I dislike economics. By this, I do not mean that I dislike economists. I’m sure that some of them are quite charming in person. I dislike the field of economics. I think that as a whole, the field is bad for the human race and for the planet.
What’s wrong with economics? Everything. Economics makes incorrect predictions, promotes bad policies, devalues the human spirit and the natural environment. Those are bad consequences of economcis. In order to understand why economics has such bad consequences, we should look at its foundations. Economics has bad foundations: bad premises, bad types of logic, even bad definitions.
Bad definitions? Yes. In most areas of thought, definitions aren’t a big problem. Even if we’re arguing with somebody who thinks that global warming is a hoax, at least their definitions of ‘global warming’ and ‘hoax’ are right; it’s only their connection of the two that’s wrong. If we’re sparring with somebody who thinks that Barak Obama was born outside the United States, we at least have a common definition of the word ‘born’. But in economics the definitions are all wrong to begin with.
Consider recessions. We all know recessions, right? We know what they are. Well, what exactly are they? The definition of a recession is two consecutive quarters of negative growth. Why is that the definition of a recession? Why not one quarter of negative growth? Does the official definition match up with the economic reality that we all experience every day? I would argue that it does not. Sometimes we all know that the economy is going into the tank, yet we still aren’t officially in a recession. Consider that in 2007, everyone could tell that the economy in the United States was going downhill. The only people who couldn’t tell it were the people who are supposed to know these things: government bureaucrats, politicians, academic economists, and corporate bigwigs. All through late 2007 and early 2008 there were plentiful warning signs. Bear Stearns went belly up. So did Indymac. Yet the people who are wise and knowledgable in economics kept insisting that things were all right. Consider what Robert J. Samuelson wrote in the Washington Post in November of 2007:
Don’t believe all the hype about the “credit crunch.” … It’s supposedly suffocating the economy. True, big banks and investment houses have suffered multibillion-dollar losses on “subprime” mortgages and related securities. But except for housing — where lending has collapsed — the effects on consumers and businesses have so far been modest.
Got that? Ignorant nay-sayers may insist that this so-called ‘credit crunch’ will have serious consequences for the economy, but we intelligent folks know better. Things are going just fine, and you can trust us to manage things well.
Only when major corporations started crashing on a daily basis in September of 2008 did they finally acknowledge that the recession was here. Then they retro-actively went back and declared that the economy had been in recession since fall of of 2007. These people have granted themselves the power to rewrite the past. The more important point is that they don’t define recessions in a way that corresponds to economic reality. In fact, if you plumb the term’s origins, you’ll see that it was invented largely to mislead. The word “recession” was first applied to economic conditions in the first decades of the twentieth century, where it generally replaced more clear words such as ‘downfall’ or plunge’. Here is a usage from The Economist:
The material prosperity of the United States is too firmly based, in our opinion, for a revival in industrial activity — even if we have to face an immediate recession of some magnitude — to be long delayed.
And when did The Economist write that? Fall of 1929.