From at least the time of J.S. Mill, the fundamental methodology of economics has been to use introspection to develop theories about human behavior, systematize them into theories, and then try to compare the predictions of these theories to the real world. For reasons I have gone into at boring length, it is very difficult to conduct such tests of useful, non-obvious rules that predict the effects of our proposed interventions reliably in economics and other social sciences. The big problem with most economic theories that claim to be able to guide our interventions with confidence is not usually that the causal pathway that they propose is incorrect, but that it’s radically incomplete. It is typically one of an all-but-innumerable array of causes that are interconnected in a maze of causation that produces highly unpredictable outcomes as a result of any intervention. Despite confident assertions by academicians, the Law of Unintended Consequences remains in force.
One point implicit in his analysis is the wild proliferation of complexity that has come with the rise of globalization and the virtual world. When economies only traded things, money was metal and people didn't expect the state to do much, the state could manipulate and get results - even if they were usually confounded by their ignorance. Today, while we know much more, our ignorance relative to complexity has grown by at least an order of magnitude, making technocrats far less able to manage the economy than the ignoramuses of prior generations. All of the computer models and spreadsheets are simply "Economic Management Theater" feeding our desire to believe that 'someone is in charge, is doing something'. Yet all of the evidence is that they only make things worse. Thus the most frightening fact in today's economy is that the Federal Reserve is an institution designed in 1911 for a world that has long since disappeared.
Please, sir, can you make it stop? I want to get off.
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