Being taught ignorant economics

 

As an economist, I have been through my educational process at the nation’s capital University at which I was taught a lot of strange things concerning the youngest scientific field in human history – economics. During my studies, I have come to some pretty startling conclusions that maybe the “stuff” that I was taught, probably has no resemblance with the real world what so ever.

For example, on my graduate year, I was taught in a class called “Fiscal policy” that economic activities come and go in waves of prosperities and troughs of recessions. This was called normal, because the capitalistic system has certain built in defects that cause strange recurrences of happiness and sorrow. Entire books have been riddled with this subject and still, it is said, we have no idea on how to stop this plague and once and for all enter a golden of everlasting prosperity, a so called “New Economics” and what the American economist Irving Fisher dubbed in 1929, just before the Wall Street crash:

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."

or, the great Keynesian demigod that brought upon multiple generations of wrongly taught economists in the mainstream and permanently destroyed what is a truly elegant science by saying in 1927:

"We will not have any more crashes in our time."

Why on Earth are these individuals heralded as the great thinkers of our time?

This blog post is merely a reflection on things gone by and the uncertain future that lies ahead if we keep on burying our heads in the sand and pretending that these guys and there modern protégés have a clue what they are talking about.

I leave you with two final quotes, one from a Princeton Professor of economics also a Nobel laureate and a former dean of Harvard (I let the reader guess the antagonists) commenting on todays depression.

“To fight this recession [Nasdaq bubble of 2001] the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, […], Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

“The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending.”