December 2, 2022

A lot of Economic “Truths” Are Built upon Fallacies

The country’s “top economists” are incompetent in monetary matters, grossly so.

A fallacy is defined as a mistaken belief or a failure in reasoning. Though most people try to avoid errors, no one is infallible, not really those who act like they are.

You can download a chart of typical fallacies  here . The online chart is hyperlinked to each of the fallacies.

I break fallacies into two major groups:

First, we have traditional fallacies you might keep in mind from philosophy 101. During these, the reasoning is obviously ludicrous, though we might be at a loss to explain the specific violation involved:

Your dog has puppies. Your dog is a mom. It is your dog; therefore , it really is your mother.

Every distance, no matter how brief, consists of an infinite number of points. For a body to move any kind of distance, it must include an infinite number of points. Absolutely nothing can move an infinite distance. Therefore , all motion is deceptive.

More frequently we find these, where the fallacies are more subtle:

The country’s best economists are in agreement the Federal Reserve is necessary regarding economic prosperity.

The country’s leading professionals agree that X is definitely harming the environment. Therefore , the federal government should regulate or ban X.

Take a look at address the first statement.

Is it true? In a literal sense, yes— the very best economists wouldn’t dream of carrying out without a central bank. Or even if they did it would be regarded a nightmare.

So , is our function finished? Do we demonstrate it as true and move on?

No, because the statement suggests that unless of course you’re a top economist, you might have no grounds for disagreeing. I call it the “ Who are  you ? ” ( Quis es? ) fallacy. History tells us  experts can be dead wrong , so why don’t at least mount a challenge, shall we?

The country’s elite economists keep advanced degrees from educational institutions that support central financial. The universities, in turn,   receive funding in the federal government , which made the Federal Reserve System and relies on it greatly for monetary support. Could it be odd the universities might promote the Fed as an essential economic institution?

With regard to funding,   many of the top economists themselves are deriving at least a portion of their income from the Fed . Is it possible their bank details play a role in their refusal to cast a critical eye? Could it be a stretch to imagine these types of economists are reluctant to turn against an institution they have been trained to salute?

And do the ones on top belong there? If they’re the very best and brightest, how did the bust of 2007– 08 explode in their encounters?   Almost none of the “ top” economists saw it coming , including  the leaders on the Board of Governors . As Ira Katz notes, the  same blindness prevailed   before the collapse of the Soviet Union. He quotes from Paul Samuelson’s bestselling textbook of 1989 to make his point:

“ Contrary to what many skeptics had earlier believed, the Soviet economy is proof that … a socialist command economy can function as well as thrive. ” The  Collapse of Communism   happened during the same year and the Soviet Union broke up two years later.

In economics as in other crony (government-connected) professions there is a pay-to-play aspect, in which the payment is an unstated agreement never to question certain assumptions publicly.

Perhaps the economics the top economists find out is flawed. In school they are taught that  low interest are necessary for economic growth . Since the central financial institution has the exclusive power to boost the money supply and thereby (indirectly) lower the rate of interest, it is therefore regarded as a pillar of prosperity.

The idea that the economy is harmed by changes in the cash supply, that any increase in money available for lending ought to come from real savings, can be given little or no hearing in classrooms or policy discussions. Not coincidentally,   the few economists who seem to adhere to these views , who for this very cause are not considered “ best, ” had claimed an emergency was “ baked in the cake, ” as some put it.

I should furthermore mention that if the Fed is necessary for prosperity,   how did we all ever prosper before Nov 16, 1914 , once the Federal Reserve Bank of New York opened for company? The period immediately before the development of the Fed— late nineteenth century — is, according to the data, probably the most prosperous periods in United states history.

And the reduction of the purchasing power of the dollar to  near zero   is scarcely a point in the Fed’s favor. And if the Fed is needed to control the business cycle— the booms and busts— how is it coming from had some of the biggest financial crises since the federal government enforced it on us?

So , returning to the initial statement, we find the state’s “ top economists” to become incompetent in monetary matters, grossly so , while the Government Reserve has been anything but the facilitator of general wealth.

I depart the second example for you to dissect as an exercise.

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