I was standing with my dad at the check-out counter of a cooperative grocery store one afternoon. It was full of the kind of propaganda you expect in a cooperative -- hat-tips to a myriad of populist causes, in various forms such as bumper-stickers, refrigerator magnets, mugs, etc.
My dad pointed out one of the pieces of schwag, a sticker that read, (paraphrasing) "Economics, as a discipline, as has never considered the idea of a maintaining a steady-state economy." Since he had previously made negative comments about "growth"-based economic policies I knew he was trying to get me to think.
My immediate inclination was to think about what would happen in an economy imposed upon by such a policy, considering the facts of world population growth and poverty... certainly, the world standard of living would decline and poverty would grow. (as I interpret it, the comment was derived from a concern about environmental issues rather than economic success, so perhaps the authors of that blurb hadn't considered this potential)
But then I began thinking about it more deeply. Economics is not a "discipline", any more than physics is. A discipline is something that you do. It implies that your methodologies could change, thus altering the outcome. For example, computer programming is a discipline because I can alter my methodologies in order to improve efficiency.
But as a physicist there is nothing I can do about the law of gravity -- gravity exists, an attractive force between all matter in the universe. And no matter how I would wish it to be so, I can't, as a physicist, alter my discipline in any way to change that fact. My
discipline is in using the scientific method to
discover and
verify the existence of the force of gravity.
Economics is the same way. The discipline is in discovering the laws (if there are any) that can be used to predict economic outcomes, just like physics is the discipline of discovering the laws that can be used to predict physical outcomes. Physics is the thing being studied -- not the discipline. Economics is the thing being studied -- not the discipline. People conflate the two, leading to nonsensical assertions that if we could just alter the discipline, economic reality would be different.... if we could just alter the discipline, physical reality would be different....
Now, it's true that people can manipulate physical reality -- as long as they do so within the limits of physical constraints. Doing so results in some very positive outcomes (light bulb, plumbing, etc.). Why can't the same be done with economics? The answer is in the nature of economic constraints, and how those constraints resist discovery. (by the way, economic constraints have a root in physical constraints -- the law of conservation of mass is the fundamental physical law behind the economic reality of scarcity)
The problem is that economics deals with the results of individual human decisions about how best to meet their own needs with the resources available to them. It's a system that is far more complex and unpredictable than physics (if this isn't blatantly obvious to you just from day-to-day interactions with others, research and consider the chaotic nature -- in the mathematical sense -- of neural networks).
For the sake of discussion, let's compare a physical particle of mass to an economic particle -- a person (this is an analogy -- not an equivalency). Instead of simple hypotheses like "a particle in motion tends to stay in motion" (conservation of momentum), what similarly simple and elegant hypothesis can be made to predict the economic behavior of an individual? NONE! Because an individual can take in any number of pieces of data (variables) in the process of making a decision (through the mathematically chaotic processes of his mind), the
only hypotheses that can be made at this level are big, ugly, complex hypotheses, that are likely to only be valid within some large error percentage. The physical equivalent would be to try to derive a mathematical model for a physical process where the input variables are not static, and the function isn't either!
Now, consider that physicists have the luxury of being able to setup
repeatable experiments to
falsify their hypotheses. They can even do computer simulations that are accurate to within minute margins of error. Economists cannot do this. Experiments, if they are to be done, must be done in-flight! The results to be interpreted only after the experiment has passed into history. The physical equivalent would be to design and build a modern commercial aircraft, and to test it by sending it on its maiden flight, fully-loaded with passengers!
All of this coalesces into the following reality: No economist (really, no person) has the intellectual ability to accurately predict economic realities. Any economist who tells you otherwise is, at best, guilty of conceit (I don't want to speak for Hayek, but I believe this is equivalent or highly related to the fatal conceit). Every time a politician tells you they are going to do X, Y, and Z, to make the economy better, they are sending you on a flight in an untested, experimental aircraft, in a universe where the rules of aerodynamics are volatile and unpredictable. The notable exception is when they are proposing to undo the bad policy they previously enacted.
It is precisely a good understanding of economics which leads (good) economists to recommend free markets as the best possible prescription, from a government policy perspective. They understand that: (1) There are certain economic realities that cannot be bent, similar to physical realities which can't be bent; (2) Even if policies could be put in place to harness the economic realities, similar to, say, applying aerodynamics to resist gravity, there are no experiments that can be done to determine what those economic realities are; (3) No one is intelligent enough to understand and model the chaotic economic activities of hundreds of millions to billions of people.
It is precisely because economics cannot ever be understood with the same accuracy and precision that physical reality can that you should want to actively resist putting economic control into the hands of politicians.
