Writing under a pseudonym was a common practice in early American history for a variety of reasons, some honorable and others not so. Often this device was used to launch vicious political attacks. Clearly, this is not my purpose here. Instead, my aim is to peel away labels and personalities. Let me quote Matthew Frank of the National Review on the use of pseudonymous blogging:
"As the original Publius argued in Federalist No. 1, keeping
one’s identity concealed can force readers to focus on the quality of
your arguments, rather than on personalities."
Unlike the physical sciences which rely on experimentation as the arbiter of truth, the study of the economy is limited to observation and interpretation. Furthermore, our understanding of the economy (as well as the economy itself) continues to evolve through time. As soon as we reach some understanding of the economy and devise policies around it, individuals adapt their behavior giving rise to new relationships and rendering our original understanding obsolete. As a result, macroeconomics is a never-ending field of study, which is rife with disagreement, uncertainty and stale orthodoxy.
This has given rise to ideological warfare between various economic schools of thought and opposing political camps. Right versus Left, Keynesians versus Austrians, Big Government versus Small Government, Saltwater vs Freshwater, Micro-foundations versus Post-Keynesians. The list can go on and on. Just like religious differences, such divides can never be settled because they have degenerated into fights over beliefs and values. People who engage in such debates often define themselves personally in terms of their ideas. Accordingly, an opposing argument or a rebuke is perceived as an assault on who they are as people, which prompts even more retrenchment and intransigence.
The problem is that this debate is not without real-life consequences. Economic policy has a direct impact on our individual prosperity and well-being. I grew up in Eastern Europe and observed the tremendous waste of human potential. I lived through the fall of communism and the complete collapse of that economic system, which exposed the immense vulnerability of our modern way of life should the economy cease to provide for our basic needs. I experienced hyper-inflation when money lost its value by the minute and bundles of cash bought a loaf of bread. I cherished the hope that free-market capitalism will bring the prosperity of the West to the newly-liberated countries of Eastern Europe only to see these dreams shattered by corruption, unfettered greed and crony capitalism. To quote none other than Alexander Hamilton as Publius in Federalist No. 1: "On the other hand, it will be equally forgotten that the vigor of government is essential to the security of liberty! ... and that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidden appearance of zeal for the firmness and efficiency of government." - a lesson that clearly went unheeded by post-communist reformers.
Later, I immigrated to the United States and was able to compare and contrast what made this country so successful while others with similar if not greater natural and human resources had failed to live up to their potential. This country more than any other is driven by the simple principle that people should be free to succeed or fail based entirely on their own merit and hard work; that the singular purpose of government is to protect individual freedoms and the right to pursue happiness. But even here, in the supposed bastion of free-market capitalism, there is a lot of confusion as to the role of government in the economy. Such obfuscation only serves to enable corruption, cronyism, greed and inequality. Even here, we are not immune from the economic abyss, as I observed first hand while talking to bond traders days before the Lehman collapse. A bond trader remarked that liquidity was the religion markets believed in; however, the trading rooms on Wall Street had fallen silent with liquidity having completely evaporated.
I hope to use this blog as a sounding board for ideas and snippets of understanding of how the economy works. I stay away from labels, nor do I belong to any ideological camp. I am not wed to ideas or orthodoxy. My goal is to understand. I like to visualize economic dependencies and relationships using thought experiments and simple stories, which will hopefully make this blog accessible to all readers.
For correspondence, I can be reached at p.valerius.h at gmail.com.