Just fresh out of Intermediate Macroeconomics and Microeconomics courses, the stark contrast of Economics as mathematical science and social science is very real. The contrast was as different as night and day as I moved from my Macro class to my Micro class throughout the day. In Macro we would study the role of the Federal Reserve and the Government in economical decision making. As I moved to my Microeconomics class, the perspective changed dramatically (obviously due to the very different content of the class, but that was not the only difference). The way my latter professor viewed economics was very different; he viewed it as a behavioral analysis of individuals making individual decisions. This is much different from my previous class with models and aggregates that represent society at large. In modern Macroeconomics, the economy is viewed as a machine – you tweak this, and this happens. Specific inputs lead to very specific outputs. For example, the economy is in the slumps (due to the Feds involvement in the market, historically) so what are we to do? Of course, we lower interest rates and the economy returns to full potential. Easy. There are countless graphs to back that up!
But that didn’t work too well these past two years did it?
The economy is not a machine – that is the problem. The economy is a collection of individuals who act, for the most part, rationally but also act irrationally due to various psychological, theological, sociological beliefs and circumstances. This is also the problem with central planning and an economy with a central bank. You cannot remedy a whole society of individuals with one fell swoop of tweaking interest rates and the money supply. You have to let each individual make his own decisions for what he wants and when he wants it and how he wants to go about getting it (ethically, of course). Planning the economy is the height of arrogance and it fools around with individual’s private property – property central planners have no moral right to mess with.
This is the problem with moder economics: the machine. It is the number one failure of today’s study of what was once a great and helpful social science.