Economic is not a science; it is augury; it is the casting of runes in a vain attempt to bring predictability to the nonlinear chaos that is our human lot. And, as John Michael Greer points out, economists have an abysmal track record.
One of the problems is that economists believe that the past never happened. The past is a dream lost in the mists of time and has no relevance to the present. Their vision is a pinprick of light that sees only the fleeting present they mistakenly believe can be captured and held in place by complex mathematical models.
Greer quotes John Kenneth Galbraith who said that, “[I]n the financial world, the term ‘innovation’ usually refers to the rediscovery of the same limited set of bad ideas that always, without exception, lead to economic disaster.”
This is especially true of bubbles, be they housing bubbles, dot.com bubbles, South Seas bubbles or tulip bubbles. Every time a new bubble surfaces, economists put on their priestly robes and mumble that four-word incantation that is the precursor to disaster, “It’s different this time,”
It never is.
However, as Greer points out, bubbles are golden eggs for economists. As asset prices soar towards the galaxy, economists are the seers assuring us that the current bubble is constructed of high-carbon steel and will never, ever burst. And the first thing a people with no sense of history do after the bubble has popped is to forget that it popped so they are primed and ready for the next one.
Economics is a branch of the social sciences, surely history’s greatest oxymoron. They filled the vacuum left by the collapse of religion and are just as invalid.
Heisenberg’s Principle of Indeterminacy is a product of quantum physics, but it certainly describes the fatal flaw in the social sciences. The principle states, “Absolutely precise measurements are impossible, due to interference to the measured quantity which is inevitably introduced by the measuring instrument.”
In other words, as soon as an economist opens his mouth, the phenomenon being described is changed by his statement. But that doesn’t stop economists from constructing their mathematical models and hawking them as valid predictors of future activity. As Greer points out:
Economics is particularly vulnerable to this sort of malign feedback because its raw material—human beings making economic decisions—is so complex that the only way to control all the variables is to impose conditions so arbitrary and rigid that the results have only the most distant relation to the real world.
He cites the example Long Term Capital Management (LTCM). Two noble laureate economists constructed mathematic models one claimed “were so good that they could not lose money in the lifetime of the universe.” Unfortunately, the model failed to factor in history, i.e. countries sometimes default on their debts. Russia did, and LTCM tanked.
The reason we need high priests is that we simply don’t know what the fuck is happening. It’s all so confusing. The truth is we don’t know if we’ll survive to see tomorrow morning. This is especially true of our financial retards who are like little boys who love building intricate structure out of blocks just so they can send them crashing to the ground.
The high priest of economics is a godsend to them. The economists unroll their complex formulae and our fund managers, whose concept of history is Sunday’s Giants game, are reassured that the current bubble is forever.
The story is told of the man who, when he walked into work every morning would be hit alongside the head with a two-by-four wielde by his boss. It was the same thing every morning, Monday through Friday. Then, one day, the boss wasn’t there, so the man waited for him to appear.
The employee must have been an investment banker.