Economics

[David]

As we all know, one of the key issues that the last election was fought – and won – on was the economy. Labor was spending too much and generating too much national debt, the Coalition argued; only the Coalition could take back control of the economy and return the budget to surplus.

Like most people, I don't know a lot about economics. I studied it in year 12, but felt like a lot of it went over my head. I suspect a lot of Australians are in the same boat, because despite the constant reminders from international observers that our economy was in a relatively good position, the Coalition took their "debt and deficit disaster" rhetoric to the polls and won handsomely.

If that's the case, than many of us, and likely many of the posters here, are in urgent need of a few basic lessons in economics. I think this article is a good start:

http://www.themonthly.com.au/issue/2015/july/1435672800/richard-denniss/clowns-and-treasurers

[Tannin]

Not a good start. The premise on which you say the election was fought had bugger-all to do with the economy.

[Wokko]

The election was fought on the economy in the Parliament and the newspapers, but the vast majority vote on which leader they like better or on their tribal allegiance to Red or Blue.

[Mugwump]

^ there is plenty to agree with in that article, but it's barely about economics at all. It's about politics, and it's a political article. So, unsurprisingly, some things in it seem true (esp. the excessive largesse of the Howard government and Hockey's premature debt scaremongering when Australia had the lowest debt in the OECD)....and some are pretty poor. For examples :

The fact that BHP borrows for business expansion is not really relevant to the case for government borrowing. They are very different animals.

In economic terms, a new bathroom may confer more utility to its owner than (eg) a share in a new f-18 fighter bomber. The idea that the latter is somehow nobler than the former is fairly debatable, depending on the circumstances. If you draw your income from the public purse, however, as Professor Dennis seems to do, it can be hard to see that.

The translation of "the markets" as "Rich Americans" exchanges one body of politically-soaked error for another. What "the markets" usually means in this context is "people who manage funds that we might want to access". You might like that reality or not, but it is sensible to pay attention to it. Caricaturing your opponent is almost always a sign of weak argument.

[Skids]

Ah... the days of Iron ore fetching $US140/t.

[Nick - Pie Man]

See, I do understand economics, having studied it in the past. So when I read an article that begins like this

[Nick - Pie Man]

Which assumptions are flawed? That resources are scarce? That human wants are unlimited?

[Mugwump]

[David]

I have to confess I'd only read about half of the article when I posted it, and I concede now that some of it does cover some fairly predictable territory. But so many of his 'hits' are so bang-on and so important to point out that I think his anti-Abbott spear-waving can be forgiven.

In short, I genuinely don't believe that Abbott would be prime minister today if the majority of people realised that the Coalition's reputation for good economic management is mostly unjustified and that the "debt and deficit disaster" was phony. That, I think it's fair to say, can be attributed to a failure to understand basic economics, and that's a misunderstanding that desperately needs to be corrected.

[pietillidie]

Why don't you re-do the thread something like this: "When politics pretends to be economics".

There's nothing wrong with the practice of economics. It can do some useful things, and it specialises in creating, interpreting and tracking some important data sets. However, as explained elsewhere, it is very often engineering and management, not science nor anything vaguely like science.

As such, it is frequently thrown at phenomena it has nothing useful to say about. There's nothing wrong with its many thought exercises, either. But you have to understand what it is trying to do to know where its boundaries are. It is the ignorance of those boundaries which is exploited by politics, much as the ignorance of the scientific process is exploited by climate skeptics who pretend Homo sapiens knowledge is digital (yes, we know; no, we don't know).

The gap between first principles, engineering and management is massive, but not obvious, and economics as a field blends them all. The frauds of course pretend they're doing first principles because it sounds so weighty and irrefutable.

The key difference is this: First principles are about identifying stable enough to be relied upon to be universal enough. Seeking first principles is about understanding the mechanics of phenomena. From that perspective, economics is at about the level of social theory.

But most of what "economists" do in reality, i.e., engineering and management, are about achieving certain ends. And achieving certain ends that affect others means taking an a priori position on the right form of those ends. And that is politics and business, not economics.

[pietillidie]

Or, in the words of Sheldon Cooper:

[nomadjack]

[Nick - Pie Man]

[Nick - Pie Man]

That second one - people do decide their priorities. It's a perfectly reasonable assumption to make.

[nomadjack]