“If those charged with advancing a field of study refuse to advance their field of study, what happens to that field of study?” – @EconCircus[i]
Its November 21, 1905[ii] Albert Einstein publishes the paper: Does the inertia of a body depend upon its energy content? In the paper, he arrives at the equation that E = mc2. Upon publication, the scientific community reads the paper, scrutinize it amongst themselves and welcomes the discovery because it allows for advancement in their field as well as humanity. E = mc2 will continue to be embraced by the community until a new formula can disprove it; and if no such formula does this then it will remain true for perpetuity.
99%[iii] percent of the population does not understand what it says and has no practical use for the formula and for most people, energy = mass x the speed of light squared will remain meaningless. This is okay because the division of labour understands that no one is equal in ability, and it is in this “inequality” that allows individuals to perform different functions in society. This means that the auto mechanic need not understand E = mc2 anymore than the astrophysicist needs to understand how to perform an oil change on a car. It is only important that the 1% of the population, such as an astrophysicist or nuclear scientist understands the formula.
Now imagine if the following happened in 1905:
Upon reading Einstein’s paper, the scientific community fails to disprove the formula, there is no rebuttal or even a discussion of the paper and it quickly gets buried by the scientific community for reasons unknown. The formula gets relegated to the realm of “fringe science” and any academic paper that speaks of E = mc2 is marked as “unorthodox.” Later that year a new scientist, let’s call him Keynestein publishes a paper declaring that E = mc3. Upon reading Keynestein’s paper, the idea that energy = mass x the speed of light to the power of cubed spreads across all fields of academia, science and is now considered to be “mainstream science.” The formula is considered perfect beyond all compare and for the next 100 years+ it will be referred to in a reverential manner; countless Ph.D.’s will spread the new formula and anything that runs counter to this is to be ostracized.
Fast-forward to the year 2020: man has still not landed on the moon, telecommunications and satellites still have never worked, while nuclear power remains in the realm of science fiction. The world still exists, but life is difficult for most people and the sciences have made little advancement for an entire century. The scientific community cannot grasp what the error is, especially because E = mc3 and since the greatest scientist of all time declared it to be true, it will always remain so.
During this same one hundred years’ time a small group of followers, known as the disciples of Einstein continually publish books and papers showing that the famous formula is incorrect. While it is understandable that the masses will not know the difference between E = mc2 and E = mc3, it is no less than shameful that the scientific community and the ones charged with advancing their field refuse to acknowledge the historical, mathematical and conceptual proof that has been laid before them.
In such a world, what hope does humanity have?
The point is this:
The above scenario is exactly what has been going on in the field of Economics for over 100 years.
In 1912 Ludwig Von Mises published the best book on money ever written[iv] called The Theory of Money and Credit. Nothing has ever been published which breaks down the essence and application of money as well as his book. The Theory of Money and Credit is the economic version of E = mc2, whether it’s what money is, what gold is, defining the medium of exchange, what is inflation, debunking both the velocity of money and faulty calculations (like a CPI index), plus countless other ideas allowing it to serve as the foundation of the economic system and Austrian economics. This book was written over 100 years ago and it has never been refuted by anyone; rather, it has simply been buried by the economic community.
To the masses and the Ph.D. community alike, any notion of economic history, theory or Austrian economics is more “antediluvian” than it is “antiquated.” It simply does not exist. Economics has remained in the dark ages since Keynes and only a handful of people remain interested in doing anything about this.
The story gets better, because Ludwig Von Mises wrote numerous books like Socialism, a book on Bureaucracy and another called Interventionism, with grace and eloquence that completely dismantle any argument for socialist interventionism. Von Mises’s magnum opus, Human Action remains a must read but still not popular amongst the masses. To many Austrians he’s considered to be the greatest economist of all time and the true beautiful mind of economics. Mises was not alone, and if there was ever a Mount Rushmore of Austrian economics, it would have: Mises, Hayek, Rothbard and Hazlitt.
Mises’s pupil, F.A. Hayek wrote The Road to Serfdom and countless other books in which he systematically destroys any notion of socialism and state planning. Hayek later went on to win a Nobel Prize in 1974 and gave and incredible Nobel acceptance speech called the “Pretense of Knowledge.”[v]
Murray Rothbard stands as the greatest economic historian of all time, writing the Great Depression, the Panic of 1819, the Progressive Era, the Case against the Fed his most famous of work called: Man, Economy, and State.
Henry Hazlitt would finish with the four greats and wrote with ease to the laymen, spelling out many fallacies and the problem with mainstream economics with Economics in One Lesson. He also dissects everything Keynes said in the Failure of the New Economics, and wrote other books with catchy titles such as: What you Should know about Inflation and Will Dollars Save the World?
One article cannot articulate nor do justice as to the genius and honesty in which these authors have refuted everything the Keynes, Friedman, and all other mainstream economist have taught, but the hope is that this provides a good start. Almost all of these books can be purchases or read for free online at the Mises Institute, and please follow the Econ Circus Book of the Month where we will discuss books of this calibre.
Once you read Austrian economics you will understand that we are living in the “Dark Ages” of Economics, primarily due to Austrian economics having not been taught for several generations. Eventually you will arrive at the startling conclusion that almost everything that is taught in the field of economics is a completely wrong.
There is no easy way to say this but almost everything is fake, for example: inflation does not mean a rise in the prices, but it has always meant an increase in the supply of money and credit. Also, the Philips curve has been long since debunked, the Velocity of Money is a meaningless and MV = PQ is both tautology and absurd. Furthermore, the CPI is based on an arbitrary basket of goods that are assigned an arbitrary relative importance, so all the CPI does is serve as a means of control. We can continue with central banks who cause the boom and bust cycle and yield curve inversion, as well as other forgotten ideas such as money acting as a medium of exchange, or how socialism will not save the world, and that debt does matter. To finish off this short list, we can confidently say that the Gold standard is the only safeguard against hyperinflation. All of these concepts will be discussed on the website in due time.
The purpose of Econ Circus is that I will broadcast the economics of liberty and freedom because it’s true, with the hope that it will lead to a free society.
Economics is not like physics because everyone can understand it to a certain degree, so all that’s needed is for a small shift or a tipping point to be reached to make a real difference; let’s try for 10% of the population. If just a small amount of the population chooses to understand Austrian economics we will be able to invoke social change. Whether it’s by contacting professors and asking for answers, or when a university program starts to teach an course, when a pension fund decides to hold gold, a politician who campaigns to end the fed, or if 10% of the population turns to gold the next market crash; one day things will change for the better.
The tide will turn because the Fed cannot expand its balance sheet indefinitely and eventually it will be apparent to the world that the USA is bankrupt. Unfortunately, the biggest financial crisis of our time will happen and the fixes of the last crisis will be the destruction of the next.
[i] @EconCircus tweets Friday, January 31, 2020.
[iii] 99% is for illustrative purposes. The idea is to illustrate that only a small number of people need to understand the equation.
[iv] Famous Murray Rothbard quote.