The US is operating at 78.8% utilization of manufacturing capacity. That’s very low. We are told that we need to keep taxes low, reduce them even further, to stimulate investment.
How on earth can that do any good if we are not even utilizing current capacity?
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Well, it took all of five minutes to get the usual response below. My question is why the “science” of economics does not describe the world that really exists.
The answer: “Econ 101” (!)…
Let’s rephrase the question: Is there a science that studies human behavior than can take our essential irrationality and put it on a graph? Does all of the insanity of our individual behaviors, when added together, create a singularity of sanity?
No. Economics is bunk. It is disguised ideology. The ideology that neoclassical economics is hiding goes by many names. I like oligarchy, but fascism works as well.
Piece of Mindful 
The American way, subsidies. Or raise tariffs on imported manufactured goods. Or suspend GATT, NAFTA, WTO. Or quit funding the IMF and World Bank. Or quit buying foreign-made junk.
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It’s a fallacy of composition – on both sides of the argument. Econ 101.
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Econ 101…Econ 999 is all bunk, nonsense top to bottom. It does not describe the real world. We don’t behave at all like neoclassical economics says we behave, and when faced with that, they retreat behind graphs that are incomprehensible.
Econ 102.
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Inconprehensibility seems to be little more than a mark of intellectual branding.
And then there is this question: Manufacturing what? Machines make more machines that are supposed to make us more, and more “well off.” So how’s that working out? We love our gadgets, but they don’t love us back. So we take pills, see shrinks, pile up money and junk, and worry about industrial jobs that produce more gadgets. Life on a pretzel. Our brains have been hijacked and filled with gobbledygook.
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Strange response when you get a comment that actually agrees with you. The fallacy of composition is at the heart of why all macro is potentially wrong. It’s not just neo-classical it’s Keynes and neo-monetarist too.
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Oh, sorry then. I thought you were referring me to Econ 101 and telling me that I just don’t get what’s going on.
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No, every Econ 101 text book covers the fallacy of composition. The unfortunate fact is that Econ 101 is taught by economist – who tend to believe in economics. My text book had one paragraph on the FOC. In graduate school there are mountains of it – mostly written to discredit opposing views without applying it to the writer’s own thinking.
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Now we all do that. My curiosity about economics is that given that it does not describe reality, why do we have it? People are slow to change, but generations of economists make the same mistakes again and again. Their predictions are nonsense, they cannot even tell us what will happen tomorrow, but every politician has two in his pocket.
Reagan consulted an astrologist. That I get
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They are highly paid to be the wizard beyond the curtain, they can get away with it because they pretend to know more than everyone else and 95% of the language they use is incomprehensible to the majority of people. People want to look smart, so they pretend to know what this or that economist is talking about and pick a side so that they too, can look smart and intellectual instead of admitting that they have no idea what Kaynes or Krugman, or Bernake just said.
And the principal of supply’s nd demand works perfectly when the number of variables is held down to just a handful, of course that gets your point, there isn’t a situation in our world as social creates that holds to only a few variables. Attempting to model human behavior is extremely difficult, and even if you get it 80% correct you could still end up being completely fucked.
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Bingo. The field of statistics is used to deal with large mountains of raw data, and parts of it work amazingly well. They can take a tiny slice of our voting habits and predict the outcome of elections with deadly accuracy. (Until recently, since there is so much fraud in the vote counting system with the advent of electronic machines.)
Economics, not so much. I’m betting that if we reduce it to two products and one consumer, they still don’t get it right.
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My roommate in college was an accountant, and so she subscribed to Fortune magazine. I always thought it was funny that every issue they had a section where two experts at picking stocks aired their opposing views on whether a specific stock was a good buy. Why would I hire one of those experts if they best I was getting was a coin toss?
Some economic rules are reliable. If you put in a price ceiling, you will almost always get a black market and inefficiently low quality; a price floor will produce a black market (a black market that killed over a hundred people in India this week) and inefficiently high quality. But for bigger issues, particularly with international economics, there’s too many factors to produce a broad, effective theory.
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I don’t think any of those rules are immutable. Prices are fixed all around us. Supply fluctuates and prices go their own way, demand is unpredictable and irrational. There is a free market, but it is reserved for sweatshop workers and waitresses. Anyone with any kind of power avoids it like the plague.
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