In a piece published April 9, I discussed the future economic conditions of the United States. Many people are generally unaware of the effects huge levels of debt could have on American living standards. Modern economists, instead of serving in their traditional role as realist advisors pointing out the impracticability of utopian political schemes, have indulged the political fantasies. The methodology used by modern economics is not apt for understanding human action under scarce resources.    

If you ask 10 different economists for policy prescriptions for higher growth, you will likely get 10 different answers. If you ask 10 physicists a physics question, you would expect the same answer 10 times. Yet though physicists, though they do important work, are not setting policies that affect the entirety of the United States.  

Modern economics is based on logical positivism, the belief that knowledge about the world must be learned through empirical, not introspective, means. The problem with this approach to economics is that economics is fundamentally different from physics. In physics, we do not know the underlying cause of phenomena. We hypothesize, experiment and repeat, devising ever-more-clever experiments to ensure everything except the variable being tested is held constant. This allows us to formulate theories describing the causal relation between entities.  

This approach is entirely untenable with respect to economics. In economics we do know the underlying cause of phenomena: People act in order to satisfy their ends. Economics is the analysis of human action under scarce resources. In physics, everything not being tested must be held constant. In economics, there are no known constants. Different people react to the same situation in different ways, while the same people react to the same situation in different ways at different times. People also act differently when they know they are being observed. An undergraduate aware his professor is watching will act differently than if he expects his action to be free from judgment. This makes experimentation in economics largely meaningless because constants cannot be controlled, and the results can never be extrapolated to people unobserved.  

If the traditional scientific method of experimentation is inappropriate for economics, what is the appropriate method? Methodological individualism, the study of individual action through introspection, is the appropriate method for understanding economics. Because the axioms are undeniable, to deny the axiom necessitates a logical contradiction — denying that one acts is an action in and of itself — all deductions from the axiom are true as well.  

Milton Friedman once wrote an article defending logical positivism by arguing that making false assumptions was acceptable because of the predictive power of the false assumptions. Imagine a physicist arguing that false assumptions are necessary to understand physics, not to mention that the acceptance of false assumptions implies the logical positivists have given up on a whole coherent theory of economics.  

At the beginning of the semester, an economics professor of mine said there are no economic truths. Though some modern economists will deny this, it necessarily follows from a positivist approach. This claim is false. For example, both parties of any trade expect to benefit from the transaction. If they do not expect to benefit, they will not partake in the trade.  

Modern economics has justified economic policy, which has led to the crisis we face today. The one possible benefit from the coming collapse is that it should conclusively demonstrate the hopelessness of mathematical models as a way to understand human behavior.

Mark Lutter is a senior mathematics major. He can be reached at mlutter at hotmail dot com.