From: ems@gallant.apple.com (Mike Smith)
Subject: What is Econ? (was Re: Running out of oil  -
Date: Sun, 4 Oct 1992 09:19:52 GMT
Distribution: na
Organization: Apple Computer Inc, Cupertino, CA

In article <1992Sep16.030723.1396@murdoch.acc.Virginia.EDU> crb7q@kelvin.seas.Virginia.EDU (Cameron Randale Bass) writes:
>In article <30643@goofy.Apple.COM> ems@Apple.COM (Mike Smith) writes:

>>The reason for inflation is that we print more money.  That is all.
>>You increase the money supply, you get inflation.  IFF the rate of
>>increase in money supply matches the real increase in productivity
>>are you 'in balance'.  (i.e. money supply growth of about 1.5%).
>
>      This is a rather extreme monitarist viewpoint. See below.

One persons 'extreme monitarist viewpoint' is anothers 'classical
monitarist viewpoint'... 

>>Get the picture?  With NO VOTE BY ANYONE and NOONE TO BLAME, you can
>>plunder the folks who have loaned out money; to the benefit of the
>>government and corporate contributors.  And since the Banks and S&Ls
>>are insured, the public will bail them out when the piper has to be paid...
>
>     To the benefit of everybody large and small.  We gave ourselves
>     large handouts which must now be paid back at government (i.e. our) 
>     expense.   

Wishfull thinking and over simplification.  The folks Keating hurt
were not the same ones he benefited.  The folks paying for the bailout
were neither.

There was a world class screw-up of regulation.  Some folks made
a killing on it.  The public gets to pay for it.  This is 'To the
benefit of everybody'?

>So what?  Even with massive price hikes for oil, one
>>need not have inflation if one doesn't print more money.  (vis.
>>the Swiss and German experiences).  One then has to actually PAY
>>for the oil, though ... while inflating the debt away is SOOO much
>>easier to do...  
>
>    At a certain point this argument fails.  Imagine a dollar fixed
>    to a fixed gold supply so that you can have no monetary growth
>    whatsoever.  Imagine OPEC somehow is able to raise the price of oil 
>    to $4000 a barrel.  I suspect that you would see substantial inflation
>    immediately prior to the economy collapsing completely (or alternatively
>    using barter as the sole means of economic transactions which
>    imposes its own penalties). 

Or you see a massive reduction in the purchase of oil without attendant
inflation.  I didn't say the outcome would be 'better', only that you 
could have oil price hikes without inflation.  It is most likely that
the scenario you propose would result in a disasterous recession/
depression and fall of production beyond belief.  

What else would you expect from a REAL price increase of that size
in that key an economic resource?  Now, it you can STEEL the resource
by not paying the REAL price, but rather paying a ficticious price
since you will be inflating the value of the money away, then the
REAL impact on the productive capacity will be lower, but at the
expense of inflation.

If I had to chose an inflation vs a depression, I'd likely chose to
inflate as well!

>>Econ is easier than any Engineering classes I've taken, you just have
>>to know how to look for who's bread is being buttered in the 
>>presentations...  If you expect Econ to come right out and say:  Here
>>is how the world works!  You will find it confusing.  If you expect it
>>to say:  Here are some interesting tools and observations presented
>>in such a way as to mislead the masses from understanding what the 
>>power elite is up to, yet be relatively clear to those from that social
>>structure who really need to know how to use those tools to control
>>the masses.  You will find it an excellent excercise in discovery.
>
>    Oh.  Economics is the study of understanding 'what the power elite
>    is up to'?  I must have missed that.

While the original paragraph is laden with cynicism (and maybe even 
a touch of sarchasm ... ;-) it is sadly rather true for some parts
of the field of Econ.  Tends not to be the case for things like 
micro-econ.  Tends to be rather completely the case for Political 
Economy.  The rest grades out in between.  Given that almost all
the money and productive assest are, by definition, owned by the
rich (and, thus,  powerful), I'd expect the study of money 
and productive assest to be concerned with the rich and powerful ...

>>If this all sounds cynical, well, it is.  There are some wonderful
>>Economists who represent the average Joe.  (Heck, there are even
>>a bunch of radical Marxist Economists).  The problem is one of number
>>and position.  Who do economists work for?  Who decides what gets
>>published?  Who controls the ability of those economists to gain
>>grants and funding?  So they work and publish, but always with the
>>understanding that they have to be careful not to offend the Patrons...
>>Government and Business.
>
>     Is economics an advocacy profession?  

I'm not sure what you mean by 'advocacy profession'.  Guessing that
it means 'a profession based on advocacy of positions rather than 
scientific physical experiment' I'd have to answer:  Often, yes.

It is really in a strange kind of middle ground.  1/2 science and 
1/2 letters.  While there are large bodies of data for some types
of research and well proven theoretical/analytical models based on it;
there are other areas almost totally devoid of basic data.  (It can
be hard to get a country to let you run a minor experiment with their
money supply that only has a 20% chance of ruining their economy ;-)

>     Also, what is 'government' in this context?  

Exactly what it says it is.  The agencies of power that govern nations
and states.  Government.

>     Heck, Senators of both
>     political parties seem to make a good living leaking classified
>     documents that have the potential of being very detrimental to 
>     our national security.  

FAR too narrow a view!  Economics deals with all kinds of governments
from all over the world with far more than just 2 parties!  Part of
what makes it a fun field is watching the folks from opposing political
systems trot out thier competing economists!  (Again:  Remember that 
there are economists from the MARXIST as well as the MONITARIST schools!).

>     I have a hard time with the contention
>     that 'government' is a monolithic bloc that 'controls' the voices
>     of economists.  

What you have 'a hard time with' is of little influence on the world.

I've not said that government is a monolithic bloc.  In fact, it
is many strongly competing antagonistic blocks around the whole world.

Large numbers of ecomists work for government agencies, departments,
research facilities, ...  If you step too far out of line, you lose
either your funding or maybe even your job.  Don't get me wrong, I'm
not saying that there is some great organized conspiracy to 
explicitly control ALL economists the world over.  I'm just stating 
the (rather obvious) fact of life than an Economist for the AEC is
going to put the best positive spin on nuclear economics that his 
EMPLOYER can get for his money.  If he is a rabid nuke hater, he 
won't likely be promoted to department head!  (BTW, you could make
the same statment for someone in the Dept. of Solar Power ... if
we had one ..)

Watching the publishings of the Cuban economists post USSR has been
a real treat...  Somewhere I have a letter from a friend quoting
a Cuban economist touting the economic benefits of bicycles in post-
Russion Oil Cuba ... (Why, it's positively a benefit that the ex-USSR
cut off oil and caused such a boom in bicycle production!)

>     As for 'business', that's a laugh.

The basic fact of life for econ graduates is that most of them can
go to work for the Government arguing why a particular industry should
be regulated and should get less money; OR they can go to work for 
the regulated industry arguing why they should be less regulated and
get more money.  Some can get jobs teaching at universites, et. al.
Some get non-econ related jobs or go into business.  Some even go
on to be managers of computer systems ...  BUT, in the context
of economists who practice econ for a living and publish stuff
for wide distribution, most of them either work for Government
or Business (and have to pay attention to the political views
of their patron).

Again, don't get me wrong, I'm NOT saying they are oppressed!  Heck,
most of them self select for employment with the side they most
strongly advocate!  Just realize that the published literature
from the Econ researchers is going to reflect this organizational
spin.  Also realize that schools have to educate their graduates
to argue either the PRO or the ANTI case for regulation, since
they don't know ahead of time which students will get jobs with
business and which with Government!

>>Due to this, you get Economics taking a very dispassionate position
>>much of the time, careful to only describe the organs of control of the 
>>economy in abstruse and technical ways; prefering to leave the 
>>interpretation of that control to the Political Economy classes
>>(for the 'Why it is good' spin) and the Sociology classes (for the
>>'Why it is evil' spin).   (Though most of the Econ texts seem to like 
>>to get in a bit of snide sniping when they think they can ...)
>>
>>Sometimes you even get the token 'radical left' class, text, or presenter;
>>but the bottom line for Government doesn't change.  Never let the 'mark' 
>>know they have been had...  leave 'em laughing or baffle 'em with BullShit,
>>but don't let on that they have been purposfully had.
>
>     'Government' is not clever enough or organized enough to 
>     perform these acts on purpose.

Sorry, that last paragraph was a bit unclear.  The comments after 'bottom
line for Gov' are meant only to apply to the inflation thread (not the
all of the spin control of all employers of economists, as it could be
interpreted ...)  Rephrasing:  While you can get a radical left class
in some Econ departments of some schools, the Goverments will still 
have a need to not let the average person catch on to the inflation
game and the US Gov't in particular would not want to admit that they
chose to inflate the oil dollars away.   

Unfortunately, it only tkes ta half dozen folks to be 'clever enough'
and 'organized enough' to deliberately cycle the inflationary tendencies
of a national currency.  ('The Fed' and, maybe, the President & VIP, 
with the consent or passivity of the Congretional Finance Committee...).

>     As far as the 'radical left' goes, we certainly have not been deprived 
>     of their point of view.  However, if you wish to make Economics
>     entirely point-of-view dependent then you will lose whatever
>     utility it may have.

Not all the utility ... and not entirely point-of-view dependent.  
But is does have some parts of the field, and these are disproportionately
the ones involved in setting national monetary policies, that are
point of view dependent ...

(BTW, my primary news box died and I havn't got my kill files over
on this new one yet ... but it is only a temporary thing..)

-- 

E. Michael Smith  ems@apple.COM

'Whatever you can do, or dream you can, begin it.  Boldness has