heath economics forecasts inconsequence

Henry George, The First Progressive
articles data galbraith henry george mihm leonard silk lewis wolpert progress and poverty unjust distribution

Economics as Pseudoscience, Geonomics as Science

Recessions are cataclysmic. Yet economists are quite bad at predicting them -- except for the handful of geonomists. We trim, blend, and append two articles from (1) Salem-News in 2011, Feb 24, on the errors of economists by D. Johnson and (2) Daily Kos in 2012, Aug 9, on Henry George by D. Mineau.

by Daniel Johnson and by Dustin Mineau

Joseph Heath, author of The Efficient Society, says, “a number of studies show that studying economics can actually make you a bad person. In fairness, these studies do not show that studying economics makes you a bad person. It may just be that bad people are more likely to be attracted to the study of economics.”

Economics historian Stephen Mihm says: “A recent study looked at “consensus forecasts” (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the ’90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later.”

The late Harvard economist John Kenneth Galbraith called the Federal Reserve System the "most prestigious form of fraud … it has had a record against inflation and notably against recession of deep and unrelieved inconsequence… The belief that anything as complex, as diverse, and by its nature personally so important as money can be guided by well-discussed but painless decisions emanating from a pleasant, unobtrusive building in the nation's capital belongs not to the real world. (Economics of Innocent Fraud)

Leonard Silk, late economics columnist for the New York Times (an economist himself) once wrote: "Economists spend vast amounts of time observing each other's articles rather than reality. Their data are poor, and they devote little time to improving them. They rarely discard their theories unless some academic or government position is at stake." (Economics in Plain English)

Galbraith added that the man who ranges widely thinks of the specialist as knowing ever more about ever less. (The New Industrial State)

In The Unnatural Nature of Science, Lewis Wolpert wrote: “The ‘Nobel’ laureate James Meade would like his tombstone to bear this epitaph: ‘He tried to understand economics all his life, but common sense kept getting in the way’.”

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JJS: Most of the problems above could be rectified by picking up where a great thinker left off.

Henry George (1839 - 1897) was invited to speak and lecture all over the country and world, and his writings appeared in newspapers across the nation. At his funeral in 1897, 200,000 paid their respects by filing past his casket (as a comparison, when President McKinley was assassinated 4 years later, about 100,000 people filed past his casket. So how did a 19th century printer become so famous? And why was he forgotten?

A popular explanation of why the poor were poor was because they were lazy, criminally inclined, or just generally rude. Henry George replied that the conditions of distribution were so unjust. Instead of each being sure of enough, many are condemned to poverty. An equitable distribution of wealth would exempt everyone from this fear. It would destroy greed for wealth, as greed for food is destroyed in polite society.

On crowded steamers, manners often differed between cabin and steerage. Both had enough food. However, steerage had no regulations to insure efficient service, so meals became a scramble. In cabin, on the contrary, each was assigned a place, and there was no fear of not getting enough to eat. There was no scrambling and no waste. The difference was not in the character of the people, but simply in the arrangements. A cabin passenger transferred to steerage would participate in the greedy rush; a steerage passenger transferred to cabin would become respectful and polite.

In other words, the negative behavior attributed to the poor is not the reason they are poor. Rather, the behavior is a result of being poor.

George redefined the class fight from being capitalists vs. workers as Marx did, to Land (and other) Monopolists vs. "real capitalists" workers. He proposed that society’s spending for land be redirected into the public treasury. Later his reform was dubbed “the Single Tax” on land.

At the time of his writing, the world of economics was moving onto the "neoclassical" economics that we are more familiar with today under pressure from the elite. Likely they wanted us to forget about him. Unlike figures such as Adam Smith and Thomas Jefferson, the elite couldn't "rehabilitate" his legacy to make him appear as a conservative.

Whatever the reason for Henry George being forgotten, it certainly isn't because his proposed solution was a bad idea; every city, state, or province that has tried it has had enormous growth.

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JJS: The main reason that economics can not be a science is that the field deals with incentives and economists themselves overlook the most crucial incentive.

It goes like this. When you buy something somebody made, they go out and make more. You reward them, they prosper, the economy grows. Conversely, when you buy something nobody made -- such as land or oil -- you reward speculators who keep the most basic factor in production -- land -- out of reach of many marginal people. Similarly, when you pay for something somebody made but from somebody who has won a government privilege like agri-biz subsidies, you pay too much and reward them, and you pay twice (the tax for the subsidy) and cheat yourself. The insiders you pay rents to prosper and they go out and win more favors, but the economy shrinks.

While you can find economists saying bits of the above, you’d have a hard time finding any making a big deal about all of the above. For comfy economists, misaligned incentives are way too hot to handle. For the big picture -- broad and deep -- you’ll have to turn to a geonomist for that.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Should Goldman Give Back $2.9 Billion to Taxpayers?

Economism and the Night Sky

Nobelist Stiglitz Calls for George's Tax

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