On mainstream economics

Aretae notes that "ALL" economists agree that "Gold standards are substantially bad for some important things."

In the trivial sense, this should be true. A good economist (like a good engineer) should acknowledge that everything has tradeoffs. The more interesting question is what we should conclude from the fact that virtually all mainstream economists vehemently oppose a gold standard.

My suggestion would be that we should conclude nothing.

- Mainstream economists get to choose other mainstream economists and support of the gold standard, by definition, means that you’re not qualified to be a mainstream economist. So, the fact that mainstream economists don’t like the gold standard is akin to the discovery that Catholic priests don’t like Martin Luther.

- Economists should be skeptical of counting heads. It’s much more interesting to look at how much someone’s opinion is worth. The average econ-blogger’s opinions on the gold standard costs $0. Jim Grant’s cost about $1000/year. I’m with Grant.

- As I understand mainstream economic thinking on fiat currency, mainstream economists believe that if a country has a fiat currency and issues debt only in said currency, the country is immune from default. In a trivial sense, this is true – reality doesn’t work that way though. (It’s also interesting that mainstream economists believe in the importance of independence of central banks, but they don’t see rising debts as a threat to central bank independence).

- For a decade or two, free market economists were on the ascent. The current mainstream faith in fiat currency has effectively reversed this ascent. If central planners can effectively manage the money supply, they should be able to manage anything. Apparently the Soviets only failed because they lacked fast computers and really good economists.

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8 Responses to On mainstream economics

  1. Five Daarstens says:

    One thing I’d like to know from economists is why has mercantilism become so out of favor. Since there are several countries around the world that practice this successfully, what’s the problem?

    Another thing I’d like to know, how come economists never have any long term plans, like 10, 20, or 100 years or more goals, is this a problem with democracy or the current state of the “science” of econonomics?

    • Foseti says:

      I’ve also wondered why economists seem so focused on short term results, when their track record in the short term is so poor.

      • Leonard says:

        “Economists” are focused on the short term because they have captured power within the Cathedral. That is, they are heavily disguised politicians, propagandists, and pro-state apologists. Mencius lays out the difference between types of economists in this article.

    • James James says:

      “Since there are several countries around the world that practice [mercantilism] successfully”

      What do you mean by that?

      (Your point about economists not having long term goals is exceptional.)

      • Five Daarstens says:

        There are several Asian countries, most notably China, that practice a form of mercantilism. The effect of this is to become a net exporting country.

      • James James says:

        OK. It seems to me that mercantilism is obviously silly: accumulate a lot of gold, so you can sit on the gold and feel good? Surely the purpose of accumulating money is to spend it.

        The purpose of exports is to buy imports. If you could get the imports without the exports, that would be great.

        Running long-term budget deficits OR surpluses is probably A Bad Thing, leading to degeneracy.

        If you run constant budget deficits and borrow to sustain them, you are living beyond your means and will not need to strive to meet your potential: the population will become degenerate. (The debt is not your problem though: the creditor countries who make loans that will never be paid back are the stupid ones.)

        But if you run constant budget surpluses, you are *already* stupid. You are lending to countries to enable them to have a better standard of living than you, for no good reason.

        Obviously, in a free market, trade deficits or surpluses will not not last long: they will naturally be reversed.

  2. josh says:

    Going along with #1. The ratio of economists that favor any theory is directly proportional to the grant money given to economists who support this theory. This is an identity that pretty much has to hold. Always.

    Since the early 20th century, mainstream economic theory has been that banks should be allowed to create money, loan it out, and mark it down as a new asset. Since the creation of the Rockefeller foundation, the grant-making agencies have been either controlled by banks, or have even owned substantial interests in banks/served as tax shelters for banks. Since the new deal, we can add the federal bureaucracy as another main source of grant money.

    So essentially what we have is a theory that the government and banks MUST create money and have the power to allocate it, based on research that is just about 100% funded by the government and banks. How is this not obviously stupid to everyone?

    • Bill says:

      Mainstream economists get to choose other mainstream economists and support of the gold standard, by definition, means that you’re not qualified to be a mainstream economist.

      Robert E Hall is a mainstream, extremely well-regarded economist who has said nice things about a modified gold standard. Here is a downloadable paper with no scary math.

      So, the fact that mainstream economists don’t like the gold standard is akin to the discovery that Catholic priests don’t like Martin Luther.

      As much as it pains me to say so, if you spent any time talking to actual flesh-and-blood Catholic priests, you would not be using this example.

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