Monday, 02 April 2012

Why I Don’t Believe A Single Word Economists Say

Written by
Rate this item
(0 votes)

This piece will form part of an appendix in my forthcoming book, ‘How to save the whole damn world: A madly optimistic manifesto.’ Am I serious? Shit yeah!

Let me state up front that what you are about to read is breath-takingly arrogant. I failed economics in high school and have never studied it at university. But seeing how I’m writing a book that can’t avoid dealing with economic issues I thought I should educate myself on such matters, so I started reading widely. After ten years, I have to say, it still mostly eludes me. I’ve read James Joyce, Gertrude Stein, Steven Hawking and a crap load of science and history. I can get my head round Chaos Theory, String Theory and even a bit of quantum mechanics but I can make no sense of economics. I can follow the chain for a short while but it always ends with me groping in the dark thinking, ‘What the bloody hell do they mean?’ The language is impenetrable, the concepts fantastical, they never seem to define even the simplest terms and they use really obscure words. Two tiny examples: in Niall Ferguson’s book The Ascent of Money, he uses the word ‘mulcted’. At first I thought it was a misprint. I could swear that I’ve never seen that word before. It took three dictionaries but I finally found it and it means ‘swindled’. Another writer used the word ‘peculate’. I thought they’d forgotten the ‘s’ at the start, but no, ‘peculate’ means to pilfer or embezzle.

For a while I thought that I was just really stupid when it came to economics but the more I read, the more I realised that the obscurity and complexity was deliberate and intentional. In his book Money. Whence it came, where it went, John K. Gailbraith quite explicitly states that when it comes to the issue of money ‘…complexity is used to disguise truth, not to reveal it.’(p3) He also uses terms like witchcraft, sorcery, magic and priestly incantation to imply that economics is more of a religion than a science. But the best analysis of economics that I’ve come across was in …MAD Magazine. The following verse appears in a 1978 issue:

 See the men with all the charts and graphs.
They are Economists.
They can predict what is going to happen to the economy.
They are very consistent.
They are never right.
Economics is a science.
However, it is not as an exact a science
As Astrology, Numerology or Tea Leaf reading.
Economists have their own language.
That prevents them from being understood.
For instance, Economists will tell us they have good news.
They will say, “The rate of unemployment is down”.
Does that mean that fewer people are out of work?
No, it means that more people are out of work,
Only less more than last month.
Good! You’re not supposed to!

Can’t get pithier than that I reckon.

So just what is it that economists are trying to hide behind all this deceptive language? A few things spring to mind. They think all financial bull markets are the Real Deal until they collapse, which always takes them completely by surprise. Who knew house prices could go down? Inconceivable! Who knew that paying $1000 per share for an internet company that doesn’t make or sell anything was foolish? Unheard of! Then there’s the fact that economics is far from being a science and that really, they don’t have any more of a clue than us as to what’s going on. They just think they do.

Now here comes the arrogance. I think I’ve figured out why economists’ predictions are so inaccurate and why they never seem to get anything right. There is a massive flaw at the very heart of economics, an assumption so wildly incorrect that it skews everything that comes after it. Namely, that human beings are rational. That they will always act in the most sensible way to further their economic self-interest. Economists couldn’t be wronger if they tried. If humans were truly rational creatures no one would ever smoke, drink, gamble, take drugs, invest on the stock market, vote or go to church. Human emotion and belief gets tied up with every conceivable area of human activity and only rarely does it make sense.

The best example of this comes from a university experiment in America. Every year they take a group of first year psychology students and conduct an auction for a $20 bill. Every year the bidding starts enthusiastically at $5 and starts slowing down as the bids near the $20 mark. All the female students tend to drop out by the time bids reach $18-19. But every year the auction keeps going until some bloke ends up paying about $27. For a $20 bill. That makes sooooo little sense and is so against logic and economic reason as to be truly perverse. So if it’s not purely about the money, what the hell is going on? Well for starters never underestimate the competitive nature of humans and how much they love winning a contest, even if it’s a stupid contest. On a deeper level, is there anything the winner acquires in the process that’s worth $7? Answer: you bloody bet. People may look at him like he’s an idiot for overpaying, but the point is; they’re looking at him. He’s been noticed and is the centre of attention for a short while. He’s gained a few status points. Is enhanced social status worth $7? Shit yeah! So there is some sense to it deep down, just not economic sense.

A more whimsical illustration of how humans bring emotion and irrationality to money and the concept of value, comes courtesy of Pablo Picasso. When Picasso was an elderly man, he never had to pay for a single restaurant meal. He’d take his friends out, order up a storm and then volunteer to pay at the end. He always paid by cheque and the cheques never got cashed by the restaurant. Why? Because Picasso’s signature on the cheque was worth more than the meal itself. Blow that up your pipe economists! The fact of the matter is that economics take none of these irrational human qualities into account. They do not fit it in to their equations or formulas. How on earth did they convince anyone that it was an actual science? Can you think of any other science that basically says, ‘we know there’s some really important but intangible qualities that we’re missing, but we don’t know how to measure them so we’re just going to completely ignore them.’ It’s madness! This is why I don’t feel guilty about trashing the field of economics in my book. If you want to follow my line of thinking in more detail and discover just how far I can take it (Hint: it contains a complete and permanent solution to global poverty) you’ll just have to read my book. That is, if I can find a publisher with both the imagination and the balls to publish it. Here’s hoping and wish me luck.

Read 2531 times Last modified on Thursday, 02 August 2012
Sue Ann Post

Sue-Ann Post is a Melbourne based comedian and writer. She has also recently started her own blog under the name, The Grumpy Optimist. 

Follow her on Facebook and on Twitter @sueannpost