<blockquote>'It is quite clear the US economy is sliding back towards recession, if not still in it. The average consumer understands that, yet the average economist doesn't.
[Why] is it that the average consumer has a better grip on the economy tha[n] the average economist?'
- Mish,
65% Fear Double-Dip, 71% Say US is Fundamentally Broken, Net 32% Expect to Reduce Spending, September 09, 2010
'But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis? Ten or 12 would be closer than two or three.'
–
Breaking the Code of Silence, November 03, 2008 (
context)</blockquote>
'..their insistence on a quantitative approach has often left them blind to other realities.'<blockquote>'Throughout the financial crisis, many mainstream experts have directed their attentions toward "the numbers." They have focused on data points, monthly statistics, long-term averages, cyclical swings, and rates of change of various trends.
However, their insistence on a quantitative approach has often left them blind to other realities. By limiting their perspective to what they can count and collate, they have missed a secular mood swing, broadscale adjustments in attitudes and expectations, and myriad behavioral shifts that are defining new perspectives on living and lifestyles.
Such a myopic frame of reference is also leading many people to support "solutions" to current difficulties that leave things worse off in the longer term. In
"The High Cost of Citizen Badwill," the Of Two Minds blog discusses how a band-aid being used by cash-strapped municipalities could be setting the stage for serious problems down the road.'
- Michael J. Panzner,
Beyond the Numbers, September 13, 2010
'If Marcelle Chauvet's model is accurate (and assuming the recession is over, her model is the most realistic model I have seen to date), then the above snip was indeed nonsense, not from the NBER per se, but rather from one or two economists who sit on the panel, most notably Princeton University Professor Mark Watson.'
- Mish,
NBER Likely to say "Recession Ended" July 2009; Assessing the Real Time Probability US Back in Recession, September 07, 2010</blockquote>
'A free society cannot exist where folk economics runs rampant...'<blockquote>'The logic of reciprocal exchange sheds light on several economic fallacies. It leads straight to the objective-value fallacy. When I do you a favor, you "owe me one" whether or not supply and demand conditions have changed. The value of this favor is objective and constant, and I expect an equivalent favor in return. This explains the popularity of such confused notions as just prices and price controls, especially usury laws.
The widespread antimiddleman sentiment is also a result of the objective-value fallacy. Middlemen add nothing physical to the good, so their transactions appear to be exploitative. Likewise for the antiprofit bias: if I make a profit in a reciprocal exchange, then our exchange was not of equal goods and I have cheated you. Another factor contributing to the antiwealth bias is that a rich person in the EEA was most likely a nonreciprocator or a cheater.
The point of reciprocal exchange is to help those in need so that they will help you when you are in need. In a market exchange, the market price is charged whether or not the buyer is in need. As a result, our economic intuitions favor reciprocal exchange — market exchange is uncaring and cold-hearted toward people when they are in need! This is why so many people are unwilling to allow free markets in anything involving the poor and needy: it simply feels wrong to charge poor people for necessities. In such situations, market exchange runs against our altruistic feelings, which form the basis of reciprocal exchange.
...
With the cause identified, the cure for folk economics becomes clear: persistent education. Although we are stuck with these evolved preferences and biases, we are not slaves to them: we can control them — those of us who prefer free markets are living proof. The only realistic solution is for people to make a conscious effort to learn the logic of markets. Economic education is a powerful tool, the challenge is only to get people to make the effort to learn.
A free society cannot exist where folk economics runs rampant. Economic literacy must be considered essential for all members of society in the same way that basic math skills are considered essential. The errors of folk economics must be directly addressed with education in the basic principles of economics. The task of economic education is never over: just as everyone is born ignorant of math, so everyone is born a folk economist. Every new generation must be taught economics in order to sustain the ideological foundation of the free market. The importance of this cannot be stressed highly enough. As Mises warns in the closing words of Human Action,
<blockquote>'The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.<a href="[
mises.org];[9]</a>'</blockquote>
This underscores the tremendous importance of teaching economics to the public, and the fine work already being done by many individuals and organizations. Needless to say, there is plenty more to be done here.
- Toban Wiebe,
Evolutionary Psychology and the Antimarket Bias, September 15, 2010</blockquote>