When economics began as an independent field of study, it was virtually devoid of mathematics and charts. Economists were considered moral philosophers; not mathematicians or scientists. This began to change with the work of John Maynard Keynes in the 1930s, and now an economics textbook looks a lot like a physics textbook. This relatively new, mathematics-laden version of economics is completely wrong. Economics has no similarities to the hard sciences like physics, chemistry or engineering. In economics, the more complex the math, the more laughable the results. What better proof of this is the collapse of the hedge fund LTCM in 1998 or AIG in 2008. LTCM in particular was teeming with MIT PhDs and AIGs investments were based on computer models developed by a Wharton finance professor. (See the Dunce biographies of Jon Corzine and Gary Gorton for more information on LTCM and AIG respectively.)
However, the biggest difference between the hard sciences and economics is the failure of economists to learn from the mistakes of the past. For example, in the 1950s the British Overseas Aircraft Corporation built the word's first commercial jet airliner, the Comet. Not long after the plane was placed into service, planes started to break apart in the air. All that was known was the planes left the departure airport and never arrived at their destination. As a result of a herculean effort by the Royal Navy, one crashed plane was recovered. The plane was re-assembled and an exhaustive investigation was begun. Eventually it was determined that the shape of the plane's windows, they were square, promoted the ability of pre-existing flaws in the plane's structure to grow and eventually propagate or "run." An entirely new field of mechanical engineering, fracture mechanics, emerged out of the Comet disaster. This new field provided all sorts of useful results for not only the aerospace industry but all sorts of other industries as well.
In marked contrast to a real science's ability to learn from the mistakes of the past, the witch doctors masquerading as economists refuse to not only learn from the past, but apparently don't even bother to consider it. The best proof of this is what economists think of inflation. Historically, there is no other economic phenomena more unsettling to a society than inflation. Many of the great revolutions in history were precipitated by a calamitous increase in inflation. Among the most recent examples of this phenomena is the Arab Spring. (1) In spite of inflation's demonstrated ability of causing enormous problems time and time again, the Federal Reserve now has a goal of producing inflation.
What makes inflation so unsettling are the enormous dislocation forces created by inflation. Generally speaking, the wealthy - and the financial classes in particular - can weather the inflationary storm. However, the average working person - whose savings might be relatively small and almost certainly aren't tied up in art, huge land holdings, or real estate - can see a lifetime's worth of savings eviscerated in just a few years.
Here is Frederic Bastiat on inflation and the havoc it creates. Note in particular Bastiat's comments on how inflation promotes wealth inequality. These comments date from the 19th century.
"...No doubt, but only think what disturbances, what cheatings are produced in exchanges when the value of the medium varies, without our becoming aware of it by a change in the name. Old pieces are issued, or notes bearing the name twenty francs, and which will bear that name through every subsequent depreciation. The value will be reduced by a quarter, a half, but they will still be called notes of twenty francs. Clever persons will take care not to part with their goods unless for a larger number of notes - in other words, they will ask forty francs for what they would formerly have sold for twenty; but simple persons will be taken in. Many years must pass before all the values will find their proper level. Under the influence of ignorance and custom, the day's pay of a country laborer will remain for a long time at a franc, while the saleable price of all articles of consumption around him will be rising. He will sink into destitution without being able to discover the cause.
In short, since you wish me to finish, I must beg you, before we separate, to fix your whole attention upon this essential point; When false money, under whatever form it may take, is put into circulation, depreciation will ensue, and manifest itself by the universal rise of everything which is capable of being sold. But this rise in prices is not instantaneous and equal for all things. Sharp men, brokers, and men of business, will not suffer by it; for it is their trade to watch the fluctuations of prices, to observe the cause, and even to speculate upon it. But little tradesmen, countrymen and workmen, will bear the whole weight of it. The rich man is not any richer for it, but the poor man becomes poorer by it.
Therefore, expedients of this kind have the effect of increasing the distance which separates wealth from poverty, of paralyzing the social tendencies which are incessantly bringing men to the same level, and it will require centuries for the suffering classes to regain the ground which they have lost in their advance towards equality of condition." (2)
As Bastiat's comments make clear, inflation is one of the most diabolical forces that can be unleashed on a society. (3) Nevertheless, the economists of today and the Fed have embraced it as a desirable goal. (The fact that these people think they can precisely control inflation rests on another set of enormous mistakes and blunders.) Going forward, when hearing some MIT PhD economist carry on, don't let their advanced degree fool you. These people know nothing, and their view of inflation as some sort of desirable goal to be pursued proves it. Chief among these MIT PhDs who actually don't know the first thing about economics are the following dunces - Ben Bernanke (#3), Alan Blinder (#5), Austan Goolsbee (#25), Paul Krugman (#31), Frederic Mishkin (#36) and Jeremy Siegel (#43). See the Confederacy of Dunces list for more details.
14 OCT 2018
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1. "Let Them Eat Baklava," The Economist, May 17, 2012 https://www.economist.com/middle-east-and-africa/2012/03/17/let-them-eat-baklava
2. Frederic Bastiat, The Bastiat Collection, Ludwig von Mises Institute, Auburn, AL, 2007, pp. 130-131
3. The word diabolical is from the Greek, diabolos, which means 'the one who scatters.' Scattering is exactly what inflation does.