The problem with what generally passes for economics is based on assumptions of classical liberalism that don't hold in the real world and likely never could be instituted with the necessary rigor to make the world conform to the model. But that doesn't stop economists from using policy arguments based these assumptions to make the world match the model. That's engineering and not science. Moreover, it is bad engineering because engineering is based on science rather than science on engineering. Time to 'fess up and get real.
"I would like to say why I think that the Doomsday Models are bad science and therefore bad guides to public policy," -- Robert M. Solow, 1973
1973 was 42 years ago and 42 just happens to be the answer "to Life, the Universe and Everything," according to Deep Thought in Douglas Adams's Hitchhiker's Guide to the Universe. When challenged, the computer replied that he had "checked it very thoroughly and that quite definitely is the answer. I think the problem, to be quite honest with you, is that you’ve never actually known what the question is."
3 comments:
Self-adjusting to what?
Even if a system is self-adjusting, that doesn't mean it is self-optimizing. It just means that left alone it will stabilize at some equilibrium condition. But the equilibrium might be far from optimal. And the optimal state might not be an equilibrium, but rather something we have to work at sustaining.
Economic liberals argue that if an economy is left to self-adjust it will purge itself of excess and return more quickly to its "normal" state based on the equilibrium of supply and demand at optimal use of resources.
Herbert Hoover, in memoirs published decades later, wrote that Mellon advised him as President to "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate... it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people." — Wikipedia
This is supposed to be the effect o contemporary austerity.
Self-adjustment is also at the root of the assumption of efficiency of capital in economic liberalism.
So I would say that the assumption is that self-adjustment is long-run optimization. That's how it is being sold.
Much the same way that the Incas sold human sacrifice I imagine.
Arguably we haven't changed much.
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