Tuesday, January 24, 2012

Realizing the Dismal in Economics

RealClearPolitics - Why the Fed Slept

Economics is often called "The Dismal Science" for much the same reason that we say "What goes up must come down" ... or young pilots are admonished that taking off is a decision entirely in their hands, landing, not always so much.

The salient point of this article is:

There's a paradox to economic policy. The more it succeeds at prolonging short-term prosperity, the more it inspires long-run destabilizing behavior by businesses, banks, consumers, investors and government. If they think basic stability is assured, they will assume greater risks -- loosen credit standards, borrow more, engage in more speculation, relax wage and price behavior -- that ultimately make the economy less stable. Long booms threaten deep busts.

There is a paradox to everything human -- we aren't endowed with the god-like powers of "final solutions", and when we attempt them, what we create are even bigger problems.

Humility, humility, humility --- but hubris is our nature.

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