Macroeconomics is a combination of voodoo complex systems and politics

Wednesday, January 16th, 2019

In a recent interview, Shane Parrish asked Naval Ravikant, What big ideas have you changed your mind on in the last few years?

There’s a lot on kind of the life level. There’s a couple, obviously, in the business level. I think on a more practical basis, I’ve just stopped believing in macroeconomics. I studied economics in school and computer science. There was a time when I thought I was going to be a PhD in economics and all of that. The further I get, the more I realize macroeconomics is a combination of voodoo complex systems and politics. You can find macroeconomists that take every side of every argument. I think that discipline, because it doesn’t make falsifiable predictions, which is the hallmark of science, because it doesn’t make falsifiable predictions, it’s become corrupted.

You never have the counterexample on the economy. You can never take the US economy and run two different experiments at the same time. Because there’s so much data, people kind of cherry-pick for whatever political narrative they’re trying to push. To the extent that people spend all their time watching the macroeconomy or the fed forecasts or which way the stocks are going to go the next year, is it going to be a good year or bad year, that’s all junk. It’s no better than astrology. In fact, it’s probably even worse because it’s less entertaining. It’s just more stress-inducing. I think of macroeconomics as a junk science. All apologies to macroeconomists.

That said, microeconomics and game theory are fundamental. I don’t think you can be successful in business or even navigating through most of our modern capital society without an extremely good understanding of supply and demand and labor versus capital and game theory and tit for tat and those kinds of things. Macroeconomics is a religion that I gave up, but there are many others. I’ve changed my mind on death, on the nature of life, on the purpose of life, on marriage. I was originally not someone who wanted to be married and have kids. There have been a lot of fundamental changes. The most practical one is I gave up macro and I embraced micro.

I would say that’s not just true in macroeconomics, that true in everything. I don’t believe in macro-environmentalism, I believe in microenvironmentalism. I don’t believe in macro-charity. I believe in micro-charity.

I don’t believe in macro improving the world. There’s a lot of people out there who get really fired up about I’m going to change the world, I’m going to change this person, I’m going to change the way people think.

I think it’s all micro. It’s like change yourself, then maybe change your family and your neighbor before you get into abstract concepts about I’m going to change the world.


  1. Albion says:

    “It’s like change yourself, then maybe change your family and your neighbor before you get into abstract concepts about I’m going to change the world.”

    In other words, what wise people have said for centuries: you can only tend your garden. Once people stop seeing the whole business of life as changeable solely in their terms and on their say so, they can progress as individuals and that passes on the family with–if lucky–the neighbourhood following.

  2. Aretae says:

    Hey, I said that for 5 years.

    There are some real predictions out there — Scott Dumner Sumner comes to mind — but that’s a basically true position.

  3. Dan Kurt says:

    re: Scott Dumner

    Do you mean Scott Summer?

  4. Isegoria says:

    I’m pretty sure Aretae did mean Sumner (and I made the edit for him).

  5. Aretae says:

    I’m very fond of Scott. Typo there. Thanks for the catch and fix.

  6. Alrenous says:

    Macroeconomics is actually easier than microeconomics because a lot of stuff cancels out.

    If you want a controlled experiment, you can’t get better than West vs. East Germany.

    However, the point of paid macroeconomists isn’t to predict or understand the economy. They are paid to understand that whatever their paymasters wants to do anyway is clearly a good idea. “Oh man oh geeze getting correct predictions is hard.” Yeah. Sure it is.

  7. Alistair says:


    Well, the “tend your own garden first” approach really sounds like he’s channelling Peterson. I’m warming to the idea; it bespeaks of a radical ethical humility.

    But I also agree on Micro vs. Macro utility.

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