Economists Got No Science

Posted on 23rd September 2008 by Ryan Somma in Enlightenment Warrior

“The salary of the chief executive of the large corporations is not an award for achievement. It is frequently in the nature of a warm gesture by the individual to himself.”
– John Kenneth Galbraith

Is there any academic field more in desperate need of empirical standards than economics? Just consider the following statements:

  • Quick! Buy a new home! Housing prices never go down. (source)
  • Cutting taxes for the oil industry will bring down prices at the pump! (source)
  • You can’t raise taxes on the rich!!! They’ll just pass the expense on to consumers!!! (See here, here, here, here, and here)
  • Where’s the peer-reviewed study on these statements? What methodology did they use to test these hypotheses/theories? What were the controls? Or are the economists just pulling this out of their butts? Is it possible economists just make this $#!@ up?

    Let’s take the last bullet point about the wealthy passing higher taxes the government places on them onto consumers. Sounds logical right? In fact, it’s based on the following business model:

    Cost + Profit Margin = Price

    Funny thing about this model though, it’s completely out of date. Businesses stopped using it a long time ago. The new model is fixed-price. You always charge the absolute most money for your product that consumers are willing to pay to maximize profits. Under this model, reducing costs becomes the primary means of increasing profit:

    Price (fixed)Cost = Profit

    Funny. Why don’t all these talking-heads mention this stark economic reality when they’re babbling on and on and on (and on)? Why doesn’t anyone point out that there were $18 billion in Oil Industry tax cuts under Bush, and that prices didn’t go down? Why do the economists who have no idea what they’re talking about get to come back on television to continue bull$#!&ing us?

    A characteristic of scientific research and implementing scientific innovations is regulation. When a new genetics breakthrough comes about, there must be a lengthy and in-depth review of its implications and unintended consequences. When a new medicine is developed, there must be years of review and testing to ensure it does not do more harm than good. Imagine if science used economic’s model of anti-regulation, letting scientists genetically engineer, clone, and manufacture pharmaceuticals however the heck they want? After all, a magical invisible hand will prevent the scientists from wreaking havoc. Right?

    Interesting, isn’t it? These guys spend hours on the television talking about this stuff, they have entire cable channels dedicated to the subject, and they send e-mails criticizing me for posts like this and this, and telling me that economics are just too complicated for me to understand… And then they’re wrong far more often than Meteorologists (No, I haven’t tested that hypothesis).

    Economists have no Science, and yet we hang on their every word.


    Note: Shouldn’t we be worried that the $700 billion socialist power-grab bailout for our corporate oppressors includes the following?

    Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

    Sounds ominously totalitarian, doesn’t it?


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