Economic Reform Australia Blog

The problem is the moribund state of mainstream economics

Steve Keen has made the point that monetary reformers are going to have an uphill battle in bringing in any real or meaningful reforms because the monetary system, as it currently operates, is so poorly understood — even by many of those who consider themselves to be financial professionals and competent economists.  I recently saw an estimate that perhaps 90 percent of professionals at the FED have an inadequate understanding, if not a gross misunderstanding, of basic monetary mechanics. 

A large part of the problem is that the most coherent explanations of modern monetary operations are counter-intuitive.  Such a state of affairs would not be a problem if we were talking about one of the physical sciences, where counter-intuitive explanations are commonplace.  However unfortunately economics is not yet a science, notwithstanding that mainstream economists love to play mathematical games based on flawed economic models.  These are models that simply ignore the mass of embarrassing empirical evidence which happens to demonstrate their falsity.  Such omissions and inconsistencies would never be tolerated in a genuinely scientific discipline. 

John Hermann