One of the great experiments in human history is going on under our noses while remaining very nearly invisible; it’s rather as though some geneticist had bred up a batch of young Tyrannosaurs Rex and was turning them loose to roam the local park while nobody paid any attention. However, this experiment isn’t genetic, it’s economic and will impact the entire earth, not just a local park. Economic effects can easily outrun dinosaurs…
The arrival of science in education banished the astrologers from the ruler’s court; nobody believed any more. Well, except for a few Hollywood folk perhaps. Now we have economists. Back when Adam Smith wrote, they spoke of ‘political economy’ rather than of ‘economics.’ Some of us think they were on to something. And while many writers on political economy were perfectly competent mathematicians, their discourses held no equations. Because their readers wouldn’t understand? No, rather because they were describing human behavior, not physical science, so numerical values and equations weren’t applicable. An interested reader could understand everything they wrote! Assuming of course, that he was educated. Politicians understood it better than many others. However, unlike the many others, they mostly didn’t like it. (Nothing in it for them.)
The politicians had a neat little grift going: They claimed that exports were good, they brought in money but imports were bad, they sent money out of the country to foreigners. As your history teacher may have told you back in high school they called this Mercantilism. It put the politicians in business with the exporters, who often needed government subsidies to compete internationally. Old Adam Smith blew that out of the water with his writings that government should keep hands off the economy and not worry about the balance of trade. The pols didn’t love him for that.
However, another economist came along a century plus later: John Maynard Keynes. He wrote that Smith was wrong; government should intervene into the economy. The pols loved him; they made him a British Lord. And the soothsayers having gone, they hired economists to advise them and so did their buddies in business. But there was a little problem.
Most of us can understand Adam Smith and even Keynes. But how do you put a high price on your advice when most can understand it and even (gasp!) argue with it? Intolerable! So the economists, especially in America, began putting it all into math and equations that only they and their apprentices could understand. Reminds some of those arcane symbols the astrologers used to use with the same effect. The physical scientists’ equations are subject to tests against reality and tossed when they don’t prove to correspond. But economists don’t do that and famously can’t predict anything useful, such as the Great Depression or the one we’re currently claiming is a recovery. There are a few out-of-the-mainstream economists of course, who eschew equations, talk sense and predict successfully. But they believe government shouldn’t intervene in the economy; nobody important pays them any attention. I suppose Adam Smith or Frederic Bastiat might, except of course, they’re dead. But now at last, mainstream economics is getting tested, a genuine reality check, in of all places, Japan.
The U.S. has been following the same strategy Japan is adopting, if half-heartedly and it’s common among the European basket cases like Greece, Spain and Italy. France to a point. Germany has resisted this money-printing shtick; memories of the Weimar Republic haven’t receded enough yet. Japan intends to print its way out of debt, thus cheapening the Yen to protect its trade against the other devaluing currencies. And stimulating production too—if modern Keynesianism is correct. You need a blood transfusion? Let me drain some out of you so I can give you one!
If you haven’t followed this (no blame there!), just watch Japan for the next few years. If it does well, the economists are right and Keynes body should be pickled and displayed in Gramercy Square. And the world’s mainstream economists should receive raises and respect. If on the other hand, Japan proves to be committing Hara Kiri or Seppuku or whatever they call it, you will be able to send all those ‘mainstream economists’ to live with the astrologers. You can see why the economists and politicians don’t want to talk about this. I’m considering making book on it, wanna bet?