“Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousand fold by a factor that is insignificant in say, physics, mathematics, or medicine – the special pleading of selfish interests.”
– Henry Hazlitt, Economics in One Lesson
Thomas Piketty, Paul Krugman, and new-to-the-scene, political hopeful Alexandria Ocasio-Cortez, are all economists who subscribe to a leftist mentality and they typically support a Keynesian model (the economic theory that suggests we can boost the economy by spending on jobs, like road workers, who in turn spend their paycheque elsewhere, further stimulating the economy).
This raises a puzzling question for those of us who are passionate about economics in the liberty movement – how can someone spend their life looking at a subject and walk away getting it so completely wrong?
There are common criticisms within the philosophy of science concerning biases in the practice of science, be they cultural, religious or irreligious, philosophical, or economic.
For example, why would a scientist study how to fit a smaller nut into a candy bar when they could be studying a cure for cancer? It’s because the candy company pays them more money.
With economic bias, we should take note that it’s possible this has crept into the practice of economics itself.
Macroeconomic researchers get government grants, and Keynesian economics, the justification for politically-popular, lavish spending programs, is popular with those who fund the grants (the politicians themselves).
The left will never cease to cry out for bias when an economic argument is given in favour of cutting taxes, explaining the economist is on the payroll of some major corporation, whatever validity there is to this applies equally well to their own economists – they tend to be on the payroll of spend-happy politicians through research contracts.
The puzzlement is that Keynesian economics is definitely a false and misapplied theory. It’s misapplied for two reasons. The first is that Keynes developed his theory to combat deflation from 1929 and we now live in an inflationary world. The second is more complex.
We live in a global community. Road workers don’t spend their funds nationally, they spend them globally.
When Trudeau gives money to road workers, they don’t necessarily buy Canadian goods and services. They buy Japanese Nintendo, South Korean electronics, toys manufactured in China, Floridian oranges, and Scotch whisky.
Free trade is beneficial to an economy but it has absolutely decimated the usefulness of Keynes – spending money no longer boosts a national economy; going into debt to spend money leaves us with no major gain in jobs but with huge debts to pay off.
Even if it weren’t misapplied, the theory itself has been disproven on multiple data points. It claimed that inflation (the result of spending) and unemployment could never rise simultaneously, and they have – especially in the 1970s.
The reason why libertarians are puzzled is that an economist who supports leftist policies would be the equivalent of encountering a doctor using leeches to heal a broken leg. Not only are the medical benefits of leeches suspect, they were never used in the first place for fractures. It’s a false and misapplied theory.
What has happened is that those who excel in politics – those who frame political discussions – have an essay writing intelligence. They are lawyers, scientists, journalists and so forth.
When they need an economics perspective they turn to their fellow essay writers, and the economists that received the most grants and have published in the most prestigious journals are the economists they turn to for guidance.
It is this same group of economists that receive funding in the future.
It has become a self-perpetuating echo chamber of terrible ideas. Contra posed against the essay writers are the builders, the engineers, the business people, the accountants, – those who have to get things done and we call them the executional intellects. They only care if an economist has a successful career in forecasting, or generating wealth. How many essays they’ve written is irrelevant to them.
Libertarians concern is strictly for the economic theories that foresaw the housing collapse, the resultant inflation from abandoning sound money, and can correctly identify bubbles such as our current debt bubble. We stand against this self-perpetuating echo chamber, but it exists for a very real reason. There are left-wing economists, but their credentials don’t add to their arguments.