Economics remains in a difficult intersection between science and humanities, with distinctly political and ideological conflicts.
We seem to be in a passion play about inflation right now. It is skyrocketing, or zooming, etc. It is a huge crisis. But, since it is measured year-over-year, maybe it is just a simple bounce from the depths of the pandemic when demand and prices, especially for gasoline, were negligible, and some businesses shut down. Now demand is back, but some sectors of the economy are having a hard time meeting demand, especially for workers, so prices are going up, by modest amounts. Some stories say that "inflation is never temporary". Others say the structural dislocations will pass and things will get back to normal. One can tell the ideology quite clearly from the story line. Conservatives have double motives to paint it a crisis, to disparage the current president (tax cuts had nothing whatsoever to do with this!), to support the preservation of capital and capitalists, and to generally box in policy makers from spending money on truly momentous objectives, like addressing climate change.
Why is this such a drama? Why isn't economics more of a science? In real sciences, you do not see competing schools of thought, such as the Chicago and the Keynesian schools of economics, the New Keynsians and the Modern Monetary Theorists, which last for decades and never seem to resolve their warfare. Maybe that is because real sciences don't study anything important. But more likely, real sciences have methods to efficiently describe and resolve their differences- with reference to reality- that economists do not seem to have. For in the macroeconomics realm, there is not a lot of experimentation that one can do. It is a field more like history, from which scholars and observers tend to draw the lessons they want to draw, not the ones that would serve them best. Or theology, whose subject is wholly illusory, such that its practitioners are not really in the business of studying anything observable at all, (or even discernible!), but in social management- how to build ideologies and propagandize with effective rhetoric, how to build churches, how to sermonize, whom to target in their weaker moments, what and whom to value, which social hierarchy to support, and how to do so.
Economics is far from illusory, and plenty of economists do the truly scientific work of describing the economy as it is, giving us the grist of statistics from which the theorists can spin their opinions. It is at the policy and macro level where things get theological, where moral and ideological commitments outweigh technocratic sense. For economics at the policy level is fundamentally Darwinian- how one wants to split the pie depends on who you think is worthy- morally and operationally. Economics is not intrisically democratic- far from. There are some who are worth more to the system, depending on one's standpoint. The Ricardians (with the Chicago school carrying on its supply-side banner) deemed production and producers the only important parts of the mechanism. Demand would take care of itself as long as producers were given maximum latitude to conduct business and trade as they wished. As the ideological cycle turned, entrepreneurs were once again the vanguard and watchword in the eighties and nineties.
When it comes to inflation, similarly vast ideological forces are at work. The progressive Kenyesian policy environment of the 1960's was eroded, then eviscerated by Milton Friedman's and the Chicago school's general neo-Ricardian attacks during the 1970's, in our period of stagflation. It was genuinely destructive to experience inflation at relatively high levels, and the solution ended up being deep recessions ultimately authored by Jimmy Carter via his appointment of Paul Volker. The power of workers to bid for higher pay and inflation-protected pay was destroyed by de-unionization, outsourcing and off-shoring. Those forces largely remain today, suggesting that the current inflation blip will be transitory.
Inflation is measured in consumer prices, so it largely reflects low-end wages that are spent most readily, rather than the stock market or other places where the rich invest. As long as wages are kept down, then inflation will be kept down as well. The big question is how the economy splits the pie- between wages at the low and middle levels, versus returns on capital / wealth and executive pay. This balance has been heavily out of kilter over the last few decades. This may have been great for keeping inflation down, but has obviously had highly corrosive effects on much else, from the opioid epidemic, to our great dependence on China for goods and supply chains, and our political breakdowns. So economics is not just about the economy, but about a great deal more- who we value and what vision we have for the future.
Keynes in his magnum opus had some wry comments on this phenomenon, in 1936:
"The completeness of the Ricardian victory is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident to the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commanded it to authority. That it afforded a measure of justification to the free activities of the individual capitalist attracted to it the support of the dominant social force behind authority."- John Maynard Keynes, The General Theory of Employment, Interest, and Money
- Resisting the lies is harder than you think.
- Sustainability is the big issue, and our politics are too small to address it.
- Democracy is hanging by a thread.
- And each side seems to think it is saving democracy, apparently. Though only one side does so undemocratically.
- Of course.. Republicans dedicated to state destruction will support crypto.
