Rob Johnson on the economists' collective guilt

Rob Johnson, President of INET, on the sophisticated (but often unintentional) fraud that passes as scientific economics. (I could not, and would not, have put it differently myself.)


  • You are both too kind to the profession. A large proportion of academic economists could be accurately described as high-class prostitutes with letters after their names.

    Other than that reservation, I agree with the excellent commentary. There is a great difference between the methodology of natural science and that of social science. Whereas physicists seek to understand the universe, and to create models from empirical observations, economists (and other social scientists) start off with incorrect and unchallengeable paradigms and develop mathematical models from invalid (often unstated) axioms.

    What is worse, though, is that there is generally little sense of trying to understand the complex human world. If there were such a sense, then economics would have to include study of institutional behaviour, human interactions, history — in short, a political economy of the type that Marx and others have embraced. That they do not, is because they have sold out (from early career stage) to powerful politico-economic interests that seek to rig the debate for the purpose of profit-maximising. Economics who do not understand this are bad economists — those who do, are generally prostitutes with letters.

    • Truer words are seldom spoken.

      Economics is politics by other means
      War is politics by other means

      Therefore Eurozone “Crisis Resolution” is economic warfare.

  • What I’m hearing is bullshit – but then I think much of the world is bullshit ( excremental musing based on a non-scientific view of the world, that is a failure to use the scientific method because it does not fit you paradigm). When you build models ( not the models that the Chicago school built) they must be predictive and provable. If I build an economic model, one of the more difficult tasks in the social sciences, you must be able to prove that a line of occurrences happened according to this model based on a set of starting or base conditions and a set of parameters that take into account the variables and progressions of the economic system. You have to have a differential that states that over time you will get “this result”. And something like that result must occur or you model is wrong. Very simple. In some respects you have to be a Marxist, that is magic does not occur, and you must be based in a materialist frame work. The current American economics profession is , as Rob Johnson states, a collection of sycophants who will bend reality to predict higher profits and hope for self-fulfilling prophecies. But their models do work; people make record profits from speculation and market manipulations. Is just that the economy and the people that work in that economy suffer the consequences of the general failure of the concocted models.

    • Models can work in a strict scientific manner if there are equations governing them and very few parameters. The great mathematician Von Neumann said once : give me four parameters and I can fit an elephant, give me five and I can make his ears move”.

      Once many parameter fitting starts models are not better than maps: very good in explored territory because the parameters are well fitted and iffy in unexplored territory( here there be dragons). It is a gamble that sometimes pays off ( here we have mapped mountains so probably it will be mountains 100 kilometers further) or not . If it pays off it works psychologically as positive reinforcement, until one hits a gross disagreement with reality.

      A more mathematical way of putting it is that in many parameter fits there is no guarantee that the extrapolation to unknown phase space regions will follow the dynamics of the model.

    • More marketing and selling their products ,more perception manipulation.
      They create extremes and then they have the nerve to ask society to adjust and prove their math ,so as to not lose the power advantage over the people ,instead of adjusting their math to reality.

    • But your models must be built on some valid and realistic assumptions, no? Garbage In Garbage Out (GIGO), as they say in computer science.

      The problem with economics is that it is built on fundamentally faulty and fraudulent assumptions. This premise that justifies the existence of economics as a “scientific” discipline is the assumption that there is such a thing as “economic relations” that are separable from and somehow independent of human relations. As David Graeber argues in his book “Debt: The First 5,000 years” this is fraud that has been invented by mouthpieces of bourgeois ideology like Adam Smith and elevated,through hook, crook, and violence, to the rank of science as bourgeoisie became the dominant class and capitalism – the dominant ideology.

      The sole purpose of this so called economic “theory” is to squeeze
      money out of people, period. It is nothing more than a sophisticated
      three card monte game in which sophisticated shills – economic consultants and economics professors – trick marks (everyone else) into an inherently fraudulent game that is rigged all the way through so nobody can win but the dealer. Their role is to convince the marks that they can win the gamble. Just as the shills in the street version of the game, the economists appeal to the greed of the mark and his willingness to cheat others. The only difference is the language they use – street shills cajole their marks with vernacular flattery, economists – with mathematical mumbo jumbo.

      Let’s just face it – the emperor has no clothes. It is all fraud at it has always been such. If you want to do bona fide modeling, forget about economics. Go into psychology, cognitive science, sociology, or even the old fashioned political economy.

  • ” a great disservice to mankind…….”

    I really liked his choice of words. I hope it was intentional. Not to world economy, not finances or stock markets but mankind. We are humans not commodities.

  • First off, some predicted the recent economic disasters. In other words, financial and economic reasoning is predictive, not in the astonishing way of high physics, but in an ordinary, run-of-the-mill way. Basically, we asked for it, and got it – punishment for being stupid. So quit your complaining that no-one has found a way to reason usefully about economic life. It’s true that timing is beyond us.

    The problem is capture. Economists are too aligned with financial power. This is known. Across the piece, we find a failure to keep sensible distinctions. Civil servants flit between working for the State and private business. Educators work for corporates. I know this list is naive: there are many, many corruptions out there.

    Much of it is obvious: observe the distinctions. Have mind for the differences between roles. Adopt a small-c conservatism: assume some hidden values in distinctions which are worth maintaining.

    • “Across the piece, we find a failure to keep sensible distinctions.”

      Oh ,yes. Have been saying that a lot.
      Distinctions ,terms ,roles ,categorizations.
      It is like everything is opposite of what it should be.
      In politics ,economics ,education ,you name it.

      We accept a bunch of characterisitcs dogmatically as an ideology ,not guestioning anything ,not thinking that these characteristics do not have to be perceived in an absolute fashion and only as a part of that specific ideology. That they can be used in a different manner. A different combination.

      That’s human nature.

  • Priceless. I always thought of economics, as it is practiced today, as not just a distortion of reality but a deliberate attempt to use scientific procedure to cover up the truth about reality, in other words – a swindle, a con game. These assholes earned their place in the 8th circle of Dante’s inferno.

    • “Economics ought to be the theory of oneness, not division.”

      This phrase should be their punishment.
      Repeat verbally and write on the blackboard about 200 trillion times.

    • A good colleague of mine at the University of Athens, recently elected member of parliament for the Greater Athens constituency.

    • Ya. He’s with Syriza and apparently a key economic adviser to that party. I just heard him interviewed (somewhat hostilely, of course) on the radio here in the U.S. and he spoke with a pronounced British accent. Any information on his bio, CV, publications, beyond the very limited amount I could find with a quick google. It seems like he would be an interesting character to get to know under the circumstances…

  • “…Οι περισσότεροι θεωρητικοί των οικονομικών στην ιστορία δεν είναι παρά απολογητές συγκεκριμένων status quo. Θεωρητικοποιούν με ψευδο-επιστημονικές μεθόδους τη στήριξη της επικυριαρχίας της μίας ή της άλλης κοινωνικής τάξης. Στην περίπτωση των νεο-φιλελευθέρων, η κυρίαρχη τάξη αυτή είναι η τάξη του χρηματοπιστωτικού τομέα…..”

    πηγή: “Παρατηρήσεις για τους Δεσμευμένους Ελευθεριάζοντες”

  • As someone who has studied financial services regulation and followed Rob Johnston for years, I can only tell you that he is THE MAN. This is because he was an active and successful trader before he pursued his interests in economics and politics. He is someone who came “from the dark side” and knows and has repeatedly exposed, all the dirty tricks of market manipulation. Along with William Black and Elizabeth Warren he belongs, according to my humble opinion, to the dream team of financial regulation reformers. If anyone cares, she/he can watch his interviews in No technical stuff, no mumbo-jumbo, no oversimplifications, no lecturing. Pure brilliance and intellectual honesty. Finally I would like to stress that I never met the man nor do I have any direct or remote connection to him whatsoever.

  • Just a naive thought.
    What if we set a design principle in economic modeling concerning complexity? A threshold in complexity. After all, the bargaining process between two individual stands only if they both understand the underlying terms.

    This is an argument in favor of looking economic theory as common sense and therefore science. What is the point in complex models, not applicable to reality.
    Investors and economists become gamblers and preachers if they don’t understand or realize what they’re talking about.
    If you don’t like it, go to casinos and gambling clubs, not financial institutions.

    I am tired of seeing people trying to show that they are smarter than others, trying to show that they are more respectable than others. Does this show inferiority complex or what?

    If they were really smart they wouldn’t shout it …

    Be a scientist for a second and accept the facts. Or else admit that the essence of economics is bargaining and politics. At least seismologists and meteorologists give confidence levels and margin of errors. At least seismologists and meteorologists are out there in the field trying to listen and comprehend. At least seismologist and meteorologists USE the word model and prediction. And the complexity of their problems are inferior to that of economics.

    Dedicated scientists lay out their arguments and are subject to critic. I get so upset when i hear an economist say that this is a disaster or the other is a miracle.
    It’s one thing to lay out your argument and defend your opinion.
    It’s one thing to say that i don’t have time to explain the concept in two minutes while being interviewed.
    It’s one thing to say that the audience is not likely to understand because it requires a more solid background.
    It’s one thing to say that this is my educated opinion and there are other opinions as well.
    And it’s a total different story to state confidence and certainty.
    It’s another thing to defend your opinion using means such as “academic titles”, “financial status” and “superior IQ”.
    Many a times have i seen “respectable” economists being ridiculed by “children” and “housewives”, not being able to give a simple answer.

    No economists are not the scapegoats! They did that to themselves. And the next question is why? The decoding of this last question will reveal more “essence” about the “real” world.

    • And a nasty remark. It’s evident that economics is politics. Listen to how economists talk…

    • Well ,i am smart enough. I can tie my shoelaces applying two different knot theories. Then i step on them and eat dirt. Aaah ,reality!!!!

    • Enjoyed it! Simple and clear.
      No more no less ! 🙂

      All i need is solid ground. But i think i ask for too much.


    How the social memes rule the world. For the most important tool of the powers is fear and greed of the masses.
    But the masses wake up slowly.

    One of the conspiracy theories is that the only reason the elite doesn’t back off and correct things ,is their use of the problems (created by them) to propose to the world a more centralized government on the path for a NWO. And ofcourse they can be most convincing.
    These people reside on the borders between chaos and system control. It is not farfetched to think that they will gain independently of any outcome. But i just do not get it. What is the rush? If something like that is true ,wouldn’t they do a better job by “good deeds”?
    Trying to think of the future ,if humans evolve ,i do see globalization taking place anyway. Not one of power and control though. For if it was such ,in what world these people would be the rulers ,other than a world of misery and destruction? Is this what they want? Are they that stupid?

    No. If they want the world ,they want to keep people happy as much as is needed BUT with the elite preserving the ability of being years ahead of the crowd. What we may be experiencing is a transitional phase. They need to change direction fast for their plans (and the preservation of their advantages) and this turning of the steering wheel makes people sick. So people wake up. For noone can force the whole world to change just for the sake of power. And noone can keep the advantage forever without having to resort to manipulative means that hurt people.

    So ,go on then. Steer the boat. Hoping that the icebergs will melt before you lose control.
    I just do not see it.

  • Reblogged this on Freedom Notes and commented:
    Rob Johnson, president of INET, presenting his critique of contemporary mainstream economics and what caused the global economic crisis. He talks, among other things, about the obsession with abstract theory and technique that dominates the discourse of modern economics, at the price of understanding how the real world works.