Grand Theft Kocherlakotau

Well, I’m not going to register with the FT to read the article, but blaming this mess on the economists is a bit rich. It seems like pre-crash 90% of the economists out there advocated a more stimulative response that we didn’t get (unless you include policy-makers like Trinchet). Post-crash, post-Obama election, suddenly conservative economists changed their tune and decided that Republican party goals were the answer to our problems. And yes, they should take a lot of heat for this. That anyone considers Greg Mankiw to be ‘respectable’ is a joke. The man is nothing more than a mouthpiece for the party when it matters. But we should be specific about this. It’s not that they were playing GTA (it’s worse than that), they were shilling for their political masters. Except the Chicago people. That’s all they ever do, so no change there.

Following the link to Kocherlakota’s article leads to a lengthy and surprisingly honest admission that Kocherlakota and his professional colleagues know almost nothing about the economy.

The mayhem in a first-person shooter is virtual; economists are destroying actual lives and economies.

oops

The original Grand Theft Auto (which is the only one I’ve played) is apparently available as a free download from Rockstar games’ site. I have an impression that it is quite a bit more silly – possibly accidentally – than its many sequels. People have probably become more picky about what constitutes plausible gangsta dialogue since 1997.

My suspicion is that the use of GTA in the article is a way to make the claim “Nero fiddles while Rome burns”. I also suspect that the games that would even remotely come close to using anything similar to DSGE to model the economy would be Tropico 3 (which is an interesting twist on SimCity type games). That being said, mentioning either game is an odious comparison claiming that central bankers are car thieves (GTA), or looting-dictators (T3). Norquist, like Gingrich, are signposts showing where the right wing (in the US) is heading, so their words are important in understanding why the blather is coming out, and why now.

With the right-wingers attacking Keynesian economics (such as the Norquist quote that appeared 3 days ago), this sort of article is a dog-whistle: GTA is reviled in the right wing media for glorifying sex, drugs, carjacking and violence; and attacking Keynesian economics shows loyalty to Norquist (who is the architect of much of Republican economic policies in the US, such as “starve the beast” and “cut taxes no matter what”).

Are there any games that do a sufficiently accurate economic model to satisfy economists? If so, what sort of player types would it appeal to? When you are spending money developing games, you have to strongly consider how it will appeal to the people who are going to be paying for it, and generally, those folks don’t want “economic realism” because they’re playing games to get away from the world (aka “have fun).

Following the link to Kocherlakota’s article leads to a lengthy and surprisingly honest admission that Kocherlakota and his professional colleagues know almost nothing about the economy.

But isn’t that a standard freshwater rhetorical ploy? I’m not saying this is true in Kocherlakota’s case (don’t know much about him) but I frequently see arguments along the lines that we know all-too-little about the economy, so the Fed should concentrate on price stability and let the unemployed sort out their own problems — after all, they know their own circumstances so much better than we do.

I’m not enamoured of that kind of humility. Give me some Keynesian arrogance every time. When millions are unemployed we may not be able to model the market failure as elegantly as we would like, but we’ve good reason to believe expansionary policies help.

Frictionless exchanges, in which gunfire never occurs because all actors anticipate what other actors are likely to do, and hence avoid welfare-lowering actions?

It is my understanding that the human controlling the player avatar in the game gets quite a lot of welfare-heightening from gunfights, else they’d play Sudoku instead. (Player character as utility monster?)

Searched for other copies of the article, nice to see that Peter Gallagher is finding a life after “The O.C.”

Pah, Rockstar’s puny Grand Theft Auto Economics shall be crushed under the wheels of ToadyOne’s unstoppable Dwarf Fortress Economics! Fear the OpenGL rendered ASCII! :)

In fairness Conall, has any prominent theologian ever said that the point of studying theology is so as not to be fooled by theologians?

@ Kevin, that sounds like main reason to study economics too.

In the background on GTA there is a playing a wonderful mickey-take of US radio, both the DJs and the adverts, which makes the game worthwhile. Possibly that’s one of the things that annoys right-wing commentators.

SKapusniak: The economy in DF isn’t quite there yet.
http://threepanelsoul.com/2009/07/21/on-mixed-economies/

You can also read all of John Kay’s FT articles at his website.

Here is a link to the article in question:

http://www.johnkay.com/2011/08/26/economics-rituals-of-rigour

Cahal, Worstall is like that. He’s not a troll, but he should be regarded as a glibertarian, and pretty much ignored.

I think people are slightly missing the point of Kay’s piece regarding GTA. The point is not the specifics of GTA, but rather that as a game, it has a set of internally consistent and rigorous rules and outcomes. So if I drive my car at a certain speed and hit a ramp at the top of a parking garage at just the right angle, my car will do three flips and land on its wheels in the second story of an office building. If I repeat this many times over, each time I do it I will get an internally consistent outcome, and if I find another ramp in the city, I know my car will behave in a similarily consistent fashion.

But this internal validity tells me nothing of the external validity when applied to a REAL car driving off a parking ramp. This is the key point of Kay’s article (Delong has a longer excerpt that gets into the comparison between macro/financial models and “game” models). Top macroeconomists are the equivalent of me trying to hit that ramp at different speeds and angles (exogenous shocks) and then observing the model’s outcome. I would push Kay’s criticism further in noting that the profession has tended to reward macroeconomists who are clever builders of consistent and rigorous models of cars flying off parking ramps over those who actually try to understand how cars fly off ramps in the real world.

As a gamer and an economist (applied micro/environmental), Kay’s comment is more or less literally true (though I was probably playing Warcraft and Call of Duty in 2008)

But the problem is that there were plenty of prominent economists with plausible models for what was happening on offer. The conservative ones quickly switched things up once they realized the recession was an opportunity to punish a Democratic government (and also maybe slash SS or medicare). So I don’t think this problem really had much to do with the failure of the economics profession to offer meaningful guidance to the political system over the last 3 years.

I think the third sentence quoted above is contradicted by the second, which describes a thing that could not happen in a profession that was not riddled with widespread intellectual dishonesty and corruption. That’s not a failure of the profession?

I think the author’s point is that economists and bankers are overly reliant on highly abstract, complex computer modeling systems like the DSGE. They get so wrapped up in their computer simulations (created by the best brains money can buy) they lose sight of the fact that they’re playing with billions of other people’s savings and pension funds.

It’s like Grand Theft Auto where you have a grand old time playing a virtual gangster shooting up police cars and killing rival gang members without giving any thought to the morality or consequences of your actions. Economists and bankers get to play out their little computer aided analytic games with trillions of Dollars – and when things don’t work out exactly how their algorithms predicted the world’s economy collapses.

Wikipedia “Long-Term Capital Management”. It was a hedge fund started by a bunch of quants on Wall Street whose board members included Nobel Prize winning economists. Their game plan was to use purely analytic models for their investments – it couldn’t fail according to all their calculations. Long-Term Capital Management was established in 1994; by 1998 it lost $4.6 billion. It quietly folded in 2000.

Conall (#19): “How about Economics departments especially at Ivy League and Russell Group universities be re-assigned to the Theology Faculty? “

This would be to grossly disparage Theology. One difference between the two disciplines is that the majority of people studying theology have evidence (in the form of personal experiences) of non-material realms. Even if all such experiences are forms of self-delusion, this subjective evidence outweighs the evidence that neo-classical economists can produce for their unrealistic models of human nature, or for the existence of metaphysical carpal entities.

the majority of people studying theology have evidence (in the form of personal experiences) of non-material realms.

Really? Honest question – this isn’t true of any of the theology students I know, but that’s only a pool of 3.