Wood for trees

from andertoons.com

One of the oddities about complex systems is the way we are much better at diagnosis after the event than we were at predicting the event beforehand.

It makes our diagnoses difficult to evaluate because the as ever the benefit of hindsight is a wonderful thing and we are loathe to give it up. After all, the diagnoses feel like expertise and we all fancy a bit of that from time to time.

It seems to me that economics suffers from this problem to such an extent that disinterested outsiders can have real difficulty in seeing the wood for the trees. Almost any point of view seems to have its proponents and challengers. It’s like trying to do chemistry without the benefit of atomic theory or the periodic table.

We are in the middle of an economic crisis, yet the shelves of Sainsbury’s are full and the car park just as packed as ever on Saturdays. Not a good test I admit, but it’s data isn’t it? Data we can trust because we gathered it. This personal stuff is another factor that seems to go missing from the wailing and gnashing of teeth, from all the talk flavoured with the musty tang of sackcloth and ashes.

Take this post from The Center of the Universe. For those that don’t know, this is a blog devoted to economic issues viewed from the perspective of Modern Monetary Theory (MMT).

Now I am only a faint-hearted dabbler in MMT, partly because I distrust economic theory, but the Center of the Universe post seems to say a number of things which flatly contradict all the mainstream alarm we get about our huge UK national debt and the ongoing budget deficit.

The post refers to the US, but as the UK issues its own currency, then the same arguments apply. The MMT crew seem to say that our huge government debt is a consequence of the slowdown in private spending, although about a million caveats would no doubt be attached to my simple version of the narrative. State spending is what keeps production going through a private sector spending lag.

Is they Keynesian theory or MMT or are they similar on this point? How does one tell if the nomenclature isn't consistent? In my view inconsistent nomenclature is a sign of systems being gamed - as we know from climate science.

Now I’m not sure how one would demonstrate the truth or falsity of this MMT take on government debt, but for some reason it resonates with me. Unfortunately, as soon as I delve into MMT, I come up against one assertion after another. Whole swathes of argument hang on these assertions, but they never seem to get beyond assertions.

Now maybe there is lots of high quality research in the background and maybe I should take that research for granted, just as I take atomic theory for granted, but somehow I’m reluctant. However much I learn about economics, I never lose the inclination to keep my distance.

Still - I’ll persevere.