Comparing the Difficulty of Undergraduate and Graduate Economics Programs

[Shackleford]

I am a math major, physics minor senior. Generally speaking, how does the difficulty of an economics master's program compare to my undergrad?

Well, I put this in the Social Sciences forum because I thought the people who post in there would have a better idea. This forum really just seems to be about engineering and hard science academics. But, I guess I'll find out. I may already asked in this forum. I don't remember.

 

[talk2glenn]

I am a math major, physics minor senior. Generally speaking, how does the difficulty of an economics graduate program compare to my undergrad?

Well, I put this in the Social Sciences forum because I thought the people who post in there would have a better idea. This forum really just seems to be about engineering and hard science academics. But, I guess I'll find out. I may already asked in this forum. I don't remember.

How did you do in your math classes and the math portion of the GRE?

The first two years of a PHD program in econ will be heavy proofs of intermediate theory (real analysis type stuff). Your last three years will be stats and metrics heavy, as you gather and work with data from your thesis.

An undergrad economics background isn't required.

 

[Shackleford]

How did you do in your math classes and the math portion of the GRE?

The first two years of a PHD program in econ will be heavy proofs of intermediate theory (real analysis type stuff). Your last three years will be stats and metrics heavy, as you gather and work with data from your thesis.

An undergrad economics background isn't required.

Sorry. I forgot to specify that I'm only interested in a master's program.

I have not taken the GRE yet. I have most of my senior-level math classes ahead. My cumulative GPA right now is 3.4. I only have one more class to finish the physics minor. My goal is to have at least a 3.5 when I graduate next spring.

 

[magicarpet512]

Hey, I'm kind of in the opposite boat that you're in. I got an undergrad in econ and am working on a masters in math.
The math in the undergrad econ programs are pretty watered down, and I think that is somewhat true for most masters econ programs.
At my university, there were several masters econ students taking electives in my upper level undergrad classes, which required elementary statistics and business calculus type stuff.
Also for the graduate level courses such as Microecon theory and macroecon theory, the department distinguished between masters level and Ph.D level classes. Some of the masters students with good math backgrounds opted to take the Ph.D level courses as credit towards their masters degree; which I think those courses were more along the lines of proofs intensive alalysis like talk2glenn said.
With your math background I don't think you should have any trouble with a masters program in economics.

 

[Pyrrhus]

Some universities do not offer Master's. I think with your undergrad background you'll survive the master program quite well. It is not as intensive as the PhD program.

 

[Shackleford]

Thanks for the input so far, guys. I'm glad to hear that all my hard work in undergrad will help me do well in grad school. On a different note, my personal economic philosophy tends to the free market/Austrian school of thought. Unfortunately for me, most major universities are Keynesian/neo-classical. I've found where all of the free market/Austrian programs out there, but none is in Texas. I think I may just have to bite the bullet and attend grad school in state that may not teach me the economic thought I'm looking for. However, I suppose I will still learn outside of school on my own.

 

[ParticleGrl]

On a different note, my personal economic philosophy tends to the free market/Austrian school of thought.

You should be wary of any program that teachers Austrian school primarily, as its not a mainstream school of economic thought. It would be like attending a physics program that devotes a class to Lorentz ether theory.

most major universities are Keynesian/neo-classical

Depending on what your program requires, you may not see much in the way of the simple Keynesian/classical models. Much of that work is done in intro macro/micro, which you would see in undergrad, not usually grad school. The major focus in grad econ (at least at the universities I am familiar with) will be on mathematical models of different facets of the economy (some maybe could be considered neo-Keynesian, some mayve real business cycle, etc), and on mathematical tools for studying data (regressions, etc.)

Because Austrians decry the use of mathematics in studying economics, in favor of philosophizing and meta-economics, they have walled themselves off from most modern economic thought.

 

[inknit]

I really recommend you look into some PhD programs in economics. Terminal Masters degrees aren't particularly good signals to employers, nor are they even offered in many places. Why? Because a lot of undergrads these days take graduate level micro/macro theory courses.

Btw, have you taken any economics courses at all? At the very least, you should have taken intermediate micro and macro, and some econometrics.

 

[Shackleford]

You should be wary of any program that teachers Austrian school primarily, as its not a mainstream school of economic thought. It would be like attending a physics program that devotes a class to Lorentz ether theory.
Depending on what your program requires, you may not see much in the way of the simple Keynesian/classical models. Much of that work is done in intro macro/micro, which you would see in undergrad, not usually grad school. The major focus in grad econ (at least at the universities I am familiar with) will be on mathematical models of different facets of the economy (some maybe could be considered neo-Keynesian, some mayve real business cycle, etc), and on mathematical tools for studying data (regressions, etc.)

Because Austrians decry the use of mathematics in studying economics, in favor of philosophizing and meta-economics, they have walled themselves off from most modern economic thought.

Just because it is not mainstream does not make the Austrian thought incorrect. Using propositional logic to deduce economic theory based on human action seems the most rational to me. If you simply want to measure economic activity, that's a different story. And, it seems most graduate programs have that as a goal using mathematical models. That's fine. However, I do not know of any program that is exclusively Austrian. I was strongly considering George Mason. I would imagine Austrian and free market merely form the qualitative theoretical framework.

I really recommend you look into some PhD programs in economics. Terminal Masters degrees aren't particularly good signals to employers, nor are they even offered in many places. Why? Because a lot of undergrads these days take graduate level micro/macro theory courses.

Btw, have you taken any economics courses at all? At the very least, you should have taken intermediate micro and macro, and some econometrics.

I have taken Intermediate Macro. At my university, I would have to take Intermediate Micro, Intro. to Econometrics, and Statistics for the Sciences.

I do not want to spend 5 years on a Ph.D. My university has an M.A. in Applied Economics. Would an applied focus be more marketable to employers?

 

[inknit]

If your goal is to engage in pseudo-economic philosophizing, why waste money on a graduate program? The works of Hayek and Mises are available online for free...

I don't think you're in a position to criticize neoclassical economics, when your knowledge of it is limited to what you may have read in the Wall Street Journal.

 

[Shackleford]

If your goal is to engage in pseudo-economic philosophizing, why waste money on a graduate program? The works of Hayek and Mises are available online for free...

I don't think you're in a position to criticize neoclassical economics, when your knowledge of it is limited to what you may have read in the Wall Street Journal.

I don't read the WSJ. I suppose I should instead look at the vast success of Keynesian economics.

Pseudo-economic? To understand economics, you consider the consumer, the market, and the effect of government on the exchanges in the market.

But, you're right. If that's my goal, why waste money on a graduate program? At this point, I'm trying to determine a goal. It could be to simply have economics as a hobby. I have yet to figure that out.

 

[Shackleford]

By the way, I should probably state that I have very much enjoyed listening to Milton Friedman online, if that's any indication of a direction I should take.

 

[inknit]

I'm not trying to deter you from applying to graduate programs, but you should know what you're getting yourself into.

Economics is not ideological, but methodological. No one's out there to indoctrinate you. The supposed Keynesian vs Austrian debate is merely a figment of the public's imagination about what they think economics is about.

These days the big macroeconomic debates concern New Keynesian sticky price models vs Real Business Cycle Theory models. Austrians aren't really taken seriously in academic circles.

Now in terms of masters programs, I'm sorry to say that there aren't any reputable programs in the United States. The good ones are in Europe (i.e. Toulouse, LSE), but I don't know if you're willing to go overseas.

But given your background, how about masters programs in mathematical, computational finance? These degrees are more marketable than masters degrees in economics.

I know NYU, CMU has programs in mathematical finance.

 

[Shackleford]

I'm not trying to deter you from applying to graduate programs, but you should know what you're getting yourself into.

Economics is not ideological, but methodological. No one's out there to indoctrinate you. The supposed Keynesian vs Austrian debate is merely a figment of the public's imagination about what they think economics is about.

These days the big macroeconomic debates concern New Keynesian sticky price models vs Real Business Cycle Theory models. Austrians aren't really taken seriously in academic circles.

Now in terms of masters programs, I'm sorry to say that there aren't any reputable programs in the United States. The good ones are in Europe (i.e. Toulouse, LSE), but I don't know if you're willing to go overseas.

But given your background, how about masters programs in mathematical, computational finance? These degrees are more marketable than masters degrees in economics.

I know NYU, CMU has programs in mathematical finance.

Well, you say Austrian isn't taken seriously, but you haven't given any reasons why. Tell me the merits or lack thereof. Does it not simply go far enough in seeking to mathematically model activity? I don't need a graph to tell me something about what consumers will or will not do. I need behavioral analysis, logic, reason. Their choices are not constrained to graphs or models. I think I'm asserting that economics is first ideological to the extent that is seeks to understand the behavior and rationale of the consumer in the market. The methodology certainly plays a part, but it should be more descriptive, not prescriptive.

Again, I appreciate everyone's input. Frankly, I'm just now starting to look seriously into economics, so I have much to learn or confirm. I'll look into mathematical finance in a minute.

 

[twofish-quant]

On a different note, my personal economic philosophy tends to the free market/Austrian school of thought. Unfortunately for me, most major universities are Keynesian/neo-classical. I've found where all of the free market/Austrian programs out there, but none is in Texas. I think I may just have to bite the bullet and attend grad school in state that may not teach me the economic thought I'm looking for.

In that case, I think it's a lot better if you read stuff on your own and get a job where you are interacting with the markets so that you see what makes sense.

Also, you need to read people that you *disagree* with. If you are of the opinion, no I will not read Keynes, because I disagree with him, then you are going to be in a bad situation.

Personally, I think Hayek gets some things right, some things wrong, but I base my opinions on what he gets right and wrong on personal experience with markets. If you aren't interacting with the markets on a day to day basis, then I don't see how you are going to get the information to figure out what makes sense and what doesn't.

 

[magicarpet512]

I do not want to spend 5 years on a Ph.D. My university has an M.A. in Applied Economics. Would an applied focus be more marketable to employers?

When I was still an undergrad econ student, I spoke with an econ PhD student about graduate programs in economics. He basically told me that a masters degree in economics wasn't worth the time unless one thinks it is absolutely necessary to have the degree for whatever industry they are working in; i.e. an undergrad econ degree is really sufficient enough.

However given your circumstances, it sounds like you will need a maasters degree to get into the economics industry. I don't know what kind of applied area you are interested in, but I saw that you mentioned something about texas earlier. U of Houston offers a nice applied masters program in energy or healthcare economics, and I believe Texas A&M recently finished restructuring their masters program into a financial economics program.

Another guy I spoke to completed the first two years (core coursework) of a PhD program in economics and went out and got an internship with an econ consulting firm. He decided that he liked the money and the work good enough to drop out of the PhD program and continue his career with the consulting firm.
Wherever you decide to go to grad school, with your math background, I would suggest taking some of the PhD core courses; it would probably help out a lot with obtaining your future career.

 

[Shackleford]

In that case, I think it's a lot better if you read stuff on your own and get a job where you are interacting with the markets so that you see what makes sense.

Also, you need to read people that you *disagree* with. If you are of the opinion, no I will not read Keynes, because I disagree with him, then you are going to be in a bad situation.

Personally, I think Hayek gets some things right, some things wrong, but I base my opinions on what he gets right and wrong on personal experience with markets. If you aren't interacting with the markets on a day to day basis, then I don't see how you are going to get the information to figure out what makes sense and what doesn't.

I associate Keynesian economics with government aggrandizement in the market and spending. In my opinion, this is never a good idea. The big, stupid, inefficient, unaccountable government only creates artificiality in and encumbers the market. You want the market, whatever its state, to be as "natural" as possible. I admit I am not familiar with Neo-Keynesian economics. I am not very familiar with Hayek's work. I am only slightly more familiar with Von Mises and the philosophical approach of Austrian. As I mentioned, I really like Milton Friedman's perspective and what he espouses with respect to free markets. Free to Choose. Any thoughts on him?

 

[twofish-quant]

Just because it is not mainstream does not make the Austrian thought incorrect. Using propositional logic to deduce economic theory based on human action seems the most rational to me.

Except that it doesn't work. Much of the problem is that you have to oversimplify human behavior to do that. Also using pure deductive reasoning doesn't get you very far. In a lot of situations it works better to move the other way, observe markets and then figure out human actors.

If you simply want to measure economic activity, that's a different story. And, it seems most graduate programs have that as a goal using mathematical models.

There is a reason for that, which is oddly economic. Graduate schools respond to market signals, and there is a huge demand for people on Wall Street for people to do portfolio management and econometric analysis.

It's what I call the second Einstein versus janitor problem. You don't need that many economic philosophers. Once von Mises, Hayek, Keynes, or Friedman writes their magum opus, you don't need another one. So the marginal utility of a second Einstein is very low.

By contrast, janitors have much higher marginal utility than Einsteins. Once you have one brilliant Einstein, you don't need another one. However, it doesn't matter how brilliant a janitor you are, you can't clean more than one toilet bowl at the same time. So if you have two toilets, you need two janitors.

It turns out that there is a ton of work that involves the economic equivalent of toilet bowl cleaning, and graduate schools are geared to churning out people that can do that.

I do not want to spend 5 years on a Ph.D. My university has an M.A. in Applied Economics. Would an applied focus be more marketable to employers?

Hell yes. But then you end up cleaning toilets for a living.

One reason that I think that Austrians are odd is that a lot of them don't have much market exposure so the more recent ones come up with very odd ideas that are so far from reality that no one takes it seriously.

 

[Shackleford]

When I was still an undergrad econ student, I spoke with an econ PhD student about graduate programs in economics. He basically told me that a masters degree in economics wasn't worth the time unless one thinks it is absolutely necessary to have the degree for whatever industry they are working in; i.e. an undergrad econ degree is really sufficient enough.

However given your circumstances, it sounds like you will need a maasters degree to get into the economics industry. I don't know what kind of applied area you are interested in, but I saw that you mentioned something about texas earlier. U of Houston offers a nice applied masters program in energy or healthcare economics, and I believe Texas A&M recently finished restructuring their masters program into a financial economics program.

Another guy I spoke to completed the first two years (core coursework) of a PhD program in economics and went out and got an internship with an econ consulting firm. He decided that he liked the money and the work good enough to drop out of the PhD program and continue his career with the consulting firm.
Wherever you decide to go to grad school, with your math background, I would suggest taking some of the PhD core courses; it would probably help out a lot with obtaining your future career.

Well, I'm actually at U of H. I just recently started looking into their Applied Economics program. I wasn't sure exactly how good their programs are. I'm glad you have favorable remarks on it. It looks interesting and like it has a bit of usefulness in industry. The energy and health care aspects would certainly come in handy in the Houston area.

http://www.class.uh.edu/econ/grad/master.php

What exactly does consulting entail? Given personal interests, I would like to recommend sound economic policy, but I guess that would necessitate a Ph.D.

 

[twofish-quant]

I suppose I should instead look at the vast success of Keynesian economics.

Things change over time, and new data comes in. China went wildly Keynesian in response in 2007, and right now my best guess is that by 2020 it will be rather obvious that that was the right choice, at which point we end up with another crisis in which Keynesianism doesn't work.

Keynesian economics didn't work in 1980, which is why people went monetarist. Right now, I'm looking very closely at the institutional school of the 1920's, with people like Veblen and Ayers. The thing about institutionalism is that it wasn't useful in the 1930's, but it seems to be useful now. I've also been reading a lot of Marx and Gramasci.

My philosophy goes very heavily toward economic history as a "meta-theory."

To understand economics, you consider the consumer, the market, and the effect of government on the exchanges in the market.

Except that you'll find if you do work on Wall Street you'll find that this is much, much too abstract.

There isn't a "consumer". There are seven billion different consumers. There isn't a government. There are about 200 different national governments, many, many local governments, different factions within different governments. There isn't a market, there are thousands of different markets with different characteristics.

The good news is that lots of complexity means lots of jobs. I know someone that has spent a good part of their time thinking about how lunch rules affects the price of stocks through the day, and how to make money off of it. It turns out that market A behaves very differently than market B because the exchange has different rules from when brokers can eat lunch.

Economics graduate school comes in because if you want to describe exactly how lunch rules affects market A and market B, and you want to come up with a trading strategy to take advantage of this, then you have to crunch a ton of numbers using the statistics techniques that they teach you in graduate school.

I think that's cool. YMMV.

At this point, I'm trying to determine a goal. It could be to simply have economics as a hobby. I have yet to figure that out.

For me it's more than a hobby. Real lots of books. Figure out how the labor market for Ph.D. theoretical astrophysicists works or can work. Profit.

 

[Shackleford]

Then it seems pure economic philosophy is probably just a footnote or anecdote in modern economics. Modern economics is just applied mathematics. Would this be a fair characterization? Given the myriad of markets, consumers, and so forth, the mathematical techniques are used to describe economic activity and take advantage of it to maximize profit and so forth. Would economic philosophy and first principles be more suitable for developing sound economic policy? Or political economics?

 

[twofish-quant]

I associate Keynesian economics with government aggrandizement in the market and spending. In my opinion, this is never a good idea.

Since the government saved my rear end and yours, I'm all for big government. Now if you hate big government for the sake of big government, and you can convince me that you have a better mechanism to organize an economy, then I'll listen to you, but first it helps if you listen to me to have me explain why I'm a fan of big, intrusive government, and massive regulation.

The big, stupid, inefficient, unaccountable government only creates artificiality in and encumbers the market. You want the market, whatever its state, to be as "natural" as possible.

I sure as hell don't. Based on what I've seen first hand, I don't think that you can have financial markets without *massive* state intervention. We can argue about the type of intervention.

Part of the reason that it might be a good idea for you to just get a job in finance is that you can get experience so that you can be more effective at arguing against me.

There's also a lobbying issue. Maybe we can't ever agree, at which point the determining factor in who wins the argument is going to be who can lobby the political system to implement their policies.

As I mentioned, I really like Milton Friedman's perspective and what he espouses with respect to free markets. Free to Choose. Any thoughts on him?

Very, very important historically because he resolved a lot of the economic issues of the 1970's.

I'm a great admirer of Margaret Thatcher and Ronald Reagan, because they came up with good solution to the problems of the 1970's. However it's 2011, and the solutions of 1980 are the problems of 2008, and whatever we come up with now is going to cause problems in 2025.

Also Reagan was one of the most Keynesian Presidents in recent times. If you look at the timeline, a lot of the deregulation happened under Carter, whereas Reagan caused massive government deficits and increased defense spending massively.

 

[magicarpet512]

What exactly does consulting entail? Given personal interests, I would like to recommend sound economic policy, but I guess that would necessitate a Ph.D.

I had a couple of professors who ran their own consulting firms. They mostly did consulting for firms involved in antitrust litigation. They would do things like analyze the effects of competition between firms, estimate the magnitude of economic damages a firm may have imposed on another. One professor did a lot of consulting with companies in the pharmaceutical industry, the other professor did a lot of consulting with oil companies.
Other consultants work closely with government entities doing things like cost benefit analysis. I know of one who has been consulting with lawmakers on social security and medicare reform.
One of the professors I had told me that he did some work for DeBeers (the diamond mining company.) They paid for all of his expenses for a 1st class flight to London, 5 star hotel, meals, all kinds of good stuff for three weeks while they were involved in some kind of big lawsuit. That kind of stuff sounds pretty enticing.

When consulting firms hire young people, they look for people with good math/statistics backgrounds to work on their projects.

 

[twofish-quant]

What exactly does consulting entail? Given personal interests, I would like to recommend sound economic policy, but I guess that would necessitate a Ph.D.

Actually it doesn't. Academic economists aren't in very high regard. I think you would have more impact on public policy if you start your own business, and learn the mechanics of lobbying politicians.

The other thing that you'll find is that if you don't like massive bureaucratic institutions and like markets, you have to stay away from academia.

First of all, academia is about as far away from a market as you can get. Second, if you think that big government is the problem, then you have to deal with the fact that academia is largely funded either directly or indirectly from governments. Trying to be an "academic Austrian" not only opens you to charges of hypocrisy, but if you hang around people that are used to "big government" you get brainwashed by their ideas.

For example, if you start screaming "Wall Street bail outs are evil" then you'll suddenly find major investment banks start wondering why they should hire your students and funding chairs. If you've spend the last decade idolizing Wall Street, then you really do have a problem since you can't argue that this is a "bad thing."

You do know about the Von Mises Institute (http://www.mises.org/)?

 

[Shackleford]

Since the government saved my rear end and yours, I'm all for big government. Now if you hate big government for the sake of big government, and you can convince me that you have a better mechanism to organize an economy, then I'll listen to you, but first it helps if you listen to me to have me explain why I'm a fan of big, intrusive government, and massive regulation.



I sure as hell don't. Based on what I've seen first hand, I don't think that you can have financial markets without *massive* state intervention. We can argue about the type of intervention.

Part of the reason that it might be a good idea for you to just get a job in finance is that you can get experience so that you can be more effective at arguing against me.

There's also a lobbying issue. Maybe we can't ever agree, at which point the determining factor in who wins the argument is going to be who can lobby the political system to implement their policies.



Very, very important historically because he resolved a lot of the economic issues of the 1970's.

I'm a great admirer of Margaret Thatcher and Ronald Reagan, because they came up with good solution to the problems of the 1970's. However it's 2011, and the solutions of 1980 are the problems of 2008, and whatever we come up with now is going to cause problems in 2025.

Also Reagan was one of the most Keynesian Presidents in recent times. If you look at the timeline, a lot of the deregulation happened under Carter, whereas Reagan caused massive government deficits and increased defense spending massively.

Government is necessary to formulate and enforce laws that proscribe people from infringing upon my rights. My freedom and liberty contribute to the market and economic activity. This is how wealth is created. If there is anarchy, no law and order, there is very little economic activity. Why do you think Africa is such an indigent place? I'm all for the essential functions of government, but taxation is only appropriate to the extent that it funds the essential functions of government. It is my money, correct? Let's not confuse scope with function. Of course, you need a "big" government for defense. But defense is the primary essential function of the federal government.

Are you talking abot massive regulation of the avaricious manipulation of financial markets, securitization of mortgages, etc.? The Founding Fathers believed it was the duty of the federal government to balance the special interests in the country. You can easily make the argument that a few special interests have exerted disproportionate control for many decades.

Reagan also eliminated the price controls and reduced tax rates. What happens when I keep more of my own money? Keeping more of my own money is also superior in principle. Was not the defense spending by Reagan designed to precipitate the economic collapse of the Soviet Union? Still, I'm not a fan of deficit spending and the huge inrease to the national debt. In spite of all that, the country continued to prosper.

 

[ParticleGrl]

Would economic philosophy and first principles be more suitable for developing sound economic policy? Or political economics?

Economic philosophy from first principles, divorced from some empiricism is pretty much useless for anything but academic conjecture. To develop economic policy in the real world, you have to study the real world- which requires both mathematical modeling and sophisticated methods to handle data.

 

[twofish-quant]

I had a couple of professors who ran their own consulting firms. They mostly did consulting for firms involved in antitrust litigation. They would do things like analyze the effects of competition between firms, estimate the magnitude of economic damages a firm may have imposed on another. One professor did a lot of consulting with companies in the pharmaceutical industry, the other professor did a lot of consulting with oil companies.

Lots of money here. The problem is that you are going to have to "sell out". You can make a lot of money writing reports on how companies should act within the system, but you aren't going to get contracts if you start writing reports questioning the system itself.

Now since I don't have any moral objections against big government, this isn't an issue for me, but if you do, then you have to think carefully before putting on the golden handcuffs.

For me it's great because since I've funded by industry, I can say nasty things about academia and not get into trouble. It would work will if things worked the other way and people in academia could say nasty things about industry and keep quiet about academia. But one thing that worries me is that academia has become too captured by industry to do that.

Other consultants work closely with government entities doing things like cost benefit analysis. I know of one who has been consulting with lawmakers on social security and medicare reform.

Same issues with drinking the kool-aid.

They paid for all of his expenses for a 1st class flight to London, 5 star hotel, meals, all kinds of good stuff for three weeks while they were involved in some kind of big lawsuit. That kind of stuff sounds pretty enticing.

But you can get into trouble if don't keep your head on straight. The problem is not that someone will pay you large sums of money to lie and say that they look beautiful, the problem is that if someone pays you large sums of money, then they really *will* look beautiful to you.

When consulting firms hire young people, they look for people with good math/statistics backgrounds to work on their projects.

They also look for people that will take orders and not rock the boat too much. Also they like people from big name universities, not so much because they are better, but because its a branding issue.

 

[Shackleford]

Actually it doesn't. Academic economists aren't in very high regard. I think you would have more impact on public policy if you start your own business, and learn the mechanics of lobbying politicians.

The other thing that you'll find is that if you don't like massive bureaucratic institutions and like markets, you have to stay away from academia.

First of all, academia is about as far away from a market as you can get. Second, if you think that big government is the problem, then you have to deal with the fact that academia is largely funded either directly or indirectly from governments. Trying to be an "academic Austrian" not only opens you to charges of hypocrisy, but if you hang around people that are used to "big government" you get brainwashed by their ideas.

For example, if you start screaming "Wall Street bail outs are evil" then you'll suddenly find major investment banks start wondering why they should hire your students and funding chairs. If you've spend the last decade idolizing Wall Street, then you really do have a problem since you can't argue that this is a "bad thing."

You do know about the Von Mises Institute (http://www.mises.org/)?

I don't have any plans for academia. I look at education as a voluntary privilege provided by society. I have no more a right to education with other people's money than vice versa. However, compulsory education funded by state and federal dollars is the way of life right now. Practically, I support efficient use of tax payer dollars in education, and throwing more money at education never fixes anything. I like the idea of vouchers creating more choice and competition in education.

The bail outs were theft in my opinion. No institution should be bailed out by tax payer dollars because of its failure in the market. Again, that simply creates artificiality in the market. It's not "natural." There is no correction. When a company goes bankrupt, it reorganizes, or it doesn't and the ownership changes.

I've posted a little on the forum asking about Austrian programs. It seems practically I'm free market but academically I like the early Austrian thought, I guess.

From watching a lot of Friedman's interviews and discussions online, it seems he always answered from a principle. For example:

 

[twofish-quant]

Government is necessary to formulate and enforce laws that proscribe people from infringing upon my rights. My freedom and liberty contribute to the market and economic activity. This is how wealth is created. If there is anarchy, no law and order, there is very little economic activity. Why do you think Africa is such an indigent place? I'm all for the essential functions of government, but taxation is only appropriate to the extent that it funds the essential functions of government.

So you say. I don't agree. If you have quasi-religious reasons for hating big government, that's fine, and we can work things around that. If your reasons for hating big government is that big government can't generate economic prosperity, then that's another issue.

Also, it's a good thing to be exposed to people that have different views. The other thing is that views change based on external circumstances. People were all supportive of Soviet style central planning in the 1950's because it seemed to be working then. Once it started stalling in the 1970's, then monetarism became the rage.

I don't like to spend too much time arguing about this because you can seek truth from facts. China has gone massively Keynesian, and the US/UK has gone largely anti-Keynesian. We could spend the next five years arguing, but the decisions have been made, and we'll see what happens.

My working assumption (i.e. what I'm putting my personal money on) is that Keynesian is going to win the argument.

It is my money, correct?

It's really not. One thing that you have to realize is that someone else is currently using the money in your bank account, and for this to work, you have to have someone (like the government) guarantee that you will get the money back even if the person that is using your money is an idiot.

For that matter, the money you think is yours probably originated with some peasant in China.

Of course, you need a "big" government for defense. But defense is the primary essential function of the federal government.

One reason that it's a good idea to have people with different ideas around you is that you stop saying "of course."

Are you talking abot massive regulation of the avaricious manipulation of financial markets, securitization of mortgages, etc.? The Founding Fathers believed it was the duty of the federal government to balance the special interests in the country. You can easily make the argument that a few special interests have exerted disproportionate control for many decades.

1) So what? The Founding Fathers believed in slavery.

2) Yes, you can make the argument that a few special interests have exerted disproportionate control for many decades, but if you go to economics graduate school, you have to realize that you are going to end up helping them maintain that control. Now since I don't have a problem with special interests, I don't have a problem with this.

Reagan also eliminated the price controls and reduced tax rates

Most of the deregulation happened under Carter. Reagan did reduce tax rates, but he didn't reduce government spending, which forced Bush I to roll back some of those rates.

In any event, that's 1980.

What happens when I keep more of my own money? Keeping more of my own money is also superior in principle.

Something that you realize once you are in banking is that it's not your money. You have that money in a bank, and if the government doesn't guarantee that you get your money back, it just disappears.

Since you are the curious sort, you might want to figure out what happens when you put the card in the ATM.

Was not the defense spending by Reagan designed to precipitate the economic collapse of the Soviet Union? Still, I'm not a fan of deficit spending and the huge inrease to the national debt. In spite of all that, the country continued to prosper.

My view is that the country did well in the 1980's *because* of defense spending and massive deficits (i.e. like Keynes said it would). One of the things that defense spending did was put lots of money into science which really paid off in the 1990's.

 

[twofish-quant]

I look at education as a voluntary privilege provided by society. I have no more a right to education with other people's money than vice versa.

Well I see things differently. :-) :-)

Also this things with other people's money. I suppose one reason that your economic philosophy doesn't work for me is that I'm aware how much my of wealth is based on other people's money.

Practically, I support efficient use of tax payer dollars in education, and throwing more money at education never fixes anything.

Throwing money at things can fix stuff.

The bail outs were theft in my opinion. No institution should be bailed out by tax payer dollars because of its failure in the market. Again, that simply creates artificiality in the market. It's not "natural." There is no correction. When a company goes bankrupt, it reorganizes, or it doesn't and the ownership changes.

The problem is that you were the one that was bailed out. You put your money in the bank either directly or indirectly. If the bank goes under, you lose all of your money. It ceases to exist. That's what almost happened. The only reason that it didn't was that the government printed massive amounts of money to stabilize the markets.

So the government bailed *YOU* out. And it was a damned good thing.

Personally, I don't think that natural markets exist. Markets are extremely artificial creatures and at large scales require massive government intervention to exist. You might argue that I've been brainwashed into thinking so, and I plead guilty to that.

Also, that's the standard story. It may be wrong. The problem with Austrians right now is that they haven't come up with a convincing alternative explanation of what happened. The explanations that people have come up with are *so* out of touch with of the experience of the people that make the decisions that they aren't being taken seriously at all.

Maybe you can come up with something better. The problem is money, and this is where the "it's my money so I can do what I want" theory breaks down. You can say that governments are evil, so at that point you can expect no money from the government.

Fine, go private. But if at that point you say that private institutions are evil (i.e. because they have lots of government bailouts), then they aren't going to fund you, at which point, where are you going to get your money from?

At that point if you had a different philosophy, you could argue "unfairness", that the government and private institutions are being evil by not giving you money, but this is inconsistent with your philosophy.

You have a problem.

Now I'm telling you this because I'm really interested to see how you can figure out how to solve this problem. But to get back to your original question, what I think you will find out is that the economics graduate schools that exist will force you to "sell out" to the system you seem to hate, and those that are close to your philosophy are small, because they can't get money from the system.

And the reason I'm interested in that, is that I'm ultimately interested in getting at the truth, and if the truth happens to be closer to what you think than what I think they there is no way in hell I'll be able to get there because I've already put on the handcuffs.

 

[Shackleford]

You're not defining your terms. What is "big government"? You mean government in which I have restricted freedom and liberty, excluding infringing on the rights of others? Yes, I absolutely want to minimize that. I don't want or need some jackass bureaucrat making decisions for me that affect my choice in the market and my course of life. Certainly, I don't like big government in that sense.

The central style planning never worked. It just took a while to evince its not working. Custom solutions are superior to one-size-fits-all.

How about you go live in China and report back to us its superority? Why do you ignore the fact that government does not create anything. The private sector, individuals innovate. Government can get in the way or it can move out of the way and protect such growth.

Sorry. The money I work for is mine. How the banking system operates does not negate the fact that it is my money. I don't have to put my money in a bank if I don't want to take that risk of the bank running off with my money. The government does not have to do that. However, it does give a positive effect by providing certainty in the banking system.

Way to lose credibility. Many of the Founding Fathers abhorred the institution of slavery. Their main concern was the unification of the states in order to survive as a nation. The legal framework they crafted made the abolition of the legal institution of slavery inexorable.

That's a false dichotomy. It is in a bank's best interest to guarantee the money itself. The government's guarantee removes the responsibility and checks and balances in the market. If a bank invests your money and it consistently loses it, that bank will not stay in business very long. Have you considered that this FDIC simply perpetuates cavalier treatment of money?

If anything, the defense spending, not massive deficits, contributed to economic growth. There was growth in spite of the spending. Or, if you want to look at it this way, the deficit was the defense spending, so it would be erroneous to conclude that deficits in and of themselves contribute to growth. However, I do support funding into basic scientific research as a mandate of society. That can contribute to the total productivity factor.

 

[twofish-quant]

To develop economic policy in the real world, you have to study the real world- which requires both mathematical modeling and sophisticated methods to handle data.

Also you need to study the real world since even if you have the answers, it's a pain to get someone in power to listen to you.

The other thing is that a lot of things are things that we will never agree on via discussion, so at that point it becomes a lobbying effort to get people that agree with you in positions of power, and to keep people who disagree with you out of power. In the United States the political system is set up so that it's impossible for anyone to win total victory, which means then you get into political bargaining with people that are never going to agree with you.

Personally, I think it's cool. But it's partly because I think stuff like this is cool that I got out of academia quickly.

 

[twofish-quant]

You're not defining your terms.

One problem with defining terms is that you end up removed from the emotional meaning of those words, which is really important in politics. If you say "big government" to someone in the Tea Party, they are going to have a bad emotional response. If you say "big government" to me, I have a neutral to good emotional response.

Yes, I absolutely want to minimize that. I don't want or need some jackass bureaucrat making decisions for me that affect my choice in the market and my course of life.

Neither do I, but my experience is that having unrestricted markets and no sense of basic rights increases the likelihood of that happening. I'm annoyed when a government bureaucrat makes a decision that adversely impacts me, but I'm equally annoyed if a non-government bureaucrat makes those sorts of decisions.

At least with a government bureaucrat, I can get together with friends and force them to make a different decisions. Often you don't have that option in the market.

Personally, I trust governments quite a bit, because they gave me stuff that I'm grateful for. It was some immigration bureaucrat that let my parents into the US. Some other bureaucrat that got me a chance to go to college. Some other bureaucrat that gave me really cheap loans, and some other bureaucrat that gave me funding for my Ph.D.

Overall, I'd say that government bureaucracy has helped me rather than hurt me.

YMMV.

The central style planning never worked. It just took a while to evince its not working.

It worked in the Soviet Union in 1950. Stopped in 1970.

Sorry. The money I work for is mine.

If you say so. For me, I would have never been able to get my job if I hadn't had lots of government help.

That's a false dichotomy. It is in a bank's best interest to guarantee the money itself.

No it's not. It's in the banks interest to take your money, put it in the money of the bankers, and they ran away once there is a problem. It's only massive government regulation that keeps that from happening.

If anything, the defense spending, not massive deficits, contributed to economic growth. There was growth in spite of the spending. Or, if you want to look at it this way, the deficit was the defense spending, so it would be erroneous to conclude that deficits in and of themselves contribute to growth. However, I do support funding into basic scientific research as a mandate of society. That can contribute to the total productivity factor.

Which is something that I agree with.

 

[twofish-quant]

How about you go live in China and report back to us its superority?

How do you know that's not what I've been doing.

 

[Shackleford]

Okay. Then how about you pay for my graduate education. I will make it easy on you. I will go wherever you want me to go and study whatever you want me to study. Deal?

Are you sure? If you have a flat tire, buying a battery won't fix it. Buying an upgrade HD radio will not fix it. I think you get the idea. You have to first correctly identify the problems and deficiencies in the system. You first do that by clearly identifying the goals and objectives of such a system.

Well, again, you're mis-characterizing the situation. There were far more banks than not that did not require a bailout. You rewarded extremely poor investing and behavior. You let them get away with it. There were no consequences. You can expect this to happen again. If you just had to have a bailout, then it should have been a direct bailout to those whose money was lost as well as the creditors. The next step would have been to let the failed banks fail. You cannot protect everyone from the devastating and unfortunate events in life. To want to do so is just as foolish as those who make the mistakes that lead to such situations. It helps to perpetuate such bad behavior and systemic flaws.

The banks did not bail me out. They bailed out those who pissed away people's money. Don't look at like it's for my good. Actually, I think Wells Fargo bailed out Wachovia, which was my bank at the time.

What happened? You mean the government intervened and through legislation, regulation, and policy demanded mortgages be given to those who could not afford it? That sounds like a great idea to me! And, the securitization of mortgages did not help. When many of those mortgage loans defaulted, it had a massive ripple effect in the market. And when the insurer for all of those, Goldman Sachs if I remember correctly, could not pay off those insurance claims, thus the bailout was needed. Right? I'm not sure what the Austrians are saying. I'll have to look into it. Government intervention helped to get us into this mess and you claim government intervention saved the day. Such counter-productiveness.

You sure do like to make things up. I never said government was evil. I don't expect money from the government. I work for my money. You know damn well I could hide it in the mattress. But, if I do that, then the banks have less with which to invest. I know the argument.

Here's a hypothetical situation. Say you invest in my business. It succeeds for a while but ultimately fails. Should the government reimburse you?

 

[Shackleford]

I'm sympathetic with the Tea Party. However, I know you like to spend money we don't have. I suppose you think we should shoot for 20 trillion dollar national debt. The greater the deficits the better! Woo hoo!

What is an unrestricted market? What about no sense of basic rights?

Certainly, you have that option in the market. You go down the street. It's a lot more simple and often times immediately effective in the private sector. The only case where you lack this is in a monopoly. Choice and competition!

You're approving of government policies and legislation that the bureaucracy facilitated. For the most part, I "trust" the post office to deliver my mail, but, again, they need another billion-dollar bailout this year. Why is it that FedEx and UPS don't need bailouts? Just because a task is completed does not mean a bureaucracy is efficient and unencumbered. The private sector has a natural impetus to be profitable, the federal government does not. It simply sucks out more tax payer money. Do you know the story about Milton Friedman going to India for the building of railways?

Totalitarian regimes can operate for a while, but it is not sustainable. What's that old adage about socialism?

You're missing my point. Some banks don't care about carefully investing our money because they know the government will bail them out. The government should not have to do so. If a bank ran off with your money, would you reinvestment with them? Would you also maybe want the government to prosecute them for their infringement on your rights? Would you also better investigate a bank next time to see how they are investing your money and if there is a reasonable chance of them skipping town? Would you also be aware of the fact that it is ultimately your responsibility what you do with your money?

If you're happily living in China, then you're being insulated. How many children do you want to have? What kind of wages are you making? Do you get to put however many Yuan you want on the international market? Of course, don't answer these questions.

 

[twofish-quant]

Okay. Then how about you pay for my graduate education. I will make it easy on you. I will go wherever you want me to go and study whatever you want me to study. Deal?

Already happening.

I put my money in a bank and any time you take a loan, you are using my money. Also, some of the funding for the university comes from the government which comes from the taxes that I pay.

Personally, I like it that way. I'm not an expert in what you should study, and the decisions about how you should use my money are made by people (loan officers, grant committees, and legislatures) that are supposedly better at figuring out what you should do than I am. As long as I get my money back with some interest, I'm not picky about the details.

Things fall apart if that happens not to be true.

If you have a flat tire, buying a battery won't fix it. Buying an upgrade HD radio will not fix it. I think you get the idea. You have to first correctly identify the problems and deficiencies in the system. You first do that by clearly identifying the goals and objectives of such a system.

Where it gets tricky is that people have different goals and objectives. If the bank doesn't give me back my money, I get *REALLY* annoyed. If the bank doesn't give me back your money, I'm less annoyed. If they bank doesn't give me back your money so that it can give me back my money, and it's done in a non-obvious way, I'm not really going to care.

It gets even trickier, because part of politics is to convince people that their goals should be something. If you have an effective leader, he or she can convince people that they *should* do something. This power can be used for great good or great evil.

Just to give an example of conflicting goals. I am a US citizen so that if some one moves jobs from the US to France, I'm going to be annoyed. The trouble is that I'm likely to feel differently if I'm French.

Well, again, you're mis-characterizing the situation.

I'm stating the situation as I saw it first hand. One problem that you will have convincing me is that if you start arguing something that I think is utterly ridiculous based on personal experience (i.e. the sky is pink) I'm going to tune out. This is the problem that a lot of people in Austrian economics and U Chicago have right now.

Curiously it's also the problem some Marxists have. You have some Marxists that are so convinced that Marxism can't be wrong, that they can't really interact with people that believe otherwise.

There were far more banks than not that did not require a bailout.

The trouble was that everyone owned money to everyone else, so once a few banks go, then everything falls apart. A owes B owes C owes D owes E owes A. Once E goes, everyone else gets dunked.

You rewarded extremely poor investing and behavior. You let them get away with it.

The moral hazard problem.

1) The problem is that you really didn't have a choice. It's like shooting someone for stepping on your toes. If you shoot them, they aren't going to have a chance to learn not to do it again.

2) Also things were so interconnected so that innocent bystanders were hurt. If you have a situation in which everyone gets dunked, then there is no learning.

There were no consequences. You can expect this to happen again.

If you don't have massive government oversight, yes. There is now massive government oversight. Maybe it will work.

If you just had to have a bailout, then it should have been a direct bailout to those whose money was lost as well as the creditors. The next step would have been to let the failed banks fail.

Except that everyone owned everyone else money. If you could stop the world economy for a few years to figure out who owned what to whom, then maybe this would work.

The other problem is that if you think that your bank is about to fail, then you will go in and withdraw all of your money and put it into a mattress. People were doing that, but the trouble is that if everyone withdraws all of their money and puts it into mattresses you will have massive bank failures, and another great depression.

This *almost* happened.

You cannot protect everyone from the devastating and unfortunate events in life. To want to do so is just as foolish as those who make the mistakes that lead to such situations. It helps to perpetuate such bad behavior and systemic flaws.

I find that people that say this tend to be people that think they are immune to bad things. As it was, a lot of people that did nothing wrong got hurt by losing their jobs. It could have been worse.

One reason, I don't believe that "it's my money" is that I think I understand the system to see how you, I and everyone else was bailed out.

The banks did not bail me out.

Yes they did.

They bailed out those who pissed away people's money. Don't look at like it's for my good. Actually, I think Wells Fargo bailed out Wachovia, which was my bank at the time.

And the Federal Reserve bailed out both Wells Fargo and Wachovia. You go to the Wachovia ATM, put in your card. What you got was freshly printed Federal Reserve Notes that the Fed paid Wachovia in exchange for mortgage securities that no one else would buy. Once people relaxed, then Wachovia and the Fed could resell the securities and make a profit, but for few months or so, the Federal government was the only buyer and they did this through the TARP funds that Congress approved.

You mean the government intervened and through legislation, regulation, and policy demanded mortgages be given to those who could not afford it?

And those that could. Again this is the sort of "the sky is pink" argument that people in the financial industry just don't believe because it doesn't match personal experience.

If you think that government is inherently evil, I think you could probably come up with a system that works, but arguing "the sky is pink" argument isn't going to do this.

!And, the securitization of mortgages did not help. When many of those mortgage loans defaulted, it had a massive ripple effect in the market. And when the insurer for all of those, Goldman Sachs if I remember correctly, could not pay off those insurance claims, thus the bailout was needed.

Pretty much, but if you didn't have government intervention, those bad mortgages would have gotten issued anywhere. It's not a bad thing to start with a conclusion "government is evil" and come up with arguments that support it, but you have to realize that you are doing it.

I'm not sure what the Austrians are saying. I'll have to look into it.

Or make something up. The problem is that the Austrians aren't saying anything. It's like how Marxists reacted to the fall of the Soviet Union. It was an impossible event, so it takes time to figure out how the event is going to be impossible.

Government intervention helped to get us into this mess and you claim government intervention saved the day. Such counter-productiveness.

So the obvious thing is no government intervention. Except that without governments, there are no markets. You seem to believe that markets work just fine without governments constantly tweaking and intervening, and I just don't think so. The argument is that things were fine and without the evil government, we wouldn't have had a mess.

Again, I think about what my world would be like without governments, and it would be a disaster. Without strong regulation, finance becomes a matter of who can tell the biggest lies.

I never said government was evil. I don't expect money from the government. I work for my money.

Sure, but to give your money to you involves a million other people. If I didn't save my money or pay taxes, the money to pay your salary wouldn't be there, and you wouldn't have a job.

You know damn well I could hide it in the mattress. But, if I do that, then the banks have less with which to invest. I know the argument.

Actually, if everyone pulls their money out to hide in the mattress, you'll find that the banks all collapse. That's what damned near happened.

Here's a hypothetical situation. Say you invest in my business. It succeeds for a while but ultimately fails. Should the government reimburse you?

It's not hypothetical. It's quite real. It really depends, but...

If I put my money into an insured checking account which then gets loans out the money, the answer is hell yes.

If the bank is run by idiots, then maybe I can go to another bank, but 1) it's not obvious to me if the bank is run by idiots and 2) this doesn't work if all the banks are run by idiots.

So it's easier if the government guarantees my money, and then you pay a bureaucrat to make sure my interests are represented in the bank.

 

[twofish-quant]

However, I know you like to spend money we don't have.

There's this "having money" thing again.

Money is a collective illusion. A lot of things make sense if you remember that.

I suppose you think we should shoot for 20 trillion dollar national debt. The greater the deficits the better!

A lot of this is timing. A year ago, yes. Right now the US is getting out of the ditch so if you flood money into the system, you run the risk of inflation.

If I sound unsure is that I haven't thought this through completely. The risk that you run with economic stimulus is that you may end up spending your money on things that have no tax benefit in the long run, which is what happened in 2001.

The thing that worries me is a downward spiral. Less spending -> less productivity -> less taxes -> less spending.

There's also the political aspect. Right now a budget that massively increases spending is not going to get through the House. So it's sort of pointless to have this argument now. It's more relevant in 2012 when everyone is up for election.

Certainly, you have that option in the market. You go down the street. It's a lot more simple and often times immediately effective in the private sector. The only case where you lack this is in a monopoly. Choice and competition!

Except that you often find that you have only the illusion of choice. For example, if you choice funeral homes, you see lots of different funeral homes, but ultimately you'll find that most of them are owned by SCI. The same sorts of things happen with banks. You *think* that you are making a choice between banks, but they all are connected to the same markets so there isn't much of a real choice.

Also there are times when you don't have enough information to make a choice. Sometimes you don't have the power to make a choice. Suppose you go to a bank and want to invest $500M. You can negotiate the terms and conditions of the loan. Now try that with $50. It's not a real market.

Markets are really cool things. I love working in them. They seem like magic sometimes, but that makes people think that they are magic.

You're approving of government policies and legislation that the bureaucracy facilitated.

Some were good. Some were stupid.

For the most part, I "trust" the post office to deliver my mail, but, again, they need another billion-dollar bailout this year. Why is it that FedEx and UPS don't need bailouts?

Because they can charge more, cut service, and fire people, whereas the post office has to go through a massive effort to raise rates, cut service, and fire people. Also FedEx and UPS has the post-office as a backstop. The other problem is that the Post Office isn't allowed to make fundamental infrastructure investment. If FedEx wants to spend $$$$$ on improving computer systems, they can whereas the Post Office can't.

We can let FedEx and UPS do stupid things because it's not the end of the world if they go under.

Amtrak has the same sorts of issues. Chinese state-owned enterprises usually don't.

What has any of this to do with banking I have no idea....

Just because a task is completed does not mean a bureaucracy is efficient and unencumbered. The private sector has a natural impetus to be profitable, the federal government does not.

Horse hockey. You can create a market in which works through the profit motive, but that's not easy and it's not natural.

It simply sucks out more tax payer money. Do you know the story about Milton Friedman going to India for the building of railways?

No. What any of this has to do with what we are discussing I have no idea.

You're missing my point. Some banks don't care about carefully investing our money because they know the government will bail them out.

A bank has 200,000 employees. What does it mean for 200,000 people not to care.

The government should not have to do so.

Disagree

If a bank ran off with your money, would you reinvestment with them?

It wouldn't matter.

Would you also better investigate a bank next time to see how they are investing your money and if there is a reasonable chance of them skipping town? Would you also be aware of the fact that it is ultimately your responsibility what you do with your money?

Gets really inefficient here. I don't have the time or energy to be a bank examiner, and if I go to a bank demanding to examine their books, they will most likely either not give me the information, or give me tens of thousands of pages that I can't understand.

And if I can't do it, your average person has no hope.

 

[twofish-quant]

If you're happily living in China, then you're being insulated.

One thing that seriously concerns me is that I think that Americans are much more out of touch with the world that Chinese are. The assumption that Americans tend to make is that because the US has a lot more press freedom (which is true) that they can get a more accurate idea of what the world is like that Chinese in which the news is very heavily censored.

Curiously, I've found educated Americans to be far, far more out of touch with the world than educated Chinese.

First of all, I've found that Chinese people tend to be more intelligent about news than Americans. In the words of one of my friends "the difference between Chinese and Americans is that we know our government is lying to us."

Second, Chinese people can very easily get sources of information about the US, whereas Americans are pretty clueless about China. Most educated Chinese know some English, and most educated Chinese know someone that has lived abroad for long periods of time.

Finally, the US is the most powerful country in the world. You can't ignore the US if you live in China. Whereas you can live in the US and pretty much ignore China.

How many children do you want to have? What kind of wages are you making? Do you get to put however many Yuan you want on the international market? Of course, don't answer these questions

Let's not talk about me specifically, but about the average returnee.

1) Family planning involves paying a fine. It's a huge fine if you are a peasant, but for someone that has a job in a Western company, it's trivially small.

2) Most returnees make as much money in China as they do in the US. And you can get a job in China.

3) If you can open an account in HK, then you can move CNY 20,000 per day between USD and CNY. Since the CNY is appreciating, everyone is trying to get out of dollars and buying CNY.

What I find scary long term is the brain drain that is happening with US and China. Physics Ph.D.'s tend to work in areas with massive government funding, and if you cut funding, you lose a lot of talent.

 

[Pyrrhus]

I couldn't have said it better (thanks to the above posters). Bottomline is, if you want to do economics professionally then forget about the Austrian School of Economics. In fact, even most places won't hire you as a professor if you can't do mainstream economics, and most universities teach mainstream economics.

By the way, graduate degrees matter in economics. An undergrad is not seen better than a Master, and a Master is not seen better than a PhD. The reason is PhD graduates will tend to have more Math, and thus be able to do more sophisticated mathematical modeling in comparison to Master and Undergrad. Actually, undergrads in economics are not even looked at favorably even by economic graduate schools. In fact, economic graduate schools tend to recruit students with degrees in math, physics, and engineering. The basic idea is that is less difficult to get an economic intuition than to learn all the required mathematics. In terms of paying jobs, PhD>Master>Undergrad as well.

Also, "brand" is important in economics degrees (to some degree). A PhD from University of Chicago is looked very favorable by both hiring universities, and professional jobs.

The difference (generally) between Economics programs and Applied Economics program is mathematical rigor. Both are actually similar, but Econ programs will tend to cover more in detail.

 

[inknit]

I recommend this forum:http://www.urch.com/forums/phd-economics/

 

[twofish-quant]

I'm going to try to keep my comments focused on the career and academic aspects of economics degrees and avoid getting into an economics argument. Economic arguments are interesting but they belong in another forum and you can find someone else with similar views to argue with :-) :-) :-)

I couldn't have said it better (thanks to the above posters). Bottomline is, if you want to do economics professionally then forget about the Austrian School of Economics. In fact, even most places won't hire you as a professor if you can't do mainstream economics, and most universities teach mainstream economics.

On the other hand, banks don't care what your ideology is. They just care that you can make them money. One reason I like working on Wall Street is that it's much less ideological than academia. Personally, I happen to thing that some of von Mises and Hayek's ideas are both brilliant and profitable. Others are total non-sense. One reason I like my job is that because I'm "close to the action" I see things and this helps me make up my mind which ideas are useful and which one's are non-sense.

For example, I've read some papers by award winning economists, and thought to myself, this is utter b******t, because it just doesn't match what I'm seeing. On the other hand, some of von Mises and Hayek's ideas *do* "make sense" and so I try to use and develop those ideas. If you stay in academia, you just read about markets. If you get a job (even if it isn't in finance) you have to live the market.

If you do go into economics graduate school, it will help to know why people teach what they teach. Economics graduate schools are pretty heavily mathematical, not because those techniques teach you anything insightful about the economy, but because it so happens that learning what the unit root test or what a GARCH model does let's you crunch data for financial institutions. And you can think of crunching data as something like cleaning toilets (or debugging software). Think of economics grad school as a vo-tech trade school.

Just to reinforce the point about ideology. If your resume came across my desk, the most important thing about it would be how good your computer programming skills are. The fact that you like Austrian economics would be irrelevant as long as you can work will with people that have different views. If you try to get a job in academia, it would be the kiss of death.

Personally, there are two other reasons I like working in markets.

1) stuff happens. In academia, someone writes a long winded paper, and then expects people to disagree to writing another long winded paper, and this can go on for decades. In industry, you come up with an idea, some trader will say b******t, and that's the end of the discussion. Part of the reason for this is that in markets, things happen fast. Sometimes you need to make a decision in seconds, and there is no time to write long papers.

2) stuff matters. One reason I try to be "nice", is that if it turns out that he is closer to the truth than I am, then I'm going to seriously mess up my life and the lives of a lot of other people. The possibility that I'm totally wrong keep me "nice" to people that disagree. Of course, it also works the other way.

In academia, the stakes are less high, so people tend to be less "nice" to each other.

By the way, graduate degrees matter in economics. An undergrad is not seen better than a Master, and a Master is not seen better than a PhD. The reason is PhD graduates will tend to have more Math, and thus be able to do more sophisticated mathematical modeling in comparison to Master and Undergrad.

Which means that in the pecking order, Ph.D.'s in physics and math often in a better position than finance or economics Ph.D.'s. If you've done lattice gauge theory and modeled proton decay, you are going to demolish 99% of economics or finance Ph.D.'s when it comes to math skills.

Of course this is a little silly. One problem with economics is that most economists secretly (or not so secretly) want to be physicists, so there is a lot of physics envy. This results in cargo cult economics, and one reason I like Austrian economics is that Austrians think that equations are a bad thing. So you come up with stochastic models of mortgage defaults, and no one bothers actually talking to the borrower or going to the house.

If you get nasty you can use a complex model to beat someone over the head. (How dare you say that it's a stupid idea to lend to people with no income, the model with 100 differential equations that you don't understand says its fine.) A surprisingly large number of people will just freeze when you show them lots of math.

Actually, undergrads in economics are not even looked at favorably even by economic graduate schools. In fact, economic graduate schools tend to recruit students with degrees in math, physics, and engineering.

And for many jobs, investment banks tend to recruit people with graduate degrees in math, physics, and engineering over people with those degrees in economics and finance.

Weird, isn't it?

The basic idea is that is less difficult to get an economic intuition than to learn all the required mathematics.

At which point you might ask why don't you just get a physics, math, or statistics degree.

Indeed.

This also points out why von Mises and Hayek aren't "sexy." They are actually quite good writers so that you can read them and understand their main point very quickly. The trouble is that if anyone can do it, then it means that it doesn't give someone a chance to make money by showing how smart they are because they are the only one that understand X theory.

Also "street cred" beats everything. If you really do understand something important, the tendency is not to write a paper, but rather to keep it secret so that you can make money off of it.

Also, "brand" is important in economics degrees (to some degree). A PhD from University of Chicago is looked very favorable by both hiring universities, and professional jobs.

But then you have to understand why brand is important. A lot of Wall Street stuff is basically toilet bowl cleaning, but if you say that your toilet bowl cleaner are graduates from the University of Chicago, then you can sell your products. Getting your economic models designed by a graduate of Harvard or the University of Chicago is a lot like getting your purse designed by Hermes or Gucci.

It's just ***better***.

Also, a lot of what professors do is basically to be corporate shills. If a lobbyist tries to convince a congressman that it's a good thing that investment banks make more money, that doesn't sound great, but if you can get *BIG NAME PROFESSOR* to write a report saying that it's a good thing that investment banks make more money, well that looks cool.

Of course, if a professor really thinks that banks are evil, then you take that report and toss it in the trash, and if you know that said professor is going to write a report saying that banks are evil, well said professor is not going to get consulting contracts.

The cool (and scary part) is that while you can argue that the *system* is unethical, no one person is doing anything unethical.

There's no shame in being a corporate shill, but if you are interested in understanding markets, they may be you should think of something else to do.

One problem is that you have so many professors that have made careers explaining how the pre-collapse system is wonderful, that they are totally unable to explain the collapse.

The other problem is that if your job all along was to tell politicians and bankers how smart and wonderful they are, and you've concluded from the collapse that politicians and bankers are evil, then you'll suddenly find them not listening to you.

 

[kramer733]

I don't understand why shackelford who has little experience in economics and finance compared to somebody who worked in a financial industry is arguing with somebody who has a phd in physics and WHO HAS WORK EXPERIENCE.

 

[Skrew]

I don't understand why shackelford who has little experience in economics and finance compared to somebody who worked in a financial industry is arguing with somebody who has a phd in physics and WHO HAS WORK EXPERIENCE.

Why wouldn't shackelford argue? Twofish's economic(social) ideology is based completely around his personal worldview. It hardly is objective.

Economic policy is a means to an end and usually people who support differing economic policies want different results.

The core argument isn't actually over which economic policy is better, the argument is over what version of society is better...

 

[MECHster]

I don't understand why shackelford who has little experience in economics and finance compared to somebody who worked in a financial industry is arguing with somebody who has a phd in physics and WHO HAS WORK EXPERIENCE.

If Richard Feynman was alive he`d slap you square in the face.

 

[magicarpet512]

And here is a very interesting article to wrap up The Great Debate of twofish and shackelford! Written by the 2008 Nobel Prize for Economics winner Paul Krugman. It really puts into perspective the history of clashes between Austrian & Keynesian economics. I think twofish would side with this article more than shackelford would, but its an interesting read; and you all can judge for yourselves!

http://www.sfb504.uni-mannheim.de/~grosskop/teaching/440/economics.pdf

 

[kramer733]

If Richard Feynman was alive he`d slap you square in the face.

If it's square in the face, wouldn't he punch or facepalm me instead?

 

[MECHster]

If it's square in the face, wouldn't he punch or facepalm me instead?

No. It'd be a slap.

 

[Pyrrhus]

Of course this is a little silly. One problem with economics is that most economists secretly (or not so secretly) want to be physicists, so there is a lot of physics envy. This results in cargo cult economics, and one reason I like Austrian economics is that Austrians think that equations are a bad thing. So you come up with stochastic models of mortgage defaults, and no one bothers actually talking to the borrower or going to the house.

If you get nasty you can use a complex model to beat someone over the head. (How dare you say that it's a stupid idea to lend to people with no income, the model with 100 differential equations that you don't understand says its fine.) A surprisingly large number of people will just freeze when you show them lots of math.

This is a problem with economics. It seems anyone with some insight can write a paper, and justify it because of the math. I've seen professors in Economics publish up to 11 papers per year... This is in contrast to natural science where 1-2 papers is typical. Does 11 papers > 2 papers? of course not, especially when the 11 papers are all theoretical based on some idea by some professor. In Economics, there's a disconnect between observed reality and hypothetical reality. This disconnect is significant. Sometimes, I still find problems with it. Before, I went into economics, I did my BS in Engineering. Coming from a Natural Science background where "experimentally verified" is paramount, it is difficult to stomach some of the papers I read in economics...

 

[Shackleford]

Well, I decided not to argue anymore with two-fish because we have different political and hence economic worldviews - or vice versa. The more I look at the explanations and theory of Austrian economics, the more it makes sense to me. It seems entirely reasonable and rational. The Keynesian simply want to arrogate more power to government under the guise of extricating an economy from a deep recession/depression. They are simply statists. The government always takes from one, or many, and gives to another according to its whims.

By the way, the Austrians, in particular Peter Schiff, back in 2006-2008 predicted with accuracy the impending financial crisis. He was ridiculed constantly by other "economists" and "financial experts" all over TV. It doesn't matter what two-fish's professional experience is. That doesn't automatically lend merit to her arguments. Clearly, that is not generally true for experience to produce correct results.

Second coming of Keynes:
http://mises.org/daily/3583

Peter Schiff:

http://www.youtube.com/watch?v=Z0YTY5TWtmU&feature=related