The Real Problem With Economics

The last few years have seen a substantial increase in public interest about economics- from honest attempts to understand and compare various belief systems which underlie different schools of economics to attempts at justifying pre-existing biases and prejudices through name dropping and sophistic arguments. However all attempts to understand and use economic theories or ideas suffer from a number of fundamental problems (rational actor, utility maximization etc), but none is as serious as the one fundamental assumption which every brand, version and school of economics makes.

Economics is based on the very peculiar idea that a shared illusion of money is more important than human life itself.

Did you catch that? Economics assumes that abstract numbers in a spreadsheet are worth more than the lives, happiness and continued survival of billions of human beings- who incidentally are the only reason economics exist in the first place. Apparently, economics is more concerned about whether a complex system functions in a particular manner than it exists in the first place. Let me illustrate the bizarreness of this worldview by applying it other complex systems.

Would you believe an ideology that told you that having some form of cancer was a sign of health and youth? While there is no doubt that the rate of new cell formation in an adult with cancer is equal to or greater than a rapidly growing child, most people would not see the growth of cancerous cells as physiological. However an eCONomist on the payroll of the rich (cancerous growths) would gladly invent arguments to justify the accumulation of wealth by his masters even if that process was starving and destroying the rest of society (body). Such an eCONomist might even recommend austerity (starvation and bloodletting) to treat the disease (cancer) rather than exterminate the cause of the disease (the cancerous cells) because his lifestyle and short-term survival is dependent on the continued existence of those cancerous growths. The same eCONomist might also recommend sacrificing functional organs and tissues to feed the cancerous tumors by labeling it “creative destruction” and “signs of a healthy market eCONomy”. He would then justify the suffering of the excruciating pain, intense suffering and slow death caused by the disease and his intentionally misleading advice as an inevitability.

You might wonder- How can anybody get away with such atrociously dishonest behavior? Surely people are not that stupid and gullible? or are they? Well.. I prefer to see people falling for such crap as another example of the harm caused by religious-type beliefs. Human history is full of conflicts, wars and genocides perpetrated by people fighting over whose “god” was the one “true” god. They did so inspite of the fact that their “gods” were incapable of mundane things such as providing them enough food, protecting their kids from infectious diseases or even upgrading their horrendous living conditions.

Economics is like a religion obsessed with getting the approval of an invisible and impotent entity. You cannot rationalize with people who see and hear things (or pretend to do so) to justify their stupidity, cruelty and callousness. The best way to “reform” any religion is to eliminate its true believers and priests down to their last offspring. You might see such actions as inhumane, but can those who fail to see and treat other people as human beings be still classified as human?

What do you think? Comments?

  1. J Schitz
    August 12, 2012 at 5:32 pm

    I disagree with you. Firstly, economics is supposed to be an attempt to understand a natural system (i.e., the natural human propensity to allocate resources). At its core this is all it is (or at least should be). Humans will allocate resources based on supply and demand (or some other “command” type system if forced) irrespective of whether or not someone is trying to figure out how or why they are doing it (or worse, usually, advising them how to do it).

    Really.. so it is about “efficient” resource allocation? But efficient for WHOM?

    The problem with economics is hubris amongst economists. To describe this let me take a step back. Economists are said to suffer from what is called “physics envy”. Physics envy is what economists feel when they look at their physics colleges with their fairly simple Newtonian equations (let’s leave aside the particle physics and the standard model for now). Economists would love to engage in simple reductionist logic to come up with an equation (or set of equations) that accurately describe the economy. Here is the problem though. Physics experiments are all independent events. Economic observation (note: not experiments) are not. The economy is a Non-Linear Complex Adaptive System (look it up on wikipedia) and the biggest failure resulting from the hubris of economists is to NOT recognize this fact and to assume that they have a greater handle on what is actually going on then they do. So when they get up and tell us what we need to do, they really don’t understand what they are talking about with any acceptable certainty. Its even worse with academic economists (say hello to the Bernank) because they are more beholden to their Linear ( see above re non-linearity ) economic models and the largely sketchy assumptions (e.g., rational expectations) that underpin them.

    If you had read previous posts on my blog about how the economy is a evolving complex system, you might not have said that. But you had to show off.. well.. try to show off.

    So its not economics its the economists who are the problem. FWIW, this is starting to change with the gathering prominence of the so called Heterodox Schools of economics (behavioral economics, experimental economics, complexity economics, etc.), but a good portion of the main stream macro crowd is still full of shit and should be ignored.

    Just so you know, I am a former global macro hedge fund manager who is ivy-league/LSE educated.

    Cheers.

    So how much money have you stolen from other people? Those who gamble with other people’s money are thieves irrespective of their so called “respectable ” education.

    PS: saying that you are ivy-league on my blog is the equivalent of calling yourself a CONman.

    • J Schitz
      August 12, 2012 at 7:49 pm

      “Really.. so it is about “efficient” resource allocation? But efficient for WHOM?”

      I’m very sure I didn’t use the word efficient, and you are confusing the normative and the positive/descriptive.

      “If you had read previous posts on my blog about how the economy is a evolving complex system, you might not have said that. But you had to show off.. well.. try to show off.”

      I wasn’t criticizing you (and I haven’t read your other posts) and having reread that paragraph again I can’t see how a reasonable person would have seen my post as an attack on you. What I was criticizing were mainstream economists, but you have obviously taken my comments to mean that I was attacking you. What’s up with that?

      “So how much money have you stolen from other people? Those who gamble with other people’s money are thieves irrespective of their so called “respectable ” education.

      PS: saying that you are ivy-league on my blog is the equivalent of calling yourself a CONman.”

      Stolen money? I hardly think so. I got paid 2 & 20 by people willing to invest with me and I traded profitably (for the most part) with people who were voluntarily willing to trade with me. So nothing was stolen and no-one was compelled (and I got no government bailout or other government money). I’m not seeing the problem here. The reason I mentioned this fact was to show that I was intimately familiar with economics on both an academic level and in the real world.

      Also, it seems that your point is that everyone who went to an ivy-league school is a crook no mater what their views are. How is that rational skepticism? Frankly, it sounds to me like pure crankiness.

      I must admit that I stumbled onto this blog through Hawaiian libertarian and I shall make sure to avoid it in the future. Good luck.

    • Andrey Shvets
      September 7, 2012 at 9:41 am

      “So its not economics its the economists who are the problem. FWIW, this is starting to change with the gathering prominence of the so called Heterodox Schools of economics (behavioral economics, experimental economics, complexity economics, etc.), but a good portion of the main stream macro crowd is still full of shit and should be ignored.”

      I agree. You may be interested: http://andreyshvets100.blogspot.com/2012/08/i-know-how-to-stop-global-crisis.html

  2. BellRinger
    August 12, 2012 at 6:50 pm

    It is an honor to read your blog Mr. President. I as your humble servant am happy to hear that you now view other human lives as being important. Thank you for your generosity towards us. Good luck on your re-election.

  3. August 13, 2012 at 12:15 am

    The problem with economics is quite simple. All the different schools ( (Keynesians, Neo-classical, Austrians, Marxists etc) are just theories with no predictive value. Every time they fuck things up they point at someone else and claim that their theories are correct but were applied wrongly etc.

    That’s not science. If you look more closely into their beliefs (perfect exchange of information, knowledge of the future, debt has no effect in the economy etc ) you stare into the face of madness.

  4. Joe
  5. JamesFun
    August 16, 2012 at 7:04 am

    It’s sort-of funny how “paper money or electronic numbers in a b*nk” have been “given meaning/brainwashed into the minds of millions of people around the world” to actually believe that this “paper money” has “meaning/value/worth,” when it really does NOT, and yet the economy (and most of daily life where this “paper monopoly money” has to be used) is based on millions of people going along with this made-up belief that money is “worth something” when it’s really not worth anything. As the saying goes, the house always wins, so in this case “the house” is whoever is controling/printing the “money.”
    I never had and I do not have much of this “paper money” being currently broke, plus I never have and I am not receiving any g*vernment funds anyway.
    At least with barter/trading, there is trading one real item for another real item.

  1. October 26, 2013 at 4:52 pm

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