The priest, the engineer and the economist
I was exchanging economist jokes over the holiday and heard this one that seemed apropos both to our resource predicament and the seeming abundance of the holiday season:
A priest, an engineer and an economist were stranded together on a desert island. Given their location, fish seemed to be a logical source of food. So, they discussed how to get some. The priest said that the three of them should pray. The engineer said he thought a better approach would be to fashion a net from materials on the island. The priest and the engineer then turned to the economist for his input. With his hand on his chin, the economist thought for a moment and then looked up and said, “Assume a fish.”
That joke neatly summarizes the problem with the vast majority of economic thinking today. Much of that thinking rests on something called the Cobb-Douglas function which has three terms:
Total production = Labor input X Capital input
What is so obviously missing, of course, are physical resources. Hence, “assume a fish” illustrates the slight of hand which most economists perform when referring to the physical world.
In fact, most economic growth projections simply forecast a certain expected (higher) level of demand for goods and services and then assume that the physical resources to meet that demand will appear. Which reminds me of a quote I shared over Christmas dinner that comes to us from economist John Kenneth Galbraith:
The only function of economic forecasting is to make astrology look respectable.
And, I am reminded of yet another quotation attributed to economist Herbert Stein:
If something cannot go on forever, it will stop.
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