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Politics : Rat's Nest - Chronicles of Collapse -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (9527)	9/11/2009 12:30:02 PM
From: Wharf Rat	Read Replies (1) \| Respond to of 24210

The Mistakes Economists Make by Dave Cohen What has been is what will be, and what has been done is what will be done; there is nothing new under the sun —Ecclesiastes 1:9 It’s almost worth a Great Depression to learn how little our big men know —Will Rodgers Paul Krugman’s remarkable article How Did Economists Get It So Wrong? reminds us that the high priests of modern societies often have a muddled understanding of the economy they preside over. Their poor track record of late has not deterred many economists from making their usual prediction—despite the small bump in the road we’ve encountered lately, prosperity is just around the corner. Before I am accused of making sweeping generalizations, let me be clear that I am referring to the kinds of economists Krugman discusses in his article. Winston Churchill allegedly said that “if you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.” Unfortunately, all the economists Krugman talks about had the same opinion. Let’s talk about the mistakes economists make. This is an awfully big subject, so it’s hard to know where to begin. There are the Big Misconceptions, and the smaller ones that follow from them. Here are the overriding fundamental errors as I see it. People are rational Endless growth is possible. Right away we run into trouble, for it is not reasonable to assume that endless growth on a finite planet is possible. The math alone tells us that sooner or later, humanity will get its comeuppance. These large mistakes are founded on another error. Markets, driven by the power of price & technological innovation, always overcome apparent limits on growth or obstacles arising from human imperfection. I call this the Assumption of Human Progress. Economists rarely make this assumption explicit, but this is what they have in mind. The progress assumption implies that markets, a human invention, are like God—omnipotent (all-powerful), omnipresent (always present) and omniscient (all-knowing). Whereas a rational individual suffers from limitations such as imperfect knowledge, a market does not much more energybulletin.net