On a simpler level, if it were a science, economists would be called scientists.
Much too much of economics is expectation arising from theory based on speculation about assumptions. It's less accurate, on more than a simple level, than meteorology. Like history, it is always playing catch-up. At this stage, it’s like alchemy to chemistry or astrology to astronomy. Economics tries to be the study of everything, reducing everything to economic pressures and mechanics. One day, we may have such a universal science, but it isn't today.
Meteorology doesn't claim to be a perfect forecaster, so we don't base long-term behaviour solely on it. But we base national policy solely on economics. We don't do that with history, assuming that just because that's the way it was, it can't be done differently. We don't base a nation's future solely on its past. But we do it with economics.
We shouldn't be taking educated guesses as gospel truth and we shouldn't be treating it like physics. Even physics got it wrong a bunch of times before it became a true science, and it's still not perfect.
Economics certainly isn't.
Do we want let the phrenologists continue to guide us by the lumps they inflict on us?
Monday November 28, 2016
It's The Economists, Stupid
Interest rates. Unemployment. GDP. Markets. Austerity measures. Economists tell us what we, as societies, can and can't afford. But how do they decide? What values are at play? IDEAS producer Mary O'Connell speaks with two economists about how modern mantras on the economy limit our choices and shut down civic debate. **This episode first aired September 9, 2015.
Participants in this episode:
- Dr. Julie Nelson, Department Chair and Professor of Economics, University of Massachusetts, Boston.
- Dr. Richard Denniss, Chief Economist, The Australia Institute, Canberra City, Australia.
As a group, economists don't have a great track record: they largely failed to predict the oil crisis of the 1970's, the dot-com bubble, the U.S. housing collapse. Even the O.E.C.D. -- the Organization for Economic Co-operation and Development -- admits its forecasts have been way off. One of its staffers even conceded: "maybe we suffer from group think". Little wonder that economics has been known as "the dismal science" since the 19th century.
John Kenneth Galbraith once explained that, "Economics is extremely useful as a form of employment… for economists". However, there are deeper, more serious fissures. Economists explain how the turbulence of housing markets, mortgage rates, inflation and income inequality affect us all. But who are they speaking to and whom do they represent?
Feminist economist Julie Nelson believes most economists no longer represent the public good because they're operating out of self-importance and greed. "You can find economists shilling for all kinds of groups. If they're not consciously shilling, they're incredibly careerist." The University of Massachusetts Department Chair and Economics professor thinks the media obsession with the state of financial markets doesn't tell us how we're doing as a society. "Maybe we should be asking, who's eating and who's not." Richard Denniss concurs. He's Chief Economist for the independent think tank, The Australia Institute, and calls himself a "whistle-blower economist". He believes we've come to view markets as gods. "The market does this, the market does that… as if it's something magical. It's really just a small group of people with a lot of money who are gambling on making more."
Richard Denniss and Julie Nelson believe current economic group think produces a mantra that supports cutting taxes, reducing deficits, massive down-sizing, bloated CEO salaries, and "shrinking social programs till they scream". Julie Nelson concludes these trends not only generate more poverty; they hollow out the middle-class, and that's bad for capitalism. She says: "this was figured out a long time ago. Henry Ford wanted to pay a wage to his workers that would allow them to buy the kinds of cars they were making. And that makes a whole lot of sense. If you want a market for your product, you have to have people who can afford to buy that product. But that basic logic is drowned out by all the austerity rhetoric that we're hearing from industry and government these days".
- Affluenza: When Too Much is Never Enough, by Richard Denniss and Clive Hamilton, Allen & Unwin, 2006.
- Economics for Humans, by Julie Nelson, University of Chicago Press, 2006.
- The Skeptical Economist: Revealing the Ethics Inside Economics, by Jonathan Aldred, Routledge, 2010.
- The Australia Institute
- Spreadsheets of Power: How economic modelling is used to circumvent democracy and shut down debate by Richard Denniss
- Of Clowns and Treasures: Joe Hockey and the myth of Coalition economic management by Richard Denniss
- Friends, countrymen, lend me your ores, opinion column by Richard Denniss, Canberra Times