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Contact:
Foundation for Economic Growth,
P.O. Box 10-282,
Wellington, N.Z.
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The Foundation for Economic Growth is a group of like-minded individuals who have decided to act rather than accept New Zealand's continuing poor economic performance. The Foundation is not affiliated with any political party. Add Your Comments here.

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Most recent update: Nov 29th, 2014 - 12:27:44

Newsletters : Current Newsletters : 24 November 2014
Thought for the Day

Some people refer to economics as the dismal science. Others would say that it is not a science but merely a collection of assertions that bankers hide behind so they can rule the world.

So which is it?

First let me help the discussion by explaining what science is. The first thing we have in a science is clear definition of terms, just like in mathematics, so we all can reason from the same base of information. So words mean one thing and are not used ambiguously in a science.

The second thing that defines a science is that it is a collection of facts that everyone examining it can agree. These are the simple observations that we can make and measure using our senses and any instruments we have.

The third element is the observation that some actions cause certain effects. Science is then concerned to measure these as carefully as possible and show clearly how the cause and effect relationship works. Magic is not allowed!

The fourth element is the development of an hypothesis. This is an idea coming from the facts and observations and may indeed be just the observable cause and effect relationship.

The fifth element is to test the hypothesis. This can be done by experiment or by observations of a wide variety of situations where the hypothesis can be shown to be true.

True means "in accord with reality" as defined in my New Oxford English dictionary.

In economics it is impossible to run experiments. But in cosmology it is also impossible to run experiments on objects in inter-stellar space and this hasn't stopped science making hypotheses and from these hypotheses making predictions and then making observations of the heavenly bodies to see if they act according to prediction or not.

Economics can be examined scientifically in this way.

If the hypothesis allows us to make a prediction and it comes true then we can begin to think that maybe our hypothesis is true in all cases. So we can continue to make predictions and every time one comes true we get more confidence that our hypothesis is true.

At this stage we can elevate our hypothesis to the status of "Theory". We now think our theory is true.

But the sixth element of science now comes into play. By finding more examples of our theory being true we get more and more certain that it is true and we can use this knowledge to advance our thoughts to the next stage of the science.

However, at some stage some annoying scientist may arrive on the scene and show one case where our theory is wrong - that is it is not true. It doesn't accord with reality. This is our new knowledge. We know for certain that the theory is wrong.

Notice how we can never have final proof that a theory is true but we can have final proof that a theory is wrong.

This is the nub of science.

I suspect that this analysis of the scientific method is never discussed in our schools or in our Universities as the basic most important piece of understanding anyone can have. Science shows us what is true and definitely proves that which is wrong.

So a scientific examination of economics is possible and I would suggest necessary so we can obtain knowledge of what is true and what is false in the current list of assertions promoted by economists around the world.

At the moment, the most people can say is that obviously all the economic theories can't be right because they contradict each other. This is a bit like saying that all religious beliefs can't be right because some beliefs contradict other ones.

This is the difference between a science and a religion.

Currently we are being indoctrinated by a economic belief system and we are expected to just act like believers and accept the word of paper money economists as gospel.

But we are too smart for that. Aren't we?


Nov 23, 2014, 15:56