I think any subject that deals with human behavior is going to be fuzzy by definition -- you can only predict what people will do with their money up to a point, because people aren't always rational (or even predictably irrational).

Sorry to interrupt this discussion, but I only have a second due to lots of actual (yuck) work to do and I have to post a link to the coolest little film ever. [link]

watch, marvel, and enjoy.

Grad school is full of scorn and derision, in all directions. It's sort of its raison d'etre.

I think where economics differs as a field from the academic professions bon bon mentioned is that the 15-second sound bite on topics that directly affect people's lives (like the housing market) does not occur in fields like theoretical physics and math, and not much in psychology except Dr. Phil. I am sure many academic economists fully admit that much of their work is theoretical, but they don't get on TV much.

Except you could argue that houses had become overvalued, and the drop in housing prices is just forcing people to confront reality. All this wealth was created on paper and people borrowed against it. And now a lot of this wealth is gong away. So there really wasn't as much "real" wealth there in the first place....

But all that debt (created by the borrowing) is still out there, waiting to be repaid. So there's an effect on real wealth as well, because people will have to repay the principal (plus interest) borrowed earlier.

Another difference between this market drop and prior market drops is the rise in alternative mortgages. People who've been paying interest-only or teaser interest rates are going to be facing big jumps in their payments when they have to start repaying principal or paying more normal interest rates. And most likely, some of them won't be able to make those payments.

the 15-second sound bite on topics that directly affect people's lives (like the housing market) does not occur in fields like theoretical physics and math

But wouldn't it be awesome if they did?

"Coming up next, how vibrating strings in eleven dimensions could affect your morning commute..."

I wish we owned a house. The trouble is, I don't want to own a house in LA. I want a house in Truckee or Santa Fe or the Bay Area. Because those are places I'd like to be. It's a dilemma, I tell you.

Doesn't J Lo always have retouching done on her butt?

You know what's sort of fun in a I'm a Total Nerd Way? Reading A Christmas Carol aloud to 7th grade urban students. I so don't care if they get 20% of the words. It's so fun to read.

I would also like to note that the Duke lacrosse "scandal," which took place (or didn't according to your belief) two blocks from my house, was 3 of the top 4 "scandal" hits on Google this year. Oh, the joy.

One of the unfun side effects of the bubble is it's effect on driving rents up too. It's not just houses that become unaffordable but apartments too.

Right: also the various factors I mention produce a shortage of rental housing.

In terms of economists and fuzziness - we have really uncertain economic theory being used as justification for things that hurt the vast majority of people, like the Fed raising interest rates every time real wages show any sign of going up. Psychological theory is subject to the a degree of bitterness among a high percentage of the people who spend much time in mental institutions.

I think where economics differs as a field from the academic professions bon bon mentioned is that the 15-second sound bite on topics that directly affect people's lives (like the housing market) does not occur in fields like theoretical physics and math, and not much in psychology except Dr. Phil. I am sure many academic economists fully admit that much of their work is theoretical, but they don't get on TV much.

I tried to pick a broad range to demonstrate that all academic endeavor relies on uncertainty. If we're talking about sound bites, I'm pretty sure EVERY profession is misrepresented, that's why there are professionals in the first place. IMO economic illiteracy is a huge problem that really doesn't have anything to do with the state of the field or the activities of professional economists.

Oh, I have no doubt that the scandal happened. I've completely given up on sorting out the actual facts, otoh...