Dilbert discovers economists live in an ivory tower!

His 500 economists listed their 13 top issues and not one issue -- NOT ONE!!! -- concerned the enormous drop off in American labor bargaining power over the last 35 years -- and consequently the loss of 12.5%* of income share from lower 90 percentile earners to top 3 percentile earners over 35 years. Not one noted that (as of June 2007 anyway -- could not have changed much since the minimal minimum wage raises) FULLY 25% of American workers were earning less than LBJ's $10/hr minimum wage -- DOUBLE the average income later.

Pardon the shouting (all caps), but to my labor obsessed self that was the most important discovery of the survey.

*http://ontodayspagelinks.blogspot.com/2008/08/income-share.html

Some are Good Economists and some are Good Students of Economics. So goes the saying. SO, which ones are you talking of?

I see Economics as a cool thing : Two equations are all I need: [a] Greed Divided by [b] Fear = Action

Cheers
Olga Lednichenko

Arrgh. Somehow, the system logged me out while I was writing my comment, so my comment did not post, and I cannot find it again. Ah, well, now I will be briefer.

Even if a new president could immediately implement all the requisite policy changes without waiting for congessional cooperation, we are looking a years of bureaucratic and industrial delays before economically significant oil production from new fields could actually reach the US gas pumps. Over that interval, economists cannot predict:

(1) how OPEC would respond to in increase in domestic US supply. OPEC means the international oil market is not a free market, so intuitive supply and demand curves do not apply. If OPEC decreased production to offset our domestic increases, there would be no long term price impact. -- just the usual short-term fluctuations from speculators.

(2) how much demand in other countries will increase -- particularly in China and India. If the international demand increases enough to account for the increased production, then OPEC would not have to do a thing, and prices would still not go down. In this scenario, increased production could only be expected to minimize price increases as demand increases.

Economists who claim they can accurately make these predictions (particularly about OPEC) lose all credibility.

Oil is a finite resource. Over the very long term (decades), even if demand does not increase (unlikely), the price is likely to keep going up as cheap production becomes scarcer, and the only remaining sources require more expensive production techniques (i.e., tar sands). Promises of lower fuel prices only fool the ignorant.

Sorry, don't know why the system made my marks weird. I'll try again.

Saying that drilling now will notreduce gas costs now, is like saying no use saving for retirement, because if I save now, I can not retire now.

What about energy costs in the future? I thought we were supposed to be worried about the future? Does not drilling now help costs, thus the economy, in ten years? (Or less if we fast track some regulations.) If we had drilled ten years ago, during the Reign of Bill, would not things be better now?

There is also a psychological, non-economic effect. Drilling now sends the message we are going to get serious about developing our own energy sources, makes speculating in betting against us look more risky, long term.

As to the gas tax holiday, why do economists agree it is a bad idea? I’d guess because it does not stabilize prices, does not encourage conservation which will hold prices by reducing demand, and is a temp fix.

But both parties just thought it was a good idea to put more money into the economy via economic stimulus checks. Yeah, economists thought it was a bad idea, and they were right, as most people who got the $1200 in taxpayers money saved it, rather than spent it. Despite that, I read Speaker Pelosi is advocating doing it again. If they put tax dollars into the economy through a gas tax holiday, I would guess people are more likely to spend those few extra dollars saved at the pump each week, than they were that lump sum stimulus check. So maybe it makes sense as an economic stimulus—or at least more economic sense than another check.

Again, I urge everyone to read Basic Economics by Dr. Thomas Sowell, to learn why politicians of both parties do economically dumb things. (Hint, the public thinks they are being helped and votes for candidates who are really !$%*!$%* them. Politicians win now, economy goes in the dumpster later, no connection.)

As to most economists being Democrats, being a Democrat and espousing the party line is the route to advancement in academia, just like being a Nazi or Communist was required in those respective totalitarian systems. Economists working in the real world, where companies live on profits, not tenure, may see things differently. Hard to survey them, though.

Saying that drilling now won’t reduce gas costs now, is like saying no use saving for retirement, because if I save now, I can’t retire now.

What about energy costs in the future? I thought we were supposed to be worried about the future? Doesn’t drilling now help costs, thus the economy, in ten years? (Or less if we fast track some regulations.) If we had drilled ten years ago, during the Reign of Bill, wouldn’t things be better now?

There is also a psychological, non-economic effect. Drilling now sends the message we are going to get serious about developing our own energy sources, makes speculating in betting against us look more risky, long term.

As to the gas tax holiday, why do economists agree it’s a bad idea? I’d guess because it doesn’t stabilize prices, doesn’t encourage conservation which will hold prices by reducing demand, and is a temp fix.

But both parties just thought it was a good idea to put more money into the economy via “economic stimulus checks.” Yeah, economists thought it was a bad idea, and they were right, as most people who got the $1200 in taxpayers’ money saved it, rather than spent it. Despite that, I read Speaker Pelosi is advocating doing it again. If they put tax dollars into the economy through a gas tax holiday, I’d guess people are more likely to spend those few extra dollars saved at the pump each week, than they were that lump sum stimulus check. So maybe it makes sense as an economic stimulus—or at least more economic sense than another check.

Again, I urge everyone to read “Basic Economics” by Dr. Thomas Sowell, to learn why politicians of both parties do economically dumb things. (Hint, the public thinks they are being helped and votes for candidates who are really !$%*!$%* them. Politicians win now, economy goes in the dumpster later, no connect.)

As to most economists being Democrats, being a Democrat and espousing the party line is the route to advancement in academia, just like being a Nazi or Communist was required in those respective totalitarian systems. Economists working in the real world, where companies live on profits, not tenure, may see things differently. Hard to survey them, though.

To Leora.

Okay, I admit that that statistic was incorrect, but my actual point still stands. If it wasn't for all of the restrictions and nimby attitudes, we could seriously expand nuclear generation and completely free ourselves from dependence on fossil fuels. That one statistic I incorrectly quoted had nothing to do with 95% of what I said. I apologize for the error.

'the other is a lukewarm corpse.'

Does that mean that every 71 year-old man is to be put into this same category despite how healthy or able-minded they are? If your only gripe against McCain is his age then you should vote for him. His experience and knowledge of world affairs put Obama to shame. I'd rather have a healthy, smart old guy than an inexperienced young guy for president any day of the week.

This is a Slate.com analysis by economists predicting which countries would haul in the most Olympic medals (http://www.slate.com/id/2198536/) .

I find it interesting that the people that are so opposed to drilling as being a solution to the rising prices of oil say that increased production (read increase supply) won't have any affect on the cost of oil. Then as a rebuttal to the plan of increased domestic drilling, they indicate that to lower the cost of fuel, the goverment should release the strategic oil reserver (read increase supply).

I would say that we should do everything possible to increase domestic energy production (including wind, solar, nuclear and any other new technology that we may discover), decrease energy usage by conservertion increased energy efficiencies and what ever other means that we can find.

However my reasons for supporting this have nothing to do with the cost of energy. Right now we are being held hostage by every oil producing nation out there. If Saudi Arabia sneezes, it affects what happens here. We are involved involved in middle eastern politics be because it is in our national interest because of the oil there. There are worse things going on in other parts of the world than what was going on in Iraq but we do nothing because it is not as important to our economic security. If we didn't have the huge dependency on middle eastern oil, perhaps we wouldn't be involved in Iraq the way we are.

So, I am all for doing everything to become self sufficient in energy and reduce our dependence on the dwindling supplies of oli. We need to develop alternative sources of energy. We need to find more efficient ways to use the energy we use. But we still need to bridge the gap in the process because we didn't learn the lesson from the last energy crisis.

Look Scott! Economists can even help to create more bountiful strawberry harvests.

http://www.slate.com/id/2197735/

"Doctors are often wrong, but you are still better off going to the doctor than diagnosing problems yourself. And when you get the opinions of several doctors, your odds improve, even if those several doctors aren't a scientific sample. The important thing is that following a doctor's advice, or the consensus of several doctors, increases your odds compared to the alternative. And the more doctors the better."

That's true only if you assume that mainstream medical texts and training are the best treatment [for your specific problem]. My experience of doctors is that that would be a disastrously incorrect assumption. Mainstream medicine has a destructive tendency to focus on the symptoms to the exclusion of the cause - a delightful anecdotal example is the doctor (plus two other doctors called in to consult) who diagnosed my poison ivy as "an infection", and prescribed antibiotics. My feet had swelled up. My boots had absorbed the oil off some poison ivy, so I was experiencing constant re-application of poison ivy. Would antibiotics help? No. Was I able to self-diagnose correctly by asking the right questions? Yes. Could I cure it myself? Kind of, with a simple trip to the chemist to get poison-ivy-oil-breaking soap.

Similarly, anemia, a symptom, is often treated with iron supplements, to no avail, because as soon as you stop taking them the anemia returns if you haven't dealt with the cause (if they even help at all, which they often don't).

Now, that may all seem tangential to the point of the post, since I'm responding in detail to a throwaway analogy, but here's why it makes sense. From my perspective there's a strong apparence that economists are in every way parallel to doctors, treating an anemic economy by the application of solutions that fix 'the problem' instead of solutions that fix the *cause* of the problem. And economist-training and economist-textbooks in large part endorse this approach. This is why I would be ill inclined to accept the opinion of 500 economists without a strong explanation (so I can see for myself that their intent is to treat an underlying malaise) to back them up.

To drill more domestic oil is a bad idea, because the more you wait, the more the oil price increases. It is best to burn the oil of other countries first...

tkwelge said that Canada gets half its electricity from nuclear sources. Not even close, my friend.

59% hydro
17% nuclear
21.5% coal/natural gas
2.5% wind/solar/other

I was curious to know the numbers myself, so I looked them up on the government's statistics page. These are from 2006, but likely the proportions are similar.

Forum www.SciAm.com/ontheweb

The Economist Has No Clothes
Unscientific assumptions in economic theory are undermining efforts to solve environmental problems BY ROBERT NADEAU


The 19th-century creators of neoclassical econom­ics—the theory that now serves as the basis for coordinating activities in the global market sys­tem—are credited with transforming their field 9HM& JHP into a scientific discipl ine. But what is not widely known is that these now legendary economists— William Stanley Jevons, Leon Walras, Maria Edgeworth and Vil-fredo Pareto—developed their theories by adapting equations from 19th-century physics that eventually became obsolete. Unfortunately, it is clear that neoclassical economics has also become outdated. The theory is based on unscientific assumptions that are hi ndering the implementation of viable economic solutions for global warming and other menacing environmental problems. The physical theory that the creators of neoclassical economics used as a template was conceived in response to the inability of Newtonian physics to account for the phenomena of heat, light and electricity. In 1847 German physicist Hermann von Helmholtz for­mulated the conservation of energy principle and postulated the existence of a field of conserved energy that fills all space and uni­fies these phenomena. Later in the century James Maxwell, Lud-wig Boltzmann and other physicists devised better explanations for electromagnetism and thermodynamics, but in the meantime, the economists had borrowed and altered Helmholtz's equations. The strategy the economists used was as simple as it was absurd—they substituted economic variables for physical ones. Utility (a measure of economic well-being) took the place of ener­gy; the sum of utility and expenditure replaced potential and kinetic energy. A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathe­matical scientific discipline.
Strangely enough, the origins of neoclassical economics in mid-19th century physics were forgotten. Sub­sequent generations of mainstream economists accepted the claim that this theory is scientific. These curi­ous developments explain why the mathematical theories used by mainstream economists are predi­cated on the following unscientific assumptions:

The market system is a closed circular flow between produc­
tion and consumption, with no inlets or outlets.
Natural resources exist in a domain that is separate and dis­
tinct from a closed market system, and the economic value of
these resources can be determined only by the dynamics that
operate within this system.
The costs of damage to the external natural environment by
economic activities must be treated as costs that lie outside the
closed market system or as costs that cannot be included in the
pricing mechanisms that operate within the system.
The external resources of nature are largely inexhaustible, and
those that are not can be replaced by other resources or by tech­
nologies that minimize the use of the exhaustible resources or
that rely on other resources.
There are no biophysical limits to the growth of market systems.
If the environmental crisis did not exist, the fact that neoclas­sical economic theory provides a coherent basis for managing economic activities in market systems could be viewed as suffi­cient justification for its widespread applications. But because the crisis does exist, this theory can no longer be regarded as useful even in pragmatic or utilitarian terms because it fails to meet what must now be viewed as a fundamental requirement of any economic theory—the extent to which this theory allows economic activities to be coordinated in environmentally responsible ways on a worldwide scale. Because neoclassical economics does not even acknowledge the costs of environmen­tal problems and the limits to economic growth, it constitutes one of the greatest barriers to combating climate change and other threats to the planet. It is imperative that economists devise new theories that will take all the realities of our global
system into account. •Robert Nadeau teaches environmental science and public policy at George Mason University. His most recently

42
SCIENTIFIC AMERICAN
April 2008

Scott Said: "For example, they know that additional domestic drilling won't make much of a dent in the energy problem."

QF's Response: "Who is paying you to lie like that besides maybe the oil company!? Drilling offshore in combination with new oil refineries can potentially displace all of our gas and oil imports, and it absolutely would boost our economy. Oil is abiotic in origin, being produced in the upper mantle of the Earth, and hence is far more plentiful than Peak Oil 'Fossil' Theorists would have you to believe. At any rate, figure that the costs of drilling will be largely offset by the lower operational costs of pumping and the additional cost savings of domestic production/refinement."

Anyone who thinks that drilling for oil will produce more oil is an idiot? I really have a hard time with this statement. I agree that any difference will be marginal, but come on! Obviously the stuff does more good in a barrel than laying in the ground. I mean, if somebody could show me a cost benefit analysis, then I would change my mind, but nobody is doing that. All you people are doing is arguing that more supply won't effect the price, and I agree with you whole heartedly in the temporary sense. However, I still believe that any long term cost-benefit analysis will probably show us that the oil staying in the ground does us little or no good. So let me turn the tables on you. How does keeping oil in the ground make us better off? Environmentally maybe, but let's assume that we find ways to use the oil efficiently and that the oil will be used to help find other alternatives down the line.

Seriously, if we want to base our ideas off of facts rather than opinions, we need to weigh the productivity of the oil in society vs. the benefits we would receive (environmental, financial, and safety-related) by keeping the oil sitting where it is. Anything else will be opinionated hearsay. But for some reason we would rather argue about whether or not the oil lower tomorrow's prices by 5 cents or not. To make any real changes in the oil market, you need years of development and infrastructure. To me it seems that more drilling and exploration is the best solution to part of the energy problem for the next 20 years. I'm sure by then, there won't be enough untapped oil left in the world to make a difference anyway, and we'll be forced to look elsewhere, but right now more drilling and exploration is kind of a stepping stone between the old era and the new era of energy development. It's up to all of us to look for other solutions in the meantime, but let's not ignore reality.

I'm finding myself at a point where I really don't know which candidate I'd vote for. I didn't major in economics in college but I recall enough to know that neither of these guys has a firm grasp of the big picture. In the last election, at least it was a clear decision to be made but definitely not because one candidate was better than another. I'm at a loss for a good analogy right now but one choice would have been compounding already catastrophic problems and the other would have just been inviting new problems, not necessarily fixing the ones we already have. I really thought this election would be more clear cut but I have serious issues with both candidates. Whoever thinks drilling for more oil is the answer is a baffoon and should be admitted to the nearest building with padded rooms because no more can be done to help them. However, I'm not persuaded that the other candidate is any better. I have worked really hard for my status in life and I'm not keen on the idea of giving it up to those less fortunate as defined by the other candidate. I was one of those less fortunate at one point and I pulled myself up by the proverbial boot straps. I think Americans need to reevaluate their definition of "less fortunate."

I like how the oil argument is going. The anti-drillers keep slamming the idea of drilling more, because they believe it won't effect the price. However, I'm pro drilling, because nobody has argued how the oil does us better in the ground than in a barrel. Sure, more drilling won't lead to a drop in price of any large magnitude if any, but I thought that each incremental barrel of oil that we don't have to get from somewhere else was worth it no matter what. Plus, it seems like the anti drillers use some skewed logic. They tend to assume that we won't find any more oil and that future technologies won't allow us to use these oil deposits more efficiently. More drilling will not have any effect on prices in your immediate experiences, but if you look at the contribution to GDP that domestic drilling will make over the long run (a hundred years) vs. the benefit of just leaving it in the ground (now I know it's better for the environment to leave it in the ground, but I'm not saying that the oil shouldn't be used efficiently or that it shouldn't be conserved; I'm looking purely at the economic cost benefit analysis of drilling or not). What if this extra amount of oil contributes the development of future technology that frees us from our dependence on fossil fuels?

I'm sorry, but the anti drillers argument seems really backwards. "More drilling for oil won't increase supply." What? How does that work? I though every marginal bit was important. Of course when I say marginal I'm talking about BILLIONS AND TRILLIONS OF DOLLARS IN THE LONG RUN. There is no such thing as "marginal" in the great scheme of economics.

Let me just reiterate that I'm not discussing how the oil is to be used. I'm not saying that it shouldn't be conserved or used as efficiently as possible. I'm not saying alternatives shouldn't be developed. But hiding from oil that we need isn't going to make a future of alternatives more likely.

I also want to laugh at the commenter that suggested that it was "the free market that got us into this energy crisis." First you have to assume that a free market truly exists for energy in this world. There isn't. Than you have to ignore the fact that the free market wanted to build more nuclear power plants (where Canada gets half of their electricity). SO go f*ck yourself please.

Scott, I have trouble reading the responses of both your liberal and conservative readers. I mean, the conservatives don't want to acknowledge the problems of the poor and the liberals burn conservative straw men, accusing them of just believing that "the free market will sort everything out." I consider myself to be a conservative and amateur economist, and I don't believe that. I also love the last post that declared being a former satellite of the USSR is a good thing to be proud of.

First of all, the USSR did not defeat us with in the early part of the space race with their "brains." They did it on the backs of the working class and with resources stolen from every corner of their empire. Sure, they did have muscle, but when 50% of your GDP goes towards military spending (as opposed to 4.5% for the US today, I'd hope you'd have some muscle. Let's call a spade a spade. The USSR was not a workers paradise, but a travesty built on the backs of confused and indoctrinated slaves. This same commenter accuses Scott of being prejudiced against albanians, but he has already explained this point before. Elbonia is supposed to be a composite of how US citizens view the poor and developing world. It does seem offensive, but maybe that's Scott's way of pointing out our prejudices by reflecting our views and showing them to us.