Wednesday, November 6, 2013

Nobel What?

Schiller got the Nobel prize and I am floored. Not because he got it. Not because the work he did is shoddy or wrong. I don't even know what it is about. I am amazed because due to the award, he has been in the news talking about a variety of things. He has made clear that he has absolutely no understanding of basic economics, no idea of the principles that guide economic development.

On CNBC he railed against the income gap. He said that the debt is unsustainable (true), the day of reckoning is coming (true), and that since raising taxes on the rich is the only way to correct it (false by lightyears), raising them now will be less painful than after the crisis occurs (maybe). When asked about the philosophical differences between himself and the other Nobel Prize in Economics winners he said that the difference is more political, their coming from University of Chicago and his being from Yale.

Is not economics supposed to be a scientific inquiry? If so, is empirical evidence political? Is Newtonian physics left or right leaning? How about relativity? His statement is an absurdity. Yes, supply side economics is commonly referred to as from the right and Keynesian economics from the left. But they are mutually exclusive. One is correct and one is wrong. Political ideology is a total irrelevancy (the exception being climate change, which was spawned by political goals, nurtured by political agitation, and falsely promoted as science in a way that would make Marx, Goebbels and Freud blush).

Needless to say, "leftist economics" are completely wrong. Ir assumes that people act the same regardless of what is imposed (taxes and regulations) by government. Worse, it assumes that the economic pie is finite. Therefore raising taxes raises government revenue. Again, this is absurd. Increased revenue comes from an expanding economy. Bleeding wealth producers of the currency needed to expand the economy and imposing senseless regulations decreases revenue to everyone, the producers, government and the poor as well. See Cuba, the former Soviet Union or Venezuela for details. The entire Keynesian idea makes no sense and it's failure has been demonstrated every time it has been employed. Conversely, supply side has never failed. There is no argument.

The question about Schiller is why is he so blind. Another idea he supports is the efficient market theory. That is just more garbage. If it were true, how would certain individuals make money year after year investing while others consistently underperform? It wouldn't happen. It does because companies get mis-priced, people have varying degrees of talent, understanding and work ethics. People buy and sell with differing amounts of information, different macro assumptions, and different personalities allowing some to be patient while others cry our in pain every time things go against them. I won't answer why Schiller is blind because it is off topic. I will say that maybe his left and right political ideas should be looked at.  

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