An associate on the Global Citizenship forum on LinkedIn, Olimpiu Frant, posed the question if the wealth of the richest companies and countries was made by academic economists (such as from Harvard was his example). The follow-up question is if these are the same people who make policy and are driving industries and markets into the current widespread decline.
Because of challenges in language and unfamiliarity with the exact application of his what he call “Defects Science”, I don’t know if I’ll do this justice, but I’ll try. Frant asserts that academic economists are not experts in “economy” at all, but only in “trade” — the bulk of their expertise is in the milieu of supply chains, neglecting for the most part the process of actual production. Succinctly put, they are guiding us in the wrong direction because “Harvard is not making economists but mongers!”
Economy and Trade
How Frant defines and differentiates “economy” and “trade” is important here. By “Economy” he means specifically industry and agriculture. “Trade” is the trade of products and services, which of course includes all the banking (and speculations) based more or less on the real assets of industry and agriculture. This latter definition encompasses the troubles we are having with the mortgage crisis and banking, as well as bailouts and national debt from America to Greece.
He places fundamental importance on the empirical fruits of economy (production) rather than derivative or even arbitrary statistical analyses of currency and debt (banking). In a world where people, companies, and whole nations can be paper rich and quality-of-life poor or vice-versa, I find this a refreshing, if not vitally helpful perspective.
Frant’s theory of “Defects Science” is simple: All problems are caused by some defect in process or material, and it is specific defects that must be uncovered and directly addressed to prevent unwanted results. This is a reverse of the typical abstraction we find in economics or political science, where we can only argue over causes and effects based on theories rather deal with them as concrete values in a formula whose result is actually known.
Using this model, I now realize the glaring cracks in our fundamental approach to economics as a discipline.
Instead of looking at technology, we look at the “technology sector”. Instead of examining medical practices to address costs, we look at health insurance “reform”. Instead of manufacturing efficiency, we look at labor issues. It is not that the latter of these are not real, but that they are effects that have then become causes of problems though regulation, speculative commoditization, and misplaced efforts as questionable ‘economic justice’. Capitalist investment has made all good things possible, but has become the ends instead of the means. Unions have jeopardized and eliminated countless jobs they served to protect. Governments have legislated controls of all sorts that have treated the patient of Free Market as the disease itself.
This brings us back to economists, who for the most part do not deal with the building blocks of the economy, only the systems between them. The modern world is run on such systems, no matter how abstract, so one would think even arm-chair economists should be running the show. Well, they are, and that is perhaps the problem. Market and trade systems are the focus of attention rather than the more tactile needs of supply and demand. No matter how high-falutin’ intellectually this may be, it is like a doctor knowing everything about the circulation of blood, but very little about the heart and lungs. And they don’t care.
This is Frant’s point. Economists do not know how wealth is created or used so much as how it is moved about. They are not the job creators and I guess that many are not investors beyond their own pensions. And I have found that those who are expert investors have quite different opinions from economists interviewed by the press. When I researched the “housing bubble”, I went to people in the trenches for explanations, not newspapers. And I got answers that beg solutions far different from the road we go down today.
As Frant puts it,
“Imagine if one University [has] one top professor … to teach electronics to the students, but he must ask for an electrician … to replace the broken fuse in his TV set! [And when chosen from academia] Those presidents may not ever know even where the “fuse” is located in the economy, let alone about how to replace the “broken fuse”, for to restart the economy!
I honestly never thought of it this way. Frant even used Fukoshima as an illustration, though I would express it a bit differently. You can’t blame the energy market on the disaster, but engineers. They are the ones responsible for ensuring the facility could withstand or handle such a disaster — or replace it with one that could. When there’s an economic disaster, instead of blaming corporations, banks, and unions, it is the economists whose theories are the whispers behind the thrones. The economy is being run, thanks to heavy government influence and control, by ECONOMISTS.
From this perspective, the influential economists are not really the students of the subject, but subjugators of it. It is the opposite of honest science — theory in practice has taken dominance over dealing with reality. Through influence on political policy, economic theories have created the result observed rather than observation being used to theorize and correct.
The argument can be summed up thusly: The creators of wealth and suppliers of demand are the industrialists and their workforce; the creators of the economic milieu that has been the focus of economists — and ground zero of the global economic crisis — is the result of failed economic policies, not the nuts and bolts of the economies themselves. And even if they were, economists are the wrong tool for the job.