Thursday, March 11, 2010

Did Einstein inadvertently give birth to Keynesianism?

Acting man makes his mark, 100,000 years ago

I was reading some Richard Feynman the other day, on special relativity, when I came across the set of the original Einstein equations which eventually build up into the infamous E=mc2.

Eventually managing to squeeze my head around it (thank you, Professor Feynman), I had a mad idea.

Before Einstein, everyone lived in a happy Newtonian world of ordinary humanity. One egg, plus another egg, would equal an omelette, in this ordinary world. Also, if you hit a ball with your foot, it would travel at a known velocity in a known direction, with a known mass and momentum when it hit whatever got in its way, such as a goalkeeper's hand. So far, this world had worked perfectly well for the human race for approximately 100,000 years, since the first Cro-Magnon man had blown some paint around his own hand. Newton had codified it a bit, but essentially it was a world everyone felt comfortable in.

But when Einstein came along and spotted minuscule problems with this Newtonian world, especially with massive objects travelling at close to the speed the light, from the grey conservative town of Zurich the brilliant Herr Einstein turned the entire world of physics upside-down with his horribly complicated (though horribly accurate) equations.

Nobody at the time, except perhaps Einstein and three others, knew what the heck was going on with these equations, because they said that one egg plus another egg equalled a jam sandwich, but only if one egg weighed the same as the Titanic and the other egg flew faster than a speeding Aardvark travelling on a steam train in first class.

But despite only four men knowing what the heck special relativity was all about, everyone was incredibly impressed with the W├╝rttembergian scientist. If you had told them that Einstein had solved Maxwell's great problem about electromagnetic radiation always travelling at a constant speed (c), no matter what speed the observer was travelling at, they would have been nonplussed and far from impressed.

This was because Einstein's equations were gobbledegook to virtually everyone in the sane world.

In the real world, two eggs still equalled an omelette and footballs could still be kicked into goals with confidence. However, what impressed everyone about Einstein was, (1) His mad wild hair, unruly clothes, and mad Mittel-Europan accent, which obviously confirmed he was a genius, (2) Blackboards full of incomprehensible equations which also meant he must have been a genius2, and (3) Other unintelligible geniuses said that he was a genius so he must have been a genius3.

Hence, he single-handedly equated the idea in society's mind that 'Incomprehensible equations which bear no relation to observed reality, when delivered by a genius who is acknowledged by other geniuses, must actually represent reality, because mere mortals are not worthy of understanding such cleverness.'

This 'Equations = Genius' ideology later fed into the rise of the tall mad Old Etonian, John Maynard Keynes, and his bizarre witchcraft world of nonsensical mathematical voodoo.

His 'General Theory' was a scatological cornucopia of utter incomprehensibility, filled with meaningless pages of unintelligible equations. It was so bad, that even Paul Samuelson, almost literally the St. Paul of the Keynesian movement, said this of it:
"It is a badly written book, poorly organized; any layman who beguiled by the author's previous reputation, bought the book was cheated of his five shillings. It is not well suited for classroom use. It is arrogant, bad tempered, polemical and not overly generous in its acknowledgements. It abounds in mares' nests and confusions... In short, it is a work of genius."
And here my quantum theory reaches its climax, because Keynes was able to over-turn the 1930s world of 'sensible' economics and the rapidly growing Austrian school, particularly those Englishmen following Hayek, because Einstein's similarly incomprehensible equations had successfully over-turned Newton.

I therefore contend, m'lud, that if the Einstein phenomenon had not previously existed, then the Keynes phenomenon would not have been strong enough to throw Hayek under the wheels of its insane 'economic progress'. Because the truth of Hayek (and that of his Geneva-based mentor, Von Mises) would still have been able to shine through.

And so, we have spent the last 80 years under the thrall of the Keynesians staggering from one crisis to another, finally arriving in the Keynesian long-run crisis to end all Keynesian crises. And yet still we cling to Keynesianism, and hope those incomprehensible equations will actually prove correct, in the same way that Einstein bested Newton.

But here is where the analogy breaks down. Because physics can get as incomprehensible as it likes, with (probably) 24 major particles, 24 (undiscovered) symmetry particles, dark energy (similarly undiscovered), dark matter (a theoretical concept invented to hold together earlier, probably mistaken, theories), 18-dimensional string theory (or 11-dimensional string theory, take your pick), and other quantum shenanigans.

All of these require books full of equations to explain them, because physicists are trying to uncover the unfathomable behaviour of the 24 known particles acting in bizarre quantum world ruled by Planck's constant and Heisenberg's uncertainty principle, where nothing can ever be known ahead of the game, and where the simple act of measurement breaks everything down.

Very little is known about this world, even now. And much of what is known will be changed in the future as our understanding changes. (And when I say 'our understanding', I do of course mean the actual understanding of about 17 different men and women in a handful of physics laboratories.)

But human economics is not like this. It is all known, or at least it can all be found out and derived, without requiring the invention of Keynesian 'dark matter' or 'dark animal spirit energy' to make it all work.

A man needs to eat. He needs to drink water. He needs shelter. He prefers leisure to non-leisure. He prefers more of something to less of something. He prefers things now to things later. And so on.

You may even like to argue with these axioms, which is good, but it is clear to everyone in non-Keynesian society, that these axioms exist, subject to a little argument about whether these desires are quantal, like rocks on a beach, or smooth, like waves on a beach.

Having argued, in sensible simple English (or even sensible Viennese) about these 'Euclidean' axioms, you can then build further truths, which eventually scale up into the whole world of entrepreneurs, stock exchanges, and complex economics.

Because economics is like mathematics. It is not like physics. (Even Einstein was a fan of Euclid.)

Economics must be comprehensible to 'ordinary' people because it is being done by ordinary people, every time they buy a pack of butter in a supermarket.

I'll give you an example. The other day I had to buy three packs of butter, to make a particularly large cake. I went to Tesco, rather than Waitrose, because the parking is easier in Tesco. I bought a pack of Irish Kerrygold butter, because it always reminds me of an old Irish girlfriend, I bought a pack of New Zealand Anchor butter, because I like the New Zealand film 'Goodbye, Pork Pie', and I bought a pack of English Country Life butter, because I like Johnny Rotten and I hope he can get more advertising revenue because of my purchase of the brand he works for.

At no point did I check any of the prices. Oh yes, and I avoided the perfectly acceptable Tesco 'value' butter, because although I am cheap, I didn't want its blue and white stripes to advertise my cheapness.

Only Austrianism can explain all of this strange behaviour. Try getting a Keynesian to explain it, and if his head doesn't blow off first, he'll talk an utter load of rollocks about 'perfect' competition and 'inelastic' pricing and other total supply-curve and demand-curve bilge. In the end he'll come up with some stupid communoid government plan to force me to consume a fixed butter ration each week, sold in simple white packaging so I can't tell where it comes from, to make his damned stupid equations 'work' - which they won't, anyway, because Keynesianism is such utter nonsense and has never ever successfully predicted anything, except that in the long run we will all be dead.

(My cake, made with my butter, tasted great by the way. Thanks, Johnny.)

Newton, however, knew that economics is driven by the people, rather than the other way around. Which is why he was Master of the Royal Mint for so many years, guarding the purity of the Gold Standard, to avoid dishonest government dissembling its corrupt practices onto the people of England, and guarding the spirit of the Glorious 1688 bloodless revolution, in which the government, in the person of King James II, the former Duke of York who captured New Amsterdam from the Dutch, was almost thrown into the Thames by valiant fishermen, and was later tossed ignominiously out of the country for his foolhardy corruption, by these very same Dutch. Ha!

Newton was a genius of a different age, who due to his fortunate dispute with Leibnitz never let calculus or equations get the better of him.

If only we could say the same about the idiot, Keynes, and all of his idiot followers.

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