Economic Witch Doctors
August 13, 2022
“Most economists are political apologists masquerading as economists,” wrote investor and author Doug Casey in an online article entitled “How Economic Witch Doctors Convince Everyone They’re Really Neurosurgeons.” They “tailor theories to help politicians demonstrate the [alleged] virtue and necessity of their quest for more power” — so much so that economics has become “the handmaiden of government.” Evidence of Casey’s contention abounds, and is a major theme of my new book, The Politically Incorrect Guide to Economics.
New York Times columnist Paul Krugman has been teaching economics for decades, during which time a recession was defined in all the textbooks — most certainly including the ones that he used in his classes — as two consecutive quarters of negative GDP “growth.” That did not stop him from shamefully telling a CNN audience on July 31 that this time, the textbook definition of recession does not apply. There’s too much conservative bias in the media, he ludicrously complained, blaming that for all the talk about recession.
This is the same Paul Krugman who once predicted that the internet would have no more impact on the economy than fax machines; that declaring an impeding invasion from Mars would, in theory, cause an explosion in defense spending that would be good for the economy; and who wrote in a 2002 Times column, in the wake of the 2001 Nasdaq crash, that Federal Reserve Board Chairman “Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” Fellow economic witch doctor Greenspan did, and the bursting of that Fed-created bubble caused the “Great Recession” of 2008 and the subsequent explosion of even more government intervention, corporate welfare bailouts, and money creation, quaintly renamed “quantitative easing.”
Then there’s former Treasury Secretary Larry Summers who informed a CNN audience on June 12 that the cause of the current high inflation rate is not too much legalized counterfeiting by the Fed but the January 6, 2021 protests at the U.S. Capitol. Criticism and distrust of government, according to Summers, causes inflation. But if so, one would have expected the relentless, often hysterical, vitriolic denunciations of the Trump government by the unhinged Left, including Summers, to have caused hyperinflation. Like all witch doctors, Krugman and Summers and their ilk jump around, shout, wave their arms, and blow a lot of smoke.
Witch doctor economics was seemingly everywhere after the 2008 housing market crash. Establishment historian John Steel Gordon wrote in the Wall Street Journal on October 10, 2008 that the cause of the problem was that the Fed, arguably the most powerful central planning agency on earth, had too little power, thanks to “the baleful influence of Thomas Jefferson.” Huh?! What?! Jefferson opposed a national bank operated in secret by politicians, said Gordon, and such damaging skepticism lives on today in the likes Fed critic Congressman Ron Paul, the real culprit behind the crash of 2008!
The Financial Times echoed the same song in 2008 by publishing an article by Wall Street speculator Henry Kauffman arguing that: a) Alan Greenspan had been a protégé of Ayn Rand’s forty years earlier; b) Ayn Rand advocated laissez-faire economics; therefore, c) The Fed is too laissez-faire and not interventionist enough. The economic witch doctors always dream up excuses for more and more governmental power while blaming every economic problem on too much economic liberty and too much “market failure.”
Perhaps the most ludicrous academic response to the crash of 2008 was the theory, repeated seemingly everywhere, that the cause was a sudden appearance of greed on Wall Street. Or if not a first-time appearance of greed, a sudden burst of extra greed. Such banter speaks volumes about just how stupid the economic witch doctors, and the politicians whose careers they support with such rhetoric, think we are.
New York Times columnists, former government bureaucrats, court historians, and politically-connected Wall Streeters are not the only practitioners of witch doctor economics. In an August 2005 article in the academic journal Econ Journal Watch, George Mason University economist Lawrence H. White documented that at least 75 percent of all articles published in academic journals in the field of monetary economics were by authors with some financial connection to the Fed – as direct employees, contract employees, conference attendees, etc. (Murray Rothbard once said that the average monetary economist would stab his mother to death with a fork for an invitation to a Fed conference).
Larry White suggested that Nobel laureate Milton Friedman put his finger on the effect of this financial connection when he said: “[I]f you want to advance in the field of monetary research . . . you would be disinclined to criticize the major employer in the field.” That was good career advice and explains perfectly Doug Casey’s witch doctor hypothesis to boot.
Witch doctor economics started during the “progressive era” of the early twentieth century when some of the progressive founders of the American Economic Association (in 1887) were “pietists” who wanted to marry church and state to “perfect” society with government interventionism. They apparently wanted the public to believe that the socialistic policies they promoted were God’s will.
Witch doctor economics really took off during the “New Deal” of the 1930s when academic economists discovered that it was far more lucrative and gratifying than teaching economics to undergraduates to become a bureaucratic social planner or an advisor to politicians seeking to implement FDR’s Mussolini-style planned economy. Doug Casey’s economist as political propagandist was born.
Don’t rely on witch doctor economists. Educate yourself instead and become your own economist as Ludwig von Mises wisely advised.