dagblog - Comments for "Megan McArdle Still Doesn't Understand Basic Economics"

"The other burning question

Barry — Mon, 20 Sep 2010 23:22:08 +0000

In reply to Yeah, the debate around her

"The other burning question is why in the hell the Atlantic of all publications chooses to keep her on staff. As a man of letters, I'm sure you're aware of the storied history of said publication. "

Because the people currently running the magazine are shameless wh*res?

Remember, we've seen Martin Peretz turn 'The New Republic' into a mockery of it's past self.

Maybe now I will not have to

EmmaZahn — Fri, 17 Sep 2010 22:51:23 +0000

In reply to Yeah, I read that, but it's

Maybe now I will not have to write a post explaining what I think was the cause of the Panic of '08. Via Tyler Cowen I see that Gary Gorton has a new paper out explaining what happened and how. Arnold Kling comments as well. Hope you find these illuminating.

Note the biggest bubble of all was money itself -- that global glut of savings Bernanke warned about.

Yeah, I read that, but it's

DF — Wed, 15 Sep 2010 18:57:56 +0000

In reply to Okay, maybe my opening

Yeah, I read that, but it's not illuminating. So, hopefully I'll get to read it in the future, but for now your chicken-and-egg claim remains as it is.

Okay, maybe my opening

EmmaZahn — Tue, 14 Sep 2010 21:56:40 +0000

In reply to Well, your original comment

Okay, maybe my opening sentence could have been clearer (I phrased it as a question to be polite) but no way did I say it backwards.

As for explaining how the financial collapse happened. Did you read this part of my comment just above?

I hope to eventually put together a post about it but it way complicated. Maybe even more complicated that Fracking.

Skimming and commenting don't mix very well. I know, I've done it myself.

Well, your original comment

DF — Tue, 14 Sep 2010 21:20:10 +0000

In reply to Business schools offer majors

Well, your original comment was that you thought PV was more economics than finance. Now you're saying you doubt economists use it multiple times daily. I suppose that all depends on who you're talking about and what they're doing. PV is just a way to compare values at different times, so you'd use it anytime you needed to know that. But that seemed to be a lead in to you saying something about economists not understanding finance, which still had me puzzled.

Now it seems that you're saying it's really a financial event and that economists who understood enough about it to predict the impending crash have only begun to understand it. That may be so, but you'd have to start by explaining how the financial collapse happened, as financial collapses aren't spontaneous events even if they are causes and not effects of other events.

Business schools offer majors

EmmaZahn — Tue, 14 Sep 2010 20:46:27 +0000

In reply to In short, no. Present value

Business schools offer majors in other areas than Economics including Finance, Accounting, Management, Marketing among others. So an Economics degree requires some finance courses. Guess what. Finance degrees require some economics courses. They are just separate specialties.

Also, I doubt economists use PV and FV calculations multiple times daily as bond and mortgage traders or investment advisers do. Of course, nowadays, mostly the computers calculate them automatically but still -- no way do professonal economists Excel* them.

And how many economists carry one of these around with them?

DF said: "I'm not sure what you read that lead you to believe that economists generally don't understand finance or accounting."

I read the economists. The ones you mentioned and others. And I worked in FIRE for 30+ years so I have something of an insider's view of Finance. All during Summer 2008 I kept expecting the leading chatterers to get to the heart of the matter but none even got close until Gary Gorton's book and FCIC testimony earlier this year. The housing bubble pop was an effect not a cause of the financial collapse. I hope to eventually put together a post about it but it way complicated. Maybe even more complicated that Fracking.

Oh about economists and accounting. I was thinking of MMTers when I wrote that.

* pun intended

Yeah, the debate around her

DF — Mon, 13 Sep 2010 19:23:00 +0000

In reply to As a proud holder of an

Yeah, the debate around her has pretty much congealed around "Team Evil" and "Team Stupid" to put it in Daily Show parlance. Of course, I've always been a fan of the "little of column A, little of column B" line of explanation.

The other burning question is why in the hell the Atlantic of all publications chooses to keep her on staff. As a man of letters, I'm sure you're aware of the storied history of said publication. And as Business and Economics editor no less? She can't manage to write a blog post without making egregious errors of basic fact, but she's the editor of that whole endeavor?

As a proud holder of an

Doctor Cleveland — Mon, 13 Sep 2010 19:11:47 +0000

In reply to Megan McArdle Still Doesn't Understand Basic Economics

As a proud holder of an undergraduate English degree, I'm upset that McArdle is devlauing my degree, too, We are not all incapable of doing arithmetic! Some of us understand that an order of magnitude difference is a serious thing! And some of us (although maybe not me) have the common sense not to make loud pronouncements about stuff we don't understand.

McArdle's so intellectually slipshod, it's scary. Her lack of basic math skills (such as, say, division) is a baleful wonder to behold. The fact that the result will clearly be off won't faze her, because she seems to have no intuitive sense of numbers or proportion.

I first noticed this a year ago, where she was huffing and puffing about New York teacher's unions, and declared that "about 5% of the teacher's in the system" were drawing paychecks for nothing. Elementary math would have told her that the number was below 2%. So would elementary reading skills, since the article she was quoting actually cited the figure "1.8 percent."

She's just not smart.

In short, no. Present value

DF — Mon, 13 Sep 2010 18:53:57 +0000

In reply to Isn't present value more

In short, no. Present value is taught as a part of microeconomics. Also, finance, at least as an academic subject for undergraduates, is probably more properly viewed as a concentration within economics rather than a separate subject. Much of what is taught in finance courses is based on the fundamentals taught in economics and accounting courses. Also, at least at my university, finance courses are taught by the economics department. I'm not sure what you read that lead you to believe that economists generally don't understand finance or accounting.

MBA programs don't require a BA in business (which many universities don't even offer) or in any particular major. There are entrance requirements for mathematics aptitude, but as long as you can demonstrate said aptitude you can apply regardless of your major.

It's probably fair to say that the University of Chicago dominated economic theory in America in the post-war era, in no small part due to Milton Friedman. However, the last several decades have given rise to a sort of schism, typically dilineated along the lines of "fresh-water" (like Chicago) and "salt-water" (like Cal) schools. The names listed by the commenter from DeLong's blog are all big UofC names.

But the "salt-water" economists (Krugman, Baker, Stiglitz, Akerlof, Schiller, etc) were the ones who called the housing bubble. The "salt-water" economists were largely saying (like Obama's boy Goolsbee, another UofC alum) that there was no bubble.

As for McArdle, she does have a bachelor's degree - it's just in English Lit. She also has an MBA, for which she had to take some economics classes. If you really want to dissect things at that level, anyone with a BA in economics has more exposure to that material than someone with an MBA, because the MBA program also requires courses in accounting, management, business planning, etc. From that perspective, McArdle is someone with less than an undergraduate education in economics, but she's arguing with a PhD professor.

And she seems to think she's just going to talk over his head.

For what it's worth,

Beetlejuice — Mon, 13 Sep 2010 17:18:54 +0000

In reply to Megan McArdle Still Doesn't Understand Basic Economics

For what it's worth, McArdle's arguments aren't meant to be discussed among those of us who think and have knowledge of basic economics. They're meant for tea-baggers, birthers, Palinista's and other republican rejects who hold republican generated myths close to their hearts and look for reassurance their belief in the myths are recognized by those whom they entrust their faith to. So it's pointless to argue against a make believe whim that has no subtance, but enjoys a large public approval as a political fact that needs to be dealt with.