I have a bone
to pick with Keynesian economists. It is not that they are overseeing
the systematic destruction of our economy, although I do object
to that. It is not that they are widely trumpeting the necessity
of the plunder of the American people on behalf of big bankers,
although I do disapprove of such doings. I will even leave aside
for today their willful destruction of the so-called “money” that
I am forced, against my will, to use.
I have with them today is that, in all their nefarious schemes,
they insist on claiming for themselves the mantle of “empirical
science.” I have a deep personal affection for “empirical science,”
and so I beg to be allowed to speak a word or two in its defense.
By what right
do I challenge this claim of the economists? I am an experimental
physicist by profession. If there is such a thing as empirical science
at all, I believe that experimental physics fits the definition,
so I have had some experience with it myself. Now I do not dispute
that economics is a science. Austrian economists do not dispute
that economics is a science; it is just that they understand it
to be a logical science, the science of human action.
deny that economics is an empirical science, that is, one
whose theories can only be known to be true by experimental verification.
Economics is a science in the same sense that mathematics and logic
are sciences. Its claims are based on logical deduction from indisputable
axioms, and may be illustrated historically, but never verified
or falsified experimentally. In the same way, we do not ask for
experimental verification that a straight line is the shortest distance
between two points on a two-dimensional plane.
economists have not fallen victim to the invasion of logical positivism
that has wrought so much havoc in our intellectual landscape. The
logical positivists wished to eschew metaphysics, to escape transcendence,
to leave behind forever the tyranny of an immaterial world of ideas.
And so they devised a rigid criterion of knowledge: you cannot know
anything you cannot empirically verify.
and venerable disciplines, such as history, ethics, and theology,
found themselves unwelcome guests at the table of scientific discourse.
Even mathematics itself felt its foundations shaken. But with little
delay, logic came to its own rescue! The logical positivists’ criterion
did not meet its own demand: logical positivism is self-refuting.
In short order, it became an amusing relic in the annals of undergraduate
never got the memo, and there persists to this day a widespread
prejudice that the only “real” sciences are empirical sciences.
And Keynesians want to be scientists too! So they criticize Austrian
economists for not being scientific – though, of course, in
the only sense of “scientific” they recognize, the positivist sense.
No hand-waving nonsense for Keynesians! No floating on the ethereal
heights of logic and deduction like those superstitious Austrians!
They are empirical scientists, grounded in the hard and
unforgiving reality of facts and experimental verification.
But just here
is where I wish to raise a “point of order,” as they say. After
all, I am not a professional economist. I am a physicist. But for
this reason I know what to do with the theories of an empirical
science. In an empirical science, if we are to retain any criteria
at all, we must at least agree to abandon theories that routinely
fail in their predictions. This is a small thing I ask of the Keynesians,
if they wish to stand in the ranks of empirical scientists. So let
us consider the record.
How did I hear
about Austrian economics in the first place? Undoubtedly like many
people, I became aware of it through the presidential campaign of
Ron Paul. He talked about inflation, sound money, the Federal Reserve,
the business cycle, and also that we were heading for a major economic
disaster if we didn’t mend our ways. Of course, he was ridiculed
by the other candidates for his views: “What is he talking about?”
The mainstream press systematically ignored him. But I heard what
he had to say. It made sense.
I did more
research on the topic, and found the Mises Institute and its seemingly
infinite storehouse of resources. I became a believer in the Austrian
theory of the business cycle. Austrian economists were unanimously
in agreement with Ron Paul in predicting a serious financial catastrophe
as the inevitable consequence of our fiscal and monetary policies.
Many adherents of the Austrian School predicted some of its details,
such as the bursting of the housing bubble: Gary
Schiff, and Frank Shostak,
just to name a few.
But what about
the Keynesians? How did their theories fare in predicting what most
economists now agree is the greatest financial disaster since at
least the Great Depression? One would think that an empirical theory
worth its salt could have predicted a crisis of such epic proportions
– if it could predict anything at all.
But what did
we hear from them, from even the best and brightest? Alan Greenspan
the existence of a housing bubble. Through the first half of
last year, Ben Bernanke and Henry Paulson continually assured us
that the economy was fundamentally sound, the banks were solvent,
and that the subprime crisis was well contained. If the mainstream
economists were really concerned, they didn’t let on. Nouriel Roubini
was the lone exception, and he was only given coverage because he
represented a contrary opinion, a curiosity.
everything hit the fan, and we were all assured that if these
same people who weeks ago denied that anything was wrong
didn’t immediately get 700 billion dollars to do whatever they wanted
with it, then the entire world economy was going to collapse in
a matter of days.
I asked a Keynesian
about this the other day in a Q&A session. He had been debating
Walter Block and was critical of Dr. Block’s Austrian view of the
scientific status of economics. I simply wanted to know, if his
discipline was so empirical, if he had in fact predicted this current
mess, since the Austrians certainly had. He responded,
are like the weather, very complicated systems. We don’t get things
right every time. You don’t fire your weatherman just because
he’s wrong once in a while.
Well, if the
weatherman misses with his temperature forecast by five degrees,
that’s one thing. If he misses the fact that a class-five hurricane
the size of Texas is speeding directly for New York City –
not only fails to predict it but explicitly denies its existence
up until the moment it hits – I’d find another weatherman.
said a hurricane was coming. They didn’t know precisely when, but
it was coming, and it was a big one. Keynesians denied its existence.
don’t claim to be doing empirical science. Keynesians do. What is
ironic to me as an empirical scientist, is that it is the Austrians
who get their predictions right, while Keynesians seem to have been
caught like deer in the headlights.
pattern is nothing new to the current crisis. It was Ludwig von
Mises who predicted the Great Depression, while Irving Fisher, still
highly revered by the Keynesians, proceeded to lose his fortune.
It was the
Keynesians who assured us that we were headed for a severe recession
(which never materialized) after World War II if the government
cut back on its spending.
It was Fed
chairman Arthur Burns who assured Murray Rothbard that a continuation
of the inflationary recession was impossible.
weary time, it is the mainstream and Keynesian economists (who ridicule
and ignore Austrian economics as unscientific) whose predictions
are utterly refuted by the events of history. Yet they continue
to propound their eternal nonsense and use government coercion to
force their bankrupt ideology on everyone else. As Paul Feyerabend
said, “I have no objection to incompetence but I do object
when incompetence is accompanied by boredom and
I would also
add that I object when incompetence, boredom, and self-righteousness
are accompanied by government coercion. But that is a digression.
What I mean
to insist on here is that Keynesian economists, who claim to be
empirical scientists, ought to abandon their theory. The entire
history of civilization stands as a monumental falsification of
it. Or please, at the very least, stop degrading the good name of
empirical science with such rubbish.
first appeared on Mises.org.
C. Richards [send
him mail] received his BA in philosophy from Covenant College.
He is currently completing his PhD in semiconductor quantum optics
at the College of Optical Sciences, the University of Arizona.