| Have you ever wondered where economic theories come from? Are they earnest scientific attempts to describe truth, or are they better described as public policy propaganda tools? Well, if an economic theory was truly rooted in the pursuit of scientific truth, then the theory would be revised when actual results contradicted the theory. Right? |  |
Let's take the economic theory of free markets, as espoused by Milton Friedman and his many current-day conservative adherents. The theory says that markets are efficient and will find the best result for the greatest number of people if they are allowed to operate freely.
The last 30 years have seen tremendous financial deregulation, at the urging of free market economists. But, income and wealth inequality has greatly increased. In other words, the results of deregulation have not benefited the greatest number of people. The "invisible hand of the market" has not been kind to the many. Instead, it has served the few quite well, at tremendous cost the the many.
What should an earnest scientist do when faced with mountains of results that contradict their theory? Change the theory, of course! Instead, most economists continue to insist the world is "flat" (i.e., highly free markets ultimately serve the common good), even though the evidence proves the world is "round" (i.e., highly free markets do not serve the common good).
Why is the free market theory still supported, rather than relegated to the trash heap? The answer is painfully obvious: Because it does serve some people quite well. They support free markets because they are happy with the results. In my view, those who benefit from free markets fall into two camps: those who directly benefit from the free market system, and those who wish they did.
The "those who wish they did" group represents a sadly persistent aspect of human nature. The phenomenon of humans doing things that do not serve their long-term best interests have been observed for thousands of years. Many theories for why people behave this way have been posed; which is a subject for another time.
But for now we must conclude that economic theory is primarily driven by the pursuit of personal interests rather than scientific truth. Let's be honest: economics is about who wins, who loses, and by how much.
The last 30 years have seen tremendous financial deregulation, at the urging of free market economists. But, income and wealth inequality has greatly increased. In other words, the results of deregulation have not benefited the greatest number of people. The "invisible hand of the market" has not been kind to the many. Instead, it has served the few quite well, at tremendous cost the the many.
What should an earnest scientist do when faced with mountains of results that contradict their theory? Change the theory, of course! Instead, most economists continue to insist the world is "flat" (i.e., highly free markets ultimately serve the common good), even though the evidence proves the world is "round" (i.e., highly free markets do not serve the common good).
Why is the free market theory still supported, rather than relegated to the trash heap? The answer is painfully obvious: Because it does serve some people quite well. They support free markets because they are happy with the results. In my view, those who benefit from free markets fall into two camps: those who directly benefit from the free market system, and those who wish they did.
The "those who wish they did" group represents a sadly persistent aspect of human nature. The phenomenon of humans doing things that do not serve their long-term best interests have been observed for thousands of years. Many theories for why people behave this way have been posed; which is a subject for another time.
But for now we must conclude that economic theory is primarily driven by the pursuit of personal interests rather than scientific truth. Let's be honest: economics is about who wins, who loses, and by how much.
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