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The Supposed Failure of Economics

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Tags Big GovernmentCalculation and Knowledge


The left has always been anti-economics for the simple reason that economics shows the real cost of progressive policy and government meddling in the economy. When this cost is pointed out, socialism in all shapes and forms necessarily appears less appetizing. The financial crisis, rhetorically made out to be a massive "market failure," therefore fueled the anti-economics movement's calls for a different and "more social" (that is, it overlooks some of the costs of progressive policy) economic science.

These calls for a "new economics" are heard from students (who apparently know better than their professors what should be taught) and faculty on university campuses as well as from loudmouths in the media. Post the financial crisis, the argument is simpler than previously: economists failed to predict the financial crisis and thus economics is falsified and must be changed or replaced. 

This is an interesting argument considering the two main strands of economics — microeconomics and macroeconomics — that are always taught separately in our universities. Microeconomics is what we here would refer to as simply economics, whereas the specific brand of macroeconomics (based on entirely different assumptions, theories, and types of analysis) is a tradition following the works of Keynes. While it comes in different tastes (various sorts of Keynesianism, monetarism, and so on), Austrians would agree with Armen Alchian in that "there is no such thing as macroeconomics."

Big government leftists generally despise microeconomics while they don't mind using the interventionisms often championed by various macroeconomic theories.

Funny thing, who failed to predict the financial crisis and should thus be considered falsified? The macroeconomists — the very economic theories the anti-economics left can and often do tolerate. Microeconomics, on the other hand, what they cannot tolerate, never failed. 

But, of course, this doesn't bother the statist left. They treat inconsistencies in their own thinking as though they are arguments in favor of their position. So when their preferred strand of economics fails, then this is to them an argument for more of the same. And at the same time they don't mind pointing fingers at "economics," by which they suddenly mean the proper theories of microeconomics (but probably not their favored macroeconomics). So they extrapolate blame from their own failure onto those who did not fail in order to "prove" its flaws and use as argument for a new economics — and this "new economics" is just more interventionism. 

That anyone takes them seriously is a great mystery. 


Contact Per Bylund

Per Bylund is assistant professor of entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Website: PerBylund.com.

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