My father is a physcist. But when I decided to study economics, he started paying a bit of attention to the field so we’d have something to talk about. At one point, he told me: “Economics now is where Physics was before Galileo.”
I’ve been thinking about that, and I’d like to expand on the theme. Right now, Economics is bull$%!#. Plain and simple. And it is bull$%!# for the same reason physics was bull$%!#… because people prefer to believe in myth than reality, and so many institutions crop up to defend those myths so strongly that a) even those people who would prefer to believe in reality never get exposed to it under the relentless weight of “experts” telling them what reality really is and b) those that manage to figure out what reality is usually find it best to keep their mouth shut.
And, just as before (and in the centuries after) Galileo, the acceptable “physics” myths varied by location, our acceptable economics (and I’m not putting economics in quotes the way I put physics in quotes – we know what physics really is, but I don’t think any of us know what real economics might really look like)… in some countries, prices can be frozen or set by government fiat, in others, (such as our own) cutting taxes and shrinking government always produces more growth.
I want to focus on the myths we believe in here in the US… we have fewer excuses than folks elsewhere. After all, supposedly we are free to open our mouth and make up our own minds, so we should be the most free to arrive at some form of economics that is “right.” And we worship technology enough to have made the data easily available…. its all there, at the BEA, the OMB, the BLS, the IRS, and so forth. And we all have access to computers and spreadsheets (no need for fancy statistics, just as there really was no need for fancy Latin prayers to determine whether you can transmute lead into gold) when Galileo was running around.
As I noted the other day… perhaps the most important question in economics, as it stands now, is what leads to faster growth… in particular, what is the optimal size of government, or what are the tax rates that lead to the fastest possible growth. And in fact, there are a lot of very well funded organizations and think tanks and universities that produce carefully worded studies that address these topics. But they generally find… we have to cut taxes more, and decrease the size of government.
Now I’m no academic (despite the 5 years adjuncting), and I’m certainly not angling for a position in academia, but I think what would happen to someone in any of the think tanks who pointed out that growth rates are higher at much, much higher tax rates than we observe now, and tax cuts have not usually led to faster growth rates than tax hikes. No theorizing, just pointing out the data. Because we all know that tax cuts and smaller government lead to faster growth (aren’t Republicans supposed to be better for the economy?), even though we have over a hundred years of experience watching Alabama and Massachusetts.
But a lot of people know what the data shows… but they don’t say a word. Anyone think the Dean of the business school and the Harvard Professor that advised the current president on the economy and are now advising the front runner on the Republican side don’t know what the data shows?
In the end… the reason economics is bull$%!# is because the practitioners have allowed it to remain bull$%!#. And this is a problem… how many people died because physics remained bull$%!# for so long? And chemistry? And biology? How much further along would we be if things had changed centuries earlier? And the same is true of economics. How much farther along would we be if every president since WW2 had achieve JFK/LBJ’s growth rates? Or failing that, Clinton’s?
Put another way… this is not a game. Any movement toward and not away from the optimal tax rates and optimal size of government makes us better off, and movements away from the optima hurt us. The people who choose to perpetuate the myths and the bull$%!# are harming the country. What does that say about the ones that are smart enough to know they are perpetuating myths and the bull$%!#?