Contemporary life and its relation to ethics, progress and sadly even identity, has become identified through the framework of scientism, a fallacious belief that causality is what explains our world. Given the triumph the sciences have had since the Industrial Revolution its very difficult to contend with its premise; except for the social sciences, and its epitome in econometrics.
Macroeconomics used to be called political economy, that’s because non-euclidean math was still taught within a hierarchy that was the quadrivium & trivium, the ancient world’s grand curriculum displaced by the Cold War. Just ask any grandparent that attended graduate school before the 1950’s and you’ll see that poetry, philosophy and literature ranked highest. Then came the war and the need to defeat collective ideology that raged throughout Europe. How does this relate to economics?
Students like Hayek, or Ludwig von Mises and hosts of others including Paul Volcker were shaped within a synoptic framework delineated above, and understand the limits of positivist thought. These thinkers implicitly knew a primary challenge that scientism refuses to acknowledge; namely the limits of measuring free people. This limit partially explains productivity slowdown.
True economic growth isn’t conjured, it isn’t assigned nominally by the Central Bank, nor is it guaranteed by fixed exchange rates; growth has sources in productive labor & the efficiencies of applied technology, often called labor productivity. The source of our problem may just be the impact, the relation of digital mediums engendering new vortices that cannot be measured using crude-Cartesian analysis.
If Janet Yellen and the gnomes at the Fed want insight, they should try Marshall McLuhan Understanding Media: the Extensions of Man. Its all they’ll need as they begin reconfiguring new algorithms trying to resolve Godel’s theorem. The challenge thrown down by Godel is ignored by contemporary finance, however Godel’s insight was that mathematics requires adherence to rules outside itself for the discipline of math to work.
Before Yellen and her madmen begin to strain themselves, I’d offer insight into the changing nature of global supply chains. Since the opening of globalization, multinational industries have used digital environs quite efficiently easily duplicating capital. These business networks now enjoy a redundancy that previous epochs never experienced. Simply put, what digital environs provided was a faster way to initiate and suspend binary relations cheaply. Business networks link suppliers faster and cheaper than before, brining down costs that isn’t comparable to previous modes prior to digitization.
But guys like McLuhan, Hayek and von Mises knew this mystery. The shame is the hubris animating the social, political convictions of econometricians and their fellow scientist travelers, the fatal conceit of arrogated reason.