Ep 2: Einstein And Economics

 

Economically speaking, the way in which the world works—changes—over time—but the way in which experts typically think about how the world ought to work—stagnates and becomes stale. This is because economics is not just about science—but science also mixed with belief—and what some economists believe can become dangerous.

Take economic order, for instance. Conventional economists believe the economic world works in an orderly manner. They expect order and predictability—even though disorder—and often chaos—indeed may become frequent, real world outcomes.

How did the expectation that the world should work in an orderly manner, come to be embedded in an economic way of thinking? Well—to find the culprit—look no farther than the great 18th Century physical scientist, Isaac Newton.

Newton saw the physical world as orderly and predictable. For instance, Newton, among others, observed if he knew the location of one of the planets, then the location of the others could be pinpointed. Always, the planets are in some perfect and proper relationship with one another.

Ironically, Isaac Newton’s world view of orderliness became adopted by none other than Adam Smith, the path-breaking Scottish economist. Smith was four years old at the time of Newton’s death in 1727. As Smith grew, he surmised if Newton’s physical world could be explained by orderliness, then the economic world could be explained by orderliness as well.

This common world view of orderliness and predictability—tying economics to physics—is called natural law. It is somewhat like belief in divine edict—anchored in the authoritativeness of perceived natural forces. There is nothing scientific, necessarily, nor factual, about natural law-based beliefs, however.

Physicists had the good fortune of experiencing a challenge to Newton’s world view of orderliness—over a century ago. It was none other than Albert Einstein who qualified the orderliness presumption in 1905 with publication of the Special Theory of Relativity. According to Einstein’s perspective, order exists only in the vicinity of Planet Earth. It is neither observable outside of our solar system, nor deep inside it, at the subatomic level.

Albert Einstein’s qualification of orderliness—in physics, however—has never been met by reciprocal qualification—in economics—unfortunately. The person who has come closest to disengaging from economic orderliness—broadly—was English economist John Maynard Keynes. However, because of his untimely death following World War II’s end, Keynes’ broader quest to invalidate the reflexive view that markets work in an orderly manner, was left unfinished.

What Keynes finished in his lifetime, fortunately, was to unpack the greatest practical economic problem of the Twentieth Century. With the presumption of orderliness removed in that specific instance, Depression-era economists were able to engage directly, insufficiencies in business investment and consumer demand.

Tragically, however, in more recent decades, conventional economists—after Keynes—have again circled the wagons, so to speak, around the pre-Keynesian, orderliness fixation.

More on this later. Until then, please check out Capitalism in Crisis. Org on the Web.
From Boulder, Colorado, for Capitalism in Crisis, this is Jim Sawyer.
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