An Open Letter to Physicists: Economists Are Better than You
Tuesday, March 22, 2016
I was speaking to a physicist at MIT last week. He offhandedly referred to my area of study (economics) as augury without the benefit of pretty birds. His vocal distaste for my field is neither unusual nor unexpected behavior for the average physicist. He and his kind are nothing but a legion of malcontents who live in a constant fear that their lies will soon be exposed. One day the masses will awaken to the truth: economics (not physics) is the most powerful science.
Physicists have long claimed dominion over all of the world's natural laws. For more than a hundred years, even authors such as the great H. G. Wells have fallen for this bizarre notion. In his famous novel The Time Machine, Wells depicted a physicist - not an economist - as cracking the enigma of time travel and unraveling the world's greatest secrets.
Here we are, more than a century after the publishing of that famous work. How much closer have physicists come to traveling in the fourth dimension? Despite the lack of any actual progress, films, novels and academic papers continue to wage a war of misinformation - attempting to convince the masses that physics will unravel the mysteries of time.
There's just one problem.
Economics got there first.
That's right, the very field that my conversation companion had dismissed as "modern-day augury" has made time travel manifest. Don't believe me? Think about a loan. The masses often obscure the nature of loans with overly-complicated terms like vigorish, but at its heart, a loan is an application of time travel technology. Money that you will have in the future is transported back in time to the present for literally pennies on the dollar.
The odd thing is that despite physics' continued failures in researching time travel, numerous works of fiction and countless academic papers have considered how physicists could cause dangerous paradoxes. Indeed, even many elementary school children are familiar with the grandfather paradox.
Unfortunately, far less thought has been devoted to paradoxes as they might occur in economics-based (aka actual) time travel.
What would happen if all of the money that was transported from the future to today were squandered in frivolous ways?
A fundamental tenet of economics-based time travel is that loans will be used for productive purposes. A baker might take out a loan to invest in his business. A student might take out a loan to acquire an education. But what if a fool (let's say a physicist, for example) were to take out a loan for an expensive European vacation? The money that he transported from the future to the present would no longer exist in his future. So where did the money come from?
It's an increasingly common problem. Loans are being used not for the production of future wealth, but for consumption.
This represents a time travel paradox. Yes, some limited quantity of failed loans can be absorbed by the system. A failed loan ceases to be a paradox when the origin of the attached funds magically shifts. Instead of being sourced from the borrower's future, we discover that it was actually sourced from the lender's present. The banker that provided the loan comes to realize that it had been he who had paid for the loan all along. Quite the ironic twist of fate!
But what happens when we're no longer speaking of a mere handful of loans? What happens when we borrow unbelievable quantities of funds from the future? The source of those loans can't all have come from the lender. Due to the intricacies of economics-based time travel (not to mention fractional reserve lending), the costs must shift to yet another party. As we continue to see more loans fail and a continued preference for consumption over investment, the system will become increasingly unstable and a terrible conglomeration of paradoxes to become ever more likely.
How will it all end? There are many differing theories, but the good news is that we'll find out soon. All it takes is time.