william the wie
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- Nov 18, 2009
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George Goodman, who died earlier this year wrote non-fiction economic commentary under the nom de plume of "Adam Smith". His big but ignored contribution to economic theory was the dangers of over-simplified models, in his case the definition of the money supply being oversimplified to effective uselessness in the 70s and 80s was the example.
In more modern language his accusation was that economics suffered and still suffers from information and confirmation bias: overusing the data that you have easy access to and fiddling with results to prove that the existing model works within limits. Rather than summarize his work I will use my own example from the book I am writing.
The Dust Bowl was the result of using pastureland as cropland with delayed but obvious results: 1931-9. This conversion was done because of Turkey's entry into WWI in late 1914 and prices for farmland reached a peak in 1920 while Russian farm production was still in the toilet. Pretty much everyone has a reasonably competent notion of what happened in the then 48 states: 4% of the nation was taken out of production by FDR and other farm support programs were created or strengthened.
However the farmland price run up was nationwide and the hydro-electric dams built in the
1930s removed more valuable bottomland farms from production at a time when coal, oil and NG electrical production was dirt cheap and much less eminent domain was required for their construction. Since exerting eminent domain to pay less than replacement cost for farms including lien holders is not politically possible above market reimbursement was used. So in my book I use this infrastructure building as an example of a stealth bank bailout a la "Adam Smith".
[MENTION=20854]Zander[/MENTION]
Any other uncaught errors of the standard economic models that anybody wants to post?
In more modern language his accusation was that economics suffered and still suffers from information and confirmation bias: overusing the data that you have easy access to and fiddling with results to prove that the existing model works within limits. Rather than summarize his work I will use my own example from the book I am writing.
The Dust Bowl was the result of using pastureland as cropland with delayed but obvious results: 1931-9. This conversion was done because of Turkey's entry into WWI in late 1914 and prices for farmland reached a peak in 1920 while Russian farm production was still in the toilet. Pretty much everyone has a reasonably competent notion of what happened in the then 48 states: 4% of the nation was taken out of production by FDR and other farm support programs were created or strengthened.
However the farmland price run up was nationwide and the hydro-electric dams built in the
1930s removed more valuable bottomland farms from production at a time when coal, oil and NG electrical production was dirt cheap and much less eminent domain was required for their construction. Since exerting eminent domain to pay less than replacement cost for farms including lien holders is not politically possible above market reimbursement was used. So in my book I use this infrastructure building as an example of a stealth bank bailout a la "Adam Smith".
[MENTION=20854]Zander[/MENTION]
Any other uncaught errors of the standard economic models that anybody wants to post?
