Comparing the Difficulty of Undergraduate and Graduate Economics Programs

In summary: Austrians decry the use of mathematics in studying economics, in favor of philosophizing and meta-economics. This is why you may not find many programs that focus on the Austrian school of thought. Most programs will have more of a focus on mathematical models and data analysis.
  • #71
Shackleford said:
And you don't see a problem with arbitrarily printing notes?

I see a problem with arbitrarily printing notes. I also see a problem with arbitrarily not printing notes.
 
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  • #72
twofish-quant said:
I see a problem with arbitrarily printing notes. I also see a problem with arbitrarily not printing notes.

There is no problem as long as there is a naturally-valued exchange medium.

It's funny because Hayek wanted competing monies. That's interesting.
 
  • #73
Shackleford said:
I listened to some of a lecture today, by Roger Garrison I believe. According to capital-based macroeconomics, consumption and investment are inversely proportional (my words). He then noted the C I G macroeconomic equation. It makes more sense to me that individual consumption and investment are mutually exclusive and hence inversely proportional. You invest/safe to yield a greater consumption in the future, and how this back-and-forth changes determines economic growth. So, burying it in the ground only yields economic potential. Saving outside of the "system" is such a dirty word in Keynesian economics.

Curiously and ironically, you've just pointed out the reason that I *like* von Mises and Hayek and the Austrian view of economics. The Austrians try to explain things in terms of the behavior of individuals. I disagree with a lot of the conclusions, but I agree with the methodology.

The problem with talking about consumption/investment curves is that it gets us too far away from real people. The reason that I like the Austrian approach to some things is that you look at the individual and how real people behave under some circumstance and try to figure out the consequences when large numbers of people behave in a given way. Where I disagree with Austrians is that they then come up with some wildly oversimplified rules which gets you in the same problems that most economic schools get you into.

In the particular situation of the crash, rather than coming up with an economic model with graphs, you go up to someone who is doing something, and ask them why they are doing it. In the case of 2007, no one was investing for the future. If you ask anyone on the trading floor, they were actually quite aware that what they were doing was going to be destructive. The problem is mass panic. People were putting money into Treasuries because no one had any idea which bank would collapse next, so they were pulling out all of their money and buying Treasuries.
 
  • #74
The Federal Reserve is not printing money. Expansionary monetary policy is executed through open market operations, namely by buying short term treasury securities which increases bank reserves.
 
  • #75
Shackleford said:
There is no problem as long as there is a naturally-valued exchange medium.

Except there isn't. Gold is the closest thing, but then you have problems if the amount of gold doesn't match the wealth generated in the economy.

It's funny because Hayek wanted competing monies. That's interesting.

Then you get into the question of what is money, which I've been trying to figure out. As close as I can figure it, part of the problem is that people confuse "meters" with "meter-sticks." When we talk about dollars, we can talk about federal reserve notes "meter-sticks" and wealth being measured by federal reserve notes (i.e. meters).

One weird thing is to think about what actually happens when you write a check.
 
  • #76
Shackleford said:
It makes more sense to me that individual consumption and investment are mutually exclusive and hence inversely proportional.
But that's what the equation is already saying. Consumption is just the sum of consumption of all individuals. Although I wouldn't use the wording inversely proportional, but just mutually exclusive. You consume A, you make A less investments, not 1/A less.
 
  • #77
inknit said:
The Federal Reserve is not printing money.

It's a figure of speech. It's all done via computers.

Printing money is more poetic than "increasing the balance sheet liability of the Federal Reserve."

Expansionary monetary policy is executed through open market operations, namely by buying short term treasury securities which increases bank reserves.

Actually it doesn't work that way. It did in the 1960's, so a lot of textbooks are really, really out of date. Bank reserves are pretty much irrelevant for monetary expansion in the US. They are the key driving force in China, but the PRC economy is very different than the US.

What happens is that most lending happens on the money markets, so under normal circumstances, by changing the overnight discount rate, the Fed changes the level of overnight borrowing in the money markets, and this gets transmitted to the general economy via repurchase agreements. Investment banks are critical for this because they maintain the money markets so that when you had a collapse of a major bank, everything ground to a halt.

During the crisis that totally broke down. One thing that the Fed had to do which was extraordinary was to do direct lending to banks. What happened was that the Fed bought loans directly from banks and then expanded it's balance sheet which worked in some situations. However, one problem is that without legal authorization, the Fed can only issue $1 for something else that is valued at $1.

If the valuation is unclear or less than $1, then Treasury with Congressional authorization has to act, which is what TARP was all about.
 
  • #78
One other thing is that "my credentials are better than your credentials" really doesn't help me.

Shackleford may not have impressive credentials, but without too much trouble he can find Nobel prize winning economists that have come up with the same arguments that he has, so if it's a matter of credentials, I'm not going to win the argument.
 
  • #79
Shackleford said:
You mean in an unconstitutional direction? You do know that the Constitution limits the scope of the federal government, right?

And I also know that people disagree on what the Constitution means and how to interpret it. Operationally, the Supreme Court decides these things, but then you get into the mess of how gets on the Court, and what powers they have.

You can argue that the people that think that the Constitution authorizes expansive federal powers are "just plain wrong" but they don't agree.
 
  • #80
inknit said:
In essence, if government spends money without raising taxes, it must borrow loanable funds, which which increases interest rates

In some situations it won't. Whether we are in one of those situations, is something that people argue about.

And I also agree with you that we should be skeptical of government intervention at the micro level.

I've seen the sausage being made, so I'm less skeptical.

If we consider the government bureaucrats who are instituting the measures themselves as economic agents maximizing their own utility functions, then we must take that into account when formulating policy.

Sure. But sometimes the incentives are structured so that "good" things happen when government officials act, and something "bad" things happen if you leave private actors on their own. One problem that I've seen with a lot of economic models is that they don't take into account that the loan officer may have radically different incentives than the bank or the person loaning money to the bank.

If you make a ton of money from fees on bad loans, and then you leave before it blows up, it's not going to hurt you.
 
  • #81
Shackleford said:
Well, I decided not to argue anymore with two-fish because we have different political and hence economic worldviews - or vice versa.

Well, I like arguing with people with different views. Arguing with people that agree with me gets boring. One thing about getting exposed to new ideas is that you find something useful. There is a lot in von Mises that I think that he gets right, and a lot that I think he gets wrong.

The Keynesian simply want to arrogate more power to government under the guise of extricating an economy from a deep recession/depression.

This doesn't work for me. You can argue that I'm wrong, but I get annoyed when people ascribe to me motives that I don't think I have. Personally, I think that there are some things that government just does better than private entities, and so it makes since to have government use tax and borrow money to do those things, at which point you have increased productivity and increased incomes.

It's better to be taxed 30% of $200,000 than 0% of $10,000.

The weakness in all of this is figuring out how to do this, which is why I admire Reagan and Thatcher since they seemed to have done this.
 
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  • #82
Maybe, I shouldn't be in economics as I don't care much about the philosophy of economics (which is most of it, afterall economics evolved from political economics). The bottomline is take ECONOMETRICS, and and other advanced course (Static and Dynamic Optimization), if you can get a Master in Statistics, it is a popular degree among PhD in Economics.

Good luck!
 
  • #83
Shackleford said:
By the way, the Austrians, in particular Peter Schiff, back in 2006-2008 predicted with accuracy the impending financial crisis.

1) The problem is that he made a lot of other predictions that were off.

http://en.wikipedia.org/wiki/Peter_Schiff

One problem is that if you keep predicting an economic crash every year, sooner or later you will be right.

2) The other thing is that predicting a financial crash wasn't that rare. Lots of people including me figured that everything was going to blow up. But what do you do?

One reason I'm all for government regulation is that I knew before the crash who the idiots on Wall Street were, and who they weren't, and I deliberately avoided working for some companies, because during the interview, I figured out that they were idiots. But in the end, not working for people I thought were doing stupid things wouldn't have saved me if the world blew up.

In fact, it might have made things worse. Once you figure out that a bank is being idiotic, it finds it harder to get good people to work for them which means that things at the bank just get worse and worse.

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.

Except that a lot of the people on TV really have no clue what they are talking about. This is where the information asymmetry thing comes in. You have two economists that tell you different things, and you really have no idea who to believe.
 
  • #84
inknit said:
Also when sellers are knowingly deceiving buyers (information asymmetry).

Information asymmetry is rather tricky, because part of the reason that you are buying something from someone is presumably they know more than you about it. Also there is something that I actually saw happen...

Suppose you have an honest banker and a dishonest one. The honest banker can only guarantee to give you 0.1% interest whereas the dishonest banker will guarantee you 100%. If enough people believe the dishonest bankers, this will put honest bankers out of business. OK, so we put dishonest bankers in jail. Problem solved...

Except suppose we don't have honest or dishonest bankers but rather smart and stupid bankers. The smart banker can only promise you 0.1% interest, whereas the stupid banker guarantees you 100%, but you can't arrest him for fraud because he actually ***believes*** he can get you 100% return.

After a while, the stupid bankers start getting more cash than the smart bankers, and they can put the smart bankers out of business. What's more, because the stupid bankers are more stupid they pay (or promise to pay) more to their employees. Also if you have a smart banker work for a stupid company, then they will usually get fed up and leave, which means that after a while, you don't have anyone with any sense left.

Now if you can figure out a practical way of fixing this problem using just market mechanisms, I'd be quite interested. One reason I like Austrian economics is that this is the type of thing that von Mises might be interested in working on.

Austrians, on the other hand, tend to cling to their dogma of laissez-faire capitalism purely on ideological grounds, even when modern empirically supported economic theory suggests that intervention is necessary.

I think that somewhere in the 1970's, Austrian economics started to ossify. Personally, I find von Mises and Hayek to be very interesting reading, but after Rothbard, it becomes quite uninteresting because they aren't saying anything new. In some ways, they remind me of Trotsyists.

Also, I don't think that modern economics is *that* empirically supported. Von Mises made some very interesting arguments about historicism. One problem with historicism which von Mises mentioned is the lack of a "reset button" (he didn't use those terms but the idea is there). Just to give an actual example. I claim that without the stimulus things would have been worse, whereas Shackleford claims that without the stimulus things would have been better. OK. If we had a reset button to run things over again, we can resolve this, but we don't.

So my argument is based on what von Mises calls "praxeology". If we didn't have a stimulus, then people would have acted in way A causing result B causing people to act in way C, and in the end, we would have ended up in hell.

Curiously the reason I like government intervention in particular cases is because I'm using an bottom-up analysis that is more Austrian than Keynesian.

Sorta random, but this is a great paper to read for anyone interested in econ. It deals with market failure, specifically on the notion of information asymmetry. It's by Nobel Prize-winning economist George Akerlof.

Classic paper, but what I've been wondering is how to extend this from honest/dishonest to smart/stupid. What happens if you punish dishonesty is that you give a lot of incentives to be "honestly stupid" so that you can get the dishonesty reward without being dishonest.

Also was something that I call the "double asymmetry." A loans B money. B knows that he won't/can't pay, but doesn't care because they get the cash now. A knows that B won't repay but he/she doesn't care because it's C's money and if the loan goes through then they are going to get fees. C is some old grandmother that doesn't know enough about banking to know or care that all of this is going on.

This is not a "real" market, and none of the theorems about how markets are good will apply, but it's what happened, and it's really tough to figure out how to get around this with the intervention of D, a government official, who is going to be out of a job if this all blows up.
 
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  • #85
One other reason that I think von Mises is such an important thinker is that von Mises ideas have been extremely influential in China. The basic critique of socialist planning is something that has very strongly influenced Chinese thinking on the topic. It's hard to see this, because no one explicitly talks about von Mises, and I bet that 99% of the people involved don't have any clue that von Mises came up with some of the ideas, but you see the same basic critique of central planning and the line of transmission goes

von Mises -> Janos Kornai -> Wu Jinglian

Also Austrian Economics is taken very seriously in China. The Dean of the Guanghua University in Peking University, Zhang Weiyin, is an Austrian.
 
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  • #86
OMG...

I was just surfing and it turns out that you have a lot of economics people that assume that US monetary policy works the way that inknit says it does, when it hasn't worked that way in at least 15 years.
 
  • #87
twofish-quant said:
OMG...

I was just surfing and it turns out that you have a lot of economics people that assume that US monetary policy works the way that inknit says it does, when it hasn't worked that way in at least 15 years.

Which part?
 
  • #88
Another great video. He is making some of the points I have been making.

 
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  • #89
Shackleford said:
Which part?

Here is one part that's wrong

http://www.bis.org/publ/work269.htm

Here is a general overview of how monetary policy really works at the Fed level.

http://www.newyorkfed.org/education/addpub/monpol/

Banks today work like ebay. You find lenders, you find borrowers and then you make matches and take a commission. What this means is that reserve requirements don't really influence the volume of lending. They greatly impact profitability, but that's something different.

Also, you've heard of the "shadow banking system." What people don't quite realize is that in the US the "shadow banking system" *is* the banking system. When the Fed wants to change interest rates, it gets fed immediately into the commercial paper and repo markets. Commercial banks today are largely front end retail interfaces to the money markets.

But the basic problem is that reading some of the stuff that people writing about banking is as if you had someone talk about the computer industry assuming that he hasn't changed since 1985. The same technology that created google and ebay has had similar changes in banking, and it's really, really scary to notice that most people in academia don't seem to realize that.

One thing that frustrates me is with a lot of people in academia is that they deal with "cartoon pictures of markets" and this goes with both Austrians and Keynesians. They have wild oversimplifications of how markets work, and listening to them sometimes I get the feeling that they think that they can understand Boeing 747's with kindergarten pictures with crayons.
 
  • #90
Shackleford said:
Another great video. He is making some of the points I have been making.



One thing that you'll find if you talk to people that do this for a living is that the meltdown surprised no one. It was pretty *obvious* to anyone with half a brain working on Wall Street that we were heading for trouble.

The fact that Robert Shiller got awards for saying that were were in the middle of a housing bubble and that this was controversial at all shows out of touch academic economics were. However, the problem is that you had a lot of people in academia who believed that "markets can do no wrong" which is a totally nutty idea to me.

Heck, when you talk to someone at an interview and they tell you that "you have to be careful about what you say since smart people tend to get in trouble around here", I'm not shocked when said financial institution blows up. Conversely, if during an interview you have managers asking questions that show that they really care about not blowing up the world, you really end up wanting to work there.

The fact that employer A offered ***much*** higher salaries and bonuses than employer B makes the question interesting, and why I don't trust market mechanisms. I'm open to ideas on how you can fix these sorts of problems with massive bureaucracy, but it's tricky.

So other thing not work for people I don't trust, what do you want me to do? Look it's not illegal to be stupid, and if the government regulators aren't doing their jobs, then there's nothing that I can single-handedly do to change that.

Now you have lots of academics and talking heads that were surprised, but that's something different. I don't watch any financial news because the people there are generally quite clueless. Also follow the money. Financial news networks are there to make money from ads, so they don't care if what they talk about is useful or not.
 
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<h2>1. What are the main differences between undergraduate and graduate economics programs?</h2><p>The main difference between undergraduate and graduate economics programs is the level of depth and specialization. Undergraduate programs provide a broad overview of economics principles and theories, while graduate programs delve deeper into specific areas of economics and require more advanced coursework and research.</p><h2>2. Is one program more difficult than the other?</h2><p>It is difficult to say whether one program is inherently more difficult than the other, as it ultimately depends on the individual's academic strengths and interests. However, graduate programs typically have higher expectations and require a greater level of critical thinking and independent research, making them more challenging for some students.</p><h2>3. Are there any specific skills or prerequisites needed for a graduate economics program?</h2><p>Most graduate economics programs require a strong foundation in mathematics, statistics, and economics principles. Additionally, strong analytical and critical thinking skills are important for success in graduate level coursework and research.</p><h2>4. Can I apply for a graduate economics program if I did not major in economics during my undergraduate studies?</h2><p>Yes, many graduate economics programs accept students from a variety of undergraduate majors. However, you may be required to take additional prerequisite courses to ensure you have a strong foundation in economics principles before starting the program.</p><h2>5. What are the career opportunities for graduates of undergraduate and graduate economics programs?</h2><p>Graduates of both undergraduate and graduate economics programs have a wide range of career opportunities, including roles in government, consulting, finance, and academia. However, graduate degree holders may have access to more advanced and specialized positions, such as economic research or policy analysis roles.</p>

1. What are the main differences between undergraduate and graduate economics programs?

The main difference between undergraduate and graduate economics programs is the level of depth and specialization. Undergraduate programs provide a broad overview of economics principles and theories, while graduate programs delve deeper into specific areas of economics and require more advanced coursework and research.

2. Is one program more difficult than the other?

It is difficult to say whether one program is inherently more difficult than the other, as it ultimately depends on the individual's academic strengths and interests. However, graduate programs typically have higher expectations and require a greater level of critical thinking and independent research, making them more challenging for some students.

3. Are there any specific skills or prerequisites needed for a graduate economics program?

Most graduate economics programs require a strong foundation in mathematics, statistics, and economics principles. Additionally, strong analytical and critical thinking skills are important for success in graduate level coursework and research.

4. Can I apply for a graduate economics program if I did not major in economics during my undergraduate studies?

Yes, many graduate economics programs accept students from a variety of undergraduate majors. However, you may be required to take additional prerequisite courses to ensure you have a strong foundation in economics principles before starting the program.

5. What are the career opportunities for graduates of undergraduate and graduate economics programs?

Graduates of both undergraduate and graduate economics programs have a wide range of career opportunities, including roles in government, consulting, finance, and academia. However, graduate degree holders may have access to more advanced and specialized positions, such as economic research or policy analysis roles.

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