The Economics Definition Of Sanity: Keep Doing The Same Thing Over And Over Because It Has To Work One Of These Times

We live in an age of statistics. They are everywhere, including a whole lot of junk numbers (endless studies) that don’t pass minimum scrutiny. Somehow, statistics have become the gold standard for at least the mainstream media in framing our view of everything from new discoveries to further exploration into how things work.

That’s fine for a discipline like quantum physics where the utterly complex probability models have been repeatedly tested and validated. It’s a far different proposition in the softer sciences where the rules of science aren’t as easily determined.

In 1972, Karl Popper in further defining the scientific process in this modernizing age said that,

Whenever a theory appears to you as the only possible one, take this as a sign that you have neither understood the theory nor the problem which it was intended to solve.

It’s a warning that I try to take to heart, seeing as I do eurodollars lurking ominously behind every global problem. But Popper also said at the same time, “no rational argument will have a rational effect on a man who does not want to adopt a rational attitude.” In other words, as long as I stick to a broad enough survey of evidence then proceeding as I do on the monetary explanation for at least economic deficiencies is a legitimate, rational inquiry.

For others in places of power and influence, this is just not the case. Claiming, as Federal Reserve officials have done, data dependence does not make it so. Words are cheap, and like it or not central banks all around the world have been in heavy action for ten years. That’s a record of experimentation more than sufficient to draw reasonable, sound conclusions.

If you knew nothing about what each of these monetary institutions had done this past decade, instead realizing only what the economy has been like at each significant moment along the way, you might expect that central bankers were busiest in 2008 before becoming much less so over time. That was, after all, the time of greatest obvious and immediate need, when the economy was crashing.