[kqr]

I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses, and practitioners rarely suffer from the kind of personal survival pressure that otherwise tends to filter out for people who are right.

Not to mention that the entire economy is such a complex system, and my experience with complex systems is that we can't predict them, we like to come up with causal explanations for observed events, and we're almost always wrong on closer scrutiny.

With all that in mind, I have started my economics journey not on the macro picture, but on the details. Book recommendations include:

- The Kelly capital investment criterion: a collection of historic peer-reviewed papers about what it says on the tin: how to allocate resources to risky ventures (read: how to size bets.)

- Red-Blooded Risk: a wandering tale about quantitative risk management and how it entered the world of finance in the seventies--eighties. As always with Aaron Brown, it contains lots of information on economic matters that aren't directly related to the main subject.

- The Economic Function of Futures Markets: a correct, for once, exposition on how futures markets are not about locking in prices (any regular contract can do that) or hedging (the people who supposedly would hedge don't) but about creating an implicit loan market for commodities, among other things.

- The Poker Face of Wall Street: a wandering tale on the similarities between betting, speculation in financial instruments, and insurance, among other things.

- The (Mis)Behaviour of Markets: Benoit Mandelbrot summarises some of his research into modeling markets with multifractal geometric ideas.

- Fortune's Formula: a more pop-sci friendly version of the Kelly criterion paper collection.

- Regression Modeling with Financial and Actuarial Applications: basic techniques used everywhere for statistical modeling of things.

- Moneyball: finding not the best, but the most undervalued through quantitative reasoning.

- Inadequate Equilibria: a framework for thinking about when economic incentives align with a desired outcome and when they don't.

I have also started a fairly advanced prediction market at work to get a better sense for how such things work, and I'm the guy who you either love or hate playing Risk and Monopoly with, because I invent derivative money and all sorts of exotic contracts as an aid to diplomacy.

But then again, I generally build knowledge by generalizing from specific concrete experiences. Maybe that bottom-up approach works badly for some people.

Edit: I should say that these are some of the books I have read and can personally vouch for. There are several more like them in my stack of books to read. I can list some of those that I think are more promising, but I can't personally vouch for them yet.

Second edit: oh, I almost forgot some of the most important parts. I don't have a specific reference, but double-entry accounting and financial reports are things that will teach you a lot of the basic terminology about assets, liabilities, equity, credit and so on.

I suggest maintaining your personal (or your family's) books with double-entry. A great pplace to start is Plain Text Accounting.

[huitzitziltzin]

> I personally think a lot of established macroeconomics is bullshit. There's just no mechanism to verify many of the hypotheses

Modern academic (and central bank) macroeconomics is literally all about taking macroeconomic models to data. Period. Attend any macro seminar in the field at any university and that’s what you’ll see. In particular: it is directly about “verifying the mechanisms.”

Your complaint is perhaps somewhat ignorant of the way macroeconomics is actually practiced.

Source: an academic economist.

[kqr]

I'm influenced by reports like these[1], but maybe I've been biased in my reading selection.

I also want to be clear about what I'm saying:

- I'm not saying macroeconomists don't have a hard job. Specifically due to the slow feedback and complex systems, it must be one of the hardest jobs in the world. It's like you set a dial on a big black box and suddenly, but years later, a bunch of people get sick. You'll never know whether it was that dial setting that did it. Or whether it was one of your other 35 dial settings. Actually, you'll likely never even know it happened.

- I'm not saying macroeconomists are worse at this than any others. There are many highly theoretical fields with low level of concrete feedback where this is a problem.

- I'm not saying macroeconomists aren't trying. It's just a fundamentally insanely intractable problem, so I'm still looking for evidence that they aren't failing.

- I'm also not saying macroeconomists are doing it out of ignorance or spite. The few I've spoken to have all been pretty honest about flying blind.

[1]: https://archive.is/S3UpC

[sumtechguy]

Most economic models are very nice in the steady state. If you get any sort of irrational actor or unaccounted variable in the model the model usually goes weird. The whole thing is at least s 20 dimensional graph just for the data. Never mind the hundreds of other things that feed it each of those systems some of which are impossible to model. It is a challenging problem but not really 'dialed in' and able to make decent predictions more than a few moments out. It is usually very good on explaining what happened but usually very ham fisted on predictions. Every once and awhile someone's model will 'get it right' at that point they go on book tours and predict the next disaster which may or may not happen. (source: degree in econ)

[huitzitziltzin]

> Most economic models are very nice in the steady state. If you get any sort of irrational actor or unaccounted variable in the model the model usually goes weird. The whole thing is at least s 20 dimensional graph just for the data.

If you're saying "it's hard," then I agree. And every academic macroeconomist would say the same thing.

> Never mind the hundreds of other things that feed it each of those systems some of which are impossible to model.

This also sounds like "it's hard," OR "you can't model everything." You can then say "and so I give up." Macroeconomists do not and for good reason: policymakers are going to use some kind of model to predict the impact of policies, or to select which policies to implement. We can either do our best to try to inform them on the basis of data, or we can throw up our hands, in which case they might well make worse choices.

> Every once and awhile someone's model will 'get it right' at that point they go on book tours and predict the next disaster which may or may not happen.

I do not see this happening personally. Nor do I think a lot of academic economists are in the business of going on book tours making confident predictions.

[sumtechguy]

The rub with >policymakers are going to use some kind of model to predict the impact of policies, or to select which policies to implement

It is the policy makers are not aware of the 3rd or even 2nd level effects on those decisions. The models do not show it to them because many cant, or they do not want to see it. There are also enough different theories that they can pick whatever sounds nice and fits what they want to say and then can lean back and say 'see the model said'. My point is they are not going to follow the 'science' they are going to have smorgasbord of whatever pet theory they want to promote. Then back the 'science' into it.

>This also sounds like "it's hard," OR "you can't model everything." You can then say "and so I give up."

What I am saying is the models are borderline not working. They 'sorta' work right up until you get an irrational actor (see recent stonks issue as an interesting case study). People are irrational but rational in a different dimension. But we have no real good way to model that. It is why almost all of these theories 'work' until you get something irrational that the model does not account for.

I am also not saying 'give up'. I am saying you need a lot more dimensions in your calculus. I am also saying many of those dimensions you will have a very hard time measuring. That is due to other external dimensions affecting those hyper dimensional curves, and even the model bending back on itself affecting things. It will also not be something you can keep in your head. Also at this point you will have to explain it in a way people can understand (any way else is the way of kafka). There are many years of theories that sound nice but do not work.

>I do not see this happening personally. Because in the majority of the cases it does not happen. Because the models usually get it wrong. But every once and awhile someone hits the lottery and leans into it. Usually around market crashes.