Most people don't study economics. Most of us do not expect to grasp every nuance of the dismal science. Indeed, some would say that the fault lies not in ourselves but in our stars, our experts. For like us, the experts have misunderstood something simple and basic.
How can this be? How can the experts have misunderstood something simple and basic? The answer is that our economy is constantly in a state of change. An economist may spend his life trying to understand the economy, and succeed, in his old age, in understanding only how it was in his prime. Thus Charles Osgood writes in The Osgood Files,
"So far in the history of economics, any economist who has been proved right in the short run has always turned out to be wrong in the long run."
Keynes called those economists "defunct" and said their ideas dominate the world anyway.
Why do they go from right to wrong? These economists who have proved right may be most generally the product of Long Wave declines. They are proved wrong by history when one long wave fades into another, in small steps of the Cycle of Civilization.
From mine of 23 July past:
For me, economics is the effort to understand what happens in the world that I see. For Keynes, for Adam Smith, for Bastiat and Say I am certain it was no different -- I am certain the effort was no different.
But I am also certain that the economy itself was quite different. That's why the observations change. What was true on the upswing was no longer true at the peak; and what was true at the peak is no longer true in the decline. The economy changes. That's what business cycles are: Changes. So, observations that were correct once will not be correct forever.
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