In “Twilight of the Money Gods,” John Rapley argues just that—and is fairly convincingby Avinash D Persaud / December 20, 2017 / Leave a comment
Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong by John Rapley, (Simon & Schuster)
How old were you when your parents first told you that money doesn’t grow on trees?
Before 2008, if you asked a congregation of economists why we couldn’t simply print money to pay for what we need, they would first scoff. Then if you persisted they would invoke Germany’s inter-war hyper-inflation as proof of the doctrine that this leads to higher prices and so there is no magic money tree.
However, since 2008, the world’s major central banks have printed $12trn as part of their “quantitative easing” programmes. But the inflation needle gently bobbed up and down and many continued to be worried about the perils of deflation—not inflation. QE is a Lutheran moment for the Church of Economic Science.
The question here is whether economics may be more religion than science. And while he doesn’t focus in on QE specifically, this is the case prosecuted in John Rapley’s brilliantly titled Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong. Rapley argues that much of what counts as economic theory is pure doctrine, supported by narratives or beliefs rather than evidence. The book is a must-read for all.
Some economists would haughtily counter that they follow Karl Popper’s philosophy of science. They establish hypotheses and use data to refute them. They discard the refuted theories and the rest are added to the canon of theory.
Rapley argues in lucid, fast-paced prose, that this is a veil and that such a methodology cannot work when you are studying human behaviour and beliefs. Economic belief, he argues, changes the data, rendering prophecies self-fulfilling. If enough people believe that bitcoin is valuable, then it will rise in value. We assume that scientific ideas are shaped by reality. In economics, reality is shaped by ideas.
For instance, the wealthy sponsor ideas around the belief that attempts to chasten the well-off will inevitably cause economic instability. If a government gets elected with radical left-wing ideas, the wealthy send their capital abroad, thereby causing markets to crash. Consequently, economic analysis is hopelessly conditional and contestable. Rapley tells us that the high priests of economics justify their exalted position as the most influential courtiers by pretensions of science rather than hard science.