Which ideology is the best at economics?

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Not a bad idea. I think the only long term viable economies are a mixture of market capitalism, some form of regulation to prevent bad behavior which not only stifles the economy but produces wrong and injustice, plus a certain amount of tax supported activity to maintain the public infrastructures. Some type of infrastructure does not lend itself well to the pay for services and goods model. The roads must be for everyone, whether they can afford to use them or not. Water supply and waste disposal must be for everyone whether they can afford it or not. We cannot charge people for the basic water ration to keep them alive and we cannot charge them for taking a dump or a pee. This would soon lead to plague and disease for everyone.

A pure free market economy is not likely to produce a reliable supply of fresh drinkable water for a large population. In England which at one time was the closest thing to market capitalism it was necessary to build sewers in London and Liverpool at public expense (that means it was tax funded). There is no way a pure free market economy is going to lead to adequate sewer systems. The free market can produce individual chemical toilets but the chemical goo still has to be dumped somewhere or recycled. A pure free market is not likely to handle this.

ruveyn

Last edited by ruveyn on 08 Nov 2010, 7:29 am, edited 1 time in total.

I could not agree with you more.

I would further add, that in my view democracy combined with some combination of capitalism and state spending (either structuralist or socialist) is the only form of government that can provably provide long term economic growth.

Governments play a role in proving the business environment, even if that role is to stay out of the way or just to provide roads, but the need to change the government in order to adjust that environment, especially in the case of technological development, means that non-democratic states have great difficulty providing long-term economic growth.

This is in large part due to the fact that the need to change the business environment usually means changing the government (due to factors such as, but not limited to, corruption, political-generation change and simply political entropy) and in countries where the government and the state are the same thing no change can be made with any degree of reliably. In short changing the government means changing the state And this for change is too difficult and for such states to reliably accomplish, without endangering their own mechanisms of retaining power.

No you don't, even at the height of Industrial Revolution, very few outright monopolies exist. The problem is that the only justification for an outright monopoly is efficiency. Winners often don't have sufficient incentive to buy out losers, while entrants often do have sufficient incentive to take down monopolists, particularly given that monopolies, unless they are natural monopolies, will not necessarily have efficiency bonuses, and might have lots of problems with inefficiency. (fact of the matter is that the larger a company is, the more bureaucratic it is, the less innovative it tends to be, and the less it is likely to grow, basically, there's a concept of "economies of scale" that suggests that being too small, and being too large, is inefficient)

Even further, the growth of the economy really doesn't depend upon a particular industry growing. Often there are emerging industries. Often there are changes in the means of production. Occasionally, there are new entrants. Sometimes there are new competitive strategies. Usually, there is new technology, and new technology and new products from that are a huge driver in growth.

Yes, increasing demand during economic downturns is more difficult, but that's part of the nature of a downturn.

1) That's kind of the problem with a lot of social sciences. Social sciences deal with a very complex world where the theories really can't be put to a solid test. I mean, there has been some effort with experimental economics, which has confirmed outcomes, but.... the experiments are sort of artificial.
2) "Philosophical" is not opposed to factual in a grander sense.
3) It really depends on what you call "basic economic theory". A lot of things are partially true.


Urgh....
1) The mathematicization of economics is widely considered to have gone too far. People invest a lot of time into conclusions that are mathematically interesting, but mostly irrelevant.
2) "Did the stimulus have an effect" isn't a matter of mathematical theory so much as statistics, you don't need much mathematics to do statistical comparisons. Even further, given the nature of statistical comparisons, these issues STILL have no freaking answer, as different scholars will say "yes", or "no". And most of the mathematical models they might attempt have "no relationship to reality" and thus are useless for your question. Heck, the fact of the matter is that we have a solid "philosophical" criticism of these macroeconomic models anyway, because do you know what people will do with a model? They'll use it as leverage for their expectations, and in doing so, the model will shift their behavior. This will in turn falsify the actual validity of the model.
3) I will actually admit your point about many specific policies, but not all of them. The ones that can be impacted are mostly going to be ones that have mixed effects. The problem is that a lot of these mixed effects are very difficult empirical questions anyway.

The problem is that most predictions by economists fail in some form or fashion. The best that seems rational is understanding interactions qualitatively, but using math on this chaotic system to predict?? Not even really believable.

That's because you're confused on my meaning. I mean "understanding of economics", not "good policies". One's understanding, which can be considered a fixed asset, sort of like wealth, isn't going to vary based upon external circumstances.

Different types of understanding, however, result in different policies, and different types of policies work better in different situations. No one can ever completely remove their propensity to favors certain types of solutions but the most effective economic understanding would.

The question isn't about which system works the best. The question is about which system has adherents that know the most - or, less optimistically, are least ignorant about - economics.

You can know a lot about something and still not be good at actually doing it, and vice versa.

Statistics is a branch of mathematics. Quantitative comparisons are mathematics.


Fluid flows are chaotic systems. Yet, hydraulic and aeronautical engineers do quite useful quantitative analyses by using appropriate levels of abstraction.

The reason most predictions by economists fail is because most economists get lost in the details, rather than abstracting to the appropriate level.

There's also the fact that most economists don't bother to research boring but critical parameters, such as price sensitivities.

What does "justification" have to do with anything? Monopolies tend to produce an inferior product/service for the cost. Just look at Comcast for example.


Taking down monopolists is easier said than done, especially when monopolies own patents or own non-replicable infrastructure. You also have the problem with technology that requires universal standards and protocols in order to work properly. Allowing for proprietary control over standards and protocols sets the stage for monopolistic abuse. Basically the more complex and interconnected things become (out of necessity on the macro-economic scale) the easier it is for large companies to abuse their position. Also, a strict monopoly isn't even necessary for this kind of abuse to happen. All that's needed is a universal lack of incentive for providing a cheaper/better service in an environment where it's extremely difficult for smaller start-ups to enter the market.


And in the modern world technology can stagnate when government fails to provide incentives and refuses to subsidize research and development towards new technology. I don't buy the idea that research and development and technological advancement will always "just happen" in the private sector if you just stay out of the way and let them accumulate wealth.

Without quantitative analysis it's impossible to determine which of several competing factors is dominant in leading to a statistically observable outcome. If you've ever studied chaotic systems of differential equations you'd know that qualitative intuition can often be misleading.

No, you need more than mere statistics. You need to have some kind of "control" to determine if a policy had a positive, negative, or neutral effect. You can try to use historical statistics as your control, but it's debatable whether a historical control is advantageous over a model as it's unlikely that one will find a good historical analogue for any given event.


However, mathematical models might have as much or more relationship to reality than politically motivated philosophical arguments. There isn't a valid reason why economists shouldn't attempt to construct more realistic models. I'd question the motives of modern economists who outright reject attempts to develop numerical macro-economic models.


This argument has absolutely no bearing as one can test a model on historical statistics. The model has less to do with prediction and more to do with determining how complex causal relationships interact to produce outcomes.

This isn't uniformly true. In the 1960s, for example, the U.S. had a far superior telephone system to pretty much all of the rest of the world. It worked all the time and was of high quality, as compared to other countries' systems that generally only worked some of the time, were of poor quality, and had shortages where it would sometimes take years to get a telephone number, largely due to being government run.

During the industrial revolution, the really problematic monopolies were the railroad monopolies. It wasn't because they provided poor service; it's because they were able to overcharge due to being a monopoly.

Both of those cases were natural monopolies for their time period. Natural monopolies tend to be problematic because they can overcharge, and regulation is often a good solution to that. Predatory practice monopolies often provide poor service or products as you describe, they are rarer, as Awesomelyglorious contends, and they can be limited by antitrust law.

However, the fact that government involvement in the form of regulation or antitrust law can be useful does not mean that government ownership or management is good; often that is the worst of all solutions.

Did technology stagnate when desk top and portable computers were developed with zero input from the government. These were computers developed by wunderkind in their garages. They didn't need no steeeenking government investment.

ruveyn

Umm.... yes, I know. The issue is that statistics isn't the same kind of elaborate system-building we've seen from neoclassical economists.


They also have a lot of ability to experiment, even to really know the initial data well. Economists really don't.


No, it is really because there isn't enough data to actually make good predictions, the economy at each point in time is rather different, even further, if a good prediction existed, it would be exploited to the point where it could no longer work.


Most intro textbooks actually have a table of price sensitivities.

"justification" means, that's one of the few ways a monopoly can often come about. It is difficult otherwise.

As for "inferior", the issue is really one of comparison, as a natural monopoly is still going to be more efficient than a more competitive market, as the good can't have more competitors. If the good could, then why wouldn't people make an effort?


There is some degree of this, however, this is also something that holds back monopolies, and in most cases, total monopolies just don't ever happen. I suppose there are cases of less competitive industries due to the problems you put forward, but at the same time, I doubt that a lot of these problems are outright insurmountable. It is certainly true that Microsoft, the company that inspired this:
1) Is not an utterly evil monster.
2) Does actually have competition with many of its products, the biggest area being in its internet browser.


Ok, I don't buy the idea that they won't "just happen" if let them accumulate wealth. That being said, this wasn't your point. You were arguing that monopolization prevented growth, not that governmental subsidies were necessary for growth.

It isn't necessarily more efficient. Once one has a monopoly much of the incentive to lower costs and provide a better service is gone. Competition in the form of new start-ups may eventually come, but it's rarely an instantaneous process. For the reasons I gave in my previous post it can be very difficult and it can take many years. In the mean time the consumer suffers.


No. All the things I mentioned tend to limit the prospects for consumer choice and thus limit competition. Also, you don't even need to have total monopolies for quasi-extortionary situations to exist. This is especially true for products/services with universal demand, like healthcare.


Even if they aren't insurmountable, it doesn't mean there isn't a problem. There are holes in the idea that the "invisible hand" of the free market will instantly equilibrate these problems away as so many liassez-faire libertarians like to claim.


This is off topic so I'm not really going to argue it other than to say that simply letting rich folks accumulate more wealth doesn't necessarily lead to innovation or development. This is a major contention of mine where I feel the right is full of crap.