tag:blogger.com,1999:blog-24338064.post5710706547477144589..comments2024-02-11T19:28:27.997+11:00Comments on Personal Reflections: The fall of economicsJim Belshawhttp://www.blogger.com/profile/10075614280789984767noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-24338064.post-85499287142845581982010-06-26T07:11:54.952+10:002010-06-26T07:11:54.952+10:00Hi KVD
There is a definitional problem that we ha...Hi KVD<br /><br />There is a definitional problem that we had to address a long time ago in providing advice on industry structure, conduct and performance in the electronics, aerospace and information industries and inservices in general.<br /><br />The definitions that are conventionally used for things such as investment focus on the physical, the tangible. This flows through into things such as accounting conventions. As defined, this makes it hard to analyse industries where rising capital intensity has little to do with physical capital. However, this doesn't mean that economics cannot be applied.<br /><br />The argument here is to long to put in a comment. Better that I try to articulate it in a post.Jim Belshawhttps://www.blogger.com/profile/10075614280789984767noreply@blogger.comtag:blogger.com,1999:blog-24338064.post-4663905704219285602010-06-25T15:28:42.982+10:002010-06-25T15:28:42.982+10:00Sorry, what a mess!
Just struggling to change my ...Sorry, what a mess!<br /><br />Just struggling to change my mindset from resource, production, distribution, consumption, waste.<br /><br />Unsuccessfully, kvdAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-24338064.post-54371263043011936482010-06-25T14:15:54.302+10:002010-06-25T14:15:54.302+10:00Jim
I’m burying this here so that my ignorance mi...Jim<br /><br />I’m burying this here so that my ignorance might only be on limited display. And I realise that what follows probably both conflates and confuses many issues, but here goes…<br /><br />Your post heading is “The Fall of Economics”, but I think of it more as the “Relevance of Economics”.<br /><br />I understand your past-tense quote “Resources were limited, so economics was also the study of the application of scarce means to alternative ends”, but am wondering how this now can be rephrased/rejigged to cover areas of activity such as the Internet? <br /><br />Here we basically seem to have an abundance of resource, provided by unknown vendors/sellers, to end consumers/purchasers with little or no direct cost for that consumption or even remote connection between the various parties.<br /><br />I know the above words can have specific meanings in specific economic environments, so accept my apology for hijacking them to my use. What I’m trying to get at is the relevance of past economic modes of thought to the way we, as consumers enjoy this resource. I guess what follows are examples of loss-leaders, but if my experiences are multiplied by the multi-millions, daily, surely that adds up to quite extraordinary “loss”?<br /><br />Examples: Recently I “followed” my sister in law around England via Skype. In many areas where 3G access was limited or non-existent, we were able to clearly communicate via Skype over wifi. That is a product employed by us without any specific cost to ourselves – given that internet useage plans are so “generous” and hotspots are available free of charge. In other words I am consuming something for which I pay (I realise) but I am nowhere near fully consuming my monthly allocation. It seems such a waste of resource; at the level of Skype, and at the level of my monthly plan, and by the hotspot provider.<br /><br />Two: In years past, Tom Clancy writes a book, the publisher prints it, I buy it to read and value changes hands along the way. That book will eventually turn to dust, so re-consumption involves re-production and re-supply to newer readers. But now, you produce this web presence, but are unable to be even remotely recompensed for the time involved. And any content you provide is subject to endless copying/duplication without charge, without citation, and without any degradation by its multiple ongoing consumption. How do you relate this sort of human production/consumption activity to economic theory?<br /><br />Just musings as to aptness of “fall” as opposed to “relevance”. Feel free to kick off-line and/or ignore.<br /><br />kvdAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-24338064.post-44655561767151240072010-06-23T11:02:07.216+10:002010-06-23T11:02:07.216+10:00Hi KVD. Have added the link as a postscript. Have ...Hi KVD. Have added the link as a postscript. Have to find my new matilda password to do the second!Jim Belshawhttps://www.blogger.com/profile/10075614280789984767noreply@blogger.comtag:blogger.com,1999:blog-24338064.post-5086762336366157552010-06-22T18:08:48.153+10:002010-06-22T18:08:48.153+10:00Jim
I take your points, and wish to say more abou...Jim<br /><br />I take your points, and wish to say more about your reply, and things generally, but having just now re-read your May 09 post - <br /><br />http://belshaw.blogspot.com/2009/05/saturday-morning-musings-rise-and-fall.html<br /><br /> - I really think you should have incorporated a link to that quite excellent piece in your post today and also forward it to Henderson and/or New Matilda.<br /><br />kvdAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-24338064.post-8009592702176774932010-06-22T17:22:33.747+10:002010-06-22T17:22:33.747+10:00An interesting comment, KVD. It reminded me of a p...An interesting comment, KVD. It reminded me of a post I wrote back in May 2009 Saturday Morning Musings - the rise and fall of economics - after reading Heilbroner - http://belshaw.blogspot.com/2009/05/saturday-morning-musings-rise-and-fall.html<br /><br />H. reminded just how much economic theory was tied up in the circumstances of the time. Indeed, there was a air of pessimism at economics' failure to develop a unified commonly accepted theory.<br /><br />I don't think, in fact, that such a thing is possible. I don't think that I ever did. To the degree that economics attempts to explain and understand economic activity, then it almost definitionally follows that economics will vary with time. Futher, there is almost an inbuilt problem in that economics itself affects the behaviour of the thing studied. <br /><br />This does not mean, however, that economics has not come a long way since Adam Smith. If one things of economics as a process of thinking plus a tool kit, then we clearly have.<br /><br />The difficulty I have with arguments such as Eltham's is that it places an unsupportable weight on the discipline. <br /><br />Of course economics should seek to understand "real" human behaviour. Indeed, there has been a lot of writing on this. But what do we mean by "real' human behaviour? How does it affect the analysis?<br /><br />Again, falsifiable empirical observations is a little bit slippery. All economic models or indeed analysis should be subjectable to empirical test. If it can't be tested in some way, then you have a problem.<br /><br />I do understand where Eltham and the political economy people are coming from. If you look back at the post I wrote in May - Case studies in public administration:http://belshaw.blogspot.com/2010/05/case-studies-in-public-administration.html - one of the key problems that I had to overcome was the mind-lock created by the dominant economic paradigm held in Treasury. There is a lot in the complaints about neo-classical economics.<br /><br />That said, part of my problem with the political economy people is that to some degree they want to substitute one dominant paradigm with another. Indeed, when I look at some of the assumptions built into Helen's current studies, they have actually had a fair bit of success. <br /><br />If we can't have definitive all-encompassing models that explain the world, then what use is economics? Well, if you follow my argument about economics as a form of thought, a way of analysing certain types of human activity, then it provides a structured way of unpacking particular types of problems to determine assumptions and relationships. In turn, this allows testing.Jim Belshawhttps://www.blogger.com/profile/10075614280789984767noreply@blogger.comtag:blogger.com,1999:blog-24338064.post-71342263570884539122010-06-22T15:05:40.396+10:002010-06-22T15:05:40.396+10:00Hello Jim
Very interesting piece, made more so be...Hello Jim<br /><br />Very interesting piece, made more so because of the links, and links and comments within those links. <br /><br />You finished with:<br /><br />“Economics is a discipline. To my mind, the failures in economics have little to do with ideological wars […] the failures in economics lie in the inability of economists to focus on what economics actually means”<br /><br />Over in Henderson’s article, he writes (with approval) in part:<br /><br />“Eltham called for a new economics "that corresponds more closely with the reality it purports to describe, which takes into account real human behaviour and falsifiable empirical observations"”<br /><br />And the very first commenter, links to (I assume) his own blog, in which he quotes RBA Governor Glenn Stevens saying:<br /><br />"I think what we've learnt is something that we knew or should have known all along which is that market economies are characterised by cycles, that human behaviour is driven by alternately greed and fear and that therefore economic systems are occasionally prone to this kind of instability. It's always been that way and it always will be..."<br /><br />I would just like to make the gentle observation that if Adam Smith’s Wealth of Nations is taken as some sort of modern history starting point for this “discipline” then the above two quotes would seem to indicate that not much in the way of progress has been made in the intervening 200+ years.<br /><br />Or is it just that economists are unable to explain in clear terms that which they study and seek; or that they feel their theories must be couched in such simplistic terms?<br /><br />kvdAnonymousnoreply@blogger.com