i got over a bit of the boredom of yesterday, and also a bit of the anger, after it was put in disarmingly simple terms, that i don't have a problem or anything, i'm just an introvert perhaps.
the spring is here, the sun has been shining, it's st patrick's day and ireland is trashing italy in the RBS six nations, and the pub fills with irish catholic songs. perhaps catholic is an unnecessary adjective, but it is just soo irish if you know what i mean. sounds very soulful, kinda like dirges.
i was arguing about the relevance of economics in the modern world.
if the objection to economics is that it focuses too much on money and self interest, and that a lot of people end up sitting around doing nothing productive, then why the focus on just subjects which have some inherent productive value? clearly production is not the only thing that matters in this world, and a secondary principle could be fulfilling intrinsic human needs such as curiosity.
secondly, the fact that economics only explains common sense principles. i feel a need to distinguish between "science" and "technology". it is obvious to me that an apple should fall from a tree, but it is not obvious to me why. I am unsure if physics even provides an answer to why apples fall from trees, because they are really describing the dynamics and laws which govern the mutual attraction of objects, but given that why is a question of motivation, and trees, apples are the earth are not assumed to have innate free will, we could even ask the creator why a world should be governed by the laws or physics, or why humans would want to find a way to think about and organise their sensory perceptions. physics really isn't the straightforward if you think about its deeper philosophical foundations.
in the same way, just because something happens and is commonplace experience or common sense does not mean that we shouldn't try to explain it or try to figure out where our common sense intuitions fail us, and this is something i've learnt from doing moral philosophy. we all know it's common sense we shouldn't kill people, but why? why do we respect people's rights, or do we not kill them just because we're scared. of course there are many possible answers, but if you arrive at a principle you live by, i guess it will make choices such as abortion (and i just being selfish or do i have a right to choose?) less random. would you kill 1 person to save 5? if not, why don't you donate your own organs to 5 other people?
okay, but then it comes to technology. the offspring of biology, physics and the pure sciences, and we get magnetic resonance scanners, computers, nuclear energy, you know, stuff that really helps people. economics seems to be a dark art in that respect because by nature (on the micro scale it is a question of choice), on the macro scale it involves decisions taken by a large number of people. it has more variables, and it is less certain if economics is useful as a technology-generating science, or rather, a science with a practical bent and application.
i agree that at best, economics can only aspire towards aims such as better organizational or incentive structures, because that is the business that they deal with. they can recommend laws, systems, or ways to keep the system going because ultimately it is about interactions. what successes do they have to claim, given that countries with or without good economists grow have fantastic GDP growth anyway.
but just because we are economists doesn't mean our job is to make everyone produce more, we are not interested in more, we are interested in efficient. efficient, and equilibrium. there are some things which appear to be common sense, but we have had to learn empirically and understand why through a theory. for example, stagflation, and how not to conduct monetary policy. why are interest rates and inflation so stable nowadays? how did we arrive at a regime targeting interest rates, when 25 years ago they were targeting money supply, or letting interest rates fluctuate? isn't the way things are not more stable for lending/borrowing money?
aren't there principles to auction design? individually, people on ebay act irrationally, but when it comes to companies handling deals wirth some $38 billion on more, one can expect some semblance of rationality when it comes to games of auctioning. to me, the notion that the second-highest bid wins given imperfect information produces the optimal auction proceeds is not a self-evident fact which i would have guessed without economics.
whatever derivatives or black arts mergers/acquisitions and stuff do, or whether capitalism is the best system are still questions for economics. do a history in economics course, and economic thinking applies whether you are a marxist or capitalist (although, given that marxism predicted the collapse of world capitalism, it is a discredited theory), again, proved by experiment. the capitalists would have said, "i told you so". i would say derivatives, like insurance, hedge risk, risk that people are generally afraid of. this is not to say that everyone in finance is doing it for the good of the world, no probably not, it is to make more money and you could quesiton why there are so many financial markets. but you would have to examine development economics, and ask yourself, how are countries crippled from growing if they do not have well-developed lending/borrowing or capital raising markets? a lot of what seems obvious (produce, then produce lorh), is not that simple, how are the funds raised, how do people with a bright idea turn it into a reality in some countries but are just oppressed in others?
no-arbitrage is also a very powerful principle, and you just have to see how the prices of budget airlines converge to prices of super-economy on standard airlines on the internet (a perfectly competitive market) to observe it in action. it is the basis of black-scholes and other pricing formulae which people instinctively gravitate to.
i wanted to review the nobel-prize winning ideas for the past 20 years but i will do that in another post.
