Is economics a real science?
If economics would like to consider itself a “science”, then it should be willing to be subjected to genuine scientific scrutiny.
The next 10-20 years will offer us perhaps the most damning expose of the fallacy of modern economics. The true test of a scientific theory is its ability to make testable predictions. Therefore we should compare the expectations laid out by mainstream economics with those from less orthodox origins.
Relentless (linear) growth is assumed to be possible, as long as mankind adopts the bureaucratic / technocratic prescriptions of the economic preisthood. This is the Solow growth model embeded in neoclassical economics.
By contrast in 1972 predictions of global economic growth, population and resources were made by the Club of Rome team’s “Limits to Growth”. The predictions made by this report are consistent with the field of Ecological Economics which places the human economy WITHIN the worlds natural resources. So far, their predictions are worryingly accurate:
(Chart Courtesy of Charles Hall’s Revisiting the Limits to Growth)
The Club of Rome’s model offers a considerably more plausible representation of the world economy than that postulated by traditional economics. The model relies on stocks and flows of various inputs and outputs, the rate at which is dictated by certain rules and feedback loops. Key aspects of the model are:
1) the world has a finite set of resources
2) industrial production requires resource inputs
3) the rate at which these resource draw downs are occuring are not underestimated
4) the consequence of resource extraction & consumption yields pollution
Therefore, the model does not disobey basic laws of physics, such as thermo-dynamics. So from a theoretical point of view it is superior to any Neoclassical model no matter how elaborate their mathematical prowess. Mathematics should represent reality, not replace it; and the Club of Rome model achieves this.
From a practical view, the model predicts world food per capita peaking in about 2010. Real world events are bearing this out. The model also predicts peak resource extraction (steepest decline of the blue line) between 2010 and 2020. Many in the “Peak Oil” community share this synopsis. Peak Industrial Output per capita, and Peak Services per Capita are also predicted to be on the cusp of steep declines.
If the next 5-10 years follow these trends then it will become even more untenable for the traditional economists to hold sway over the population and politicians.
But even more foreboding is that it is just as plausible for many in positions of power and influence to try and distract and deny these problems publicly, whilst privately understanding this dynamic. Instead of informing, educating and preparing the nation for the unsettling future, many in power may simply resort to hoarding wealth, influence and access to these dwindling resources.
Portentous times, indeed.
“From a physics perspective it seems natural to suppose that economic wealth is an abstract representation of a capacity to do something. If so, then economic value, adjusted for things like inflation, should be directly proportional to the rate ( in Watts) at which civilization consumes energy (e.g. coal, oil, uranium, etc.). Nothing in the universe happens without energy being transformed from one form to another. The global economy should be no exception.”
A more indepth discussion of the LTG book and the academic assualt against it see: