International Man: The average person doesn’t care about economics. But to the extent that he does, he only reads mainstream publications like The Economist and editorials in The New York Times.
In these publications, the average person will find so-called economists advocating upside-down and destructive concepts like negative interest rates, banning cash, debt-fueled consumption, government spending, and rampant money printing as the cures to economic ailments.
And if those methods don’t work—or inflict damage—the establishment economists’ response is to simply call for more money printing, more debt, and even lower interest rates.
What’s your take on conventional economic thinking and methods?
Doug Casey: Frankly, most “economists” today are only political apologists masquerading as economists.
An economist is somebody that describes the way the world works—how people go about producing, consuming, buying, selling, and living their lives. That’s not, however, what most of today’s PhD economists do. Instead, they prescribe the way they would like the world to work and tailor theories to help politicians demonstrate the virtue and necessity of their quest for more power.
As a result, legitimate economics barely exists today. What passes for economics has a very bad reputation, and it’s well deserved. Economics has become degraded. It’s not quite a laughingstock like gender studies, but it’s on a level with political science—which isn’t a science at all.
Every individual has vastly differing likes and dislikes and wants and needs. But these so-called economists like to treat people as if they were standardized atoms. They think they can manipulate people as if they were chemicals and treat the economy as something they can heat up or cool down. And they’re the ones who decide what the masses need.
Economics has become an excuse for central planning, and economists have become social engineers.
Economics is taught in colleges as if it were a subdivision of mathematics. It’s not. It has only a limited amount to do with mathematics. Rather, it’s a division of philosophy. It’s a moral study that looks at how people relate to one another in the material world.
Economics has been turned into the handmaiden of government in order to give a scientistic justification for things that the government—which naturally seeks more power for itself—wants to do.
In fact, every person should be his own economist. That’s because you owe it to yourself to understand the way the world works and to understand human action, to use Mises’ phrase.
International Man: Mainstream economists are obsessed with complicated models and charts as they try to maximize GDP.
By contrast, free-market Austrian economics is not focused on how to centrally plan the economy but rather on human action in the face of scarcity.
Austrians aren’t concerned with complicated models because they believe it is impossible to quantify the actions and preferences of billions of individuals.
Which do you think is more useful and why?
Doug Casey: Adam Smith wrote The Wealth of Nations at about the time of the American Revolution and really founded the study of economics. But the most influential economist of all time is Karl Marx. His giant three-volume work called Das Kapital includes some interesting observations. But Marx’s views lent themselves to the creation of totalitarian societies, like the Soviet Union, East Germany, and many others.
One of his most interesting observations is the breakdown of all goods into either “means of production” or “consumer goods,” which is quite accurate. The problem lies in who Marx thinks ought to own them.
He thinks the ideal system is communism, where the collective owns both the means of production and consumer goods. The means of production are things like factories, farms, and mines: things that create new wealth. Consumer goods are things like houses, cars, or clothing. There has never been a real communist society. North Korea, or China during the Cultural Revolution, probably came the closest.
Marx posited socialism as a way station to pure communism. Socialism is a system where the State owns the means of production, but private goods are still owned by individuals. It’s theoretically possible to have your own house or car in a socialist country.
Although many countries call themselves socialist today, that’s a misnomer. The terms “communist,” “socialist,” “fascist,” and “capitalist” are almost always misused, undefined, or misdefined in today’s parlance. There really aren’t any socialist countries left in the world. Every country that tried socialism failed, and the means of production wound up being privatized. Why? Because everywhere—including Russia and China—people found that the State runs wealth into the ground. Socialism died because, to use a popular word, it was unsustainable.
The public likes the ideal of socialism, however—mainly free stuff. That’s understandable. For instance, they’ve heard Scandinavia is a socialist utopia. In fact, it’s neither a utopia nor socialist—its industries are all privately owned. The confusion comes from the fact it’s a welfare state; that’s what people really want. Things look free but are at the cost of huge taxes.
There are no real capitalist countries in the world. Capitalism is a system where economic matters are regulated by the market, not by government fiat. That statement deserves further explanation, but this isn’t the place. Let me just say that practically every country in the world today follows the fascist model that Benito Mussolini laid out—where although both the means of production and consumer goods are privately owned, everything is controlled by the State. As a system, it makes a lot more sense than either communism or socialism but not nearly as much as capitalism. Because it allows private ownership, it’s often confused and conflated with capitalism.
International Man: You have previously called mainstream economists “modern-day soothsayers.”
You’ve said they’re “witch doctors who have convinced everyone they’re neurosurgeons.”
Can you elaborate?
Doug Casey: What passes for economics today isn’t science; it’s more like a religion, where dogma is handed down from on high. Economists write abstruse papers that are used as reasons for the government to “step in” and “do more.” Economists have actually become something of a secular priesthood who interpret the doctrines of various prophets. The dominant prophet for the last century has been JM Keynes.
Mixing religion with government is always dangerous. Masses of people usually have to be sacrificed to make somebody’s idea of magic happen.
International Man: It seems establishment economists are nothing more than overpaid government apologists and social engineers.
They use complex but irrelevant mathematical models to help politicians show their necessity to society. They help politicians grab more power, which only helps the government grow.
It brings to mind Frédéric Bastiat, the great French free-market economist, who once said:
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
What’s your take?
Doug Casey: An example of this is the Federal Reserve. It started out as not much more than a formalized clearinghouse for banks to help them process transactions and organize the papering over of temporary bouts of illiquidity.
It didn’t look overly dangerous to start with, but it’s morphed into the most dangerous and powerful part of the US government. Tax revenue now only constitutes about half of what the US government spends. The rest is basically printed money facilitated by the Fed. In essence, US government bonds are sold to the Fed, which then deposits dollars in the US government’s accounts at commercial banks. The Fed is theoretically independent of the US government, but at this point, they’re joined together like Siamese twins.
International Man: How can the average person navigate the situation to get an accurate understanding of what is truly happening in the economy?
Doug Casey: You have to educate yourself. And by that, I don’t mean you should misallocate four years of time and a couple hundred thousand dollars attending a college to be indoctrinated. Take some individual responsibility.
Educating yourself amounts to reading and then applying critical thinking to what you read. Which means asking questions and insisting on logical explanations. Where to start? In my opinion, the best-done single book that you can read about economics is Henry Hazlitt’s Economics in One Lesson. It’s only about 150 pages, and it’s a gem. Everybody should read it.
After that, it’s just a question of how interested you are and how deep you want to go. Anything by Murray Rothbard, Thomas Sowell, or Walter Block is on the list. They’re all sound, clear, and cogent writers. I think you’ll find stuff by Larry Summers, Paul Krugman, or Joseph Stiglitz unhelpful in understanding how the world works. They’re only celebrities. I find Ludwig von Mises too dense. It’s as if a German academic—which he was, of course—was writing for other academics. His thoughts are great, but the presentation is hard to absorb. Start with Mises Made Easierby Percy Greaves.