In an article published today on LewRockwell.com I discuss the implications of the inflation statistic often used in economics research. As I argue, it is not only the case that the statistic doesn’t show the whole extent of the problem–it is also the case that the inflation statistic used in economics research necessarily benefits the State. As scientists supposedly with expertise in how the market works, how could it be the case that they use a definition of a [non]market phenomenon that without question benefits the entity that is known to disrupt and cause problems in the market?
One possible answer has to do with how and why economics evolved from a theorizing social science to a math-dependent natural science wannabe pseudo-science. As the story is often told, economics became a solely calculus-based “science” during the time of world wars. Prior to this period the common understanding of economics was that it would not be possible to exactly foresee how people would act; rather, the task of economics was to explain why we see certain phenomena arise in the unhampered marketplace.
At the time of war the neglectedy minority proposing to calculate human action the same way the law-based movement of atoms or molecules were hired by the State to find efficient ways to use resources and transport equipment. In a time of artificial shortages in most markets these economists were relied on to find the super formula to make the most of what was still available–to calculate an optimum of consumption for the population so that the war machine could continue without interruption.
After World War II this bastard strain of economists had won the State’s approval and were therefore made “mainstream” in economics research through appointments in [public] universities and government agencies. Since that day what was previously real economics has been a suppressed and ill-conceived theoretical social science deemed “unscientific” due to its lack of exactness in calculations.
Whether this is what really happened to the economics profession or not is not relevant to the fact that economics since World War II is a theoretically ill-founded but calculus-driven social science pretending to be an exact natural science. It is also true that the economics profession like no other social science profession serves the State in numerous agencies and departments.
The State relies heavily on economics to say what the exact effect of certain scenarios or the enactment of certain policies will be. And as a result economists rely heavily on the State for their financial well-being as well as the prestige they have become accustomed to.
Asking the question “que bono?” (who benefits?) makes it easy to see that economists themselves would directly benefit from using definitions and theories that directly or indirectly makes the State look good. As a supposedly exact science, which at least manages to give exact answers to questions, known for not ever being right in its predictions, it wouldn’t make much of a difference if definitions and theories used were to benefit a certain party. After all, it is a win-win situation for economists–they still cannot provide a correct answer to the questions asked and will keep their prestigous jobs while the State that feeds them isn’t hurt “too much” by the numbers and explanations derived from them.
It is of course impossible to tell if this is the reason the commonly adopted definition of inflation is the mainstream’s “general price increase” while the Austrians’ definition of inflation as “increase in money supply” is neglected or ignored. In either case, the price increase definition effectively hides a large portion of the real inflation even if we adopt the mainstream understanding of the market. My article discusses the obvious propaganda ingredient in this false definition.