The Church of Economics

One of the things which differentiates Science from Religion is Belief or Faith. In a religion everyone has to simply 'believe' what they are told, questioning the doctrine is not well regarded.

Science on the other hand is built on questioning. The demands that theory can be demonstrated, and that evidence is key.

I reckon that the prevailing paradigm of "Economics" is more one of belief than one of science.

Today I read that retail sales were the worst since the eighties. Well its interesting to read the fine print on that:

Annual retail sales grew 2.4 per cent in 2011, easing from a 2.5 per cent rise in 2010. Last year’s increase was the weakest since 1984

Ok, so we actually had GROWTH and still this isn't good enough ... WTF?

Physicists are among the types of people who are trained in mathematics while (it would seem) that many Economists are not (I mean look at their graphs for a start, no scales often no axes). Reading the works on this topic by a physics person supports my fundamental view that growth can't go on forever.

He writes some interesting things, much of which is perhaps difficult to grasp if you didn't pay attention at school and can't read a graph (no, its not just a pretty picture) and you don't get what the difference is between Log scales and Linear ones.

So retail depends on "growth", but is this growth linear or log in nature? It would seem that to satisfy the economists it must be logarithmic. That's nigh on impossible. Some quotes from that above article:

Let’s say we lock in today’s 5% growth and make it linear, so that we increase by a fixed absolute amount every year—not by a fixed fraction of that year’s level. We would then double in 20 years, and in a century would be five times bigger (as opposed to 132 times bigger under exponential 5% growth). But after just 20 years, the fractional growth rate is 2.5%, and after a century, it’s 1%. So linear growth starves the economic beast, and would force us to abandon our current debt-based financial system of interest and loans.

Seems rational and easy to grasp. So how would we get a log growth? Well the same author makes good points in discussing what is wrong with the theory of sustained logarithmic growth here.

Looking at the past shows us that for some time (since the Industrial revolution perhaps) we have come to expect that we can always just get more more more. However looking into the past is not really a good way to identify our future.

Moore's law is the classic example. The under educated and mis-informed use it to 'predict' that every year we'll get more from less. Moore himself has identified that this can't go on indefinitely. We are actually starting to see the evidence to support this.

So perhaps we should start looking around for alternative economic approaches?

Look at it another way: Physicists and Engineers are the ones who imagined and designed everything we have which works that man has made. Economists are today the ones telling you that saving money is a bad thing, debt is leaverage and consume more because that's good for everyone.

I know which set of people has made things which seem to work.

I'll leave you with a quote from Moore himself. Perhaps it may give you pause for your religious belief in the "Dogma of Infinite Growth"

On a more sobering note, Moore, who has donated millions to save forests and other nature areas around the world, said that humans are definitely taking a toll on the environment.

"We are the last generation to have any wild places on earth," he said.

Fortunately there is another school of thought emerging in Economics, but that paradigm shift has yet to gain momentum.