Uncommon Sense

November 10, 2017

Economist’s Grasp of Reality (or Lack Thereof)

Many economic theories focus on the tendency of markets to create states of equilibrium. They say these states occur “naturally.”

Economists are also keen on making their studies seem scientific and they can and do point to many physical systems that naturally come to equilibrium. If you drop a ball, it falls, bounces a few times and then stops. The force on the ball at that point is the force of gravity (the attractions things have for one another because they have mass) and the counterforce (keeping the ball from moving downward by opposing the force of gravity) is the floor pushing up because its shape has been changed by the weight of the ball as it is made of resilient materials (materials that return to their original shapes when distorted .. a little). Voila, an equilibrium state created naturally. The downward force of gravity is exactly balanced by the upward force exerted by the floor and an equilibrium of forces exists.

Physics literally abounds with such examples: bathroom scales, child’s swings (pendulums), heat transfers, etc. But these are simple systems and economic systems are not simple (although they can be passed off as such, they are not). A better source of examples of scientific equilibria would be biology, which has more complex systems. In biology, if an organism achieves something like a state of equilibrium there is one thing you can know about it: it is dead. (Hey, this does happen … naturally!)

In complex organisms, these organisms are near states of equilibrium but never get too close to being in one. If, for example, we lose enough heat from our bodies to affect our skin temperature, we are moved to action: our hair stands up (goose bumps) to trap air to insulate us, our metabolism kicks in to generate more heat internally, and if those don’t work, we get up and put on a sweater, or turn on the heater in our house/apartment. Our temperature stays pretty much the same because we are always correcting it.

If we get too far from equilibrium, we usually are quite ill, but actually being at equilibrium means we are room temperature, aka dead.

Economist are full of shit if they espouse natural equilibrium creation by economic markets. It is one of those signs that you know they are spouting bullshit, like when their lips are moving. The reason they allow themselves such delusions is they do not check their theories against reality. They aren’t even expected to! Unfortunately for those folks, their end is coming soon. While they were not looking, behavioral economics has sprung up with a behavioral economist having won a Nobel Prize recently. These folks apply economic reasoning to actual experiments and actual people’s behaviors! That is, they check their theories against reality. (Gasp, wow!) It will not be long before the movers and shakers start noticing the progress being made by the behavioral economists is not being matched by ordinary economists and then, the jig will be up.

Imagine, if “trickle down economics” had ever been required to be validated against reality, it would have been exposed as a bullshit argument used to mask increased benefits for the elites long before it was. Think of all of the political bullshit that could have been prevented.

If this were to become SOP, we might actually find out what the last refuge of scoundrels really is.

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