What Economists Get Wrong

What Economics Gets Wrong (Almost Everything)

BY IAN WELSH 

ON APRIL 25, 2022 

Economics as a discipline is nearly worthless. What it teaches mostly isn’t true.

• Decreasing price does not always increase demand and increasing price sometimes increases demand (aka. the law of supply and demand isn’t a law.)
• People do not optimize utility (by any definition that is not circular).
• People are not rational.
• The market is not rational.
• The market does not discount the future well at all.
• Competitive markets are created by government, and destroyed by private actors.
• Markets do not and never have properly priced externalities and never will do so while humans remain human. The only way to price externalities properly is thru government or custom (government in drag.)
• Profit or loss in any enterprise in a modern economy is a social choice, entirely based on government and social decisions and mostly unrelated to fundamentals like energy in and energy out.
• Railroads are far more efficient, energy wise than roads, but govt. subsidizes roads.
• The vast majority of profit is based on market position and sustained profit is almost always based on having an unfair advantage that makes the market less competitive and therefore not have the virtues of competitive markets.
• Genuine competitive markets don’t exist, and no businessman wants them to because they drive profits to almost zero.
• The best economies the world ever saw went out of their way to keep wages and prices high, not to reduce them.
• Any concentration of market power that is not regulated or broken up will engage in practices intended to buy/undermine government and destroy wages.
• Higher CEO pay is correlated with lower company performance.
• You cannot have a good economy for long without keeping the rich poor, weak and under your thumb. It is impossible.
• Monetary efficiency between countries is bad. It should be hard to move large amounts money in and out of another currency or country.
• Financial market efficiency is generally bad, and effectiveness and shock pads should be optimized for rather than financial efficiency.
• Countries should, if it is possible, make or grow everything important inside their own borders and not trade for it.
• People perform better when happy, healthy and at least moderately autonomous. The literature on this is so abundant it is silly. Bosses are authoritarian assholes because they like being authoritarian assholes who micro-manage employees. It’s what Bezos gets out of being Bezos.
• Private money creation concentrated in a few hands is destructive to the economy, democracy and freedom (authority: Thomas Jefferson). It is also anti-competitive market, since you can’t compete with people who create money out of thin air.
• Moderate levels of inflation are good, not bad, if they include assets, because they take away the control of people who won the past so they don’t control the present and the future.
• Taxes should be low on ordinary people and high on anyone rich, including wealth and estate taxes. No one should be rich because their parents were.
• People who lend money should lose that money if the person who they loaned it to can’t afford to repay it. The function of lending is “I know how to pick people who will use the money well.” If you can’t do that you deserve to lose the money, and govt shouldn’t collect it for you
• bankruptcy should be easy, fast and leave people whole. Economically crippled people are not in the interest of society as a whole.
• A UBI’s main function is allowing people to do what they want to do, and forcing bosses to make jobs good, not shitty.
• Pensions should simply be handled by government or a general UBI.
• Comparative advantage is a terrible strategy for improving your economy.
• Free trade is garbage for most countries.
• Raising the minimum wage is not correlated with increased unemployment
• The unemployment rate measures supply driven wage push inflation pressure, not how many peole can’t get a job.
• Initial capital for capitalism was primarily acquired by theft, first of European commons, then of non-European land, people and resources.

Essentially everything Economics teaches is wrong. If and when their prescriptions for action are followed, disaster ensues. With almost no exceptions every country which ever developed did so by not doing what economists say to do.

Economics also has a morally corrosive affect on those who study it.  People mostly don’t free ride or otherwise act according to the maxims of economics: but people who have studied economics do.

Because economics is wrong and harmful about almost everything, and because economists do not say “please don’t follow our advice”, Economics should probably be banned and all Economics faculties shut down.

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“And forgive our debts, as we forgive those who owe us!”

The title of this post might remind you of part of the so-called Lord’s Prayer, which in English is usually rendered “And forgive us our trespasses, as we forgive those who have trespassed against us.”

This sounds like forgiving sins, but in Latin, which I studied for about six years, the prayer is really about forgiving debts:

“et dimitte nobis debita nostra sicut et nos dimittimus debitoribus nostris”

I don’t know enough Greek to be able to comment on the original meaning of the words as apparently written down in the New Testament in that language, but it is generally accepted that Jesus (if he really existed) spoke Aramaic – but only a few of his (alleged) words were recorded in that language, since the entire NT was written in Greek, not in Hebrew or Latin, and definitely not in English!

The following book makes the argument that forgiving debts, wholesale, was essential if you wanted to avoid stratification of society into a class of oligarchs and a class of everybody else, who were essentially little better than slaves. They make the point that compounded interest grows exponentially and without limit, but economic growth does NOT: it follows a logistic curve at best, which means that there are certain limits.

For example, while bacteria growing in a petri dish appear to grow exponentially for some hours, perhaps for a few days, eventually, there is no more uncontaminated agar for the bacteria to eat, and they start drowning in their own waste products. So despite what one learns in most Algebra classes (including my own), bacterial growth is in actually logistic, not exponential. However, unless debt is periodically forgiven – which seldom if ever happens these days – the debtors end up drowning in debt, as you might be able to discern from this little graph I made:

I haven’t read the book, but the review is most interesting. Here is a quote:

Nowhere, Hudson shows, is it more evident that we are blinded by a deracinated, by a decontextualizedunderstanding of our history than in our ignorance of the career of Jesus. Hence the title of the book: And Forgive Them Their Debts and the cover illustration of Jesus flogging the moneylenders — the creditors who do not forgive debts — in the Temple. For centuries English-speakers have recited the Lord’s Prayer with the assumption that they were merely asking for the forgiveness of their trespasses, their theological sins: “… and forgive us our trespasses, as we forgive those who trespass against us….” is the translation presented in the Revised Standard Version of the Bible. What is lost in translation is the fact that Jesus came “to preach the gospel to the poor … to preach the acceptable Year of the Lord”: He came, that is, to proclaim a Jubilee Year, a restoration of deror for debtors: He came to institute a Clean Slate Amnesty (which is what Hebrew דְּרוֹר connotes in this context).

So consider the passage from the Lord’s Prayer literally: … καὶ ἄφες ἡμῖν τὰ ὀφειλήματα ἡμῶν: “… and send away (ἄφες) for us our debts (ὀφειλήματα).” The Latin translation is not only grammatically identical to the Greek, but also shows the Greek word ὀφειλήματα revealingly translated as debita: … et dimitte nobis debita nostra: “… and discharge (dimitte) for us our debts (debita).” There was consequently, on the part of the creditor class, a most pressing and practical reason to have Jesus put to death: He was demanding that they restore the property they had rapaciously taken from their debtors. And after His death there was likewise a most pressing and practical reason to have His Jubilee proclamation of a Clean Slate Amnesty made toothless, that is to say, made merely theological: So the rich could continue to oppress the poor, forever and ever. Amen.