Should the Fed take over the IMF?

[Yelnoc]

Can we go ahead and ban him from the economics sub-forum?

[ag]

I just don't agree with you! You can run around saying that the behavior is the key condition for econ. And I can run around saying that the math is a key condition

Well, I guess, that's exactly why I had to study econ and math for most of my life: to appreciate the distinction ))

Math is an indispensable tool in econ, of course (in any science, for that matter). It is impossible to even understand most basic modern research in econ without firm grounding in math. If you were to find yourself in my class, you'd, probably, think I am doing math, not econ: I am making abstract mathematical statements and proving theorems most of the time. I am, mostly, a hardcore theorist - I never really work on data, unless I have myself generated them in the lab. But I know enough math (happen to have been a math major in college) to know it is not what I am doing )))

Math, by itself, is just a sequence of logical statements. But the sequence has to start somewhere. In the end, underneath everything, if it is an economic model, there would have to be some theory of how the world is - and, hence, since we study consequences of human actions, a theory of human behavior. MV=PY is an accounting statement: it's not economics on its own. For it to be econ, you have to appreciate what is M, V, P and Y - and, depending on your theory of what humans do, these things will change.

Naive fascination w/ math is not uncommon when people start studying economics. I know where you are coming from: been there, done that myself ))

[ag]

Can we go ahead and ban him from the economics sub-forum?

Whom, opebo? His Lordship is so charming, I would really hate to do that. Just take him w/ some sense of humor.

[Wonkish1]

Well, I guess, that's exactly why I had to study econ and math for most of my life: to appreciate the distinction ))

Math is an indispensable tool in econ, of course (in any science, for that matter). It is impossible to even understand most basic modern research in econ without firm grounding in math. If you were to find yourself in my class, you'd, probably, think I am doing math, not econ: I am making abstract mathematical statements and proving theorems most of the time. I am, mostly, a hardcore theorist - I never really work on data, unless I have myself generated them in the lab. But I know enough math (happen to have been a math major in college) to know it is not what I am doing )))

Math, by itself, is just a sequence of logical statements. But the sequence has to start somewhere. In the end, underneath everything, if it is an economic model, there would have to be some theory of how the world is - and, hence, since we study consequences of human actions, a theory of human behavior. MV=PY is an accounting statement: it's not economics on its own. For it to be econ, you have to appreciate what is M, V, P and Y - and, depending on your theory of what humans do, these things will change.

Naive fascination w/ math is not uncommon when people start studying economics. I know where you are coming from: been there, done that myself ))

The funny thing is depending on how you are exactly looking at it we may be arguing semantics on the topic. Essentially, saying all economics is behavior is like saying that all of physics is matter, motion, force, and energy; okay fine! The understanding that it is the laws of gravity(for instance) that will govern the coming together of two objects and that is a mathematical formula doesn't negate the fact that in order for the formula to work you have to actually have 2 objects of matter. But also doesn't change the fact that without the mathematical formula all you have is 2 objects, no explanation of why they came together, and no subject that is known as physics either.

So if your distinction is that economics is the mathematical study of behavior, markets and trade and that the subject of that study is behavior, markets, and trade but the study of and the laws that govern markets are mathematical then I'll somewhat agree with that distinction.

But if you are coming to the conclusion that all economics is the mathematical rationalization of behavior I very emphatically disagree. At a fundamental level the laws of economics(whether discovered yet or not) govern markets and trade like the laws of gravity and wind resistance acting on a feather descending to the Earth.


Also MV=PY is a governing relationship of the money supply and inflation just like Newtons laws of motion. Would you call Newton's 3 laws of motion not physics? Of course the laws themselves are not matter, energy, motion, or force, but that is why its the *study* of those things not actually *those things.*

[ag]

Also MV=PY is a governing relationship of the money supply and inflation just like Newtons laws of motion.

Well, this just shows two things: you don't understand the meaning of the above expression and you don't understand the Newton's laws, or, for that matter, what are the laws of nature in general.

V, by definition, is equal to PY/M - that's what velocity of money is, so the equation is, by itself, just a definition of V. It's not an experimental observation (like the laws of nature). It's "true" in the abstract, just from definition of V, but it does not, by itself, tell us anything about how the world is. Without further content, it would be perfectly consistent with anything whatsoever happening in the world, even with increase in money supply leading to deflation (if V were decreasing, for instance, or if Y were increasing). By itself, it can't be used to distinguish between the views of yourself and those of opebo )) This equation is not the content of the quantity theory, but, rather, an artifice used to explain it.

PS Obviously, economics is not mathematical justification of human behavior: human behavior needs to mathematical justification. It is an attempt to understand behavior (and its consequences), not the other way around. And, of course, knowing and using math makes that understanding easier.

[Wonkish1]

Also MV=PY is a governing relationship of the money supply and inflation just like Newtons laws of motion.

Well, this just shows two things: you don't understand the meaning of the above expression and you don't understand the Newton's laws, or, for that matter, what are the laws of nature in general.

V, by definition, is equal to PY/M - that's what velocity of money is, so the equation is, by itself, just a definition of V. It's not an experimental observation (like the laws of nature). It's "true" in the abstract, just from definition of V, but it does not, by itself, tell us anything about how the world is. Without further content, it would be perfectly consistent with anything whatsoever happening in the world, even with increase in money supply leading to deflation (if V were decreasing, for instance, or if Y were increasing). By itself, it can't be used to distinguish between the views of yourself and those of opebo )) This equation is not the content of the quantity theory, but, rather, an artifice used to explain it.

PS Obviously, economics is not mathematical justification of human behavior: human behavior needs to mathematical justification. It is an attempt to understand behavior (and its consequences), not the other way around. And, of course, knowing and using math makes that understanding easier.

In this case your just wrong. You provide the formula for defining velocity of money, but the velocity of money also represents the degree of which reserve leveraging has occurred in the economy. An equation can always be set to have a component equal to the rest, but so...! It is a governing relationship and I do understand the laws of nature.

Of course that formula can distinguish the difference between me and Opebo because he doesn't even believe in its existence nor its effects.



Your PS makes absolutely no sense!

[opebo]

Can we go ahead and ban him from the economics sub-forum?

Whom, opebo? His Lordship is so charming, I would really hate to do that. Just take him w/ some sense of humor.

Not to mention I'm the only non-right-winger who posts in there.

[ag]

Can we go ahead and ban him from the economics sub-forum?

Whom, opebo? His Lordship is so charming, I would really hate to do that. Just take him w/ some sense of humor.

Not to mention I'm the only non-right-winger who posts in there.

Well, on that definition the world consists of 7 bln. right-wingers and Your Lordship ))

[opebo]

Not to mention I'm the only non-right-winger who posts in there.

Well, on that definition the world consists of 7 bln. right-wingers and Your Lordship ))

Excessive hyperbole there, ag.  Also fatuous.

[ag]

You provide the formula for defining velocity of money, but the velocity of money also represents the degree of which reserve leveraging has occurred in the economy.

Laws of nature are empirical observations. What non-trivial (i.e., not definitional) empirical observation are you making here? Suppose I were to make a claim that increasing M is bound to increase Y without an effect on prices, how would that contradict your formula?

In fact, is it possible for this formula not to be true in any alternative universe, as long as V, by definition is just PY/M? What observation would falsify it? Now, ask the same questions about Newton's laws, and you will see the difference.

My PS, basically, said that what we are doing, as economists and social scientists, is studying human behavior, not justifying it. What is so non-sensical about it?

[opebo]

Huzzah - now there are four reasonables!

[Tetro Kornbluth]

Also MV=PY is a governing relationship of the money supply and inflation just like Newtons laws of motion.

Well, this just shows two things: you don't understand the meaning of the above expression and you don't understand the Newton's laws, or, for that matter, what are the laws of nature in general.

V, by definition, is equal to PY/M - that's what velocity of money is, so the equation is, by itself, just a definition of V. It's not an experimental observation (like the laws of nature). It's "true" in the abstract, just from definition of V, but it does not, by itself, tell us anything about how the world is. Without further content, it would be perfectly consistent with anything whatsoever happening in the world, even with increase in money supply leading to deflation (if V were decreasing, for instance, or if Y were increasing). By itself, it can't be used to distinguish between the views of yourself and those of opebo )) This equation is not the content of the quantity theory, but, rather, an artifice used to explain it.

PS Obviously, economics is not mathematical justification of human behavior: human behavior needs to mathematical justification. It is an attempt to understand behavior (and its consequences), not the other way around. And, of course, knowing and using math makes that understanding easier.

What complete and utter balls.

(Would you mind showing the "empirical evidence" for this rather amazing claim?)

[ag]

(Would you mind showing the "empirical evidence" for this rather amazing claim?)

Which claim?

[Tetro Kornbluth]

Two claims actually

1-  This

You must be logged in to read this quote.

2 - It's logical consequence - that current economics describes said behaviour (in an empirical fashion)

(Also 3 - How can tell the difference between "describing" behaviour and "justifying" it if all we have go on are believes about "human nature"?)

[Gustaf]

Two claims actually

1-  This

You must be logged in to read this quote.

2 - It's logical consequence - that current economics describes said behaviour (in an empirical fashion)

(Also 3 - How can tell the difference between "describing" behaviour and "justifying" it if all we have go on are believes about "human nature"?)

I've tried to explain this before, but your idea of what economics is seems to be based on some strange prejudices. This is sort of like asking us to prove that the Jews aren't running the banks...

Anyway, 2 doesn't follow logically from 1 at all. Although there is quite a bit of truth to it.

3 I don't get. If we aren't justifying, then we aren't justifying?

[Tetro Kornbluth]

Two claims actually

1-  This

You must be logged in to read this quote.

2 - It's logical consequence - that current economics describes said behaviour (in an empirical fashion)

(Also 3 - How can tell the difference between "describing" behaviour and "justifying" it if all we have go on are believes about "human nature"?)

I've tried to explain this before, but your idea of what economics is seems to be based on some strange prejudices. This is sort of like asking us to prove that the Jews aren't running the banks...

Anyway, 2 doesn't follow logically from 1 at all. Although there is quite a bit of truth to it.

3 I don't get. If we aren't justifying, then we aren't justifying?

Well explain it to me again. The last time it struck me as self-falsifying nonsense.

I agree that logically 2 doesn´t follow 1, I should have been clearer, but if it doesn´t, then what are we studying?

As for 3. By attempting to describe reality how can you be sure that you are not justifying it? (The world is x, therefore y is impossible).

My question can be boiled down to this: Why can we believe that mathematics is a good tool for predicting human behaviour. This should especially be asked given the context that faulty equations and assumptions about risk are partly responsible for the financial crisis which the world is currently going through.

You anti-semite comment is ridiculous.

[Gustaf]

Two claims actually

1-  This

You must be logged in to read this quote.

2 - It's logical consequence - that current economics describes said behaviour (in an empirical fashion)

(Also 3 - How can tell the difference between "describing" behaviour and "justifying" it if all we have go on are believes about "human nature"?)

I've tried to explain this before, but your idea of what economics is seems to be based on some strange prejudices. This is sort of like asking us to prove that the Jews aren't running the banks...

Anyway, 2 doesn't follow logically from 1 at all. Although there is quite a bit of truth to it.

3 I don't get. If we aren't justifying, then we aren't justifying?

Well explain it to me again. The last time it struck me as self-falsifying nonsense.

I agree that logically 2 doesn´t follow 1, I should have been clearer, but if it doesn´t, then what are we studying?

As for 3. By attempting to describe reality how can you be sure that you are not justifying it? (The world is x, therefore y is impossible).

My question can be boiled down to this: Why can we believe that mathematics is a good tool for predicting human behaviour. This should especially be asked given the context that faulty equations and assumptions about risk are partly responsible for the financial crisis which the world is currently going through.

You anti-semite comment is ridiculous.

Well, you're asking us to disprove your ridiculous prejudice about economics which anyone who is studying it knows is not true. It'd be sort of like asking me to prove that I don't have polar bears running down my street in the morning.

Obviously we are attempting to describe reality. If we already were there would be no more economic research done. But few scientific fields are done. Economics has only been around for a couple of centuries as anything resembling scientific inquiry, while, say, physics or mathematics have been at it for millennia. I think economics can tell us a lot about human behaviour, but there is still a lot to do.

I'm still not sure what 3 means. I guess in a postmodern sense, that is trivially true of everything. But it's not as if economic research in general is pro some sort of status quo. You observe a phenomenon (unemployment in a country, donations to charity, growth in countries receiving foreign aid, etc) and you then try and explain that phenomenon.

So, why can we believe that mathematics is a good tool for predicting human behaviour? Well, first off I don't think anyone is saying that. Again, you don't seem to be very familiar with how economic research is conducted. Mathematics doesn't explain why people like to have iPads. It can be used to explain how people liking iPads translates into what price iPads are sold for in the market.

While economists do look at the first issue as well on occassion it isn't typically viewed as within the field (that's more the domainof psychology or sociology, at least historically).

The financial crisis was partly due to mathematical modelling built on faulty assumptions. That doesn't necessarily indict using math to calculate things. Me thinking $10 is enough to buy to lunches costin $6 each isn't proof that one can't use math to calculate what to buy.