Paper Money Collapse: The Folly of Elastic Money, 2nd Edition

Chapter 9The Intellectual Superstructure of the Present System

When crises occur, they lead to debate, and debates always take place within an established framework, within a set of widely accepted theories and beliefs that are themselves no longer the subject of inquiry but are treated as established truths and are therefore being used as intellectual tools. In respect to economic crises, this framework is not, as many might believe, the science of economics as such but rather a specific subset of economic doctrines, a body of theories that have become dominant and that in their popularized form today provide the basis for most economic discussions.

The dominant trends in economic thinking in the twentieth century were the rise of macroeconomics and the related spread of mathematical and statistical techniques in economic analysis (econometrics). These trends brought not only new theories but also new ways of looking at economic phenomena, of framing economic problems and conducting economic analysis. Whether they constitute an improvement over earlier modes of economic thinking is a valid question that has to be answered in the realm of pure science. There can, however, be little doubt that in many ways a narrowing of perspective relative to older modes of economic thinking has occurred, mainly as the result of the strong emphasis of the “new” economics on large aggregates, in particular those that can be followed conveniently by national account statistics. Theories that ...