Economic Nonsense

I’m fond of saying that economics is closer to tarot card reading than physics on the empiricism scale.  It is not just a pithy put-down. Economics is the one area of practical mathematics where getting the wrong answer is of no consequence. The reason is no one ever gets the right answer. I’m not talking about predicting the future. The future is not written, at least we don’t think so, which means conditions can change between the time you make a prediction and the point in the future being predicted.

Economics, I’m talking macroeconomics, deals is loads of complexity. The economy of the United States is the daily economic activity of 300 million people, plus every country with whom we conduct business. The millions of variables in play makes forecasting problematic. Even long after the fact it is hard to really know how much economic activity took place in a certain place at a certain time. Despite this, economists act as if they possess the ability to accurately forecast the future.

It is not quite superstition, but the guy with the bone in his nose is within hailing distance of the town’s economist. The witch doctor thinks he is tapping into some universal truth that transcend time and place. That gives him the ability to diagnose the present and predict the future. Economics takes the same view. Every human action has some perfect model in the stars that only the economist can see. They can therefore look at current activity and predict the future compared to the world of forms.

Immigration is a great example. To the sane person, it is obvious that the people of a nation hold the exclusive right to determine who can and who cannot enter. To an economist, not such right exists. Any passing opportunist must be free to set up camp because the economist believes it will please the gods of efficiency. The fact that none of them would let you borrow their pencil much less pitch a tent in their yard is dismissed as irrelevant. Economics is modern shamanism.

Here’s a good example of how this weird religion has spread like kudzu across the West. The Scots will decide if they will to remain a part of Great Britain or become independent. From what I’ve read, they will not actually be independent as London will continue to rule their foreign policy. Scotland will become something like Puerto Rico without the rum and fine weather.

To an uncultured ear, that sounds like a reasonable thing. Scotland has been in Great Britain since 1707 and done pretty well as a consequence. If they now think it is better to go it alone, that’s for them to decide. Patriotism, tradition, nostalgia and mere taste are probably the primary motivations for the voters. That’s what sane people should expect. Instead, the smart set says things like this:

I’m against Scottish independence because I’m horrified at the prospect of our country being dismantled. I’d also argue that an independent Scotland is an economic nonsense. I’m not saying a country of 5m people, with a wealth of know-how, couldn’t survive. The problem is that the cultural, historic and commercial ties that bind us are too tight to safely be cut.

They can be symbolically severed, yes, with the creation of yet another expensive layer of Scottish government, with all the special advisers, civil servants and juicy public sector per diems that would bring to Edinburgh’s already cosseted political elite. But as far as the rest of the world is concerned, we’re one entity — a reality that’s prevailed for centuries, long before the 2012 Olympics.

Crucially, Scotland’s still extremely precarious financial services industry is viewed as UK-backed — and that means the Bank of England. The Scottish commercial banks, with their vast liabilities, and still unresolved off-balance-sheet losses, will always physically reside in Britain.

A perfectly good argument against this vote is based in history and tradition. The English can argue that he likes his country the way it is and will not go along with changing it. He may respect the Scots desire for independence, but it is not in the best interest of the British, who happen to be in charge, so they will not permit the vote or Scottish independence. Put another way, the English answer to the Scottish demand can be “No, because we said so. Discussion over.”

Instead, the writer feels it necessary to work through a bunch of pseudo-scientific reasons as to why the maths say it is a bad idea. Everyone in the West is petrified to stand up and say they want what they want because they want it. Cultural pride is so taboo we have otherwise reasonable people claiming the maths are on their side in the same way Druids thought the gods were on their side. The West is slipping into paganism and the economics profession is supplying the shamans. Worse yet, we are slipping into a tyranny of shamans. At least the old priesthoods knew their limits. I say if you see an economist, beat him. He will know why.

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6 years ago

Generally, economists are better at solving & explaining acute economic problems than predicting or preventing them. A doctor cannot reliably predict if someone can get cancer or prevent someone from getting cancer, but he can offer treatment for it and an explanation for the biological processes that cause cancer.

6 years ago

I wish, as an Englishman, to throw my small weight into the Britain or Scotland debate. It is up to the Scots to decide if they wish to be ‘independent’ (though the sensible money is that they will aim for being in the EU as soon as possible, not least because Brussels provides a safe haven for failed or worn out politicians to go on being paid vast salaries) and they will no doubt cast votes inspired by emotional subjects such as Mel Gibson waving a sword. Most English people are pretty neutral about Scotland. England gets lot of them… Read more »