The science of Economics
Introduction: We discuss how to improve <x>.
Chapters go here.
Conclusion: We improve <x> by MOAR COMPETITION!
This is a science?
The Observer treats us to another one of those give us more money pieces. This time it's a call from Athene Donald, a professor of experimental physics at Cambridge, telling us all how neither the government nor private companies spend enough money on research and development. Therefore, of course, we must all be taxed so that …
It's always struck me as rather pathetic how desperately economists want to be treated as a 'hard' science. It's a social science, which is indeed a type of science; it's arguably tougher than the physical sciences (since generally speaking, once you're outside the quantum level, the objects physical sciences measure rarely decide to change their behaviour completely and en masse in a short space of time). But that lumps them in with Sociology and Anthropology and Psychology and Political Science, which economists want to look down on (because they tend to disagree with most of what economists say people are like). Suggesting that they're on equal footing with such lesser being is a sure-fire way to wind up Econ grads.
As to the article... so, it doesn't matter that we're not spending money on science because other people are. That's definitely not an utterly idiotic answer, well done Tim. And the past 30 years of relentless deregulation and opening things up to competition has somehow coincided with average productivity growth falling enormously, with a particular correlation between the places where growth was worst and those industrialized countries which engaged in the most aggressive deregulation. Even if the bleeding edge has remained more or less at the same level of productivity as 30 years ago, that none the less suggests that there's an error in your argument that more competition will solve the problem.
Your argument applies equally, if not more strongly, to paleontology. That's usually granted scientific status. Likewise, a lot of medical knowledge has been learned by observing things that would never pass an ethics committee, but which happened anyway.
You can interpret an experiment that someone else performed, without even knowing the original design or intentions. As long as you know what the experiment actually involved and what the results actually were, you can still use those results to test hypotheses that you bring to the party after the experiment has "finished".
How many times have economists been able to conduct experiments under controlled conditions?
How many times have astrophysicists been able to conduct experiments under controlled conditions?
Or geologists studying, say, plate tectonics?
Experimentation is not the sole road to empirical observation, and believing that it is is to commit a wild category error in understanding scientific epistemologies.
Really, ONLY the drug companies in the US are being extortionate? Not ALL of them, everywhere?
You need to get out more, become less of a "victim" and try to stop blaming the US for all your problems. I'm sure there are PLENTY of cases where European drug companies are being "extortionate" to someone.
Unfortunately it's what corporations do, extract money from people, in order to pay for a product that the corporation manufactures. Some more so than others.
You also need to understand that developing a new drug or manufacturing one that only has limited usage both incur significant costs that may SEEM extortionate to the common man.
As an example of the bad side of drug manufactures, Turing Pharmaceutical, who bought the patents for the 60 year old anti toxoplasmosis drug Daraprim; raised the price by 5000%. They "say" the reason is due to the low sales numbers. Turing is being ridiculously callous and probably criminal in this case and the drug SHOULD have become a generic at greatly reduced cost.
I myself take a new drug called Otezla for Psoriatic Arthritis that only Celgene manufactures. I have a very good insurance plan but it doesn't pay well for this new drug. It has almost completely cured the Psoriasis, something no other drug or cream has ever done for me in over 10 years.
HOWEVER (as an example of the good manufacturers) Celgene has an extremely generous copay program that completely pays my out of pocket expenses (My copay would be $975 per monthly prescription refill otherwise). Otherwise I would still be suffering with plaques on my elbows and knees a half inch thick that crack and bleed and have itching like a permanent case of poison ivy over half my body as I could not afford this drug.
I'm sure other El Reg readers have similar stories. Not ALL companies are bad, not all are good.
The issue is that there is no method to assure that the drug companies R&D efforts get paid for so that later production (and the people who need the drug) is not still paying for it.
Public R&D funding often finds good money thrown after bad as in the "Global Whining" fiasco because the "Public" is very subjective and prone to popularity contests rather than an examination of need and the hard facts behind it.
> You need to get out more, become less of a "victim" and try to stop blaming the US for all your problems.
OK, I think my point went whizzing right over your head.
Right, you say all drug companies are bastards. I can get behind that. US drug companies just happen to be the largest, and therefore the biggest bastards of them all. It's not really the point though is it?
Leaving society's best interests in the hands of obscenely wealthy corporations for the advancement of core medical science is quite frankly irresponsible for any country.
This kind of stuff used to be done by the universities funded by government. These days they only seem to be interested in "climate stuff".
Just fucking ignorant is what your point is. It costs a shit-load to develop a drug, and most of those that are started along the development pathway don't make it to the end. So to produce a new drug typically has a huge capital cost. If that cost is not recouped then *bingo* no new drugs.
If you think public research and funding is the best way to research drugs, then you need good evidence that such processes actually work, and sorry, but there's damn all evidence that it does. Maybe it "used to be done by Universities", and to be sure they haven't stopped, but most new drugs come from the commercial world, so perhaps your vaunted taxpayer funded nirvana is just another "give us your money" scam for well-heeled public servants.
Just remind us all about how much of a drug's development costs are actually down to marketing. The last I heard (from Sir Robert Winston, I think) was that marketing accounts for between a quarter and a third of the "development" costs. Has that changed? Can it really be counted as part of the costs that "need" to be recovered from price-gouging (just yesterday I was looking up a company called Gilead Sciences over there in the Land of the Free(TM), who have been accused of charging $1000 per tablet for one of their medications)?
Pure socialism (whatever that means) may not work, but charging through the nose doesn't either - it is simply eugenics by economic theory. To complain that everyone is money-driven is a) a lie, and b) proved not to work. Therefore, a hybrid model should be adopted.
A lot of the drugs are developed from compounds that they buy for a pittance or steal from small, tax payer funded research groups doing basic research. The government has cottoned on to this and said that we must all do translational research now if we expect the public purse to be funding it. That means you have to work on a disease and aim to produce results which will treat that disease. Universities are all too often happy to sell out their share of intellectual property which shows potential, and sell it out far cheaper than the value of a developed product, because they don't want to be asked to pay the cost of developing it. They want cash in the bank, quick as they can.
So the argument that the cost of drug development is proportionate to the profits cuts no ice with me. They're making out that they're doing everything required to being a drug to market, and they aren't. They're doing a lot, yes, but not as much as they would claim credit for.
You and Sir Winston are both damning examples of the confirmation bias of progtards. According to the most recent information it costs $2.5 BILLION and take 10 years to successfully develop a new drug. Nobody spends anywhere near 10% of that on marketing.
To get a feel for the real percentages spent on marketing vs R&D you have to look at the yearly spending for both.
Pfizer topped that list with $622.3 million in ad spending last year . Pfizer came in fourth on FierceBiotech's list of R&D budgets, with $7.9 billion. That means DTC ads were less than one-tenth the size of its R&D budget.
That puts their marketing costs at less than 10% of what they spend on R&D and well withing normal expectations for most industry.
Didn't whizz over my head. Doesn't work here in the US. Private industry does the majority of R&D work here and they only go to Universities and Colleges to do the work if they can guarantee it will still be the property of the corporation, not the University, primarily through grants and fellowships.
Maybe the Fraunhofer Institute can provide European (primarily German) companies with their research IP but they don't give them to US companies and they don't give them away for free. NASA, whose work is funded by the US taxpayer; does not give away their IP. The only time there is cooperation between education and private industry is when money changes hands. So why would there be any incentive for private industry to use the Universities as anything besides a source of potential employees? Once they are employees, much of the costs of R&D are captured just hire the best and brightest.
Any government bureaucracy is incredibly inefficient and slow and using the Universities and Colleges only means they milk the work even longer. Large agencies like NIH and NIST can do great work, but private industry does it better and faster if there is money to be made. And there is always money to be made, one way or another. Sadly, treating a disease is always more profitable and easier than curing one.
The only time there is real innovation is when the lives of a significant part of the population are at risk.
The US Moon program is likely the only time in US history when that was not true. And that was not the most efficient undertaking. World Wars tend to provide ample motivation to innovate but only for weapons and spinoffs.
And the reason for my comment about you being a "victim" is here you are complaining about the US again like that's ever going to solve anything. Stop blaming us and our corporations for your problems. You created so many without our assistance, I'm sure you can manage to solve them all without our involvement.
Using our taxes to pay for funding R&D through the state and private colleges is a piss poor "investment" because they won't care about the cost when they are using your tax money.
Corporations deserve to reap some rewards for their efforts and that's where you seem to have a problem. YOU don't think that they should be able to make a profit. The same mindset gets you the problems of Greece.
Pure Socialism/communism does not work and they never will. You eventually run out of other peoples money too soon. If everyone is on the dole, who's left to work and pay taxes? No one, it's a big pyramid scheme. It's the same with using taxes for research.
Who trains these champion innovators, where did they learn to be cutting edge ceramicists or whatever? Some system is needed to keep universities alive and stop the boffins going and working in industry for more money or your next generation of synthetic biologists won't happen. Who do these white-hot businesses collaborate with (clue, not their competitors)? What about the secondary spend into local hi-tech industries? What about the massive shift to commercialisation of IP in universities?
I think the Observer article was more interested in pure research whereas Tim's economic analysis only applies to stuff that is within a few years of being marketable.
The value to a country (*) of performing pure research is that it attracts and then retains people. The best students want to go to the universities doing the most interesting research. Most of those students will eventually get their first jobs in that same country, if not that same area. Companies that want those students may find it convenient, or necessary, to open an office in that area -- so they do.
Various attempts have been made to re-create Silicon Valley in other parts of the world. As far as I know, the only (and only partial) successes have been around universities in the top dozen or so in the world-wide rankings for pure research. Funny, that...
Universities only teach to provide a constant source of new researchers, their primary aim is research and the teaching of people who are not good enough to be researchers is a by product.
If private corporations are taking over research then they can to a large degree take on the teaching of new potential researchers either by doing it directly or by funding students through the newly privatised universities.
is the belief that moar money == Results!
the amount of money funneled in does not magically make physics change or truths to pop out and into Scientist (capital S for a reason) heads. It's what the money supposedly provides-the hardware, the motivation, and the time to create experiments and develop ideas into reality.
More hardware and heads, often becomes more waste. Unless there is a specific, explict need then more money is *detrimental* to results.
Tell us you need xbillion to complete a large ultracollider, with a BOM and estimates for parts, then we'll support your tax. But tell us we just need to grab xbillions for Science In General then you're doing nothing different than any other crony program where some pols decide which of their friends or ideological pet ideas get money, with almost no public oversight. Sounds a lot like that "evil military/industrial complex" with the "black budgets" we were supposed to be so frightened of.
But in the end, give government money to do with what they wish and we all get screwed while a select few gain more power.
Science should never be a religion, tithed for whatever use the Supreme Scientist or Government Official should decide at any time. Nor should it pretend that the transfer of wealth directly produces anything other than a transfer of wealth.
The thing is - more money for science doesn't necessarily mean more money for a few big projects. It could (and probably does) mean funding more small projects. And more scientists researching probably does mean more results. You might be amazed at the hoops that have to be jumped through to get research council funding for research teams at universities. Many applications which people have spent significant time on, (and which describe a specific explicit need) fail - not because they're not decent, but because there isn't enough money to fund all the high-quality projects.
If you want to see what the UK research councils have funded I'm sure you can see at least some of that online.
The BoM for a collider or a space telescope isn't an investment in science - it's a WTO avoiding subsidy to your country's aerospace industry. That's why most of the staff at CERN or ESA are devoted to making sure that Belgian companies get 2.73% of the contracts to match their contribution.
Diverting that money from student place, staff posts, and university depts is what does the damage.
"Once the new knowledge is known then everyone knows it: it's "non-excludable and non-rivalrous" in the jargon."
Don't patents stuff that up, if only for 20 years? Patented IP seems to be a private good to this non-economist. OK, that's why they were created in the first place, to give the inventor a reward, but with the current mania for patenting anything and everything the patent system appears to work against innovation in some cases.
It also completely ignores the fact that the most imporant IP in a company is not the stuff about the basic process knowledge. Its the very specific and very focused knowledge of how to make that process work, affordably, repeatedly, reliably. There is a HELL of a lot of innovation happening at a great number of companies that lots of others could benefit from if only it wasn't considered a company secret by the company in question. I'm sure many fiels of manufacture are held back because some company hasn't released it's methods for achieving some other process that could have been adapted.
No - lack of training stuff that up.
A kid in Somalia can read Einstein's papers online. So there is no need for Somalia to invest in higher education, they obviously have all the info they need to build a nuclear power station.
So Britain can wait for Japanese/Korean/Chinese researches to make a discovery and publish the theory and then British industry can go and hire some school leavers and immediately begin manufacturing room temperature super-conductors? All we need is a single national subscription to Phys Rev Letters ?
The point of public science is to train scientists. So they go and work in industry and make things.
After a wasted PhD in nuclear physics (thanks to the cowardly USSR throwing the towel in) I now work on making a new kind of 3d surgery robot. It's not that I found a paper saying how to build this - but that I had years of training in research and solving problems.
Alex Tabarrok has something called the Tabarrok Curve. Akin to the Laffer Curve.
We want some IP protections in order to make research and innovation profitable. But it mustn't be too strong, over the peak, and deter too much derivative innovation. We're past that peak, well past it, he says.
I was thinking along the same lines. If there's a weakness in Tim's argument, it's the patent process and most especially those business process as opposed to manufacturing process patents. Given those business process patents are a relatively recent development, I suspect a closer study will show they are precisely or at least mostly the cause of the failure to disperse the productivity improvements.
The real argument for science, is that humans cannot improve their existence without it. At all.
The arts make us feel better about ourselves, and that is as laudable a goal as any.
But without the ability to objectively characterise and develop repeatable hypotheses to refine empirical observations, we (humans) are sunk.
The problem is that the funding of science has a tug of war between the research and application missions of various institutions. Let's not forget the ignorance peddling organisations too (pick your favourites).
Generations of ignorant politicians have siphoned away money for things that:
a) sound cool on the news (so it can be sold)
b) where productivity cannot be measured (so no one goes to jail when it fails)
c) to enforce political compliance (so that noone questions why we spend 10x science budgets on debt and weapons)
And no economics is *not* a science. There *might* be scientific value in running experiments, but if it was going to steal any "magic" from a science it would be thermodynamics and statistical mechanics.
That's the way the 19th century scientists built a bridge from the world of things you can't see to the world of the possessions you can see.
And remember, if the dinosaurs had had a space program, we would not be here debating this!!
Perhaps they did have a space program?
Suppose when we first land on Kepler 452 we discover it's populated by billions of Tyrannosaurus (sauri?) Rexes with normal arms who explain that they left all the handicapped short armed ones behind.
... before eating us ...
The dinosaurs _DID_ have a space programme - they had no access to sheet metal, so built their first spacecraft out of stone (much like Fred Flintstone would have done) but unfortunately it didn't go quite as high as predicted, and crashed back to earth with dire consequences ...
That the "horizons" of science have broadened spectacularly in just the last 10 years, let alone the last 100. There could be equal value down the road from studying ecology, manufacturing or genetics. Remember when we had roughly 3 umbrellas for science, Physics, Chemistry and Biology. Those days are gone.
It is true that more money =/= more revolutionary ideas. It does however == more educated people and more specific knowledge. Researchers literally have to prove novelty to be awarded a PhD. It is a fundamental requirement. Whether the specific knowledge directly spawns productivity advancements is quite irrelevant. Eventually it will be required. Who would have thought that etching silicon using photolithography to build transistors would have spawned the internet in advance? From global data connectivity researchers now have even more access to information from further afield.
As a boffin myself, I have to say, what have economists ever given us? What cultural, social and technological value have they added?
I am little more sympathetic to the "what have the economists ever done for us?" (cue the Month Pythonistas!)
The problem is essentially the difference between playing a video game and writing one. Every now and again someone is going to have to hire an artist that does neither (write or play), otherwise it will look awful...
It is not that there is not some measure of objective utility to Economics, it is the fundamental difficulty of creating a political system where that will ever matter.
We cannot have competent people in government because they all have *jobs* outside...
As a boffin myself, I have to say, what have economists ever given us? What cultural, social and technological value have they added?
They've given us ZIRP and NIRP. They've managed to make the unemployment rate go down even while labour participation rates plummet. They can combine trillions of dollars worth of doomed debt-backed securities to make tripple-A assets. They can produce an economic recovery during which wages fall during each quarter and the percentage of 18-34 year-olds living with their parents remains constant at 31%.
As a boffin myself, I have to say, what have economists ever given us? What cultural, social and technological value have they added?
I’m neither a boffin nor an economist so am somewhat lacking a dog in this particular fight.
Lets deal with the economists first… Without economists we’d not have reasonably well defined economic models, such that we know the impact raising & lowering base rates will have, and can predict within a few percent what inflation will be etc. Absent economists, pretty well all political parties would still be peddling the falsehood that they can borrow and spend indefinitely, which is now proven beyond all doubt to be wrong (See Greece for details). This would have led to trashed economies where nobody could fund anything, however worthy or necessary the research. We need economics, better economics than we have now sure, but we need what we have until it can be improved.
Which brings me back to the boffins. It should be obvious to all that research is necessary to improve our understanding of things, which in turn can be leveraged in unpredictable ways to improve our lives. It should equally be obvious that there has to be some sensible limit as to what we as a nation can afford to fund in any given year.
Climate science is ridiculously well funded, and yet not only can it not produce a workable model, but it cannot be used to improve our lives – after the CRU hack the credibility gap is just too large to overcome, such that they’d never get timely traction for their latest predictions of doom. Seriously, how many times has someone announced “One year to save the climate” or some such “tipping point” argument? And how many times have those cries been totally ignored by the vast majority of us? Rationally that should be telling you that we’d be better reassigning that funding to an actual science. In terms of actual science (theorise, experiment, prove, repeat) these guys are no better than economists.
> Climate science is ridiculously well funded, and yet not only can it not produce a workable model, but it cannot be used to improve our lives ...
More importantly, in some areas, "greenwash" may actually be making things worse. While it's not the same thing, the push for renewables is largely down to the warmageddon mongers warnings - so the rise in renewables subsidies* is really down to the political atmosphere driven by the climate scientists.
As far as I can tell, the subsidies paid out (year on year) for unreliable renewables amount to the cost of building a new nuclear power station every 2-3 years. Given that only a couple of new nuclear plants could replace the typical annual output of the windmills, but be able to provide power when it's needed, not just when "the right sort of wind" is blowing, suggests that syphoning all that money off into windmills (which cannot in any way contribute to any requirement to keep the lights on) may not have been a sensible decision.
* Walks like a duck, looks like a duck, quacks like a duck - so therefore it must be a cat. That seems to be the argument by many that the renewables subsidies aren't actually subsidies.
would still be peddling the falsehood that they can borrow and spend indefinitely...
I'm not sure economists have actually managed to prove that. In fact, looking not only at Greece but also the current situation, I'm pretty sure they haven't. Maybe this is more a reflection on politicians and voters than it is on economists, but given Paul Krugman, maybe it isn't.
And yet even with the CRU hack and all their failures, they remain ridiculously well funded. Possibly to the point that they keep me employed fixing their computers even though I tell myself I'm supporting the actual weather parts of the program.
I have to say, what have economists ever given us? What cultural, social and technological value have they added?
The same thing any intellectual discipline gives us: various tools for producing meaning. And since, for all of human history and, to all evidence, before it as well, that has been treated as a good-in-itself, no further judgement is really required.
Beyond that, for specific contributions to modern civilization, you'd have to make arguments from the history of ideas, because economics is rarely instrumental the way the physical sciences are. But the same is true of the arts, religion and other ideologies, philosophy, etc; and anyone who claims those haven't contributed to culture doesn't understand what it is to be human.
I'd be willing to argue that modern civilization couldn't exist without some contributions of economics, because I think some economic theory did influence shifts in economic practice (the European move from feudalism through mercantilism to capitalism, for example), and because simply considering questions of resource allocation in a rigorous fashion is a prerequisite for developing some complex sociopolitical forms.
Keep repeating the mantra that 'economics is a science' often enough and somebody might start to believe it.
Economics is more akin to biography. Or possibly history. Apply labels to phenomena. Describe them. Show historic trends.
Science offers falsifiable hypotheses that can be tested and provide predictions of future outcomes. True predictions that work.
No two economists can agree on any intervention in the economy that works. Oh, except tweak the money supply this way and the bankers will get richer. Move interest rates that way and the bankers will get even richer still. Bankrupt the banks? The bankers still get richer. The real world? Doesn't matter. They're not bankers.
You do need to differentiate between micro and macro economics. The micro stuff is reasonably scientific. While explicitly controlled experiments don't precisely exist, there are sufficiently numerous cases where we know the variables so that the data sets are sufficiently large to be science. The macro stuff not so much.
In fact I'd say the differences between micro and macro economics pretty much mirror the differences between weather and climate studies.
Unfortunately, this term was coined to compare Economics to the arts (at the time known as 'the gay science'), and not to 'hard' science. The term is commonly misunderstood to imply that economics is a science, and it most definitely does not.
Science is the process of making observations, formulating theories, drawing predictions from these, and verifying those predictions. The theories must be consistent with observable facts, have an explainable mechanism, and most importantly, be falsifiable. If you miss just one of these things out, you aren't doing science, you're doing 'magical thinking'. I'm pretty sure that most economic 'theories' are scientific in the same way that I am a multimillionaire. I mean, I bought a lottery ticket, so theoretically...
I think micro-economics probably qualifies as a science by this definition. Many of Tim's articles here are simply applications to real-world problems of the bit of economics that works and it is a great pity that the politicians (including those who got firsts in PPE) often seem to have less grasp of the fundamentals than I do.
OTOH, macro-economics isn't even a thing, as far as I can see. It is "as many things as you have macro-economists". It really ought to have a different name entirely.
Science is the process of making observations, formulating theories, drawing predictions from these, and verifying those predictions. The theories must be consistent with observable facts, have an explainable mechanism, and most importantly, be falsifiable. If you miss just one of these things out, you aren't doing science, you're doing 'magical thinking'.
Completely agree, but could you just explain climate science to me using your framework as described? I can't see any verification of predictions, I can't see any explainable mechanisms, and to my knowledge, none of it is falsifiable.
I'm happy to be educated by the inevitable downvoters as to how climate science fulfills your criteria, because from where I'm sitting it fails just as hard as economics, maybe more so, because at least some economic models function within a repeatable and observable manner - no climate model does.
'Climate science' is a bit of fuzzy term there. Which part do you have a problem with precisely?
Here's a few random points for you anyway...
- measurements of such things as tree rings and ice cores give a reasonable proxy for historical temperature measurement (although this is, of course, local to the tree / glacier in question). This has a scientific aspect - it can be shown that trees grow faster in warm conditions, and ice deposits get thicker faster if there is more snowfall.
- Current measurement of things such as ice coverage and thickness using satellites has a solid basis. Science makes those satellites work, and provides meaningful numbers for things like margin of error in those measurements.
- The infrared absorption spectrum of carbon dioxide (and other greenhouse gases) is based on solid scientific theory, and is observable and reproducible. The fact that it acts as a greenhouse gas is experimentally validated (for instance a container full of CO2 can be observed to heat up under sunlight more quickly than one full of, for instance, nitrogen).
- Climate models are not scientific theories (and do not claim to be). They also do not claim to make precise predictions (journalists, politicians, and industrial lobbyists may make this misleading claim). Any model is, by definition, a simplification (the only truly accurate model for the whole of the Earth's climate would be an entire duplicate of the Sun - Earth system, which would be impossible to model in its entirety in a computer, due to the limitations imposed by information theory). The point is to try to glean some understanding of the underlying physical processes, not to make specific predictions, or match past observations.
Dismal science is a very good name for it. Thomas Carlyle wanted to argue that slavery was just great because we pink people were so much better than those melanin enhanced ones. Economists then pointed out that paid labour was actually more efficient than slave labour.
Thus Carlyle called it the dismal science because its facts meant he didn't get to play out his Mandingo fantasies.
Strange what you can prove with something that just isn't a science, isn't it?
The theories must be consistent with observable facts, have an explainable mechanism, and most importantly, be falsifiable
It's good to know that mid-twentieth-century1 philosophy of science remains strong here in the Reg readership. Fortunately the past several decades haven't seen any innovation in the area at all, so all your Theory of Science 101 curriculum remains completely current.
If you miss just one of these things out, you aren't doing science
Props for the sophomoric rhetorical flourish, though.
1That's being generous and attributing it to Popper. If we go back to Peirce, we're talking more like 1880.
Rather, it's an argument that we want to increase the speed at which the knowledge of how to do cool new things spreads.
The spread of how to do cool new things will be immediately thwarted by a barrage of patents taken out on every sodding detail of that cool new thing and the way to manufacture them. And even when a competitor finds a substantially different way to do a rather similar but still somewhat different cool new thing, there will be lawsuits over how that substantially different way resulting in a rather similar but still somewhat different cool new thing is still effectively the same as the original cool new thing and thus should be banned from sale, worldwide, with the result that there will be a spread of Lamborghinis and Maseratis amongst the lawyers involved, and not much more. And if it's not the original inventor of the cool new thing it will be the World Domination Corp that has just snapped up the Cool New Startup.
Economics is a science like psychology is a science.
In psychology there's a bunch of rules that only work in the narrowest of situations, you get to say important stuff without any proof and you get an excuse to shag your mother and kill your father (or is it just me who thinks Freud was a deviant?).
With economics, exactly the same; definitely someone gets f***ed.
- with regard to your unsupported assertion that economics is a science. I put it to you that economics is a game; it's the non-virtual version of Sim City, in essence. It consists of a set of arbitrary rules subject to change at the whim of a small subset of the particpants in the game (most of whom to quote the saying can't win, can't get ahead of the game and aren't allowed to quit) and is essentially chaotic. It isn't event chaotic in the way that a deterministic system like Newtonian mechanics is (eg:the rotation of Hyperion (Saturn VII) for q simple example - the stability of the planetary orbits in our solar system for a more complex one) as chunks of it are essentially down to individuals betting on each others emotions, which are of course unpredictable.
Economics is a trade, it's accountancy writ large, it can be regarded as a kind of a game, but a science?! That's a laughable conceit, IMO. If you insist that it is a science I want to see your grounds for believing so, not simple assertion of something that so far as I (and many others here, it would seem) can see is patently ludicrous.
spending on R&D and sciencey stuff is good.
Not because you need to know exactly how a up-quark interacts with a higgs boson, but because the scientists charged and funded to research the matter noticed by chance another interaction between sub-atomic particles that means cold fusion is entirely possible......
Science works like that, strange things noticed from leaving dishes to grow mould over the weekend etc etc etc
Science works like that, strange things noticed from leaving dishes to grow mould over the weekend etc etc etc
In fairness, most psychology students could claim that as one of theirs too!
spending on R&D and sciencey stuff is good.
Yes, yes it is. The desire to know more, to understand more, to be more is what seperates us form the other species (that and a love of curry). Scientific research, much like national defence, is one of the things individuals can't easily organise, fund, or coordinate amongst themselves; so I think some level of science/R&D should fit nicely with Mr Warstalls own views on the type of activity the state should be doing. Just perhaps not in the manner the scientist to whom Tim was responding would prefer?
Economics is not a science.
Economics is an Applied Religion (in the sense of applied vs pure mathematics)
With the difference (from maths) that economics - like all religions - comprises a bunch of competing mutually incompatible contradictory unsubstantiable unsubstainable whimsical theories of intellectual self-deceit.
String 'theory' makes no predictions, and is used as a hypothetical explanation for observations. AS such, it is not technically a theory at all, and merely a hypothesis - an important aspect of a scientific theory is that it makes predictions that are falsifiable.
Economic 'theory', on the other hand, can and does make predictions, however, the outcome of those predictions is neither deterministic or reproducible (both also important aspects of a scientific theory).
So, in a way, you are correct; neither is a scientific theory, although for different reasons, so not 'in the same way'. It is also worth noting that string 'theory' could possibly be developed to make testable predictions, as it is not incompatible with actual physical theories, whereas economic 'theory', based upon a non-deterministic aspect of reality (human actions) cannot be adapted to become deterministic.
Serious question for Tim.
Let us suppose for a moment we consider more science to be a public good, in the sense that the more science we do the greater the benefit is likely to be for all human-kind, competitors and collaborators alike, in the long run.
In that case, how does economics suggest we proceed in order to maximise the amount of science done by the human race in toto?
Has anyone tried it? If so, what were the results, compared with other alternative approaches?
>In that case, how does economics suggest we proceed in order to maximise the amount of science done by the human race in toto?
Traditionally having a decent world war
>Has anyone tried it? If so, what were the results, compared with other alternative approaches?
Last time, we got computers, radar, jet engines, nuclear power, rockets, sonar, proper weather forecasting, ocean floor mapping, discover of the jet stream.
Although there were a certain level of inconvenience for many people and quite a lot of mess.
Yeah - not many inventions, and almost none of them applicable in civilian life:
Tanks, machine guns, tactical air support, poison gas, sanitary napkins, sun lamps (yay for rickets!), Daylight Saving Time, tea bags, wristwatches, veggy sausages, the zipper, flamethrowers, tracer bullets, interrupter gear (for shooting through propellers), air traffic control, depth charges, hydrophones, aircraft carriers, drones, mobile x-ray machines, industrial fertiliser, field telephones, blood banks (and effective transfusions), camouflage, protective helmets, submarines, gas masks, hospital hygiene, plus, I'm sure, a huge amount of knowledge gained in dealing with severe physical and mental trauma as it was "produced" on an industrial scale.
In the sense that WWII accelerated the development of a lot of technologies - as opposed to generating new science - I'll pick the development of the aeroplane and related tech (aerial photography, wireless comms) as the big WWI equivalent. Compare a 1914 Bleriot XI to a 1918 Handley Page V/1500.
To show that economics is a generally applicable set of rules, whether that qualifies it as a science or not, let's walk through the basics of climate economics.
Humans are subject to hyperbolic discounting. That is, we value the future less than we rationally should do. Our estimations of the costs (and benefits) of future events seem to go a bit wonky 20-30 years out and further. I link this with our being a species that by long experience (the time is longer now) has generally had about that much adult lifespan to enjoy. We might also link it with Sir Pterry's "grandfather".
Stern and his Review said that they way to counteract this was to use not market interest rates to estimate the future, but much lower rates not subject to that hyperbolic discounting. He's right in theory.
Sir Partha Dasgupta said the theory is right. But the actual rate is far too low. Because, if we accept Stern's rate, then rationally we should be investing up to 98% of current income in investing for the future. On very much the grounds you are thinking about science on. Because we should value the future being richer than we are more than we do, and if we do that at the rate Stern says then that's the amount of our current income which we should be spending on that knowledge that will make the future richer well after we're all in our (paupers') graves.
So, the framework within which economics thinks about this, and climate change is a public good (although when it's not good we call it a negative externality) just as future MOAR SCIENCE is a public good, is what is the discount rate we should be applying to the costs of foregoing current consumption to gain that greater wealth for the future.
98% of current consumption for MOAR SCIENCE won't get past most peoples' bullshit radars even if people seem to accept it for climate science.
Ultimately though it comes down to what you think economics is, normative or positive. Should we be describing what ought to be done or should we be describing what is done? And if we take the positive route (which most economists generally try to do) then we come back to, well, people seem to value future MOAR SCIENCE at rather the interest rates that they view most other things in the future. At market interest rates.
Perhaps, according to some standards, they shouldn't. Maybe that hyperbolic discounting is "wrong" in some manner. But that is how humans act and it is us humans we're trying to maximise the utility of.
Alternatives have been tried: the Soviets spent vastly more as a proportion of current production on science than we ever have done. Pretty spiffy stuff came out of it too. But it was few peoples' definition of the desirable society.
Leading to a weak conclusion: spending on future public goods should be what people will put up with having taken out of their current consumption.
@Tim Worstal - Whilst I can, and do, applaud the attempt to understand what the heck is going on in the thing that is generall called 'the economy' using a combination of maths and psychological hypotheses, the trouble is that it's an ever-changing target due to the ability of a minority of those taking part to change the rules more or less at will (and they can't confidently predict the outcome of their fiddling with the system, a lot of the time).
I put it to you that the root of the problem is that our current economic system presupposes that humans always behave greedily and dishonestly and therefore actively encourages such behaviour (within 'economics', greedy behaviour is seen as 'good'; encouragement of dishonesty follows in its wake), which, of course, means that it encourages fiddling with the system to ones own benefit, and thereby making the whole thing more chaotic than it might otherwise be, thus rendering the study of the economy more of an intractable problem in statistics than a separate science itself.
Further, I put it to you that if a little of the effort put into diddling the current system by economists were instead put into devising a better system that presupposes that humans can act cooperatively and encourages them to do so for mutual benefit, then we MIGHT come up with a better game for us all to collectively play in the name of trying to ensure a fairer distribution of goods.
If there's one thing that apalls me, it's the fact that so many people seem to assume that we came to the end of what's possible in the field of economics once capitalism was created. First barter, then money and capitalism then that's it (aside from the creation of paper, and later digital, money, which simply let the game become ever so more complex and chaotic and changeable on ever smaller timescales). Everything, and I do mean EVERYthing, including so-called 'communism' - since some bod decided that trading using chunks of metal rather than sheep and cows was a good idea - has been, pretty much, diddling with the rules of the SAME game. Let's put some thought into devising a NEW and BETTER game to play with our collective wealth, eh? Followed by, assuming we succeed, trying to work out how we get from our current system to the better one without inducing a major war, if possible.
Not quite right.
What it presupposes is that there exist greedy and dishonest humans who will actively seek to pervert the system and that their perturbations of the systems are likely to be sufficiently large as to overpower the otherwise honest people in the system.
Unfortunately, those greedy and dishonest people have managed to take over the systems originally designed with the thought of keeping them in check.
from the article:
"It's entirely true that rising productivity is what makes us all richer (and average productivity in a society is what determines average wages in that society) and thus we desire rising productivity."
Maybe things are much better in England, but in North America this hasn't been true since the 1970s or maybe the early '80s.
Unfortunately, wages have been stagnant and or negative for about 30 years in the states. That runs from the kitchen help to middle management.
This followed all the "brilliant" advice that corporations got about trade pacts and outsourcing that ruined our economy.
Now CEOs have had vast increases in wages albeit completely undeserved.
It seems to me, then, that rather than throwing money at discovering new things, it would be worthwhile throwing money at investigating and collating information on what new things have been discovered. Instead of testing loads of plants to see what medical effects they may have, trawl through the literature of already-performed research to combine and collate existing research of plant medical effects. I think there was a recent research project doing this with chinese medicine research that pulled all the anecdotes together into coherent, testable information that gave some valuable results.
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