Accountability

The Dow is down 250 or so as I write. Earnings reports seem to have injected a little reality into the Keynesian fantasy. Even the prospect of a smaller iPad, which propped up the stock market yesterday,  may not be enough to save the world, it seems. Say it isn’t so.

Complacency is everywhere. The Fed has our back, say the bulls. The problem is that the Fed is unarmed. Ben might as well hold his breath until unemployment reaches 5% as buy bonds – neither will be effective. Although if he holds his breath long enough, market morale might actually improve, come to think of it.

An Italian court sentenced a panel of scientists to long jail terms for giving bad advice about the likelihood of a major earthquake following swarms of small quakes. People took their advice, stayed in the quake area, and many died when a large quake resulted. The scientists protested, in vain, that there was no way to accurately forecast quakes. In which case, they should not have given advice, the court held. This verdict has been widely derided. But not by me. People giving advice should be held accountable for their advice. Engineers are. Lawyers are. Doctors are. Why not economists? If their advice ruins lives, should they not be sent to jail? Particularly when they base their advice on dogma, rather than evidence? The lesson from the Italian convictions is that you shouldn’t take money to make a prediction (negative or positive) when you know that the event is unpredictable.

Mr Bernanke is perfectly willing to make predictions and experiment with other people’s lives. He has no basis to make predictions – his track record is abysmal. But he does it anyway, shameless and secure in the knowledge that his little world of yes-men, private dining rooms, tennis courts and limos will continue serene, regardless of the hardship that results from his economic advice.

Economics is largely bogus. No epistemological analysis is ever applied to economics, so we don’t know what is true or not. To our cost. More reliable forecasting methods exist – crystal balls, tarot reading, I-Ching all come to mind. Then we would have at least random  rather than pathological forecasts.

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