Monday, April 28, 2014

Economic whoas

How can economics be a science when everyone lies about money?

I had this thought this morning over my eggs and toast, and not for the first time. But economics was in the news, with Thomas Piketty's new book and all.

If I did not have to work for a living I would spend all my time reading. But since I can't spend all my time reading I spend hardly any time reading, because there's no point to stimulating my mind when I have to spend so many hours of my life focusing on the tedious intricacies and annoying interruptions of my trade. You also need to take time simply to breathe and observe the life around you. Without the need for gainful employment that's how I would spend the time I wasn't reading. Or writing. Or drawing.

Piketty's work is being glorified and machine gunned because it addresses economic inequality. Economic inequality is also glorified and machine gunned. I tend to side with the machine gunners on that one. Or perhaps those wielding brutal pruning saws, since a little inequality acts like differential atmospheric pressure in fostering healthy circulation rather than stagnation in our financial climate. But massive inequality has an equal if not worse tendency to grind the economy to a crawl. And as we can no longer deny that the economy is as global as the environment, what crawls here drags everything down.

As I searched the web on the topic "economic science" I discovered that many people question its right to remain among the sciences. It has -- as you no doubt expected -- its detractors and supporters. The first page of search results contained thought-provoking snippets enough to keep me occupied for several unproductive days.

This piece by Alan Wang in the Harvard Crimson addresses some of the challenges faced by economists in their pursuit of solid principles and successful predictions. "Economics is not, and will never be, at the stage where models can precisely predict the day on which a financial crisis will start before it happens,..." writes Mr. Wang. The statement accepts without question that the crisis will occur. And Wang tangentially addresses why this is so: "...what is the building block of economics? People. Economics does not study any unit smaller than a collection of people. And human behavior can never be absolutely predicted or explained—not if we wish to believe in free will, at any rate."

People: sneaky and noble, sleazy and altruistic, and all motivated to falsify or conceal for reasons both lofty and lowly. There will be a crisis, and another crisis, and so on, because people will try to get away with shit. They'll slip this one past and it will work, so they'll try another and another. Next thing you know you've got a bubble on your hands or all your working class jobs have gone across an ocean.

As economists try to predict the future by laboriously getting further behind the present by studying all they can find of records from the past, people are producing, consuming, trading and transporting as best they can. The principles that guide them are basic: get more than you give, if possible. Try to get a lot more than you give without anyone noticing until you're so big no one can take you down. Then feel free to be as arrogant as you like about it. If there's action, get a piece of it.

What's so complicated? Wealth can't be created without a basis. The basis is finite. Therefore, wealth is finite. How it is distributed depends on human agreement to social conventions. Do you accept that a bold and ruthless person deserves title to all he can seize, or do you favor more general compensation for every contributor to the economy? These aren't economic questions. Economics are the result of these factors, not the origin.

If you want to be the robber baron you will never agree that you should pay workers more or give more in taxes, because that comes out of your own bottom line. If you want to see all contributors enjoy as high a standard of living as the total amount of wealth will allow, you will never agree to let "the free market" decide anything. You'll need to work out some rules, which will lead to arguments, tricky language, lawyers, loopholes and the natural advantages of more money over less money. Inequality is like a controlled burn. The right amount of fire in the right place at the right time renews the vegetation. Too much, too seldom, results in catastrophic conflagrations. Maintaining a fair economy takes a combination of intelligence and empathy that may simply be impossible. We may be doomed to live from one conflagration to the next. And the economists will be sitting in a blackened landscape saying, "we should probably get some fire hoses pretty soon."

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