“Economics is a faith-based pursuit forever in search of a new deity . . . Each of the gods has been worshipped with the fanatical fervour of the convert. What is curious for those sitting outside the sacred circles is that the apostles show not the slightest hint of self-doubt. The Treasury has become to economics what cults such as Opus Dei are to Catholicism.”

-Philip Stephens


Fascinating discussion at the FT about the failures of economics by Philip Stephens. Wondering how “a compassionate God” could “allow such terrible misery to be inflicted on life’s innocents,” Stephens attempts to “square the circle” of ongoing economic errors, suggesting a leap of imagination is whats required.

Monetarist fundamentalism proved a false prophet; efforts to regulate broader measures of credit failed; focus on exchange rates went nowhere; fixing the value of the pound with a cap on inflation did not work; Full independence for the Bank of England failed. Borrow-till-you-are-broke approach failed, as did Austerity.  The latest economic catechism is fiscal flagellation. It too crashed and burned.

In the US, we tried sanctifying Markets as all-knowing and all-powerful. They were neither, and collapsed in a heap. The fallout form, the damage they inflicted required a taxpayer funded bailout.

Stephens invokes the idea of the Hedgehog and the Fox by noting “the fervour with which economists propagate this or that theory is usually in inverse proportion to the evidence. Fanaticism is thrown as a cloak over the absence of empiricism.” The concept of the single big idea as the solution to our woes, and the misplaced confidence economists have in those single big bold and typically wrong ideas cannot be denied. Consider that view in context of the politician’s embrace of economists and financiers, from Milton Friedman to Arthur Laffer to Robert Rubin to Larry Summers. Then consider the lasting damage each has inflicted upon the nation, as their flawed philosophies wreak ruin.

Skepticism, and reality based policy is what is required. Not blind devotion to disproven fantasies. The sooner the world’s nations recognize this, the better off we will all be.

What most countries on this planet need is a benevolent technocratic philosopher king — and not yet another partisan meglomaniac . . .


Do not put your faith in the false deities of economists
Philip Stephens
FT June 18, 2012

Category: Economy, Philosophy, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

26 Responses to “The False Deities of Economists”

  1. cewing says:

    Technocratic philosopher kings aren’t needed. We just need elected officials who know how to add and have the courage to make decisions that would piss off their multi-millionaire and corporate sponsors.

    One false deity you didn’t mention is the belief that tax cuts will fix everything.


    BR: I thought the mention of Art Laffer covered that.

  2. UncleMilty says:

    Saying economics has no value is like blaming the weather man when it rains on your picnic. Just because they are both inexact sciences doesn’t mean they don’t have value.

    Econimics is, in fact, a science. It is the study of the choices people make with scarce resources. People very diverse and their preferences are constantly changing. But true econimics is data driven, just like the stock market, which is equally difficult to predict.

    The problem is when politicians use economics to promote their own agenda.

    As for the “benevolent technocratic philosopher king,” it sounds like a terrible idea. The only thing saving us from a Congressmen is that they have hundreds of other A-holes to keep them in check. I don’t see how making ONE of them king would fix anything.


    BR: Straw man much?

  3. Petey Wheatstraw says:

    “. . . blind devotion to disproven fantasies”

    Faith-based economics.

  4. Super-Anon says:

    Keynesianism is the economic equivalent of creationism.

  5. “…What most countries on this planet need is a benevolent technocratic philosopher king…”

    Wouldn’t We be better off with an Informed Citizenry? or, does that take too much Time from ‘Angry Birds’ and/or ‘Farmville’ ??

  6. rd says:

    I think that we will find that more that a particular economic religion advocates for tax cuts for the wealthy to stimulate the economy, the more the propogaganda machine of the wealthy supported it as the “correct” economic model to use.

    Since Keynesism advocates for tax cuts as only one of many potential tools in the tool box (others include increased government spending) it clearly needed to be discredited at all costs even though data appears to show that it is not necessarily more right or wrong than the other models floating around.

  7. bobnoxy says:

    I’m glad it’s not just me that thinks Friedman was a screaming hack. His best ideas seem to have failed miserably wherever tried. Naomi Klein’s book Shock Doctrine spells out where it did the greatest harm globally, and was usually tried only at the point of a gun since nobody liked his ideas when first proposed.

    Then again, what seems to be gaining traction now is that modern economics is just another political tool, and a great way for the rich to get the rest of us to go along with whatever serves them the most. Remember ”trickle down”? Still waiting.

    We just learned that the median net worth has fallen back to 1992 levels. But the rich have done wonderfully well, and leading economists swear we’ve been doing the right things. For the rich, obviously so!

  8. NoKidding says:

    “benevolent technocratic philosopher king”

    That would be nice, however they tend to pass on their kingdoms to malevolent selfish philanderer kids.
    I believe old testament books of Kings and Chronicals provide good evidence for “ever it has been the case”, whether or not you take the message of the compilation as horsedung.

  9. Mike.R says:

    To make a philosopher king, you start with a king, not a philosopher -something Plato and his successors have had a hard time figuring out. – Nassim Taleb, May 6, 2012

  10. rktbrkr says:

    I think Stephens smeared Opus Dei comparing it to Treasury.

    Opus Dei emphasises the “universal call to holiness”: the belief that everyone should aspire to be a saint, that sanctity is within the reach of everyone, not just a few special individuals.[47] Opus Dei does not have monks or nuns, and only a minority of its members are part of the priesthood.[48] A related characteristic is Opus Dei’s emphasis on uniting spiritual life with professional, social, and family life. Members of Opus Dei lead ordinary lives, with traditional families and secular careers,[49] and strive to “sanctify ordinary life”.

    Opus Dei stresses the importance of work and professional competence.[51][52] While some religious orders encourage their members to withdraw from the material world, Opus Dei exhorts its members and all lay Catholics to “find God in daily life” and to perform their work excellently as a service to society and as a fitting offering to God.[53][54] Opus Dei teaches that work not only contributes to social progress but is “a path to holiness”,[55] and its founder advised people to: “Sanctify your work. Sanctify yourself in your work. Sanctify others through your work.”[56]

  11. RW says:

    The ‘Keynesian’ — more accurately Hicksian — models have predicted every major economic turn in this debacle and I have lots more money in the bank to prove it; e.g., holding long-bonds.

    The reason is simple: models are context sensitive so you have to use the right one for the circumstance, arguing from principles as if the economy were a math problem or a moral dilemma is a doomed approach; e.g., monetary and supply-side models worked okay when the economy was growing but they fail during contractions which is when demand models such as Hicks give you much better results.

  12. Conan says:

    Economics has it’s uses, just as math & scientific study does, however the comparison to a cult is apt…When people start justifying their profession like it is a religion or cult or a political fanatic..then you have no basis to call it a science…

    Lastly you forgot to address the biggest fallacy of all…the vast majority of Economists think that the market is efficient…. on this hugely false premise they have constructed their houses of thought..

  13. lunartop says:

    “the fervour with which economists propagate this or that theory is usually in inverse proportion to the evidence. Fanaticism is thrown as a cloak over the absence of empiricism.”

    *cough* MM *cough*

    *cough* MMT *cough*

    and what’s with all the M’s!

  14. lunartop says:

    Surely there should be some kind of hippocratic “first do no harm” oath for Economists?

  15. DeDude says:

    The problem is that we all want simple rules applicable at all times – and that just won’t do for economics. The human brain want to simplify things to the point where it can understand them – sometimes you end up disconnecting from reality before you get to that point.

    The economic rules are content dependent and to get something of predictable value you would have to build very complicated models. Small countries may be able to devalue and export their way out of trouble in a way that very large countries cannot. A large country with the world’s reserve currency, can borrow a lot more in its own currency from other countries than a small country. Supply side measures may work in a world of great demand, but fail miserably if there is a world-wide lack of demand.

  16. river says:

    Economists and bankers should be required to get licenses, and stamp everything they do, just like engineers. Imagine that world where the banker who blows up his bank is held personally accountable and never allowed to practice again (like surely happened to the engineer in charge of the oil well in the gulf of mexico), or the economist who argues against regulating derivatives (Larry Summers, I am looking at you) looses his license and can never speak about economics again. A guy can dream, can’t he.

  17. MojaveMax says:

    Inadequate (or non-existent) oversight and regulation are more to blame for out current set of crises than particular economic models. Unchallenged corruption can ruin any plan.

  18. t1dude says:

    Seems like there is an approach that was left out. Instead of “borrow-till-you’re-broke”, we haven’t really tried “Borrow-in-recession-then-surpluses-in-the-boom”. We **almost** tried it until Bush decided that running surpluses was dangerous (In Bush’s defense, this was the advice that Greenspan was giving at the time).

    Perhaps human nature and/or politics makes this approach impossible in actual practice?

  19. VennData says:

    Supply-Siders always have an argument for lower taxes for the rich, even though the evidence against them is staggeringly convincing.

    If they could find something in Sociology or English lit. they’d use it to rally their supporters. They’d do anything:

    “…in fact the the low marginal rate microstate under Differential Entropy is negative, then sobeit! Or do you want your children growing up in dis-continuity?!”

  20. AtlasRocked says:

    “benevolent technocratic philosopher king”

    The Senate, with appointed, not elected, members, was supposed to serve this role of technocratic body.

    It was eliminated by the progressives in 1913. We are now a full on democracy – one of the surest failing forms of gov’t in history, going back to Plato’s days it has been recognized as fundamentally flawed because the citizens will begin voting for wealth transfer instead of healthy policies.


    BR: Except, of course, for all the rest!

  21. RW says:

    What t1dude said.

    It would appear that when it was their turn at the trough too many of the faithful conveniently forgot Joseph’s interpretation of Pharaoh’s dream: [7] Years of plenty is the time to store wealth in preparation for the years of want.

  22. AtlasRocked says:

    There was no surplus before Bush, the debts were lower, but we still ran deficits. here is the treasury data:

    1997 5,369,206
    1998 5,478,189
    1999 5,605,523
    2000 5,628,700
    2001 5,769,881 Note the Clinton Debt ALWAYS GOES UP.

    “Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done. It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000.” – Democratic Senator Ernest Hollings, October 28, 1999

    Here is the borrowing stats for all the recent administrations:
    Debt increase by the term:

    ………..increase…per GDP
    bush I……48%……..32

  23. emaij says:

    We might want to dabble with enforcing the law. When people who commit fraud don’t go to jail, economic policy of any flavor is undermined.

    Actually, that’s not entirely accurate. When the most influential central banker in the world doesn’t believe that a rule against fraud is necessary, we have a major problem. Does Alan Greenspan read this blog? Even his God, Ayn Rand, believed that the government should regulate fraud.

  24. t1dude says:

    atlasrocked – I am sure that I am wasting my breath, but… http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/

    I am wonkish, but not enough to do the hours of research required to explain why the *national debt* went up while the *budget* ran surpluses. My guess is that the national debt is still accruing interest, thus growing and our budget surpluses were not larger than the interest on the debt. The point is that there is a difference between the national debt and the budget, and citing facts about the national debt rising doesn’t say anything about budget deficits or surpluses.

    emaij – amen!

    “A criminal is a person with predatory instincts, but without sufficient capital to form a corporation.”

    – Clarence Darrow

  25. cynical says:

    Perhaps our benevolent king can pass a law that Economics should be re-labeled “economic theory”. And economists as “economic theorists”. Perhaps then people like Krugman could be seen in the proper light as idiots spouting theory not fact.

    btw – you’re kidding about this right? >> In the US, we tried sanctifying Markets as all-knowing and all-powerful. They were neither, and collapsed in a heap. The fallout form, the damage they inflicted required a taxpayer funded bailout.

    There hasnt been absolute anything. And markets ALWAYS crash. You are not lighting your office with whale blubber now are you? And the fallout did not force a bailout. That was just choosing one form of wealth transfer versus another.