# Economics ?

1. Mar 26, 2008

### RufusDawes

What are your opinions on the discipline of Economics ? Do you think it has the potential to be used to help people or do you think it is simply a tool used by the rich and powerful.

Is Economics a science ? Is the mathematics behind it sound ?

I have friends who say it is fluff, that it is nothing more.

What do you think about Economics ? I have noticed as of late that policies that can be demonstrated to help the average person (such as higher minimum wages) under the right conditions are largely ignored.

I am interested to hear what some of you sound mathematicians think of Economics.

Last edited: Mar 26, 2008
2. Mar 26, 2008

### Staff: Mentor

You have a degree in economics and can't answer these questions yourself? What do you think the answers are?

Saying that economics is a too for the rich and powerful sounds pretty silly to me. Economics is merely the study of how the economy works. Anyone who wants to understand how the economy works can use it and benefit from the knowledge (and presumably get a job in a related field).

Policies like a higher minimum wage are problematic due to the secondary effects. As you know, the labor market is a real market, and supply and demand applies. So if the price of labor increases, the demand will decrease - unemployment will increase. How much....well, that's what economists are for. But such policies are also understandably politicised.

Last edited: Mar 26, 2008
3. Mar 26, 2008

### RufusDawes

frankly...we can do so many cool things with science and engineering with perfect precision but we can't somehow organise our economy, to FEED and give everyone a job...and not have to live in relative poverty.

What ? the mathematicians can't figure that one out ? or are we being run by flambouyant retards (economists) ?

4. Mar 26, 2008

### Staff: Mentor

I am not sure whose economy you are talking about. It certainly isn't the US economy.

There is no real poverty in the US (relative poverty is rather meaningless), nor is hunger a real problem (obesity is the number one health problem for our "poor"), and unemployment is about as low as it can be without causing real problems (full employment would be disasterous to the economy).

The flambouyant retards (politicians) try to mess things up, but so far the people have managed to keep them away enough to not cripple the economy.

Last edited: Mar 26, 2008
5. Mar 27, 2008

### RufusDawes

That is exactly what I mean. 'Relative poor is rather meaningless" why so ? who's purpose does it serve to ignore relative poverty ?

You're just excluding the concept of poverty based on a comparison to a different beast (a developing nation). Could an engineer get away with similar ? comparing an aspect of his design to something made in the 50's ? ''Relative inefficiency is meaningless".

6. Mar 27, 2008

### Staff: Mentor

Relative inefficiency is meaningless too, an engineer would never quote an efficiency number in terms of other designs, past or present. An engineer would simply tell you what the efficiency of his design is. It is a meaningful number on its own.

Relative poverty is a silly concept precisely because it is relative*. A person living in a $500k home eating 5,000 calories per day would be considered impoverished if his neighbors had more. That is a meaningless definition of poverty, and since it is meaningless it best serves everyone (including the relative poor) to ignore it. A better question is "relative poverty is a meaningless concept so whose purpose does it serve to support it?" *Relative numbers can only be meaningful in general if they are referenced to a stable standard. This is the case for e.g. kilograms, but not the case for poverty. Last edited: Mar 27, 2008 7. Mar 27, 2008 ### RufusDawes The poverty line is at something between 10,000-18,000 per year I fail to see how many people living that cheap would have a 500,000 home. What you described is relative wealth not relative poverty. 8. Mar 27, 2008 ### russ_watters ### Staff: Mentor Are you really an economist? I guess it shouldn't surprise me, I have seen such things before, but it truly disappoints and disturbs me when I see such things. Last edited: Mar 27, 2008 9. Mar 27, 2008 ### russ_watters ### Staff: Mentor The point is that using that standard as our poverty line then requires defining probably about 90% of the world population as impoverished. The way we define poverty enables people with cars, refrigerators, and air conditioning to be labeled as "impoverished" while in other places in the world there are people in real need of basic necessities such as food and shelter. The way the word is used by those in a position to define it (ie, government agencies and the UN) is not based on real need/material condition. And this is in an era where technological and economic advancement have enabled rapid and truly spectacular improvements in material condition. The way the word is used it is intentionally deceptive and manipulative - it is used for political purposes only and has no real basis in objectivity. It is unscientific. Ie, it can be said that the poverty rate in the US has not decreased significantly in the past 50 years or so (using the definitions given by the government agencies responsible for tracking it). A logical person would take this to mean that the human condition is not improving in the US. But that isn't true. In fact, living conditions have improved dramatically in the US in the last 50 years. You asked the question and you yourself may be the answer: Economics is capable of being science and probably should be scientific (it claims to be, afterall), but whether it is treated scientifically by economists is another matter entirely. It appears to me that a great many economists are more politicians than scientists and use economics as a political game rather than a real scientific endeavour. I believe that a field that claims to be scientific really should be scientific. It should be based on math and logic. Last edited: Mar 27, 2008 10. Mar 28, 2008 ### RufusDawes I don't see the need to try and be so insulting. Mine is simply a different point of view based on my experiences. 11. Mar 28, 2008 ### Dale ### Staff: Mentor You obviously missed my point completely, so I will try again. My point is that no honest person would consider someone in a big house eating lots of food to be impoverished, but that is precicely the sort of thing that can happen under the current relative definition of poverty. The definition of poverty is someone that makes less than half of the median income. So, let's say that the median income level today is$36k. A median income of $36k provides for a comfortable lifestyle that nobody would call impoverished: 4,000-5,000 calorie/day diet, ~2400 sq. ft. home, utilities, health care, car, cable tv, a/c, etc. Now, assume that GDP goes up by 6%/year and that inflation goes up by 3%/per year over 25 years. After 25 years it will take an income of$75k to purchase the exact same comfortable lifestyle that nobody would call impoverished. However, the median income is now $155k, so suddenly the$75k (4,000-5,000 calorie/day diet, ~2400 sq. ft. home, utilities, health care, car, cable tv, a/c, etc) is considered impoverished. That is silly.

Similarly, by this definition of poverty (half the median income), if half of the population were starving then there would be a large portion of the population between the median income and the poverty income that would be starving but not considered poor. That is also silly.

Anyway you look at it a relative definition of poverty is silly and it benefits noone other than politicians.

12. Mar 28, 2008

### RufusDawes

"Anyway you look at it a relative definition of poverty is silly and it benefits noone other than politicians."

It benefits the relatively poor people when the government decides to try and help them specifically.

13. Mar 28, 2008

### Ronnin

Economics is far from "fluff". The mathematics are very sound and are used to a very high degree of accuracy. Now, the models or statistics being used in calculations may not be as accurate as one would like. If the methods of economics were just "fluff" I doubt Wall Street would employ the amount of intelectual capital, man and computer power that they do. The purpose of economics is not to establish any kind of "fairness" in the marketplace, that is regulated by economic policy and trade law. Knowlege of economics would certainly benefit anyone who wishes to learn it. Perhaps the knowlege of economics and its application helped contribute to the acquisition of some of that wealth those wealthy people obtained.

14. Mar 28, 2008

### Staff: Mentor

I disagree completely. It does a man no good for someone else to do something for him that he can and should do for himself. It ruins his integrity, his work ethic, his self respect, his value to the community, and his capacity to do good. It breeds in him a sense of entitlement and corrupts his morals to the point that he thinks it is virtuous of him to forcibly take another man's property at the point of a gun.

15. Mar 28, 2008

### RufusDawes

We are never going to agree on any of that. To me what you are saying is total madness, to you a pay rate of $20 an hour for a retail worker would seem crazy. However, that is the reality of things in my country, a retail worker does get paid roughly$20 an hour. Many goods that in the United States are on a user pays basis are provided and regarded as a basic human entitlement. However this is obviously not without its costs.

16. Mar 29, 2008

### Staff: Mentor

Given the lack of thought and reason displayed in your posts this is hardly surprising.

17. Mar 29, 2008

### RufusDawes

Yes, ok in a global context any reference to poverty in the western world silly.

In local context I think it is a very useful measure that should not be ignored. Largely has been ignored to the detriment of the local economy. In that regard I am questioning the merits of economics as a means of helping people.

18. Mar 30, 2008

### Staff: Mentor

OK, for the sake of argument, let's pretend that relative poverty has been largely ignored. I have two questions for you:

1) How is the number of people earning less than half the median income a useful measure of anything?
2) How has ignoring it been detrimental to the local economy?

19. Apr 1, 2008

### Economist

I am an econ major and intend on going to grad school in the discipline.

In my own personal view, you have a "backwards" view of the discipline. You can't think of economics like it will allow you to be some sort of social engineer. What economics has taught me is that many individuals have different preferences, values, wants, etc, and by interacting with others "the system" works out fairly well. Try reading books by F.A. Hayek, Milton Friedman, etc, and then see if you still feel the same way about economics as a socially engineering tool.

20. Apr 2, 2008

### mulp

I think I know the problem you are having, because I had the same problem trying to figure out why economic theory seemed correct, but required so many "bags on the side of the machine" to make it work. It's like everytime you turn around, some god of externality needs to be invoked to fix some illogical conclusion.

Then I read the first page of Eco-economy by Lester Brown and the flaw was revealed. A different version of the same essay is available here at
http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=2234
A bit of it...
Remember that the ecology of trees and birds and waters and fish is also the ecology all people live in.

People, rich, poor, young, old, sick, healthy, working, retired, are all consumers. Yet the economic model excludes all but the worker from this list of consumers.

The handwave is that all consumers are tied to a worker or capital. But when confronted with a person that isn't, the god of externality explains the wayward consumer crossing the economic flow.

Think of the magic of labor appearing when consumers demand more that the existing pool of labor can produce. It's like a god makes them appear, as in a video game. When demand no longer requires as much labor, poof, the person disappears.

The same is true for other natural resources. The economic model demands clean water? Poof clean water materializes. Toxic waste as a byproduct? Poof it vanishes from the economy.

I believe economic theory suffers from arrested development.

I think it traces to the cold war when it was the god ordained free world against the godless commies, and in the US, socialism and Marx, neither of which had anything to do with the Soviet Union or Red China. But in any case, all discussion about poverty stimulated a knee-jerk claim of becoming like the evil commies.

I liked Milton Friedman, not because I always agreed with him, but because he recognized the problems, like poverty. He proposed market solutions that acknowledged the existence of poverty.

But the problem is that he saw poverty as something that arises from something external, yet still considering the economy to be the whole. By taking that approach, the people who the economy makes believe don't exist end up being special cases that need to be treated specially every time they can no longer be ignored by the pressure on the economists to deal with them.

The economy takes place in the physical world and is absolutely constrained by the physical world, just as the actors in the physical and economic world are.

Economic theory like supply and demand can be seen as like Newton's Laws, useful simple rules that explain a small aspect of the laws of motion and energy. But they are lies, as Einstein showed. But still useful for many problems.

But economic theory has only partially embraced Newton's level of abstraction. Newton incorporated time, something that economic theory rarely does. Supply and demand is static, not explicitly dynamic, except for handwaves, like "in the short run" and "in the long run."

Going back to the Ptolemy vs Copernican difference; before discarding the earth centric model, special rules of astronomy were used to explain comets and to explain the planets. Economics seems to be doing the same thing with special versions of economic theory, like environmental economics that come up with special rules rather than fixing a single set of rules to apply generally.

The physical sciences has divisions, but all divisions operate by the same rules. Even the social sciences, where economic theory is placed, connects to the physical sciences increasingly in the search for understanding; behavior is not considered separate from environment or the physical nature of the person. Yet economic theory seems to seek to escape from the confines and limitations of the physical world.

To see the degree to which economics seeks to exclude the real world, consider the many models for labor supply curves and the explanations for the shapes of the curves. No where do I see an explanation of what happens to the people who clearly exist to provide the points on the curve. A curve might represent the supply of workers who can't be supplied if the pay is too low, like below the cost of bus fare to get to the job, but nothing is said about the people who can't work - where are they in the economic model - they still exist in the physical world.

To recognize those people as part of the economy takes you into the territory covered by Marx which means communism which means evil which means that all reasoning must cease.

Time to move past the constraints of the inquisition: McCarthyism is nearly dead. You won't be black listed as a commie if you say that people are more important than property or money. Time to stop dividing economics into capitalism vs socialism vs communism vs who knows how many other ideologies there are.