Canadian author Laurence Peter described the economist as “an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” From Paul Krugman declaring that the internet would be as impactful as the fax machine to Art Laffer betting a penny that the economy would not suffer a crash in 2008, economists repeatedly get it wrong. It’s no wonder the public is left believing these so-called experts’ opinions and analyses are about as reliable as a psychic’s crystal ball. But perhaps we are getting it wrong regarding what an economist is and isn’t.
Can You Imagine a World Without Economists?
If you turn on a business news network or read through a finance-focused publication, you will inevitably come across an economist predicting a 40% collapse in equities by next year or a monumental crash in the bond market within the next six months. These types of predictions make good headlines and drive clicks, but they inevitably hurt the profession when these forecasts do not happen.
Now, there are plenty of smart people who can accurately anticipate a downturn by examining monetary policy or expect a spike in share prices by noticing certain patterns. Peter Schiff, the CEO of Euro Pacific Capital, was right when he stated that the Federal Reserve would eventually cut interest rates and relaunch quantitative easing. Jim Rogers, the billionaire co-founder of the Quantum Fund, also got it right by going long on the US dollar, despite President Donald Trump’s victory, the trade war, and the bloated deficit. These were smart moves.
But are Schiff and Rogers economists? No. They are successful stockbrokers and businessmen.
An economist, meanwhile, is not a forecaster. Legendary economist Ludwig von Mises was a genius – you have to be to write Human Action – but he was not a rich man. That said, writing in Theory and History, Mises explained:
“This is not to say that future human actions are utterly unpredictable. They can, in a certain way, be anticipated to some extent. But the methods applied in such anticipations, and their scope, are logically and epistemologically entirely different from those applied in anticipating natural events, and from their scope.”
Economics is a science of human action, the rational explanation and investigation of human decision-making in our everyday lives. It will not give you the tools to prognosticate how the S&P 500 will perform on June 2, 2028. But it will give you qualitative knowledge of human action transpiring in particular instances or specific circumstances.
An example of this would be pontificating on how a central bank printing money and manipulating interest rates distorts financial markets and erodes the purchasing power of money. Or, as another example, how price gouging will send market signals that there is a huge demand for a product in short supply. Or, even just the simple fact that, in a free-market society, voluntary transactions will benefit all parties involved.
The real role of the economist is to explain.
How Austrian Is It?
The economics profession has a diversity problem. No, not the racial one. It is a paucity of intellectual diversity. If you read The Wall Street Journal or watch CNBC, you usually learn the opinions of economists who read from the – as eminent libertarian historian Tom Woods says – 3×5 index card of allowable opinion. These are premises that do not stray far from what the elite find tolerable.
Last year, Woods hilariously wrote in his newsletter:
“Why, hello, Mr. New York Times reporter, sir. Before we continue, let me assure you, sir: I’m a libertarian, but I’m not like those bad people you don’t like. They’re really awful and dangerous people. They haven’t imbibed p.c. morality at all. I’m not like them, trust me!
Also, I make sure to confine myself to trivial issues you in the media don’t really care that much about.”
The economists that the mainstream media interview hold views that are determined the correct ones. Sure, this economist might support a tax cut or oppose a bailout, but you will never hear them propose to abolish the central banking system, legalize all drugs, or go to bat for price gougers. These opinions would send every news anchor into a seizure.
Of course, when the press does decide to offer some sunlight to a seminal scholar, like Walter Block, it will twist every word and turn a benign position into something iniquitous. The New York Times did this with Block, attempting to make it sound like he endorsed slavery. For a freedom-fighter like Block, who has written several books and countless articles on liberty, freedom, and the non-aggression principle, this was egregious and absurd.
The public might just be tired of the same old talking heads grieving about trickle-down economics or a new way for the federal government and central bank to stimulate the economy. People want something refreshing, not someone who got it wrong with concepts that have proven to be catastrophic, such as a housing bubble to replace the dot-com bubble.
Suffice it to say, this was why former Rep. Ron Paul (R-TX) became popular with millions of Americans in 2008 and 2012. He introduced them to a whole new world of economic thought: The Austrian School of Economics. For the first time, mainstream audiences were told that maybe the Federal Reserve is the root of all our booms and busts. Or, just maybe, that government-backed student loans are not a good idea. It was a breath of fresh air from the usual statist opinions.
Take a Hayek Around the Block
Vox recently wrote about the so-called new economics coming to save us from the old one that supposedly destroyed the planet. Forbes magazine posited that economists need a recession. While their grievances over the discipline are understandable, some of their stated reasons demonstrate exactly why economics is necessary – that is, more freedom-oriented variety and less of the space-alien-invasion-to-stimulate-the-economy type. Indeed, the world needs to learn more from the Austrians on their television sets, computer screens, and newspapers. If not, we are still going to hear why trade agreements are free trade, and what the supposed correct rate of interest is. And, in that case, pass the bourbon and cyanide.