#BTColumn – Multiverse of economics (Part 2)

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

by Adrian Sobers

“Normative economics is like religion without the aesthetics.” – (Nassim Taleb, Fooled by Randomness)

In Fooled by Randomness, Taleb makes the point that “we are still very close to our ancestors who roamed the savannah. The formation of our beliefs is fraught with superstitions —even today (I might say, especially today).”

He continues, “Just as one day some primitive tribesman scratched his nose, saw rain falling, and developed an elaborate method of scratching his nose to bring on the
much-needed rain, we link economic prosperity to some rate cut by the Federal Reserve Board.”

This apt description of the genesis of our Multiverse of Economic Madness doubles as a good place to start. Before Karl Mordo parted ways with Dr. Strange in the first movie, he said something that applies to our magicians, “You still think there will be no consequences? The bill comes due. Always!” And here we, footing said bill. (So much for Paul Krugman’s, The Week Inflation Panic Died.)

Taleb does not rate Murray Rothbard as a political economist but we do well to consult What Has Government Done to Our Money?

“Money is a commodity. Learning this simple lesson is one of the world’s most important tasks.” But, it “differs from other commodities in one essential fact.”

“What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labour, and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich
for the moment, but clearly all we are doing is diluting the money supply.”

And that is precisely what the Supreme Sorcerers at the Federal Reserve, the ECB, and other central banks have been doing at an unprecedented pace.

This sorcery was, of course, marketed under the auspices of more pleasant sounding terms: “stimulus” and “quantitative easing”.

Practically, it served as a sedative, a collective squeezing of consumers by bidding up the price of goods. The pandemic only sped up, nay, exposed their inflationary policies.

As Victor Hanson put it in another essay, “The pernicious coronavirus tore off an American scab and revealed suppurating wounds beneath. ”Similarly, the pandemic did not cause/create the economic madness we are now witnessing; it tore off the scab, revealing the wound beneath.

“Despite the fall of the Soviet Union,” writes Gary Saul Morson (Leninthink), “Leninist ways of thinking continue to spread, especially among Western radicals who have never read a word of Lenin.”

As was the case in 2008, our Comrades have seized the opportunity to cast suspicion on the god-awful “greedy” capitalists. But they do well to remember the words from one of Lenin’s pamphlets.

“In countries like Russia [and ours], the working class suffers not so much from capitalism as from the lack of capitalist development.

“The working class is therefore undoubtedly interested in the widest, freest, and speediest development of capitalism.”

Taleb doesn’t rate Rothbard, but he does rate Edmund Burke as a political economist. When you read Burke it quickly becomes evident why. Burke was way ahead of his time (and from what one reads these days, ours too): “But this paper money may, and does increase, without any increase of trade, nay often when it greatly declines, for it is not the measure of the trade of the nation, but of the necessity of its Government.”

Gregory Collins’ comment in Commerce and Manners in Edmund Burke’s Political Economy, applies today: “The zealous issuance of paper currency created odious uncertainties and volatilities in colonial economies. Their widespread diffusion led not to the enlargement of trade but to the depletion of wealth, for paper money did not ultimately determine the value of commercial activity but simply measured the desires and needs of government.”

To focus only on the cause of inflation is not only a disservice to the reader but misses an opportunity for a more important conversation.

As Steven Horwitz (Monetary Evolution) argues, money is central to the socioeconomic order. The plot in the Multiverse of Economic Madness will thicken in 2022 but inflation is only the tip of the iceberg. I leave you with two tidbits for thought from Professor Horwitz.

“There is a split over practice and theory that plagues the social sciences and real-world political action. [Read that again.]

“Money stands as an excellent example of the misunderstandings, and undesirable unintended political consequences, that can arise from such splits.”

Two, “Perhaps the most important point to realise is that both orthodox Marxism’s central planning and general equilibrium market socialism are products of Enlightenment views of knowledge and science.”

Thankfully, God can provide even in an environment of experts in enclaves blinded by their epistemic arrogance. If the “working paupers” in the region are to get any relief, it will not come from monetary magicians tinkering with rates, but from a recognition of the limits of their craft.

A limit that is well documented by former central bankers like Sir Mervyn King, Paul Tucker, and, of course, the late Paul Volcker.

But perhaps we need to start asking, why do our monetary magicians always play the leading role in economic crises? But, that is another story. All the best for 2022.

Adrian Sobers is a prolific letter writer and social commentator. This column was submitted as a Letter to the Editor.