Wednesday, January 09, 2013

Economic Science and Economic Religion

I notice that a lot of my correspondents are reluctant to credit economics with being a science. Actually, most of them dismiss the idea out of hand. This doesn't keep them from having economic opinions however. In fact some of the strongest opinions come from those most dismissive of economics as a science.

It seems that Paul Krugman has noticed a similar phenomenon.

For many people on the right, value is something handed down from on high It should be measured in terms of eternal standards, mainly gold; I have, for example, often seen people claiming that stocks are actually down, not up, over the past couple of generations because the Dow hasn’t kept up with the gold price, never mind what it buys in terms of the goods and services people actually consume.

And given that the laws of value are basically divine, not human, any human meddling in the process is not just foolish but immoral. Printing money that isn’t tied to gold is a kind of theft, not to mention blasphemy. For people like me, on the other hand, the economy is a social system, created by and for people. ...

Now, the money morality types try to have it both ways; they want us to believe that monetary blasphemy will produce disastrous results in practical terms too. But events have proved them wrong.

And I do find myself thinking a lot about Keynes’s description of the gold standard as a “barbarous relic”; it applies perfectly to this discussion. The money morality people are basically adopting a pre-Enlightenment attitude toward monetary and fiscal policy — and why not? After all, they hate the Enlightenment on all fronts.