Is economics really a science?

28 Jun, 2012 at 20:55 | Posted in Varia | Comments Off on Is economics really a science?

In cycle after cycle the same script is acted out. An asset bubble begins inflating, together with its associated credit bubble. The lead singers of the free market school strike up their familiar song: markets know best, markets are efficient, there are no bubbles, let the markets run. While asset prices rise and credit expands, the doctrine of market efficiency reigns supreme. But immediately as asset prices begin falling and the credit bubble begins contracting, the singers swiftly change tune. The free-marketeers cast aside their message and, without even the decency to blush, strike up a new song: central banks must cut rates, governments must stimulate, credit must not contract, asset prices must not be allowed to fall. While the lead singers flip from song to song, apparently unaware of their discordant lyrics, the backing singers maintain a constant comical chant: markets are stable, markets are stable, markets are stable.

For a field of study aspiring to the status of a science today’s economic consensus is in a risible state, both internally inconsistent and entirely in conflict with the experimental evidence. Had Isaac Newton subjected himself to these standards he would have given us three laws of gravity: one telling us how an apple behaves when thrown up into the air; another quite different law telling us how it then falls back to earth; and a third law telling us the apple never moves at all.

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