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What Will the Economists of the Future Be Doing?
26 January 2010
The following is a question submitted to Lyndon LaRouche on Tuesday, January 19, 2010 on the subject of economics, and his reply. Dear Mr. LaRouche, I want to know how to teach economics, especially your ideas, and I had some questions. I will number them: 1. How do you calculate what you call potential relative population density? 2. What exactly does an economist do, and what is wrong with what todays’ so-called economists are doing? What is it that you want us, as future economics majors, or advisers, to do and to know? 3. There is a lot of material on your websites about scientists like Kepler, Leibniz, Riemann, and Gauss, and Einstein. That’s a lot of mathematics, first of all. What is it that you, as an economist, do with the ideas of these people, specifically as it relates to economics, and not just the natural sciences as such? What do the mathematical ideas of these thinkers, how do they apply in your work to economics? 4. I believe I am mostly asking what it is that the economists of the future are going to be doing, as opposed to the things today’s economists do. Your idea of potential relative population density is very interesting. Is that what ultimately you are trying to do, to be able to develop a mathematical system that will allow you to be able to calculate and forecast potential relative population densities? Thank you. LaRouche replies: I shall abbreviate my reply, to the extent that the nature of your question obliges me to do so. You are talking about an entire field in physical science, a field in which there are but a few competent cases of application to economic studies, still today. I have been forecasting national economic developments since my first such forecast, as an executive for a consulting firm, since July-August 1956. On the occasion, I was, to the best of my knowledge during that general period, the only successful forecaster of that period. Among the principal reasons for the forecasting of what might be considered my rivals, three types of cases are notable. First, since the popularization of the methods and influence of followers of Bertrand Russell such as Professor Norbert Wiener and John von Neumann (what were called "the ivory tower economists" of that time, ambitious young economists were imitating the highly promoted followers of von Neumann et al., and also that so-self-described prophet of "creative destruction," Schumpeter. Second, were the followers of John Maynard Keynes. Third, were the now vanishing species, that of followers of the so-called Marx-Engels tradition. That generation is now simply dying out, but was very influence prior to the mid- to late 1960s, when they began to be, speaking loosely, killed off by the "68ers." In contrast to those, all of my forecasts, since my first general forecast of Summer 1956, have been based on the underlying principles of physical-economic systems, which I developed under the influence of the 1854 habilitation dissertation of Bernhard Riemann. The essential point to be recognized in all my forecasts, is that forecasting premised on mathematical-monetarist modes of financial forecasting have been repeatedly demonstrated to have been intrinsically incompetent; not a single crucial case of a general forecast, based on monetary theoretical considerations, for the international financial and related national systems has been successful. However, hindcasts have been popular among professionals, although never truthful scientifically. The case of my successful forecast of the deep U.S. recession of February-March is the best model, up to the present time, of a successfully proven forecast of a recession in, or among some national economies. 1. The most basic consideration is, that except as the productive powers of labor of a society are improved by capital-intensive trends in physical-economic rates of productivity per capita and per square kilometer, the tendency of continued existence of society is always threatened by attrition. The best approach to defining this process of attrition, is found in the implications of the work of Academician whose work is based on the developments by Gottfried Leibniz (the principal scientific influence in shaping the principles of physical economy on which the constitutional definition of the U.S. national economy were premised), as greatly enhanced by the relevant work of a follower of the school of Bernhard Riemann, Russia’s (and Ukraine’s) Academician V.I. Vernadsky. All of my forecasting up to the present time has been based on developments through which my work has progressed on the basis provided by those scientific figures. It is the expression of a rising physically-capital trend in both science progress and increase of capital-intensity in both basic economic infrastructure and production as these considerations are expressed as progress in increase of the relative potential energy-flux density of power applied, which accounts for all overcoming of the persistent tendency for collapse through attrition. Money as such has nothing to with this, except as the way in which money is uttered and circulated affects the rates of relevant physical-economic flows through the physical-economic process of the nation, or nations. In the case of the 1957 recession, my forecast developed around an intensive study of retail and wholesale new-car and used-car marketing during the decade of the 1950s. The imposition of rules of accounting imposed by the automobile manufacturers us of inherently fraudulent dealership accounting practices, was the single more significant aspect of the types of general practices which predetermined, already in mid-1956, the timing of the sudden and deep recession which stuck during February-March 1957. The dealers’ accounting systems, by contract, required that the sale of a new car must be shown at a fixed price. Actually, the price shown as paid for that purchase had two "interesting" components of pathology. First, that the sale of the new car required increasing deductions from the actual list price, deductions which were largely concealed, by standard arrangements, by dumping the give-back on the sale of the new car onto the inventory value of the used car taken in trade. This trend was aggravated by increasing of the terms of new car sales to thirty-six months maturity, but, with a trend for an increasingly large 36th-month "balloon note" at the end. That practice of a very large 36th balloon-note was provided on the assumption that before the thirty-sixth payment was due, the automobile carrying that burden would have been traded-in for a fresh new-car purchase. In the meantime, the price of a used-car of equal denomination and condition could be purchased from a wholesale used-car inventory at a price below the listed wholesale-inventory price of the comparable used car on a new-car dealer’s lot. These practices were not limited to new-car marketing; but, the new-car marketing was the model on which comparable cases were premised. Such cases suffice to show anyone not duped into standard academic and related ideology, that monetary flows through an economy are the principally determining factor in the dysfunctional features of national economic trends. For that reason, existing monetary trends are never competent sources for forecasting general economic trends in an economy. In dealing with crises such as that confronting the U.S.A. and Europe now, all monetary statistics are wildly fraudulent. The margin of fraud built into prices, largely through practices of financial markets, is so large, that no monetary statistics provide a true indicator of mathematically forecastable result. Rather, relative physical values of basic economic infrastructure, wage-rates and supplementary benefits of productive employees, and rate of increase of average net basic economic infrastructure and capital investment in production, are the primary indicators of what must be examined more closely and in detail, if one is to estimate a fairly accurate forecast result. No competent forecast for a national economy can be based on what is considered statistical market forecasting today. — Lyndon. |