Only in Economics: When Data and Theory Disagree, Change the Data

April 24th, 2014
in Op Ed

The Whole World Runs A Capitalism, Macro-Economic "Barro" Experiment, And The Results Come Out Opposite To Theory

by Roger Erickson

This is just astounding. Was there ever another peep from Barro?

Bill Mitchell Unearths Yet More Options [not taken] for Europe

If this occurred in the field of physics - or any other science/engineering field - they'd IMMEDIATELY change the theory ... to fit experimental facts.

But not us!!! We just pretend it never happened, and try twice as hard to make the failed experiment-on-ourselves work "right" - right?

Follow up:

There are a number of astounding findings Bill Mitchell is dredging up about the Monetarist backlash against reality. I'll only mention one, for the sheer lack of imagination it shows.

"[Imaginary] multipliers and marginal propensities to consume ordinary goods and services would be relatively larger under [imaginary settings] than under quantitative easing/new bond financing of budget deficits."

Wow! We're trying to let ad hoc accounting rules dictate to unpredictable reality? What would Maxwell, Boltzmann, Einstein & Planck say? Or Alfred Nobel? Is there an Ignoble Prize in Economics?

What to do about the "banking reserves" which our fiat currency accounting methods throws off as a nominal side effect of any economic growth? How about some imagination? If we can run Carbon Credit Markets which trade Carbon Credits for reducing greenhouse gases, why not a Public Purpose Market that trades PublicPurpose Credits for draining nominal banking "reserves" as well?

If you listen carefully, you can actually hear the sound of reality re-entering the faint minds of double-entry accounting gnomes. Despite all odds, they haven't made an entry for net national growth on their ledgers, opposite the entry for net banking reserves.

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