is: how much effect on the real economy do you expect to see if the government spends or saves a dollar. This has been complicated in the last few decades by central bankers doing their level best to mask that effect as much as possible (by loaning out a dollar whenever the government saves one and reducing the loans by a dollar whenever the government spends one). But right now the Federal Funds Rate is one quarter of one percent and the central bank literally cannot lend out any more dollars. So suddenly government cuts and government spending have a way bigger effect on the real economy than they seemed to back in the 1980s when the Fed could (and did) offset those changes by fiddling with interest rates.

So pretty much everything "learned" since 1980 is apparently wrong and the IMF's predictions about economic growth were consistently wrong by the factor of having listened to conservatives. Seriously:


-Username17

[nockermensch]

Question time, beginner tier:

Who (or what) fuel the calls for austerity? I keep trying to understand which class can benefit from it, but it seems everybody loses: The poor are obviously fucked by the cuts on social programs. The middle class will face unemployment and less credit. Even the rich people should see their fortunes growing at a slower rate during a recession (the unemployed consume less, for example). And, of course, the government will have less taxes to collect because there will be less money flowing through the economy.

So, how the fuck is "austerity" an actual respectable platform? Who backs it, and more importantly, who actually gains when austerity plans are implemented?

[Maxus]

Conservatives back it because they have this notion that a government can just stop buying stuff like a normal person.

No one gains, but there's folks who beat off to the idea of other people suffering because of perceived laxness or irresponsibility.

[virgil]

So, how the fuck is "austerity" an actual respectable platform? Who backs it, and more importantly, who actually gains when austerity plans are implemented?

Authoritarians. They don't care about the economy, they care only about punishing & controlling. The same motivation goes behind the abortion debate and the War on Drugs.

[Username17]

So, how the fuck is "austerity" an actual respectable platform? Who backs it, and more importantly, who actually gains when austerity plans are implemented?

Authoritarians. They don't care about the economy, they care only about punishing & controlling. The same motivation goes behind the abortion debate and the War on Drugs.

This. You will never understand the Austerians as long as you attempt to understand it in terms of wealth. As a simple matter of arithmetic, reducing government expenditures during a depressed economy makes the economy do worse. A falling tide sinks all boats. Austerians come from a standpoint of Confusion, Ideology, and Class Warfare.

Confusion
Many of the arguments made for Austerity today were made in 1930 with equal seriousness by the Very Serious People of the day.

The orthodox Treasury view ... is that when the Government borrow in the money market it becomes a new competitor with industry and engrosses to itself resources which would otherwise have been employed by private enterprise, and in the process raises the rent of money to all who have need of it.

This is an understandable argument and makes sense to a lot of people. Basically there's a limited amount of borrowable funds, so the thinking is that if the Government borrows a dollar that this necessarily means that GM doesn't borrow a dollar and the economy hasn't been changed at all (save that one dollar worth of the economy has been moved from the private sector to the public sector). This is, of course, wrong. At least, it is wrong in a depressed economy for the simple reason that not all of the borrowable funds are being borrowed. If the government borrows a dollar, that is a dollar that GM already declined to borrow. So the entire "crowding out" scenario never happens.

Note that even when economies are firing on all cylinders the Treasury View is still wrong because there is some flux and give in the money markets and crowding out is almost never 100% - but it's a lot closer to being true. Close enough that people use it as a simplification when making models and then when actual recessions happen they have allowed themselves to be confused by the fact that their model uses a zero-sum public-private spending tug of war as an approximation and then when there are honest to goodness unused resources lying around and the effective competition is zero (or even less than one in many cases as government investment makes private investment more appealing), they are caught with incoherent models.

The other big one is the "household budget" analogy. People love this one because it makes intuitive sense: simply treat government budgets like family budgets. When a family has lower incomes, they need to spend less. Borrowing more can be done for a while, but eventually spending has to drop and paying back years of borrowing can be painful. This is completely unlike an actual government budget in pretty much every way. A government borrows primarily from its own people and pays back its debts to its own people. A government is also immortal and its spending literally creates the incomes of a sizable number of people in it. The household budget analogy is simple and intuitive and easy to explain to people and gets almost every salient detail of government finance completely wrong.

Ideology
Many people in the Very Serious People class are rentiers. Even those who aren't find that most of their friends are. And so it is that they have a very great tendency to have rentier ethics. That is: they feel that earning interest is good while paying interest is bad. There's no logic there, every borrower needs a lender and every lender needs a borrower. Every "investor" requires that someone somewhere be a "debtor". But the people in suits are used to feeling superior over the unwashed masses who need to take school loans and don't make money from their mutual fund. So since these guys feel that it is morally superior to run a surplus and morally reprobate to run a deficit, they call for spending cuts when the money goes away.

Secondly, a lot of Austerians genuinely want poor people to suffer. You can see it plainly when they get get pissed off about people on food stamps having any fun. For these Austerians, any economic arguments are basically post hoc. They are in favor of massive cuts to the welfare state because they are in favor of massive cuts to the welfare state, and for no other reason. Cutting the deficit is merely a useful excuse to punish poor people for the audacity of being poor without having actually frozen to death like a good little match girl. You can see this disingenuousness most clearly in the deficit chicken hawks. It's all austerity now now now! except only when we're contemplating cutting social services or raising taxes on poor people. The instant we start talking about raising taxes on rich people or cutting the budgets for military and prisons the whole urgency of Austerity simply melts away.

Class Warfare
Many of the men in suits would rather be richer than you than to be richer than themselves. These people are already rich and have enough money to stay rich for the rest of their lives. The only thing they really fear is an uprising by communists or anarchists. The economy can go up, the economy can go down, and they will never starve. And so they perversely see their position as being best assured by crashing the economy into the sun. A falling tide may lower all boats, but their boat is very big and they will still be high up no matter how much the tide falls. But people on smaller boats can get eaten by giant fucking crabs.

Now superficially, this seems like a terrible plan. Communist revolutions don't happen for no reason, they happen because life is extremely desperate for poor people. But in our current system the amount of political power you have is almost linearly dependent on how much extra money your class has in aggregate to hurl into the open maw of the political system. Making everyone poorer has the demonstable effect of reducing the discretionary incomes of the middle class and poor by more proportionately speaking than it does to the rich. So the amount of the dollar/speech discourse that rich people get to dominate does go up when the economy suffers.

-Username17

[nockermensch]

Now, where's one "I don't want to live in this world anymore" macro when you need it?

Seriously, this is a fucking depressing insight.

[tussock]

I think of it as the "world is just" delusion.

In this case, rich people think they are rich because they worked very hard, and therefore poor people are poor because they did not work hard at all. People who make hundreds of millions of dollars honestly believe everyone could have done the same if they'd just worked as hard (completely ignoring the tens of millions they started with on zero interest family loans, the cushy jobs, and any number of other advantages).

So the poorer people get, the more "incentive" rich folk think they need to get off their asses and go do all that work (which isn't actually there at the moment) and get rich (despite jobs not paying anything like that no matter how many hours you get).

[Lago PARANOIA]

Where/what do you guys read about economics? Any recommended texts?

If you want economics from a liberal viewpoint, you could do much worse than Steve Kangas's website.

Unfortunately, he died back in 1998 and a lot of statistics are woefully out of date. But the same general thrust for all of his arguments are the same. The nice thing about debating conservatives is that their arguments don't change much.

[Lago PARANOIA]

This. You will never understand the Austerians as long as you attempt to understand it in terms of wealth. As a simple matter of arithmetic, reducing government expenditures during a depressed economy makes the economy do worse. A falling tide sinks all boats. Austerians come from a standpoint of Confusion, Ideology, and Class Warfare.

Don't forget State Warfare. See: IMF v. Argentina and I think you can make an extremely strong case for Angela Merkel v. Southern Europe. And there are also some actors like, oh, Red State U.S. politicians v. Blue Staters but they're idiots and have the situation reversed. The intent is the same, though.

Also another point of confusion: for monetarily sovereign economies that practice austerity anyway (like the U.K. or Japan) the countries still live under the delusion that they're on some ephemeral fixed currency standard and think that they have to 'borrow' or 'extract' money -- so everything Frank said about that stupid household budget analogy holds with the additional caveat that it's like an extremely skilled counterfeiter wondering where the hell he is going to get enough money to pay rent.

[Lago PARANOIA]

Psychologically, is/Was Social Security being 'funded' through a tax (relevant for FDR's time, completely stupid now) a good idea or a bad idea?

It's good in a sense that it allows people to have a sense of ownership and get people screaming like raped apes whenever a politician proposes tinkering with it. But it's also bad because it enables butthurt American working class conservatives to live in a state of denial about the need for a safety net.

[Taishan]

But it's also bad because it enables butthurt American working class conservatives to live in a state of denial about the need for a safety net.

The keyword there is 'butthurt'. This implies, and I think correctly, that they don't have a well reasoned, coherent argument against either a social safety net or taxes funding it. I mean, these are the same people who think taxes = theft by government. They're never going to stop complaining, so trying to placate them is bad strategy. Good strategy would be getting them to complain about something that makes them look dumb(er).

[Whatever]

Good strategy would be getting them to complain about something that makes them look dumb(er).

'Keep Government out of my Medicare' wasn't enough for you?

[K]

It's important to remember that 50% of Americans think that they will be millionaires with ten years and only 25% think that they are in the lower 47%.

In a very real sense, half the nation is trying to set up the nation for when they get to be part of the 1%.

[Mistborn]

It's important to remember that 50% of Americans think that they will be millionaires with ten years and only 25% think that they are in the lower 47%.

In a very real sense, half the nation is trying to set up the nation for when they get to be part of the 1%.

I remember someone once speculating about the reason that so many people join team evil in D&D land even though hell is a real place that people actually visit. Basically they all think they're going to be the in the tiny fraction that shoot up through the ranks and get to be high end fiends right after they die rather than the hapless rubes who's souls get wrung out like sponges for the power to keep the hellfire burning. It seems distressingly credible now.

[Sashi]

It's important to remember that 50% of Americans think that they will be millionaires with ten years and only 25% think that they are in the lower 47%.

In a very real sense, half the nation is trying to set up the nation for when they get to be part of the 1%.

And then when they get sick/get to retirement age and suddenly have to depend on the system they've been trying to dismantle because "only leeches and lazy people use it" they get terrified of changes to it because in their mind "let's fix Medicare" means "let's burn Medicare to the ground because only leeches and lazy people use it"

[nockermensch]

It's important to remember that 50% of Americans think that they will be millionaires with ten years and only 25% think that they are in the lower 47%.

In a very real sense, half the nation is trying to set up the nation for when they get to be part of the 1%.

Is this data still pertinent after the last bubble burst?

[Username17]

As of last year, twenty percent of Americans think that they will be millionaires inside of 10 years. With another twenty percent saying that it could go either way. The remaining sixty percent said that it was unlikely that they would be millionaires in ten years. So three years into the great recession, the number of people who gave themselves at least a coin flip's chance to be a millionaire inside a decade had dropped all the way to 40%.

Note also that the article tries to portray this belief as less ridiculous than it actually is. They point out that 5% of households are worth a million dollars, but the actual question was about whether the respondent expected to be worth seven figures individually (which is only 1.5%).

-Username17

[Doom]

Weirdness. I'd have to sit with a pencil and paper to see if I'm over halfway there, and still don't see me making it to a million within 10 years without considerable luck (or relatives dying, which is high probability).

Edit: Nope, not halfway there.

[nockermensch]

Weirdness. I'd have to sit with a pencil and paper to see if I'm over halfway there, and still don't see me making it to a million within 10 years without considerable luck (or relatives dying, which is high probability).

Edit: Nope, not halfway there.

I like the "not halfway there" statement because it generates in the mind of the listeners an expectation of value, while actually being true for all networths lesser than $500,000, including the negative ones.

So the next time somebody asks me how close to a million I am, I'll take some moments to stare into the horizon, nodding silently as if doing mental calculations, to finally answer: "You know, I'm not halfway there."

[Koumei]

Is there anyone else here who is reasonably confident they won't ever be a millionaire short of going to Zimbabwe for a stint?

[Sashi]

It's fairly reasonable to think that a person making $60-80k/year could accumulate $1M of net worth over a lifetime, counting a house, retirement, and nice car or two.

But the thing is that having $1M in net worth hardly makes you "a millionaire" except in the technical sense.

[Kaelik]

It's fairly reasonable to think that a person making $60-80k/year could accumulate $1M of net worth over a lifetime, counting a house, retirement, and nice car or two.

But the thing is that having $1M in net worth hardly makes you "a millionaire" except in the technical sense.

Indeed, my parents were told that they need to accumulate 1 million dollars prior to retirement to maintain their current standard of living. Now that is "household" not "individual" but they are not generally super rich or anything.

So I could certainly see that with inflation being a thing that exists, I will retire with a million dollars in assorted value. But that is hardly something to be proud of as being a "millionaire."

[RadiantPhoenix]

Is there anyone else here who is reasonably confident they won't ever be a millionaire short of going to Zimbabwe for a stint?

I'll put myself on that list.