Yep. Sadly, these sorts of critiques are often just a thinly-veiled attempt to reject any sort of scientific approach to economics, and instead just replace it foundationally with something that's more amenable to the author's ideological priors.
If you come up with a new working paradigm to predict macroeconomic variables, and you manage to use it to great practical success, the discipline is not going to freeze you out of publishing or whatever. You can precipitate a scientific revolution.
Of course, the vast majority of critics aren't even pretending they can do this. Instead they'll attack the status quo without having anything better to offer, as if showing the flaws of a theory provide rhetorical justification for believing whatever you want. It's like a secular version of the "god in the gaps" argument.
Yeah - it is telling that economics criticism rarely includes any alternative model and if it does tends to be meaningless feel-good inane fluff like "Gross Happiness Product". The same sort of woo as "alternative medicine" calling working medicine allopathic as a slur. What do they call economics which actually work more or less? Neoliberalism.
The reoccurring criticisms of GDP are fundamentally clueless as complaining that gasoline poisons you when you drink it, therefore energy density per volume or mass is invalid. GDP is still power but the things they complain about are applications. The whole point of trade is that you can convert funds from like gold or tourism to tractors and medicine.
Frankly they tend to be childish tantrums calling economists evil for not reflecting their sacred imperatives of how they believe the world should be.
"rarely includes any alternative model"? Did you read the piece?
Here is the alternative model proposed by Skidelsky:
"These deep methodological issues do not render economic knowledge utterly useless, Skidelsky suggests. But they do mean economics as we know it may have to be thrown out. [...] We should instead take a more provisional, open, and flexible attitude toward economic phenomena and treat economics as (just) another social science, rather than one supposedly purified of uncertainty by its logical prowess. Concretely, this means we should abandon dreams of an immaculate science of economic life—and stop deferring to those who claim to speak in its name. More abstractly, in place of a discipline that neglects the 'mesoeconomic' level—the institutions, firms, unions, banking systems, social movements, digital platforms, states, and other social entities that shape our behavior—Skidelsky proposes an approach 'which is more modest in its epistemology and richer in its ontology.'"
That's not an alternative model. And by that, I don't mean it doesn't have enough math, what I mean is that it doesn't offer any different methodology for improving our knowledge of the economy. All of the things listed here can be included in the current framework of economic theory. There's no alternative being put forth here.
It's not just density, many books are pure nonsense. So 200 books of pure nonsense a year won't teach you much. They'll just introduce you to a ton of terrible ideas.
Hey, that's how AI's learn as well. Reading up all the nonsense indiscriminately and making no effort to make the ideas consistent. But it's better than not reading because you get exposed to a larger variety of text so you can draw upon them when it's time to get creative.
This is nothing new. Molten salt ideas have been around 30+ years and there are projects in Spain and other countries that tested them on small scale. The economics is still poor.
I remember thinking $50k was an awesome salary when I first started working. Now I think "damn how do families survive off that kind of household income" after seeing essential goods and services cost roughly 1.5x what they were pre stimulus.
Median household income has gone up. It's currently the highest it's ever been in real terms. Households are better off today then they have ever been in their day-to-day affordability of goods.
You also can't cherry-pick a handful of things that have gone up a lot and then assume that it applies to everything. Some things have gone up in price, others haven't. Inflation is sitting at about 6%, which after a decade+ of sub-2% might seem like such a shock, but it isn't really a big deal.
Real wages have been stagnant since 1970s in the US. Median household incomes have only gone up because some people work in highly paid industries, like IT, plus household incomes include income from stocks and real estate AND most households now are two working adults.
Average hourly wage near me is like $12/hr. That's basically 50k in a 2 adult household. If anyone is projecting it's you thinking everyone has a middle class job...
It's not an indicator problem, it's a problem of people trying to time markets. Also, there are two ways to use the Buffet Indicator - right and wrong. The wrong way is to say 'it's overvalued, I should do something - short the market'. The right way is 'it's overvalues, I should avoid doing something - buying overvalued stocks'.
Buffett has been sitting on piles of cash in the past for years and years, avoiding buying securities when they are overvalued. He never tried timing the market, simply waiting for the right moment. Nor did he sell stocks when they were overvalued in order to try to buy them back at a lower cost at least AFAIK from reading his biographies. So, for a value investor, it's a useful tool.
> sitting on piles of cash in the past for years and years, avoiding buying securities when they are overvalued. He never tried timing the market, simply waiting for the right moment.
It’s not quite clear what you’re trying to say here, because if you popped into a newbie investment forum and said you were sitting on a pile of cash that you were avoiding investing because the market was overvalued, you’d be told that is the literal classic “trying to time the market” move.
Buffett obviously is a sophisticated investor who knows what he’s doing but if your description is right this is absolutely still him timing the market. Timing the market isn’t just when you try to pick the day that’s lowest, it’s still timing the market if you are picking the month or year that is lowest.
One note about idolising Buffet in modern times is that it seems to me any strategy Buffet used to employ is outdated.
Any simple metrics, or indicators you can think of are already priced in by algorithms so the only possibility to gain an edge would be to have some very specific niche knowledge or inside information, or you must have even better algorithm that considers more variables.
Any success not stemming from those things can't really be attributed to anything else than luck.
I'd argue, Buffet even if young, couldn't do the same today, that he did in the past.
If there's a successful pattern discovered it will be used until there won't be any more profits available from being able to read this pattern. And these patterns get more and more complicated as time goes on, for an hobbyist investor there's absolutely no way, to do some technical analysis and find a profitable idea.
The denizens of the investor forum would be wrong; it isn't trying to time the market. This strategy is simply valuing the stocks.
The problem with the plan is that holding piles of cash is a game for losers; you need the money to be in some sort of asset - it matters not what - to avoid the printers of the central banks. There is a real chance that stock prices never come down as much as everything else goes up.
As a sole investor you can't in modern day value stocks more accurately than their current market cap.
Any difference in valuation you come up with compared to the market cap would simply mean that there's something missing in your calculations that makes up the difference, as the stock and its market cap is coming from thousands of times more complicated methods for valuing the stock than whatever few metrics you were able to consider.
Essentially by using some sort of method to value a stock, you can only fool yourself to think that you know what you are doing and are skilled beyond luck. Because you are competing against institutions with state of the art tools, researchers and experience.
> Any difference in valuation you come up with compared to the market cap would simply mean that there's something missing in your calculations that makes up the difference
Not necessarily, can also mean that your circumstances are different from the large traders. Value is relative to your net worth, status RE the tax system, risk tolerance and current allocation. So it is not only possible but likely that the large traders have a valuation that is correct for them and wrong for you as a small market participant.
Besides, if all assets are - in some sense - equal then any inane strategy that involves buying assets is equivalent to any other and just dumping all the cash into any basket of assets is workable. So people could probably buy just assets they like and expect an equivalent return to everyone else. If that logic holds.
> people could probably buy just assets they like and expect an equivalent return to everyone else
That's pretty much true. Although risk and volatility does differ from asset to asset. So as a lone investor you can decide how much you are willing to risk to get better returns.
I firmly believe that you should just invest on a fixed schedule. Every month, every year, whatever. And if you see a significant drawdown in between those periods you can buy in before the next scheduled buying time.
But never get scared from investing when stocks are too high - this strategy works one way because you should always be long the market.
> The denizens of the investor forum would be wrong; it isn't trying to time the market. This strategy is simply valuing the stocks.
trying to pick the stocks that are least overvalued is great and everyone should be doing it all the time. (assuming you are investing in individual stocks and not index funds)
the problem comes when you say "everything is overvalued so i'll sit in cash until the market is less overvalued" and yes that's timing the market.
> The problem with the plan is that holding piles of cash is a game for losers; you need the money to be in some sort of asset - it matters not what - to avoid the printers of the central banks. There is a real chance that stock prices never come down as much as everything else goes up.
yes, you've identified the central problem with timing the market, this is precisely why it's a bad idea in general.
As others are saying: if you accept the efficient market hypothesis then your guesses are inherently no better than random chance, unless you somehow have unique insight that nobody else in the market has. Otherwise if you've successfully identified a trading strategy that worked, it would be exploited until there was no longer any value there, and the market returns to "no better than random chance".
(there's the old joke: an economist and his friend are walking down the sidewalk. The friend spots a bill laying on the ground and says "look, a hundred dollar bill!" and bends down to pick it up. But the economist keeps walking, saying "of course it can't be, if it was then somebody would have picked it up already." It's a meme but in a macro sense it's true, there are small pockets of alpha that can be exploited on a small scale but in the macro sense the market is as efficient as it can be and everybody else is just as aware as you that "the market seems overvalued right now" too.)
Therefore the best strategy is to dollar-cost-average across some span of time and accept that you may have missed a percent here or there but that the market is generally going up by more than you missed - and that you also may have timed it poorly and cost yourself a percent or two as well.
Timing the market means you are predicting when something is going to happen, ie, has elements of time involved.
Valuing an asset and then not buying when it is expensive is a completely different activity. It involves no prediction on how long it will be before the price corrects relative to value.
> He never tried timing the market, simply waiting for the right moment.
That's the same thing. Whether you are staying out or buying in, both are trying to time markets. Avoiding doing something is also an action.
In fact historically by staying out because you think something is overvalued has been shown to be outperformed by constantly putting in to the market whatever you can.
Well, when each country does that it becomes economically unfeasible. Such fines work and work very well, once FB realizes that they lose more money from unethical behavior than they make, they'll stop it. I don't believe that any corporation is evil. I do believe that there are temptations to do bad things in order to make money, even if short term. This corrects such behavior. Hopefully.
Please provide any proof they work at all. Facebook has been fined larger amounts previously and continues to receive more fines for violations of user privacy. I would say there is currently very strong proof in the real world against what you’re assuming is true. Until a fine is ~10% of their stock value they won’t even consider it. This might as well be free for Facebook.
Did you study the work of Ralph Nader and the auto industry? Or the history of tobacco industry? There are multiple examples when it worked in the past. I am quite confident that when abuse goes too far, the pushback is even bigger. I just don't want to oversimplify the issue and say that any big corporation or any IT giant is bad by nature. It's growing pains in my book.
Yeah I know all about Nader. What you’re talking about took decades of fines after those companies lobbied endlessly to avoid blame. I think you just supported my argument. Big tobacco companies literally couldn’t be fined enough to make a difference for 60+ years. I’d guess sunshine is more correlated than fines to preventing large corporations from doing awful things. I’m not sure why you’re shilling the opposite.
Even if we assume Facebook's leadership makes perfectly rational decisions, the reasons behind their unyielding behavior could very well be non-financial - saving face, internal office politics, standing ground hoping the push from the regulators will fizzle out, waiting for legal loopholes to be discovered, or simply feeling of "we know better"
It's kind of strange to compare companies strictly based on their valuation. Saudi Aramco valuation today is higher than that of Apple but these are very different companies and I wouldn't claim that one is better than the other.
It's also strange to compare two economies that have vastly different economic strategies, especially by measuring one of the areas where they diverge most strongly.
Are we comparing, country, population, size of region?
We often compare USA with China, but when it comes to european countries, it has to be EU?
This is an honest question, I couldn't care less about either region or gain anything financially or care about emotional internet points. I am not rooting for anyone, though I think predominantly western centric super powers is a bad idea.
But why this line of thinking and comparison, isn't it apple to oranges? Its a genuine question, despite being downvoted for whatever reason.
I feel it would be apples and oranges to compare (sub-)continent spanning multi-ethnic countries like the USA or China with individual EU countries. The point of the EU is to form one economical union. Sure there's still deficits in unification on other fronts, but economically the EU is pretty much one uniform bloc of comparable size.
There are so many other trading blocs out there, why not compare them? Eu itself has some of the largest economies of the world. It does seem almost unfair.
China's large size and huge population not necessarily an automatic recipe for success. As a matter of fact, other than USA, almost of all large countries with huge population are generally economic and quality of life failures.
On the top of my minds I can think of, Russia, India, Brazil, Pakistan, Mexico all doing pretty shitty job, relatively speaking.
I don’t think so. The EU is, as you say, an economic union and is considered the largest economy in the world (last time I checked, which has been awhile tbh.)
It wouldn’t make sense to compare individual European nations to China.
Though coronavirus is very different in many respects, it's worthwhile (especially if you are older like me) to remember the history of AIDS. We've learned to live with it and limit its spread very effectively in the western world.
HIV deaths were 348k in 1990 (which is the earliest year I found stats for on a quick googling). Around 4m people died from covid over the past year. We definitely would not want covid's mortality trajectory to follow HIV's, which peaked at 1.95 million, a 5.5x multiple of 1990's figure.
That's comparing apples and oranges because you're comparing the effectiveness of a particular treatment (condoms) with the effectiveness of a particular policy (mask mandates).
Do you need a study to understand that a latex condom can catch infected seminal fluids while a cloth mask cannot stop the spread of droplets, or aerosols containing covid?
A cloth mask does reduce the spread of aerlsols as well as droplets. Anything telling you otherwise is false and i will happily bury you in a dozen backing studies.
No it doesn't. The last year and a half is proof that masks played no significant role in reduction of infections. Bringing all kinds of studies doesn't prove anything since we effectively had the chance to witnesss the biggest study of all. Sure, it might stop some droplets. But a mask can never be as effective as a condom in stopping the virus. It s common sense. You can still infect or get infected. And that s the issue.
AIDS never spread broadly among heterosexuals who did not share needles or have partners who are bisexual or shared needles. Everyone is at risk for covid, like the flu.
Spoken like someone whose knowledge of the world ends at the US border. Hate to be the bearer of unpleasant news, but there are parts of the world where HIV was mostly a heterosexual disease. The nature of the main infected population depended upon how HIV was first introduced a country and what cultural behaviors helped or hindered its spread.
Even in Eastern Europe currently most HIV transmissions happen with heterosexuals. I was surprised to learn that in the Western countries it is mostly spread by MSM (men having sex with men) and IDU (intravenous drug use).
This certainly was not the experience of other countries such as South Africa where the majority of transfer (roughly 80%) was via heterosexual transfer.
There's huge inflation in many things related to making cars (chips, steel, shipping costs as many cars are still being shipped across the ocean, labor costs, etc.). We are likely to be in the very beginning of significant inflation cycle, with probably double digit inflation which will eventually drop to 4-4.5%. I wouldn't expect to prices to drop any time soon, nor have 2% inflation. My bet is that fewer and fewer new cars will be sold in the next few years (3-5) with prices rising 4-10% each year.
It's not just cars, the prices are rising across the board (not evenly), so we have pretty high inflation if you add in the items official estimates excluded.
