Wednesday, May 05, 2004

I've seen two stories in the last two days suggesting that the economists had better hang up their cleats and let the psychologists run their discipline from now on since the former clearly don't know what the hell they're talking about.

Drivers Tend to Shrug Off High Gas Prices, for Now

Refinancing and home purchase applications rise, even as rates climb for eighth straight week

I love this line in particular:
Experts say that for a variety of reasons, they should be able to keep that up for a while - but not indefinitely.
And these are the same liberals ridiculing Marxists like Althusser for arguing that capital always determines "in the last instance"!

If prices have no clear necessary relationship to demand -- if it's more about psychology than rational utility maximization -- then the junior psychologists with the Econ Ph.D.'s had better move aside for the people who really know how the human psyche works. This seems to be the essential point that Paul Krugman made some years ago in discussing the "The confidence game" the IMF encourages countries to play with foreign investors, and I don't see any evidence since then to suggest he's wrong.

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