The Corruption of Economics

If you had asked economists before 2008 why we could not just print money to pay for the things we need, they would scoff and tell you that money does not grow on trees. Then they would invoke Germany’s interwar hyperinflation as proof of the doctrine that more money only leads to higher prices. However, between 2008 and the present, the world’s major central banks printed $12 trillion between them while the inflation needle hardly moved and many continued to be worried about the perils of deflation. This begs some heretical questions. If there are circumstances in which central banks can print money without causing inflation for a decade or more, why not print money and give it to the poor who are more likely to spend in a recession than bankers are likely to lend? Why not print money to finance infrastructure that will create future value? Quantitative easing is a Lutheran moment for the Church of Economic Science.

In his brilliantly titled Twilight of the Money Gods: Economics as a Religion and How It All Went Wrong published by Simon and Schuster, John Rapley prosecutes the case that economics is a religion, not a science. He argues that much of what counts as economic theory is doctrine, supported by a story or belief, not evidence. Economists would respond that they follow Karl Popper’s philosophy of science. They establish hypotheses and use data to refute them. Economists cast away refuted theories, and add to the canon of theory those validated by the data.