Revolutionary economic policies used to be reserved for centre-right politicians.
The Zeitgeist was best expressed by Ronald Reagan: “We've gone astray from first principles. We've lost sight of the rule that individual freedom and ingenuity are at the very core of everything that we've accomplished. Government's first duty is to protect the people, not run their lives.”
Accordingly, the Washington Consensus on economic policy set the stage for a free-market paradigm and decades of human flourishing. According to Our World in Data, 1.9 billion people, 36% of the world’s population, lived in extreme poverty in 1990. By 2015, only 730 million people, or just under 10%, did – despite population growth.
But the more recent Zeitgeist holds that mainstream economic policy thinking is failing and a “New Economics” is needed – an economics that discredits GDP, increases taxes on the wealthy, provides more social transfers, and creates a circular economy.
Productivity Commission Chair Dr Ganesh Nana tells us that GDP is “not a great measure of anything useful”. Ministry of Primary Industries Chief Economist Dr van den Belt calls herself a “GDP-growth sceptic”. MBIE Chief Economist Donna Purdue says that Doughnut Economics (a concept which balances achieving twelve social foundations while not exceeding planetary boundaries) is urgently needed.
It also appears that New Economists view economics as encompassing a single dogma. On the contrary, economics is a discipline that includes many schools of thought.
Even more frustrating, is that New Economists do not have a (mathematical) theory that can be debated in detail or tested empirically. Doughnut economics or “systems thinking” are examples of this. Even its advocates acknowledge that it cannot be tested empirically, which is very convenient.
You want another example? Take the “Modern Monetary Theory” (MMT). According to MMT, in short, the government can spend as much as it wants by printing money. The problem is that it has a silent “T”, in that there is no actual theory we can debate or test. I am not aware of any peer-reviewed publications about MMT. Why does this matter? Think about peer-review as a clinical trial of a drug. Without it, we must believe that it works (increase GDP) without side effects (inflation, default).
This is a dangerous development. It gives bureaucrats and politicians a rationale for ignoring evidence and implementing any policy they want.
We must develop and test theories and policies by adhering to the highest standards in the profession. To quote from Matthew (7:15), “Beware of false prophets, which come to you in sheep's clothing […]”.