Are Economists Missing it Again
I previously have written here on my observation that we may be witnessing a basic change in economic activity. A shifting of fundamentals if you will.
In the 1700s economic’s as we tend to think of it was based primarily on trade and the incipient industrial advances contributing to its growth. This was the time Adam Smith and his followers attempted to describe what they saw.
By the Nineteenth Century industrialization spawned socialism and its reaction as attempts by the emerging self identified elite calling themselves economists to illustrate the situation as they experienced it. Being addled by their own theories, they still relied on the analysis of Smith et. al. but added “updates” to attempt to preserve the theory and hopefully more accurately describe the situation as they found it at that time. Few if any (Marx excepted) recognized the circumstances were totally new and may have required a completely new theory, analysis and description. After all, trade was no longer the driving force, production and consumption was.
In the Twentieth Century things changed again. The central focus of the “economy” morphed from production and consumption to getting people from here to there in order to produce or consume. It could be argued that the major portion of economic activity was dependent upon transportation not as merely the means of moving goods to market but the major driver of economic activity; in effect its purpose. The economists adjusted their old theories steadfastly refusing to recognize the fundamental change of everything.*
We are now facing perhaps another basic change in economic activity, social media and mobile communications have made transportation less central to ones life. as the following chart demonstrates, vehicle miles per person is steadily decreasing.
As a result, economic activity based upon getting people from here to there is also contracting. To a great extent I suspect that is what is exacerbating the current economic turmoil (if not its cause). We are entering a new economic age. Once again most economists fail to recognize it.
Should this most recent pattern change fail to mitigate the effects of climate change, expect the next so-called “paradigm shift” to focus on remedial actions to limit the effects on the environment from the carbon byproducts and waste produced by the industrial and transportation economies bringing with it a new economic template.
Economists at that time will still try to preserve their theories and will tell you that essentially nothing has changed in their analysis. Not only will they be wrong, but they still will not be able to predict anything of any importance to anyone with any greater accuracy than the flipping of a coin.
* Note: Between the 1960s and about 2010 some commentators have suggested that there may have been another fundamental shift; from a transportation economy to one based upon the exchange of financial instruments. It arose because there appeared not to be enough industrial and transportation projects to sop up all the money that had been created. So, gambling on itself seemed to be a reasonable way to continue choosing winners and losers. This era appears to have been born and now be dying right before our eyes. It may have been either an exceptionally short-lived shift in the world’s economic foundation or merely a transition between two generations. In my opinion it is probably the latter.
On the Role of Civil Society:
“Why would anyone be morally bound or wish to be morally bound to a civil society that does not share the goal that it’s citizens deserve a fair distribution of wealth, income and power? If the civil society is not dedicated to that end what else could it possibly be dedicated to? What is freedom, to those without wealth, income or power?”
On Economics as a Science:
“In Science. a physical theory that is logically consistent may be considered truth only until falsified. In Economics, a sociological theory that is logically inconsistent is often considered true even when falsified.”
On Governmental Priorities:
“As with most fundamental freedoms, preventing those who wish to abridge the fundamental rights of others is a more important role of government than encouraging the exercise of those rights. Exercising our rights are our individual jobs, protecting us from those who would abridge are rights is the duty we collectively give to government. If government is not the guarantor of Freedom then it is a tyranny.”