At one time, it was common for political leaders to use astrologers to help them form policy and of course, to be blamed for any related failures. A royal court astrologer was not unusual. But astrology fell out of style as the sciences developed, so the now discredited astrologers had to be replaced. Were the position of esoterically knowledgeable advisor left unfilled, the political leader would have no one he could blame at need. Thus the modern economist found sustenance.
The relationship required time to form. Adam Smith, author of the first acknowledged tome on the subject (“The Wealth of Nations”), was very clear with his objections to government intervention in the economy and especially into trade. His impact chased governments away from the then popular mercantilism or as we would now say, protectionism. Politicians did not, of course, love Smith for that. The Father of Modern Economics was rewarded with a Scottish customs post.
Fast forward some 150 years to an English economist who wrote a book that justified and even necessitated government intervention in the economy. He was J.M. Keynes. You have likely seen politicians and their tame economists referred to as “Keynesians” often enough, especially after President Nixon said: “We are all Keynesians now” and took the U.S. off the remnants of the Gold Standard. The politicians who had not been overjoyed to be excluded from meddling in the economy by Smith, were overjoyed at being restored to economic meddling legitimacy by Keynes; they made him a Lord.
From that day to this, two salient facts have governed modern economics: First, the politicians assume control of the economy, while denying their responsibility for it by attributing their manipulations to the advice of economists. And second, they have thereby trashed every economy on the planet, sooner or later. Keynisian policies are used to explain the presently discumbobulating economies of most of the world’s significant countries.
There is of course, a small undercurrent of little acknowledged practitioners known as “Austrian School” economists. They have a website at mises.com. And unlike their “mainstream” and often state-subsidized economists, their forecasts actually work. The mainstream economists are famous for inability to predict major economic events, giving rise to the “How many economists are needed to replace a light bulb? None; if a bulb burs out, they sit round in the dark.”
But Austrian predictive abilities are accompanied by :”Hands off” advice to politicians wishing to control the economy, so like Adam Smith, the Austrians are relegated to the bleachers.
For example, a great Austrian economist Ludwig von Mises wrote in: “Human Action:”
“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
If today’s politicians were held to that, the world financial system would not be foundering in debt and deflation. Nor would there be all our wars and “free” social services that depend upon borrowed money. One can see why politicians don’t want Austrians as advisors…
So we have progressed; we have gone from soothsayers to astrologers to economists. The march of human science, right?