How can you argue that there’s a consensus when evidently your own “school” lacks one. In fact in my own case I have the unfortunate fate of working within one of the most out of touch economic departments in the country. John Boehner recently posted a list of 34 economists who were against the economic stimulus. This was out of perhaps 30,000 PhDs in economics in the entire country. In that list were two members of my own department. One of those was my own disertation supervisor. Ironically he is an “expert” on the Great Depression. He is a seemingly rational guy but he has had a terrible year for investment advice. (For example, the very day Lehman Brothers went under he told me that AIG stock was cheap.) There was no consensus, but maybe there will be one soon, after the dust settles.

P.S. Laurent Guerby, I love Dean Baker. I’ve been reading him for years. In fact, check out this:

http://bostonreview.net/BR34.1/baker.php

“”"For the fourth quarter of 2004, according to OECD, (source Employment
Outlook 2005 ISBN 92-64-01045-9), normalized unemployment for men aged
25 to 54 was 4.6% in the USA and 7.4% in France. At the same time and
for the same population the employment rate (number of workers divided
by population) was 86.3% in the U.S. and 86.7% in France.

This example shows that the unemployment rate is 60% higher in France
than in the USA, yet more people in this demographic are working in
France than in the USA, which is counterintuitive if it is expected that
the unemployment rate reflects the health of the labor market”"”

Number of economists using unemployment measure as is to prove
superiority of X or Y policy/country: 100%
Number of economists studying this discrepancy: 0% +/- 1% (1) (2)

Raw economics data is also top secret: there is a big incentive
for the profession to keep data out of the public eye to
avoid embarassing debates (inflation comes to mind, why
are hedonic adjustments not public for example?).

(1) of the hundreds of economist I presented with this evidence
only Dean Baker reacted positively, but he also predicted this crisis
(correlation is not causation
(2) it’s easy to disprove this affirmation: cite a paper

LOL. Unbelievable. this guy is actually trying to sell consensus academics?. progress is made by dissent and not consensus. Galileo anyone?. geez, what sort of brainwashing a few years of university macroeconomics can do.

Your right, I did get inductive and deductive backwards. My bad!

Your also right that there were a few exceptions in the Austrian school with respect to deflation. But Mike “Mish” Shedlock and Frank Shostak (and Gary North for that matter) were in the extreme minority (and still are). Maybe you (and all the Austrians) should go figure out what they did (and are still doing) right. I have my own suspicions. In fact it seems to me that Mish in particular is much less a slave to monetary aggregates than the other Austrians (”credit destruction” etc.) In fact some of his analysis sounds an awful lot like the Keynesian aggregate demand thinking to me. And his predictions for the new year also sound an awful lot like the New Keynesian predictions (Could it be, for all his anti-Keynesian bluster, he is really a Keynesian in Austrian clothing?)

As for investments, I followed my New Keynesian education, selling my stocks in August 2007 (just before peak) and selling my gold last month (buy low, sell high!) I notice that Mish isn’t committed to forecasting that gold will go up this year. Hmmm.

P.S. Whitespiral, I’m an all but dissertation mainstream economist, and I love arguing with you guys!

Tell me again why no other social science like history, geography, philosophy, political science, and sociology use the positivist method and mathematical modeling?

Oh-I know some psychologists use it-it must be working out great for them.

Human Action throws any physical absolutes on their head. Learn that well.

BTW, as for the Austrian School lacking any academic legitimacy, its kinda funny how no mainstream economist will dare enter any debate with an austrian.

“As a group the Austrian Schoolers are a bunch of quacks. The Austrian School is inductive rather than deductive.”

You can’t even get your recycled, hack criticisms straight. It’s deductive, not inductive, because induction is mostly impossible with a complex system like the modern economy.

“As a result it does not believe in the scientific method.”

How, exactly, would one apply the scientific method to analyzing the economy? How do you falsify your hypotheses? If you apply one Keynesian solution (e.g., in Japan), and the outcome is catastrophe, the apparent lesson Keynesians draw from this is that you just should have tried harder. They’re no more “scientific” than the Austrian’s, but they’re very good at cloaking themselves in the mantle of science.

“Consequently it lacks academic legitimacy. (In fact there’s only a couple of schools in the entire country that even teach it.)”

You’re trying to make arguments AGAINST the Austrian School, right?

“Thus it has become the province of amateurs, goldbugs, libertarians, anarchists and other cranks. (The Austrian School is less a school than a cult. You’ll have to take up Ayn Rand and Ludwig von Mises to join.)”

Blah blah blah blah blah ad hominem blah blah.

“One glaring area where the Austrian cultists have been wrong is with respect to inflation. (And yes, inflation matters more than stock picks.) All were forecasting high inflation by this time last year. For example, here is what Peter Schiff was saying late last year:…”

Peter Schiff is not the end-all and be-all of Austrian analysts. Others, including Mike Shedlock, Frank Shotak, and the Daily Reckoning guys highlighted the possibility of deflation starting in early ‘08 or even earlier. And we’re not out of the woods yet. Schiff may yet be proved right if we go full steam ahead with deficit-spending solutions (such as Roubini favors) and wind up with a public debt that is unserviceable without using inflation or sovereign default.

Reading the Austrians, especially Mish, has personally helped me save hundreds of thousands of dollars. As far as empirical evidence for the Austrian school goes, that’s not too bad.

Economics should never have been used to give detailed predictions. It is a social art (not a science). The math gives a false precision that could never be fulfilled. People are complex, and rational in ways that simple optimization models cannot comprehend.

Economists get into trouble when they are forced to make detailed predictions. The economy is far too complex to be explained through the simplifying assumptions of economists. The best we can do is qualitatively look at things and say: “Here are the risks; here are the opportunities.” We won’t ever be right, but we can indicate the prevailing direction of future economic winds.

Also, it seems, the answer to the central Q: “Why did Economists, as a group, miss the warning signs of housing, credit and market crisis?”–lies, in pieces, within this thread.

It, to me, has been well worth reading..