I have been a student of money for some time now, and I have realized that for us to better understand it, we have to talk about economics. Is economics a science? According to my, Yes, and there the problems begin. Economics is a science, yet most economists are not scientists. Economists act like politicians, priests, or propagandists. They ignore evidence that does not fit their paradigms. Economists want scientific prestige without the rigor. Today’s weak world growth can be traced to this imposture.
The scientific method applies readily to economics. The familiar distinction between hard sciences such as physics and soft sciences such as economics is spurious. Academics today categorize specific branches of science as best suited to explain particular parts of the universe. Astronomy is a sound way to understand galaxies. Biology is a fruitful way to understand cancer. Economics is an excellent way to understand resource allocation and wealth creation. Astronomy, biology, and economics are branches of science applied to distinct areas of knowledge.
All are science, and amenable to the scientific method. Since most academic economists are not scientists; they are dogmatists. They cling to an old version of their science, they are not open to new views and discard data that contradict dogma. This decrepit landscape would be academic but for the fact that economists control powerful positions in central banks and finance ministries. Their use of outdated theory is not merely academic; it destroys the wealth of nations.
Scientists understand that all theories are contingent; a better explanation than the prevailing view eventually emerges. Newton is not considered wrong because Einstein offered a better explanation of space and celestial motion. Einstein advanced the state of knowledge. Unfortunately, economists have shown little willingness to advance the state of their own art. The Austrians, Neo-Keynesian, and monetarists all have their flags firmly planted in the ground. The research consists of endless variations of the same few themes. The intellectual stagnation has lasted seventy years. The Austrian understanding of the superiority of free markets over central planning is sound, yet Neo-Keynesian models are the reigning creed.
Keynes’s insight was that a temporary lack of private aggregate demand can be replaced with government spending until “animal spirits” are revived. Spending works best when a government is not heavily indebted, and when a surplus is available to finance the spending. Today economists, using invalid equilibrium models (the economy is not an equilibrium system), propose more deficit spending by deeply indebted countries for indefinite periods to stimulate demand, as if someone with four televisions buying a fifth is the way forward. This is folly.
Monetarists are no better. Milton Friedman’s insight was that maximum real growth with price stability is achieved by slow, steady growth in the money supply. Friedman wanted money supply to rise to meet potential growth—a variation of the Irish toast, “May the road rise to meet your feet
If Neo-Keynesian, and monetarists, have obsolete tools, why do they cling tenaciously to their models? To answer that question, ask another. Why did medieval believers in a geocentric solar system not question their system when data showed inconsistent planetary motion? Why did they write new equations to explain so-called anomalies instead of scrapping the system? The answers lie in psychology. Belief systems are comforting. They offer certainty in an uncertain world. For humans, certainty has value even if it is false. Falsity may have long-run consequences, yet comfort helps you make it through
This financial façade is reinforced by the tyranny of academic advancement. A young scholar in a highly selective finance program is rightly concerned with fellowships, publication, and faculty appointment, hence their folly of trying to explain quantitative easing if it is clear that it makes no sense at all. Then there is simple inertia, like staying in a warm bed on a cold morning. Academics have their comfort zones too. New knowledge is like a dive in the surf in winter—bracing, exhilarating, but not everyone’s cup of tea. The preference for certainty over uncertainty, the allure of elegant mathematics, the close-minded academic mentality, and inertia are good explanations for why flawed paradigms persist.
Tavonga Martin Majoni is a Money student, a Bitcoin enthusiast,a world-class network marketer, and an advocate for financial education in schools and the introduction of this money as a subject in schools.
