Joined: 28 Dec 2005
|Posted: Tue Feb 17, 2015 5:50 am Post subject: Macroeconomics
Richard, there’s been great progress in economics, i.e. in macro, micro, international trade, money & central banking, etc..
The result has been steeper improvements in living standards.
For example, compare how Americans lived and worked in the 1970s to today.
Americans live in bigger and better houses, drive bigger and better autos, the environment is much cleaner, there are more shopping malls, workplaces are much better, etc..
I’m sure, there are some good things about 19th century medicine too. However, is 19th century medicine better?
Ricardo, government can be a positive or a negative force.
However, U.S. per capita real GDP grew faster in the 20th century than in the 19th century.
And, real GDP growth in the 20th century understates the improvements in living standards.
Economics, like medicine, built upon prior work.
When you say there’s been a 90% loss in the value of the dollar, you ignore the fact there are more dollars that raised real income tremendously.
Average annual per capita real GDP growth
1871-1914: 1.56% (height of the Industrial Revolution)
1982-2007: 2.30% (height of the Information Revolution)
I’m sure, I don’t have to explain the power of compound interest.
And, I don’t have to explain it’s easier for small economies to double than large economies.
Economic boom/bust cycles (not to be confused with asset booms and busts) are inefficient both in the boom and bust phases, because of periods of strain and slack. Sustainable growth is optimal growth (rather than feasts and famines or floods and droughts). Monetary and fiscal policies smoothed-out business cycles.
I think, economics is a very difficult field to understand.
For example, there are hundreds of major forces – invisible forces – in hundreds of dimensions pushing and pulling a large, dynamic, and diversified macroeconomy.
And, we know there has been dumb, if not diabolical, economic policies, e.g. “cash-for-clunkers,” when people were paid with their own money to destroy their cars, which also caused used car prices to spike.
It’s important to learn the fundamentals and scientific methodology before building-upon the rigorous work of economists.
Unlike “dead fields,” e.g. statistics, there’s still a lot to learn in economics.
Incentives, and disincentives, matter. However, there are many moving parts. One change causes many changes – some good and some bad. Economists determine, sometimes very crudely, if society is better or worse off from those changes.