Comment by save_ferris | Hacker News Reader

Comment by save_ferris | Hacker News Reader

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The problem I have with economics after reading Debt: The 5000 years by David Graeber[0] (solid read, btw) is that the field was founded on some fundamentally flawed assumptions about its own history. The biggest one being that there's no evidence that a barter economy preceded a cash economy. We've all been taught that this was the case when there's no evidence it was true and there are a lot of unexplained problems with the idea of barter economies (i.e. how were people able to trade items of equitable value regularly, mutual goods exchange mismatch, etc.)

In our lifetimes, economists largely balked at the idea that the housing market could collapse, and then boom, 2008 happens.

I don't necessarily think that the entire field of study is bunk, but our capitalist society tends to prop them up like oracles without much scrutiny because they're the experts, and it's hard to provide a counterweight against that expertise, especially when their philosophy is used to create the vast wealth inequality we see today.

0: https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

Good points, economics as a field certainly has its flaws. Many assumptions of history are also likely made in other fields as well. But even that said, I don't see why the alternatives put forth in "Debt: The first 5000 years" aren't also just that - assumptions...

I'll also just say one thing for the concept of bartering: I don't think bartering requires equitable trade in value. It's just of matter of two people getting what they want. As for an example, my grandfather bartered his land up until 2013 when he died. He owned a farm, but he didn't farm it. Instead he let his neighbor farm it for profit, in exchange for one of his neighbor's cows that we butchered for meat each year. Was this equitable in value? Probably not, but look at it this way: our family received free steaks that lasted us almost a year, every year and it costed us nothing - my grandfather still owned the land and he never planned on farming it. And on the flip side, his neighbor got to grow and sell substantially more crops without having to buy land... (albeit at the minor cost of a cow each year, but was nonetheless was profitable for him)

> In our lifetimes, economists largely balked at the idea that the housing market could collapse, and then boom, 2008 happens.

I don't buy that without citations. Everyone knows housing markets are like most other markets and go both up and down in cycles. Like most other markets, the bigger the boom, the bigger the bust that follows.

To say that a majority of economists believed otherwise seems like pure hyperbole to me.

From an analysis by the Wharton school[0]:

“It’s not just that they missed it, they positively denied that it would happen,” says Wharton finance professor Franklin Allen, arguing that many economists used mathematical models that failed to account for the critical roles that banks and other financial institutions play in the economy. “Even a lot of the central banks in the world use these models,” Allen said. “That’s a large part of the issue. They simply didn’t believe the banks were important.”

They were fundamentally unprepared and many were unwilling to even entertain the idea that the housing market could collapse. That’s what made stories like The Big Short so surreal, they had all these experts telling them that they were wrong, and economists played a major role in that episode.

0: https://knowledge.wharton.upenn.edu/article/why-economists-f...

> But it was the financial institutions that fomented the current crisis, by creating risky products, encouraging excessive borrowing among consumers and engaging in high-risk behavior themselves, like amassing huge positions in mortgage-backed securities, Allen says. <

Which is probably a big reason why many economists weren't watching harder. If the banks are reporting things are fine while incentivizing bad loans on the down low then it's not especially surprising that a data driven field was caught offguard by tainted information.

Obviously no one knew what form it would take, but people were pointing out inflated housing prices[1] and other shady tactics in the mortgage market for YEARS. There's always cranks on TV saying This Time Is Different (2000, anyone?), but its just incorrect to say that serious economists were "unwilling to entertain the idea that the housing market could collapse."

[1] https://www.npr.org/templates/story/story.php?storyId=467926...

That's correct, but it's a far cry from the claim most economists were "unwilling to entertain the idea that the housing market could collapse."

Also 2008 surprised almost everyone, so saying economists couldn't predict it is not much of a slander. Neither could banks, governments, hedge funds, or multiple other groups whose business it was to watch out for events like that.

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