A SMALL MARGIN OF ERROR
Of course it is common knowledge that economics is no science. That there is a Nobel-prize for it does not at all diminish the fact—peace is no science either. Look at all the people that make money with economics. Lots of money. Surely that can be no science.
Because I have never regarded economics to be science, I have never paid any attention to quotations on any index. But I always had this uncanny feeling that quotations have got nothing to do with what happens in the world around us. Some event x takes places and is, according to economists, the reason the quotations drop sharply. Seven months later event x again takes place, and quotations rise sharply. Economists don’t think this is strange. Or they don’t realize, which is more likely for pseudo-scientists.
And now Wall Street, the temple of this pseudo-science, crossed the magic barrier of 4000 points. To celebrate this historic event, NRC plotted the quotations from 1929 on in a graph. One thing immediately strikes the eye: the developement took place in three distint phases. The first one, in which the quotations kept about level, runs from 1930 to 1953. The second, in which quotations rose by about thirty points every year, runs from 1953 to 1983. And the third one runs up till now, and now quotations rise by about 250 points each year.
What was so special about 1953 and 1983? From a historical point of view: nothing. Periods in time that did matter, such as World War 2 or the Cuba-crisis, did not really influence Wall Street. Well, there may have been local rises or falls, but it did not matter to the global trend. I wonder if there has been a single economist who noticed this.
Another thing: the Black Monday crash, October 19, 1987, doesn’t appear to have been such a crash. Quotations went up a bit too fast suddenly, and they went back a little faster to the median. It happens all the time in nature. No physicist would have worried.
That the first Nobel-prize for economy went to a physicist was a serious double fault: the Nobel-committee was wrong in spoiling money on child’s play, and the physicist was wrong straying from science. If we drop economy as an academic subject, wouldn’t that solve all our Minister’s problems?