1.2.7 Can this nut be cracked?

If we put the question "Is economics a science?", In quotation marks to get exactly this sentence, we get almost 100 000 different answers to this question, and we have of course no intention to resume them. We would say the question is irrelevant and doesn't point to the real problem.

The crucial question is if economics is useful or not. It interesting to see that Rober Schiller, "Nobel Prize" winner of economics in 2013, discusses more or less about everything, but not the usefulness of economics, see Is economics a science?

If economics helps people to understand the world they are living in and to understand the pro and cons of each economic systems allowing them to take the best of each system and to find a solution for the problems, it is useful. If people confuse capitalism with market economy, they suppose something that doesn't exist, capital as the condition for investment, and don't understand what is really useful, the decentralized information processing through prices. In this case, if people confuse everything with everything, economics is not very helpful, because economics, in this case, was not very successful in explaining people some basic ideas.

If we observe things from a historical point of view, we realise that the more people stress the scientific character of economics, the more ideological it becomes. A theory about how something could work becomes a scientifically proved fact.

The discussion about whether economic is a science or not is, of course, an entirely irrelevant question and reveals another thing. Economics feels no need to address a wider public, because when it comes to addressing a wider public, the question whether economics is a science or not is irrelevant. It is enough if economists explain the people the pros and cons of an, for instance, expansive monetary policy. It is up to the people to decide whether they are against or in favour of such a policy. One can try to make a statement appear as a scientifically proven and true, but concerning economics that is not going to work. People trust more in real arguments and the strategy "if you can't convince them, try to confuse them" doesn't work in the long run.

The question whether economics is a science or not it only relevant for economists. Their whole academic career depends on the publication of discussion papers; that's how they are called, although they are never really discussed, in "scientific" journals, which a high impact factor and very little impact on everything else. There is no scientific study needed to understand that this is a false incentive. People are better off if they do useless things and doing relevant things is not rewarding. This is mad.

Students do not care if their study is scientific or not and having 7000 dollars in their bank account with unscientific things is much better than earning nothing or 1000 dollars with scientific things.

However, even if the goal is not earning money, but to resolve other kind of problems, scientific "discussion papers" like this one, economic Growth in Developing Countries: The Role of Human Capital, are not helpful.

One other element enters into the calculations. The rapid expansion of new digital technologies – both as blended learning with teachers and technology and as stand alone approaches – suggests that many of the past decisions both on access and on quality might rapidly change.The potential in developing countries appears especially large.

It doesn't require any kind of mathematical modeling to understand the possible impact of digital technologies, but it requires practical work and concrete measures in order to improve the situation through the use of these technologies. People are needed who create websites and implement the infrastructure. Initiatives like one laptop per child are useful, but scientific bullshit is worth nothing. It is well possible that the Stanford University find students willing to pay the tuition fees, but it is to be expected that they lose a lot of money and time.

Economics is not complicated from a theoretical point of view. The problems are the data. If we want to know when the next bubble on the stock market will burst, we have to know for instance how it is financed. When credits finance it, it can explode quickly. Little losses in the stock markets can lead to a situation where some stockholder has to sell more stocks than the initially wanted to sell in order to pay his depth. This leads to more losses, which obliges other stockholders to sell more than expected and so on. In a view days, we can get heavy losses.

If we want to know how banks are affected by a crash, we need to know how they are intertwined with each other. There are no data published on this issues. Only after a crash, at least if the governments doesn't intervene, we know more or less what happened and then it is too late.

Nevertheless, the word transparency never appears in "scientific" publications and textbooks suppose transparency. In other words, the biggest problem of economy, whatever economic problem we talk about, is excluded. The argument, that transparency is assumed in order to simplify modeling is really funny. If the fundamental problem is eliminated through the ceteris paribus clause, there are little problems left, which can be discussed in the plain text. No science is needed.

The term liquidity preference used by Keynes to describe the fact that investors try to minimize risks through inversions that can be reversed easily, in other word inversions that are almost as liquid as money, can be stated more precisely. Part of the insecurity and the preference for liquidity is because information is missing, and/or the investors are not able to interpret the facts.

In a normal situation, where prognostics about the future are risky but possible, it is supposed that the market leads to better results. However, in an abnormal situation, the state, or the society as a whole, is in a better position to distribute the risks across several shoulders, because the whole society profits from the secondary effects.

The crucial question, therefore, is not if economics is scientific or not. The real question is, how we can make data accessible.

The following annotations are based on the situation in Germany, but it can be assumed that the situation is similar all over the world. The public administration, in general, is not very keen on publishing information. Although in Germany they are obliged to deliver information about any issue to whoever demand them, Freedom of Information Act, they don't really like to do that. In any case, the author has serious problems to get them doing what is required by law.

It is not very astonishing that the same problems occurred in other countries, for instance in the Unites States, see Freedom of Information Act (United States). There is little doubt that without laws that give citizens free access to all information gathered in public administration democracy can't work as stated by James Madison (1751 - 1836), fourth president of the United States.

A popular Government without popular information or the means of acquiring it, is but a Prologue to a Farce or a Tragedy or perhaps both. Knowledge will forever govern ignorance, and a people who mean to be their own Governors, must arm themselves with the power knowledge gives.

This was a problem for James Madison, but not at all for nowadays economists. They need no information to publish "scientific" papers, because in any case in mathematical modeling, there is as little need for information than in textbooks about algebra.

Can this nut be cracked? It is to believe that this is possible. First of all, because the internet can exert an enormous pressure and the internet is greedy of information and because publishing information is good business. Therefore, there will always exist people, who try to get them. (Without a kind of refinancing, it is impossible to create more complex websites.)

Second the process to make more information accessible is already in progress due to a very simple fact. Information on newspapers will appear and disappear on a daily basis. They appear when the newspaper is printed and distributed and disappear when they are used to light a fire. Information on the internet never disappears, because it is no problem to store them eternally. Therefore, automatically more and more information is available.

The second point is that normally information is not searchable, at least, they are not searchable in a "chaotic", arbitrary and easy way. On the internet every kind of information can be found at lightning speed without any effort. That makes it easy to verify data, to interpret data and to put them in a wider context.

This leads to the effect that people will be more and more critical. It is obvious that people are more critical when they have access to more information. Otherwise, there would be little need for authoritarian regimes to suppress information. In practise it is not enough that every kind of information is accessible, it must be easily accessible as well

The third point is that it is quite easy to exert pressure through the internet. At least for the opposition in a parliament, it can be interesting to join the pressure group. It is not really astonishing that the demand for laws like the Freedom of Information Act has been formulated by the opposition and not by the government. (In Germany by the Green Party. The problem was that the Green Party itself become part of the government later and in this position, they were not very happy with this law. The law nowadays exists, but the public administration is not really keen to apply it.)

Arguments alone are of little help when talking about transparency because transparency always hurts someone's interests. (Otherwise the information would be accessible, obviously.) However, in this case, the economic power is on the side of transparency.

Academic economists focus on the progress of the theory. That is not really typical for a science. Most sciences, nowadays, concentrate on obtaining data. The theories about, for instance, the expression of genes, are very often vague and molecular biologist tries to get, with sophisticated methods, more data allowing to specify the theories. The case of economics seems to be different. They only study the topics, where data can be obtained easily. If the theory doesn't fit with the facts, they assume that the theory was wrong, although it is plausible that the presumed data is wrong. There is then a change in the theory, as wrong as the previous theory, because once again, the underlying data are different from what the were supposed to be.

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