Economics Courses in Song and Story, and How to Inoculate Oneself.

Miscellaneous General
1

Dave has written lately about the toxic effect a mainstream economice course has on the brain.

I’ve described the slippery slope to madness here: https://forum.freecapitalists.org/t/the-path-from-being-austrian-to-being-keynesian/26018

I’ve elaborated on why these courses are useless here: https://forum.freecapitalists.org/t/what-college-econ-courses-have-you-taken/26076/16

Now is the time to help save the unfortunate who are stuck in these courses from losing their minds. But first, I want to point out that the great poets and thinkers have long understood what these courses are about.

Bob Dylan: Your useless and pointless knowledge. Obviously, a reference to an economics course.

Steely Dan:

You wouldn’t know a diamond
If you held it in your hand
The things you think are precious
I can’t understand.

A reference to mainstream economics love of fiat money, unbacked by gold or diamonds

You been tellin’ me you’re a genius
Since you were seventeen
In all the time I’ve known you
I still don’t know what you mean

Steely Dan is talking here about a child prodigy taking economics courses, one who is rather full of himself.

The weekend at the college
Didn’t turn out like you planned
The things that pass for knowledge
I can’t understand

Obvious.

Goethe, too, in Faust, describes in detail an economics major about to sell his soul to the Devil:

Scene I: Night

(In a high-vaulted Gothic chamber, Faust, in a chair at his desk, restless.)

Ah! Now I’ve done Economics,

I’ve finished Macro and Micro, 355

And sadly even Econometrics:

Taken fierce pains, from end to end.

Now here I am, a fool for sure!

No wiser than I was before:

Note that, unlike Steely Dan’s deluded friend, Faust gets it.

He knows that he has wasted his best years studying baloney.

Master, Doctor’s what they call me, 360

And I’ve been ten years, already,

Crosswise, arcing, to and fro,

Leading my students by the nose,

And see that we can know - nothing!

He got his degree, his tenure, his worshipping students, but he knows he is a big fake.

It almost sets my heart burning. 365

I’m cleverer than all these teachers,

Doctors, Masters, scribes, preachers:

I’m not plagued by doubt or scruple,

Nor is he plagued by humility, it seems.

Scared by neither Hell nor Devil –

Instead all Joy is snatched away, 370

What’s worth knowing, I can’t say,

I can’t say what I should teach

To make men better or convert each.

Bingo!

He admits that all the mainstream eco has driven Austrian Economics completely out of his system.

He forgot all of it.

And then I’ve neither goods nor gold,

No worldly honour, or splendour hold: 375

Not even a dog would play this part!

The fiat money and the bitcoins he relied on have lost all value in those ten years.

To be continued.

2

Finally we Hermann Hesse’s full length novel, The Glass Bead Game, for which he won a Nobel Prize, describing a syllabus in mainstream economics. We cannot quote it in full, but instead let wikipedia do the talking:

The Glass Bead Game takes place at an unspecified date, centuries into the future. Hesse suggested that he imagined the book’s narrator writing around the start of the 25th century.[2] The setting is a fictional province of central Europe called Castalia, reserved by po**litical decision for the life of the mind; technology and economic life are kept to a strict minimum.

In other words, the econ courses are taught to people who will have little to no real world experience. Certainly they have not actually run a business. It was a political decision to isolate them from reality.

Castalia is home to an austere order of intellectuals with a twofold mission: to run boarding schools for boys, and to nurture and play the Glass Bead Game, whose exact nature remains elusive and whose devotees occupy a special school within Castalia known as Waldzell.

The boarding school for underaged boys is a veiled reference to Keynes’s well known dark side. The econ majors have to be isolated not only from the outside world, but from the rest of the student body, lest they find out what real science looks like.

The rules of the game are only alluded to, and are so sophisticated that they are not easy to imagine. Playing the game well requires years of hard study of …mathematics…Essentially the game…proceeds by players making deep connections between seemingly unrelated topics.

Sound familiar?

One day Joseph Knecht, the smartest guy they have, wakes up and gets it:

As the novel progresses, Knecht begins to question his loyalty to the order; he gradually comes to doubt that the intellectually gifted have a right to withdraw from life’s big problems.

As Mises said, economics is all about predicting the future and knowing what to do about it. All the mainstream econ courses Knecht took either don’t bother with that stuff [econometrics], or get it completely wrong [macro].

Knecht comes to see Castalia as a kind of ivory tower, an ethereal protected community, devoted to pure intellectual pursuits but oblivious to the problems posed by life outside its borders.

Econometrics to a T.

Knecht wakes up, dumps the whole thing, starts spreading the truth:

Knecht does the unthinkable: he resigns as Magister Ludi [top dog] and asks to leave the order, ostensibly to become of value and service to the larger culture. The heads of the order deny his request to leave, but Knecht departs Castalia anyway, initially taking a job as a tutor to his childhood friend Designori’s energetic and strong-willed son, Neodoxy.

But the CIA was onto him:

Only a few days later, the story ends abruptly with Knecht drowning in a mountain lake…

Next post, how to save yourself from this tragic death.

Menger contra Mises on economics predicting the future and telling people what to do?
3

In tears, people have approached Smiling Dave asking for help.

“I have to take these courses, Dave. How can I prevent my brain from melting into a pool of slush?”

Always tender of heart, Dave was touched by these heartrending appeals. He spent many sleepless nights pondering the problem, and casting about for solutions. Finally, he came up with something Joseph Knecht would be proud of.

But the fingers tire. Next time.

4

Here is the cure. Just read this http://www.amazon.com/How-Economy-Grows-Why-Crashes/dp/047052670X/ref=sr_1_1?s=books&ie=UTF8&qid=1365099226&sr=1-1&keywords=how+an+economy+grows+and+why+it+crashes

And this

http://freedom-school.com/money/how-an-economy-grows.pdf

5

“In other words, the econ courses are taught to people who will have little to no real world experience. Certainly they have not actually run a business. It was a political decision to isolate them from reality.”

This is extremely bad criteria. Apart from being irrelevant and an ad hominem attack, many business people, quite understandably, have no actual clue how the economy is run. They might have a better job of what they were exposed to, which is actually having a specific job and working in specific conditions, but that does not mean that they are at all familiar with basic economic concepts, and I think that a discussion with the working, or businessman will reveal this to be perfectly true. Great businesspeople like Donald Trump and Warren Buffet clearly have no god damn clue how an economy works on a very large level. Indeed looking at things from an extremely anecdotal and constrained perspective may well blind individuals to the real truth of matters.

Furthermore your own idols; Menger, Mises, Hayek, Rothbard and probably many others were highly intellectual in their work. I don’t know if Mises and Rothbard ever had a real job that didn’t come under something like “author”, although I suppose that Mises once classified as “soldier”, which I don’t think makes him any more qualified to write on economic issues. Meanwhile Menger’s only job I know of that wasn’t a professorship was working for the government, and none of them ever started a business.

So why is it that pure intellectualization necessarily means economic isolation, and why would the working man be any less prone to these beliefs were he exposed to them?

This seems like an awfully pretentious and judgmental thread coming from someone with such a humble blog and no actual experience within an economics classroom.

6

…many business people, quite understandably, have no actual clue how the economy is run.

That’s like proving being 7 foot tall does not help you play basketball, because many seven footers are slow and clumsy and will never have a clue how to play.

I don’t know if Mises and Rothbard ever had a real job…Menger’s only job I know of…

Now you are arguing that many basketball players have made it witout being seven foot tall.

Summing up, you argue as follows

  1. Many seven footers are terrible basketball players.

  2. Many great basketball players are not seven foot tall.

  3. Conclusion: Being seven foot tall is not an advantage to a basketball player.

It looks so so logically convincing, but it’s obviously wrong in reality. Where is the error? Hint: “Essential”, “Guarantee of Success”, and “Very helpful” are three different things.

This seems like an awfully pretentious and judgmental thread…

I get that from Scientologists, too, when I mock them.

7

Here it is, what everyone has been eagerly waiting for, Smiling Dave’s prescription for breaking the chains. I quote directly from my humble blog:

In tears, people have approached Smiling Dave asking for help.

“I have to take these courses, Dave. How can I prevent my brain from melting into a pool of slush?”

Always tender of heart, Dave was touched by these heartrending appeals. He spent many sleepless nights pondering the problem, and casting about for solutions. Finally, he came up with something Joseph Knecht would be proud of.

What is the magical hold econ classes have on the mind? I see two things. First, a supposedly wiser authority figure is up there at the head of the class, mocking anyone who disagrees with him. Second, you have invested so much time and effort in passing the course, it hurts to admit that it was all a huge waste of time and money.

My advice: Think of all the time and money you have wasted playing video games, losing yourself in an imaginary world, a video game authority figure telling you the rules, like the phony Wizard in the Wizard of Oz. You didn’t come away from your WOW session thinking it is real, right? It was a way to pass the time and spend your money.

So think of your econ classes as video games, and your prof as the phony Wizard of Oz. This will release their grip on your thinking.

And who should walk in but Devil’s Advocate. What is it, DA?

DA: Smiling Dave, video games only set be back a few hundred bucks, all told. My college education is putting me a hundred grand in debt. And the Wizard of Oz can’t do anything to me, but my prof can fail me.

SD: Devil’s A., you are right. In your case, I suggest you throw good money after bad and ruin not only your financial situation, but your reasoning powers as well.

DA: Thanks, Dave. You had me worried there for a while.

8

Why does being a working person make you more likely to be good at economics? I’m sure that in overall numbers the number of working people who have thought about economics or taking “an interest” in it (I.E fool’s politics) is higher or at least the same as intellectuals in general, yet it would seem that a much higher percentage of intellectuals in general have the same percentage of people you “like” among them. So why does being a working man make you any more likely to understand good economics in this case. It would seem at most to be generally irrelevant.

And going with your first analogy, you’re nonetheless mocking non-seven foot basketball players, while none of your favorite basketball players were seven foot.

“I get that from Scientologists, too, when I mock them.”

That’s nice.

“First, a supposedly wiser authority figure is up there at the head of the class, mocking anyone who disagrees with him.”

"DA: Smiling Dave, video games only set be back a few hundred bucks, all told. My college education is putting me a hundred grand in debt. And the Wizard of Oz can’t do anything to me, but my prof can fail me.

SD: Devil’s A., you are right. In your case, I suggest you throw good money after bad and ruin not only your financial situation, but your reasoning powers as well."

260×194 5.4 KB

… Just no words.

9

Businessman, not working person. The way you put it, you are asking:

  1. A lot of dumb people are interested in economics, and a much lesser amount of smart people.

  2. And yet more smart people understand economics than dumb ones. Doesn’t that prove something?

Economics is the study of businesses. But you don’t see how experience running a business might help someone understand economics. You’re on your own, here, Neo.

10

"1. A lot of dumb people are interested in economics, and a much lesser amount of smart people.

  1. And yet more smart people understand economics than dumb ones. Doesn’t that prove something"

That’s implying that intellectuals are more likely to be smart and smart people are more likely to agree with you. Therefore your original point is utterly irrelevant.

“Economics is the study of businesses. But you don’t see how experience running a business might help someone understand economics. You’re on your own, here, Neo.”

Economics in the Misesian tradition focuses very little on singular firms and much more about firms in general, specific markets, and more importantly the effects of this on society as a whole. Beyond a few basic things like firms are profit maximizing, firms produce until MC=MR, and firms try to work in economies of scale, very few things about traditional economic theory actually apply, indeed mainstream economics probably has a lot more to say about these things. Working within a single firm gives one the most micro of the micro points of view, and one that can prevent them from understanding the traditional simplifying assumptions used by people like Mises. Oftentimes it can also lead to a belief in the need for protectionism in order to protect 'merican jobs and industry.

11

And going with your first analogy, you’re nonetheless mocking non-seven foot basketball players, while none of your favorite basketball players were seven foot.

No. If a scout writes about a basketball prospect that he is slow, clumsy, stupid and “not a seven footer”, he is not mocking non-seven foot basketball players. None of the scouts favorite palyers need be seven feet, either.

That’s implying that intellectuals are more likely to be smart…

Yes.

and smart people are more likely to agree with you.

If I’m right, yes.

Economics in the Misesian tradition focuses very little on singular firms and much more about firms in general, specific markets, and more importantly the effects of this on society as a whole. Beyond a few basic things like firms are profit maximizing, firms produce until MC=MR, and firms try to work in economies of scale, very few things about traditional economic theory actually apply, indeed mainstream economics probably has a lot more to say about these things.

You are getting things totally backwards, Neo. We were talking about if being 7 foot tall helps you play basketball, and you start talking about how playing basketball will not make you seven foot tall.

In other words, we were talking about if a business background helps one understand AE. You wrote a long paragraph about the reverse, if AE helps businessmen.

Working within a single firm gives one the most micro of the micro points of view, and one that can prevent them from understanding the traditional simplifying assumptions used by people like Mises. Oftentimes it can also lead to a belief in the need for protectionism in order to protect 'merican jobs and industry.

This is your personal opinion with nothing to back it up.

12

“No. If a scout writes about a basketball prospect that he is slow, clumsy, stupid and “not a seven footer”, he is not mocking non-seven foot basketball players. None of the scouts favorite palyers need be seven feet, either.”

Sure he is, he’s saying that seven footers tend to make better basketball players, yet all the great basketball players in this case are not seven footers. More importantly to this analogy, I’m betting that there are more business people who are interested on some level with economics than there are economists, yet there are clearly many more economists who preach the economics you “like”. This would indicate that actual economist intellectuals are more likely to be better at economics than businesspeople. The whole reason why the seven footer analogy “works” for what you’re trying to say is that seven foot people are so rare. The economists, not the businessperson is the seven foot tall basketball player in our example.

“In other words, we were talking about if a business background helps one understand AE. You wrote a long paragraph about the reverse, if AE helps businessmen.”

You were saying that economics was all about business. While this is true to some extent, I am showing that the two deal with concerns that are generally different and there is little overlap between the two. A basic education, either through pure economics or through business are just as good in this respect.

The point is that it’s unfair to pick on the poor intellectual just because he’s and intellectual who has never run a business, just by your own admission that he’s more likely to be intelligent and therefore to understand good economics just like you do.

“This is your personal opinion with nothing to back it up.”

So is your idea that running a business helps you understand economics. Glad we’ve got that settled.