Feels like we’ve passed the point where debt is just a background worry. If the models can’t even handle where we’re at now, maybe the risks are way closer than we’d like to think.
Same for a model crashing.
Different thing is if it showed that repayment is inpossible.
The article mentions a ery important subject, but quality is low.
https://en.wikipedia.org/wiki/Reification_(fallacy)
It is interesting that the complaint is that the model would not converge. Convergence might be a nice property to have or desire, but simple systems don't necessarily converge. For instance ecosystems are chaotic.
Want to screw with an Economist? Ask them for a model that can keep the Vatican afloat for a thousand years through empires/nations/banks/currencies collapsing.
It can be very useful for quantifying and comparing the past, but there's absolutely nothing scientific about the process and no matter how much modelling is done it can't reliably predict future outcomes.
Because we do not control perception. We have to presume multiple scenarios each of have a dimension of perception. Perception always become a determinant factor.
The Fed, for example, may have modelling that indicates we have a downturn coming in 6 months. Those models aren't predictive though, and the Fed announces their economic outlook and what they may do with rates in the future they are only attempting to modify public perception and nudge behavior to make the future they actually want happen; it has nothing to do with predicting where the economy will be.
Economics is a science of human behaviour, which is not exact. Economic models are like weather models. They cannot be exact because what they are modelling (weather, human behaviour) is incredibly complicated with millions of parameters.
Science is about observing something, forming a hypothesis about why it is that way, and then testing the hypothesis to determine whether it is correct.
Many Economics researchers do all of the above, so they are scientists.
In that case, is geology a science?
I too am sceptical about economics (mostly macro, the micro stuff is fine) but there are lots of places where you can't run experiments and some of them are science.
Even in physics, Einstein's theories had to be supported by things like astronomical observations.
I agree that this doesn't match the definition of a scientific experiment, in that there is no control group within the bloc to which the higher interest levels were not applied. Nonetheless, it seems to be a textbook example of an economy proving to be manipulable in exactly the way that economic theory suggests it will be.
A physicists once remarked that his job would been much harder if particles had free will. But that is exact economists have to do: predict what humans will do. There is an entire sub-field of study on the non-rationality of people and how it feeds into how that effects money, finance, and economies:
* https://en.wikipedia.org/wiki/Behavioral_economics
But there have been instances of models working. When QE started a group of folks made predictions:
> We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.
* https://www.hoover.org/research/open-letter-ben-bernanke
Another group of folks (often called "Keynesian") made different predictions based on their model(s) / understanding of how things work.. One turned out correct and other incorrect in their predictions.
See also predictions about "tax cuts pay for themselves":
* https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act
* https://en.wikipedia.org/wiki/Kansas_experiment
The fact that people ignore the results of the experiments is not a failing of the academic field.
Economists have agency. They don't have to predict what humans will do. They believe they can predict it, attempt to make their predictions, then claim that's what will happen.
That works in reverse as well, attempting to predict why humans did what they did in the past and then attempt to attribute those predictions as an explanation of quantified economic indicators.
In both case, past behavior and future behavior, their predictions are untestable. How is that scientific?
Economists study the economy which is made of… a bunch of humans doing stuff with money.
> In both case, past behavior and future behavior, their predictions are untestable. How is that scientific?
What is this not testable about:
> The planned asset purchases risk currency debasement and inflation […]
* https://blogs.wsj.com/economics/2010/11/15/open-letter-to-be...
* https://www.hoover.org/research/open-letter-ben-bernanke
Was there (USD) currency debasement? Was there US inflation? No? The predictions were wrong. The same day it was published (in the WSJ) there were critiques about it, e.g.:
* https://archive.nytimes.com/krugman.blogs.nytimes.com/2010/1...
When QE2 went forward and was about to stop there were many predictions (generally involving piles of money), some of which were accurate and others less so:
* https://archive.nytimes.com/krugman.blogs.nytimes.com/2011/0...
* https://archive.nytimes.com/krugman.blogs.nytimes.com/2011/0...
* https://equitablegrowth.org/pimco-lose-lots-money-influence-...
How are / were these "untestable"?
People in finance make predictions about what policies will do and where they will take the economy on a daily basis:
* https://en.wikipedia.org/wiki/Futures_exchange
* https://en.wikipedia.org/wiki/Option_(finance)
Do you have a model that tries to explain what tariffs with do to the USD? You can make a prediction and win/lose a lot of money buy shorting/longing the dollar.
I doubt you would agree that meteorology or chemistry are "nothing scientific" despite also meeting that criteria?
Inability to predict outcomes does not mean "unscientific". It usually means it models a system with a fractal inputs and chaotic outputs.
The models follow from observation, the same as they do in chemistry or meteorology. And just like those two, the models are weak compared to actual observation.
I argue that economic research is entirely based on modelling because the research results produced always depend on modelling and either don't include any type of control group or use a controlled study so small that the odds it accurately reflects the entire economy are low.
The first I think is self explanatory, for the second I'd point to studies of UBI that are done on small populations within a larger economy that doesn't have a UBI. The results of the small group are effectively meaningless because that group has a comparative advantage against the rest of the economy, and those studies are never able to create a bubble in which the UBI population is entirely cut off from the real economy while still mimicking well enough all other systems, industries, and motivations of the real economy.
I'm sure you would agree that climate change is pretty hard science (it is) so you must have a misconception or confusion about economics, because really they are the same kind of science at heart.
Models based on observation are used to predict future behavior, and while often wrong, it's critical to understand why they are wrong so you can understand where they are right.
Weather predictions are made and shared out only at the level of what will happen over the next few days. Weather predictions aren't used to predict exactly why it rained, only that it did rain (though surely the why is used as feedback for modelling).
Economists take a different tact, they attempt to claim why GDP, CPI, wages, etc changed. With predictions they look much further out than weather and attempt to not only claim what economic indicators will do, they attempt to claim precisely why it will have happened.
Economics modeling is the same way. From how to price your lemonade at your kids stand to how to size government stimulus.
So long as you have the right mindset, being a priest of a generously supported state religion is a very cushy job.
> the problem is political
For instance Scott Bessent opinion:
"I will take the market-based indicators over the so-called 'experts' all the time! That’s how I made my 35-year career, was listening to the market."
Sure, you need traders to move the markets, and if that's good enough for Scott Bessent, good for him.
And traders are not themselves predicting the future as you put it, but they are predicting the future sentiment of other traders.
And traders are moved by the Federal Reserve’s interest rate decisions
That said, economics is a mostly bunk "science".
The pandemic era fiscal and monetary policy was pretty much a 5x speed (because of the scale of everything) display of economics at work, and understanding all the levers while they were pulled made it clear that no, economics is not bullshit, people just really don't like what economics has to say.
> economics is not bullshit, people just really don't like what economics has to say.
(i have my own ideas so im curious what others think)
Economics tells them they are dumb, so they call economics dumb.
> Lots of people want to make it a law to "have their cake" after "eating their cake".
The left wants more government spending and the right wants lower taxes. Both want lower interest rates.
Many people look at the economy and see that it is bad and so they think the economists must be bad at their job, but in many cases people in power simply don't listen to economists.
The best example of this in my opinion is land value tax.
Milton Friedman is an Nobel prize winner on the libertarian side who called lvt the best tax policy. Joseph Stieglitz is a Nobel prize winner who is a socialist who also advocated for lvt. A recent survey showed something like 83% of economists saying that lvt would significantly increase growth.
And yet zero countries have implemented an lvt rate that is much higher than inflation.
Good and smart policies do not need to be accepted by economists to be implemented. They need to be accepted by those in power and by the general population.
In my opinion, if anything we should have way more economists on the news talking about the economy than the political pundits that you typically see - not the other way around!
Add to that the wild level to which economists seem to think their economics knowledge generalizes to telling other disciplines and I tend to approach with distrust.
Science makes falsifiable statements that are then tested (per Popper). When QE started a group of folks made predictions:
> We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.
* https://www.hoover.org/research/open-letter-ben-bernanke
Another group of folks (often label "Keynesian") made different predictions based on their model(s) / understanding of how things work.. One turned out correct and other incorrect in their predictions. Perhaps we should follow the models that accurately predicted things.
Governments / politicians run economic experiments every time there's a major policy rollout, and they do so based on what they predict will happen:
* https://en.wikipedia.org/wiki/Kansas_experiment
It is not the fault of the academic discipline itself if people ignore the results of the experiments for ideological reasons.
RFK Jr., the current US Secretary of HHS, is ignoring all the empirical evidence about vaccines (and even germ theory): is that the fault of biology?
It’s unstable because of how quickly interest rates can change. Right now the 3.375% interest on 37.1T of debt - ~2.7% inflation = an effective interest rate of ~0.675% well below long term GDP growth rate. But that 3.36% is a significant increase over even 1 year ago. If it grows to 5% without higher inflation things spiral fast. https://www.jec.senate.gov/public/vendor/_accounts/JEC-R/deb...
Kinda blows my mind that the US is on a strongly antagonistic & isolationist streak in that context. Seems like a great way to turn the US economy (and prosperity) into a smoking crater
A huge hurdle for American manufacturers is that their products simply cost too much, all else being equal, because the value of the dollar is too high.
So their plan is try and devalue the dollar while also keeping it the reserve currency. To put that another way, he wants countries that have invested in the dollar to take a hit on their investments while also getting their population to buy more American goods.
His negotiations will probably center around offering continuation of "America world police" services (people hate it, but governments love it) in exchange for following this path.
Whether or not this will work? Who knows, but at least that is the idea they have chosen.
For example, tariffs on agricultural products that won't grow in the US do not fit into any sort of rational model.
My comment just outlines that plan.
Plenty of US manufacturing already pays close to retail wages and these geniuses want to reshore stuff with much lower value add. It's delusional.
In New Zealand as a purchaser of a lot of US services and few US goods, I can see why countries want to create tariffs against US services.
Trump was elected by blue collar workers and his plan reflects that.
Blue Collar workers: ~ 30–35% of working population. Policy that screws your country and the other 2/3rds of the population is bad.
I do think a country needs a manufacturing base if it wants to support a military without getting pwned.
And I do agree with you, I think the current administration is focused on devaluing the dollar, while trying hard to minimize collateral damage such as higher rates.
I don't think this is going to work, but I can see a lot of ways in which it could. Future will tell us.
Apart from the US several countries meet this threshold, including the UK, Canada, Australia, New Zealand and Japan. On the other hand, the Eurozone countries do not, and this helps some of the member states, but only at the expense of some of the others.
Last I looked I recall 39% of the US stock market is owned by foreigners. Fair enough since say Apple revenue I'd say 60% from foreign sources.
Like, maybe that's sustainable but it's certainly not sustainable in a world where you're pissing your trading partners off on a daily basis.
You don’t see oil markets trading in New Zealand dollars. Or half the world holding large amounts of Aussie dollar in their forex reserves. Or a bunch of Canadian gov bonds. Or benchmark their rates against the US in reporting.
If the US prints more half the world carries the pain but US gets all the benefit. Lose reserve currency status and that so called exorbitant privilege goes up in smoke. Along with the financial system built on it
You might say it's a PR problem, others might say it's an actual problem. Either way it's going away now.
Today, nearly everyone has pocket computers, cheap internet, longer lifespans, better healthcare, cars that last decades, homes with plumbing, electricity and climate control, etc.
Poverty has been declining for decades.
Your life looks much better than your parents, and looks much, much, much better than your grandparents.
Except having what are essentially televisions in their pocket. That's the one win they get.
Doing more poorly? but everyone has all kinds of home appliances, nice reliable cars with tons of features, more people have college degree, bigger houses, etc.
The US government seems to want to intervene in every place it can, and doesn't look anything like say old school China or Japan. It seems like some people see anything short of maximally interventionist as isolationism, and I don't understand it.
I'm lazy, so ... over to the LLM:
This Hacker News thread expresses deep skepticism about macroeconomics, portraying it as unpredictable, overly influenced by perception, and possibly aligned with elite interests. While these critiques aren’t baseless—macroeconomic models often struggle with forecasting and can embed optimistic assumptions—they miss the broader point: macroeconomics remains essential and useful, especially when viewed as a tool rather than a crystal ball.
Arguing for the Usefulness of Economics (especially Macroeconomics):
It provides a framework to understand complex systems Macroeconomics helps us make sense of national and global phenomena—like inflation, unemployment, growth, and inequality. It gives policymakers and the public a structured way to evaluate cause and effect. Without it, decisions would be made blindly or based purely on ideology.
Policy decisions are informed by macroeconomic tools:
Central banks use economic models to set interest rates. Governments use them to forecast tax revenue, structure stimulus packages, and plan budgets. While models aren’t perfect, they are better than flying without instruments—especially in crises like the 2008 financial crash or the 2020 pandemic.
Imperfect models still guide effective responses
Critics rightly point out that models don’t always converge or predict turning points. But the weather forecast analogy applies: we don’t expect perfect predictions, yet forecasts still help us prepare. Similarly, macroeconomic insights helped avoid depression in 2008–09, guide inflation control today, and shape climate and industrial policy.
Economics evolves and improves:
Like any social science, macroeconomics adapts. New models increasingly incorporate behavioral insights, inequality, financial instability, and even ecological limits—areas previously overlooked. The discipline is far from static, and many economists are leading critics of outdated assumptions.
Bottom Line: Yes, macroeconomics has limits—especially when models are treated as gospel rather than guidance. But dismissing it entirely because of its imperfections is like discarding medicine because not every patient gets better. Used critically and responsibly, macroeconomics helps societies navigate complexity, make informed choices, and anticipate risks—even when the future remains uncertain.
* https://www.aei.org/research-products/book/fiscal-and-genera...
Maybe he's finally right twenty years later?
We see that the percentage rose from about 12% in 2022 to about 21% today, a very sharp increase indeed, as the article points out. And the article's authors project it to rise to ~33% within a decade. But interestingly we see the percentage was historically quite high in the 80s (peaked at 29% in 1985) before decreasing through the 1990s and 2000s. So at least we have a precedent that it is possible for the US government to get a grip and manage to reduce the share of interest payments. How they did it, I don't know.
PS: when making this custom chart I wasn't quite sure what data series to take as federal income. There seems to be two options:
1. Federal Government Current Receipts, Billions of Dollars, Seasonally Adjusted Annual Rate (FGRECPT)
2. Federal government current tax receipts, Billions of Dollars, Seasonally Adjusted Annual Rate (W006RC1Q027SBEA)
I took the first. The chart has generally the same shape with #2 but I am not quite sure what the difference is. You can click the button "Edit Chart" to test various data series.
* https://content.time.com/time/covers/0,16641,19720313,00.htm...
From 1972.
Maybe this time it will matter?
So, nothing crashed. The message simply is that this model doesn’t handle this case, so our (or that of this team of researchers) understanding of economics is incomplete.
That happens elsewhere, too, for example in Newtonian physics where the precession of Mercury deviates from what that model predicts (https://en.wikipedia.org/wiki/Tests_of_general_relativity#Pe...).
In neither case, that is reason to say the people involved are charlatans.
Economists have been predicting for years that the Japanese economy would crash due to "debt". Hasn't happened. So maybe, just maybe, the model being used by these economists is wrong, which implies that they do not understand--or are misrepresenting--how the economies of currency-issuing countries actually work. In any other scientific field this would be damaging to the branch of science involved. But not orthodox economics. It just keeps on keeping on.
> Model not converging.
> “The model's trying to find what's called a fixed point where everything just adds up, everything's consistent, and it's not able to do that,” Smetters explained.
In other fields like physics or engineering, if your model (which is usually a partial differential equation etc) blows up it can mean one of three things:
1. Your code has a bug
2. Your numerical scheme is unstable
3. Your model is unphysical
Assuming the authors are competent we can rule out the first 2. Which brings us to the 3rd point; the article does not mention what the model is or what it assumes. Why should we assume that the economy is exploding and the model is right, instead of the opposite (economy is OK and the model is wrong)? Or even both or neither?
I am not even saying that the economy is doing well or anything, just putting my journal reviewer hat on.
I'm not trying to be mean to economists, just reminding everybody how reliable macroeconomic claims are (try looking for the concepts 'confidence interval' and 'randomized controlled trials' in macroeconomic papers).
But these are very rarely good _predictive models_, which is an entirely different field.
Economists also have a tendency to lack practitioner thinking, misunderstand or grossly average actor motives, and more generally like to model every actor as an optimization problem, which rarely reflect real world scenarios.
All in all, I'm not really putting any weight on what economists models could predict of the future, though I think they have value in explaining the dynamics of past events.
HPsquared•5h ago
https://youtu.be/beuseJ0Wm3M