Five Fundamentally Incorrect Views of Economics by Jay Hanson

( The Long Version is archived at http://dieoff.com/page241.htm ) (Permission to reprint explicitly granted.) Any ONE fundamental error in neoclassical theory should be sufficient reason to reject conclusions based upon that theory. Here are five fundamental errors in the theory: #1. A fundamentally incorrect"method": the economist uses "correlation" and "post hoc, ergo propter hoc"(after-the-fact) reasoning, rather than the "scientific method". #2. A fundamentally inverted worldview: the economist sees the environment as a subsystem of the economy, rather than the other way around. In other words,economists are trained to believe that natural resources come from "markets" rather than the "environment". The corollary is that "man-made capital" can substitute for "natural capital". But the First Law of thermodynamics tells us there is no "creation" — there is no such thing as "man-made capital". Thus, ALL capital is "natural capital", and the economy is 100% dependent on the "environment" for everything. #3. A fundamentally incorrect view of "money": the conomist sees "money" as nothing more than a medium of exchange, rather than as social power — or "political power". But even the casual observer can see that money is social power because it "empowers" people to buy and do the things they want — including buying and doing other people: politics. If employers have the freedom to pay workers less "political power", then they will retain more political power for themselves. Money is, in a word, "coercion", and "economic efficiency" is correctly seen as a political concept designed to conserve social power for those who have it — to make the politically powerful, even more powerful, and the politically weak, even weaker. #4. A fundamentally incorrect view of his raison d'etre: the economist sees "Homo economicus" as a "Bayesian utility maximizer", rather than "Homo sapiens" as a "primate". In other words,contemporary economics and econometrics is WRONG from the bottom up — and economists know it. The entire discipline of economics is based on a lie — and economists know it. Moreover, if human behavior is not the result of mathematical calculation — and it isn't — then in principle, economists will NEVER get it right. #5. A fundamentally incorrect view of economic élan vital: the economist sees economic activity as a function of infinite "money creation", rather than a function of finite "energy stocks" and finite "energy flows". Infact, the economy is 100% dependent on available energy — it always has been, and it always will be. See a synopsis of the energy situation at http://www.jayhanson.org/SynopsisPics.pdf . Here is the mitigation http://www.jayhanson.org/America.htm .

Another assault upon logic to justify capitalism

Douglas Weiskopf writes, "Have any of you read this?" Here's an excerpt: "Capitalism works because, under a specific set of conditions in a well-governed market, capitalists need increasingly productive workers to achieve increasing profits, and workers need access to capital to achieve increasing wages, and in their mutual dependence both find it in their interest to act in ways that deliver good outcomes for themselves and for consumers as well. Capitalism locks everyone in a room together and encourages them to find a way out. This system of mutual dependence between capital and labor, not mere “economic freedom,” is what Adam Smith so ably described. Globalization destroys it, instead urging the owners of mobile capital to forsake the interests of their fellow citizens and search for higher profits through labor arbitrage abroad. A democratic republic’s vast working and middle classes will rightly reject such an arrangement, forcing elites to choose between restoring capitalism by constraining capital or entrenching their own economic prerogatives by subordinating the democratic process. That’s as good a description as any of the precipice at which America now stands." ***** To a certain extent and in so far as propaganda achieves widespread belief in this sort of capital-labor cooperation, the final statement has merit. However, the initial premise that capitalism works is true only in the sense that Ponzi schemes work. (to be cont'd)

Install climate change into public policy

I wonder if we need to enclose what we have learned from climate science in a sort of meta-science. For example, we can probably establish a number to represent the smallest probability of each category of damage due to climate change. Let us agree that Category II represents the extinction of many species according to their habitats and the displacement of many humans depending on their location. Let the probability of Category II be not less than 0.14. If we have complete tables of such data, we can easily decide how aggressively we wish to mitigate these circumstances. Personally, I would not tolerate any of them, as I have often dreamed of the Earth as a Garden in which industrial activity is sharply curtailed and fossil fuels are no longer used. I have written voluminously on the social changes I consider necessary and desirable. I would actually like to see the end of the automobile culture with the beautiful autos of yesteryear in museums.

Best wishes to all,

Tom