The Pretense of Knowledge
My brother has posted a few times lambasting the higher education system, especially at the elite level, for propagating a broken economic system. Worse, their temerity leads them to believe that they can diagnose and fix macroeconomic systems.
The seminal work underpinning my brother’s revulsion is The Pretense of Knowledge, by Friedrich A. Hayek. This is the name given to a speech by Hayek in 1974 in a lecture to the memory of Alfred Nobel. In it, Hayek explains the limits of human knowledge, especially in relation to the infinite variables of a macroeconomic system. As he says, “Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones.” Nevertheless, political economists tend to use rigid formulas, in a manner like the physical sciences, to analyze highly fluid macroeconomic settings. Hayek notes, “Yet the confidence in the unlimited power of science is only too often based on a false belief that the scientific method consists in the application of a ready-made technique, or in imitating the form rather than the substance of scientific procedure, as if one needed only to follow some cooking recipes to solve all social problems.”
The inane pretense of the Federal Reserve and the Obama (and Bush, etc) administration that they have the knowledge to manipulate the monetary system without consequence is absurd.
But when it doesn’t work, we can just blame the ‘free market’ — right? Talk about moral hazard…
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