Monday, June 28, 2010

The Fed Has Lost It; Publishes Essay Bashing Bloggers, Tells General Public To Broadly Ignore Those Without An Econ PhD

By Tyler Durden

Some Fed economist (with a hard-earned Ph.D mind you) named Kartik Athreya (who lasted at Citigroup as an associate Vice President for a whopping 7 months before getting sacked in 1998 only to drown solace for his expiring unemployment benefits in the public sector) has written the most idiotic "research" piece to come out of the Federal Reserve since 1913, and the Fed has written a lot of idiotic research since then - after all you don't destroy 98% of the dollar's purchasing power in 97 years with non-idiotic research. But this just takes the cake. In "Economics is Hard. Don’t Let Bloggers Tell You Otherwise" Kartik says: "I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contribute any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public." Alas, all Kartik achieves is to convince the general public that feeding Fed "economists" alcohol after midnight and letting them directly upload their resultant gibberish to the Fed's broad RSS feed the second they think they have a coherent thought , is generally a disastrous idea. In his piece, which has no other intention than to discredit and outright malign bloggers such as Matt Yglesias, John Stossel, Robert Samuelson, and Robert Reich: "In what follows I will argue that it is exceedingly unlikely that these authors have anything interesting to say about economic policy. This sounds mean-spirited, but it’s not meant to be, and I’ll explain why." Instead in what follows, the Fed presents 4 pages of thoughts so meandering, that the author's blood alcohol level must have certainly been well above the legal norm for the duration of the writing of this ad hominem pamphlet.

Amusingly, the Fed shows that it also enjoys cannibalizing its own most vocal defenders:

The list of those exhibiting this zest also includes, in addition to those mentioned above, some who might know better. They are the patron saints of the “Macroeconomic Policy is Easy: Only Idiots Don’t Think So” movement: Paul Krugman and Brad Delong. Either of these men will assure their readers that it’s all really very simple (and may even be found in Keynes’ writings). Lastly, before you dismiss me as a right- or left-winger, I am not. I’m simply less comfortable with ex cathedra pronouncements and speculations than the people I have named. (Somewhat strangely, in an earlier era Paul Krugman very effectively took the same sort of “accidental theorist” to task, so what I’m saying is really a bit of a rehash of his arguments.)

Here are some of the pearls of wisdom contained in this stunning paper:
Before I continue, here’s who I am: The relevant fact is that I work as a rank-and-file PhD economist operating within a central banking system. I have contributed no earth-shaking ideas to Economics and work fundamentally as a worker bee chipping away with known tools at portions of larger problems.

Why should anyone accept uncritically that Economics, or any field of human endeavor, for that matter, should be easy either to process or contribute to? To some extent, people don’t. Would anyone tolerate the equivalent level of public discussion on cancer research? Most of us readily accept the proposition that Oncology requires training, and rarely give time over to non-medical-professionals’ musings. Do we expect advances in cell-biology to be immediately accessible to anyone with even a college degree? Science journalists routinely cite specific studies that have appeared in specific journals. They generally do not engage in passing their own untrained speculations off as insights. But economic blogging and much journalism largely does not operate this way. Naifs write books, and sell many of them too. People as varied as Matt Ridley and William Greider make book-length statements about economics. I’ve never done that, and this is my job. This is, to say the very least, bizarre.

So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.

You might say, “you’re telling us to leave everything to the experts, so why should I believe you are adequately policed?” This is a fair question, but as someone who has worked for a decade to publish in leading academic journals (with some, but hardly overwhelming, success), I now have the referee reports to prove that I live in a world where people are not falling over themselves to believe my assertions. The reports are often scathing, but usually very insightful, and have over the years pointed out all manner of incoherence in my work. The leading journals have rejection rates in the neighborhood of 80%, and I’ve had my share of them.

How can this be changed? A precondition for the market delivering this is a recognition by the general public that they are simply being had by the bulk of the economic blogging crowd. I hope to have alerted you to the giant disconnect that exists between the nuanced discussion that occurs between research economists and the noise (some of it from economists!) that one sees in the web or the op-ed pages of even the very best
newspapers of the US. As a result, my hope is that the broader public will ask for a slightly higher bar when it comes to economics, rather than self-selecting into blogs that merely confirm half-baked views that might have been acquired from elsewhere.

And this punchline:

For my part, seventeen years after my first PhD coursework, I still feel ill at ease with my grasp of many issues, and I am fairly confident that this is not just a question of limited intellect.
We disagree.

We would comment on this if it had any merit, and central point worth arguing or even debating, but since this whole thing sounds like the ramblings of a deranged lunatic, we will just leave it out there for your comedic enjoyment.

The above originally appeared at Zero Hedge.

Economics is Hard


  1. Never thought I'd be on the side of Delong and Krugman...

    This is just more evidence that the technocrats are nervous. They see the rabble peering through their esoteric prattle. Apparently, only a nation of thoroughly reverent, pliant automatons is necessary for central planning to be effective.

    God forbid people use some common sense - then we're all doomed!

  2. Bruce Krasting points out he takes on Liz Warren...big mistake:

    "The response of the untrained to the crisis has been even more startling. I listen to Elizabeth Warren on the radio fearlessly speculating about the nature of credit market dysfunction, and so on."

  3. does this mean Bob Murphy is our new god?

  4. Wow, what a moron. Some of the worst economic tripe I've every critiqued was produced by tenured trollops at well-known Universities. Few of these gasbags can handle applied economics and have little grasp of the foundations, implicit assumptions, and limitations of their own models.

    Not having a Phd in the field (just a B.A.) has been the very thing that likely enabled me to foresee both of the last two housing bubbles and resultant economic recessions (90/91, and 07/08) well in advance.

  5. I've experienced my share of snobs and Piled higher and Deepers, but this is my first encounter with an economics snob. He must be a real hoot at parties. So full of himself, and we 'little people', er the 'actors' as he refers to us....we couldn't possible grasp all those big numbers, theorems, assumptions, equations, and 'feedback effects'.

    One little tidbit I found interesting...did you notice he admitted that 85% of the population retains a job? That would be a 15% unemployment rate. We have someone from the Fed actually admitting the DOL numbers are artificially low.

    I loved his comparison of the 'silence of the bloggers' on Haiti's earthquake and the Pacific Rim Tsunami. Does he really think that the loss of 1/2 million lives is insignificant to the 'actors'? Does he not realize that we 'actors' are perfectly aware that we have no control over acts of nature or acts of God, yet we do realize that we humans are in complete control of the world markets? What can we possibly change about the effects of earthquakes by dashing the seismologist? We can't stabilize the techtonic plates, but we can certainly learn about and rein in corrupt politicians who affect our financial markets.

    Apparently in the world of the Fed Reserve economist, we are mindless little people who have no conscious awareness of our existance or effect. We are but ants in his computer models.

    You know, for years many of us have theorized that the Fed Reserve views the general populous as simply minions to be controlled. Funny, I'll bet Mr. Athreya has no idea how much of that mindset he just revealed.

  6. well,

    here's the thing

    being an avid reader of economics and finance blogs for some years i've come to realise that all blogs are tripe some of the time and many are tripe all of the time

    every blogger seems to have a pet base world view - a leaning towards some school or other coupled with a set of personal beliefs that underlay all they write

    for example the people tend to be fixed in their inflation beliefs

    and mish seems to be fixed in his everything is a bubble that will pop beliefs and all unions are scum belief

    and others are fixed in this mind set or other - you know many - gold bugs, conspiracies, whatever

    now i see most of these blogs as a form of entertainment that tends to gravitate towards serving a continuingly narrowing scope of readers just as the number of readers expands

    ie they play to a crowd every one of them

    maybe you remember "from the wilderness" and how that went from nothing to cult to nothing again as the prime blogger lost track of the difference between blogging a line and living a life

    i've saved financial sense newshour shows all the way back to almost day 1

    i've kept track of the relationship between bloggers and state of the market

    and frankly, i have little respect for almost any of the material that econ bloggers post

    it's fun yes, sometimes and sometimes too some articles are thought provoking

    the fact is that you can't base a portfolio or any trading on most of it (though some insightful articles do appear of some of these blogs - eg the Paplava boys are good)

    so most people read bloggers because it makes them feel good about their own pre-conceived notions

    it's no different to those dis-empowered righteous types who spend their lives following Allan Jones

    so, in a way, really, independently of whether Athreya has any personal merit or skill and aside from the fact that his targets might be right occasionally - by accident like a broken clock

    he's actually right

    economics is beyond anyone's ability to understand because the only true economist would be God - who can know all things at all times

    the best that a real economist (professional or amateur) can do is model parts of reality over brief periods of time for specific purposes - often the wrong purpose i agree (eg to back up a poltical policy or to support one set of scum bags or other)

    that the critics of Athreya are confusing economics with flaws in our society - which are not to do with economics but rather to do with crime - crime by those with power at the cost of those without - is because, like the bloggers themselves, the critics of bloggers are just making noise akin to "me too, i'm a person too"

    if bloggers and critics and all the rest focused just one one thing - tracking down, exposing and punishing fat cat criminals - we might end up with a world where real economic research and real economic experimentation might take place

    in that world i'd be surprised if Athreya could find fault


  7. @ murray

    Yup, the FS guys are great. Especially Jim: "No deflation to see here! its all high-powered money! please disperse!". When did he say this ? 2007 ? 2008 ?

  8. murray,
    Very insightful observations.

    It's a signal to noise problem. Blogs and other info outside the MSM are enormous and eclectic. They vary from sometimes brilliant to claptrap. MSM is owned and therefore controlled; further it has never competently informed the public about scientific content, even when it attempted to fairly do so. Economics is a massive, flawed discipline: developed knowledge is profoundly incomplete, and moreso than in other disciplines, commercial/political influences shape professional practice.

    Add it all up and there are no easy answers. I can appreciate the Fed egg head's perspective in one way: economics is profoundly complex and much lay discussion of it is fundamentally eroneous, politically motivated, and potentially harmful. It perpetuates ignorance and falsehoods.

    On the other hand, MSM and politicians have continually misrepresented and bastardized economic science for decades.

    Citizens are tired of the falsehoods. If there are scholarly economists who can contribute to better quality dialog, I'd suggest they step up and start doing so.

    Humanity and society will be poorly served if use of the web devolves into the lowest form of discourse, where impact is rhetorical and emotional, and void of evidence and reason.

    I've found blogs to be helpful as great places to start an education. By reading Mish, Minyanville and Financial Sense, I found John Hussman, and authors like Michael Hudson and Murray Rothbard, just to name a few.

    I'd like to think that the truth is useful and that the masses can figure out where to find the truth, even as they overcome mountains of noise and propoganda designed to hide it. The alternative isn't hopeful.