Economists of the mainstream schools have been baffled by the inability of guiding the economies of the world on a sustainable trajectory using their mathematical models; and it clearly frustrates them to say the least. It as if they are unable to connect the micro world of the firm and individuals on the ground with a general overlook of the way the economy works from a macro level.
They clearly are baffled as their scientific colleagues in the field of theoretical physics. Physics has been a quest to find what is dubbed the GUT (General unified theory), or the theory of everything. But, there is a problem. The equations that define the intricate workings of the very large i.e. the movement of celestial bodies, formation of stars, planets, gravity cannot be equated to the laws that define the workings of the very small i.e. the movements of particles in an atom, the fact that probability and the very observation of an event is effected by the observer of the given event when exploring the subatomic world. But that’s physics; a natural science governed by a series of laws. It tries to find the workings of reality.
Economics is completely different; as a social science, it is governed by the laws of human action. And there exits no difference on the small and the large scale, because in economics, the large scale is nothing but the addition of the ever increasing small scale. The social laws which govern the behavior of households, is applied uniformly across the country, as well as across the globe. The laws of higher living standards in Europe are the same as they are in Asia, and everywhere else for that matter.
The obscurity comes forth when economists, especially in academia and the untrained populace demand something for nothing and expect that goods and services magically appear out of nowhere. Its as if you wanted to generate electricity, but lacked the catalyst to do it (a magnetic field or a source of mechanical or kinetic energy that can be transformed into electricity). Some very fundamental laws of relativistic physics govern economics.
In my view, to generate an output (electricity, widget), you have to have an a priori input (energy; labor hours, sacrifice) is the basic one. Reshuffling economic resources in the economy from an aggregate viewpoint doesn’t improve the general welfare; it only redistributes it in a dysfunctional way. No magic wand can magically create prosperity.
And by wand I mean the following: Credit expansion, currency debasement, taxes, minimum wage laws, price controls, tariffs, quotas, embargos, vendor financing, government spending, subsidies, public debt, Ponzi schemes.
So, when are we going to wake up?
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