I mentioned last week that economics is a “peculiar” subject. For example, it is the only social science to be awarded a Nobel Price. (Yea, yea, I know!)
To add on, there can be years when the winners have diametrically opposing views such as in 1974, when the prize was shared by Austrian Friedrich Von Hayek and Sweden’s Gunnar Myrdal.
While Hayek was a staunch champion and defender of free-market capitalism, Myrdal, was much less sure of the efficacy of laissez-faire capitalism and supportive of the idea of central planning.
Another irony to the story is Myrdal would eventuality call for the abolition of said prize after American economist Milton Friedman, whose philosophy was much more aligned with his co-winner’s, won the Nobel in 1976.
Often times economics is criticized for the lack of agreement between economists.
There is a claim that if you had two economists discussing a topic you would have two different opinions – unless, ofcourse, one of those economists was Maynard Keynes, which in that case, you would (at least) have three different opinions.
In truth, economists agree on many issues such free trade, and that free market capitalism is the best way to organize the economy.
As for the latter, most economists today fall somewhere between Professors Myrdal and Hayek, who are at somewhat polar extremes.
Still, there is a (fairly) wide range of opinions or disagreement as to how well the system works, and what role the government has in stabilizing the macroeconomy, proven evident with the recent stimulus plan.
Circa early 1970s, Richard Nixon said, “We’re all Keynesians now.”
The irony of Nixon’s quote is that “crude” Keynesian economics as policy prescription (and for that matter in much of the world of Academia) – that if the economy bean to sputter due to a lack spending in the private sector, government could pick up the slack and return the economy to full-employment by way of fiscal policy – was on its way out and would eventually be, for the most part, pushed completely out the door due to the stagflation of the 70s but would nevertheless continue to linger in the hallways.
Ergo, we’re all Keynesians now – again.
So what about the “stimulus package”, which has seemingly taken on a life of its own. I have begun to expect it to show up as a guest on Letterman?
Though President Barack Obama recently declared that it is “universal”, all concur that government action is paramount or we potentially face a “lost decade” (see: Japan, 1990s).
Additionally, although Vice President Joe “open mouth, insert foot” Biden recently claimed that every economist agrees with such sentiment, conservative economists such as Martin Feldstein, agree something needs to be done on the fiscal front.
Those who belong in the Hayek camp, think it is a terrible idea.
And the Myrdal followers are saying, why stop here? Let’s nationalize the banking system! Confused yet?
Economics: pointless, bogus? Are you joking, this is what makes it so much “fun”!
In the meantime, I would like to give you a little investment advice. To paraphrase the elder character in the 60s flick “The Graduate,” and his career advice to Dustin Hoffman’s fresh out of college character, “One word: Paper.”
