An alternative to popular faith
I probably shouldn’t generalize, but what’s the deal with professional economists? Why are so many blind to the obvious? Economics is a difficult, complex field, requiring substantial brain power to understand even the basics. There are no unintelligent professional economists. They are exposed to consumption theory, capital theory, the theory of economic growth, and the analysis of labor markets. Yet, many don’t understand the simple truths that all money is debt, and a growing economy requires a growing supply of debt.
They are taught such esoteric lessons as producer theory, consumer theory, choice under uncertainty, welfare analysis and mechanism design. Yet, many believe an expanded health care system is unaffordable for the government.
Professional economists learn general equilibrium analysis, social choice and welfare economics, cooperative, noncooperative game theory and repeated games and economics of information. Yet, many believe federal borrowing reduces the availability of lending funds.
They immerse themselves in time series analysis, ARMA models, VARs, and detrending, dynamic stochastic general equilibrium models of business cycles, and New Keynesian theories. Yet, many say a balanced federal budget is more prudent than a federal deficit.
They author and publish papers on linear/non-linear regression theory on estimation, consistency, asymptotic properties and hypothesis testing. Yet, many believe federal taxes pay for federal spending, our children and grandchildren will pay for federal deficits, and the US will have difficulty finding lenders.
They critique writings on panel data regression, maximum likelihood estimation for tobit, logit and probit estimations, generalized method of moment estimation, least absolute deviation estimation, quantile regression method, nonstationary time series, cointegration, UAR and Kalman filtering for the time-varying parameter estimation. Yet, many neither recognize that debt/GDP is a useless, highly misleading, apples/oranges ratio, nor that low interest rates do not stimulate the economy.
They speak on neoclassical growth model, endogenous growth theory, models of product variety, and Schumpeterian models. Yet, many do not understand the crucial differences between a monetarily sovereign government vs. Greece or Illinois.
Why do so many smart people closely examine minutia, while ignoring abundant, overwhelming and widely available evidence? In effect, professional economists seem to spend lifetimes examining and expounding on one dot in a pointillist work, while ignoring the Sunday Afternoon on the Island of la Grande Jatte?
What’s the deal with professional economists? Why are so many blind to the obvious?
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
No nation can tax itself into prosperity
Rodger,
There are obviously some economists (and non-economists) that are not blind. Besides your excellent book, can you recommend any others accessible to the layman? I’m aware that there are several blogs out there, but there seems to be a paucity of books for the general public with your point of view on money and debt. Thanks.
Not a book — but perhaps better than a book — I recommend The 7 Deadly Innocent Frauds at http://moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/
Rodger Malcolm Mitchell
What’s the problem? Robert H. Nelson investigates: Economics as Religion. See also John Kenneth Galbraith, The Economics of Innocent Fraud.
RAndy Wray quotes Paul Samuelson:
Paul Samuelson on Deficit Mythis: Time to Drop that Old Time Religion
So maybe these obviously smart folks are just being disingenuous “for our own good.”
Tom,
Randy knows the government always has control, so what does he mean by “out of control”?
I assume he means if the government creates too much money, certain bad things will happen. But the very fact, that bad things result, functions as a control.
Governments tend to act in response to events. So if the government printed too much money, and we had, for instance, inflation, the government would act against the inflation. It doesn’t need false beliefs to do that.
I reject the “Tree of Knowledge” notion that humans benefit from false beliefs and ignorance to control our actions. Re. religion, I never have noticed that the most pious among us historically have been the best behaved. In fact, I could make a strong case they have been the worst behaved.
Meanwhile, budget ignorance has prevented optimal Medicare and Social Security, R&D and education nationally, and impoverished the states, counties and cities. Budget ignorance has had devastating effects on our quality of life.
The belief in the benefits of ignorance is ignorant.
Rodger Malcolm Mitchell
P.S. The purpose of organized religion always has been to give power to the priests.