How do you apply this approach to questions like “to what extent was underconsumption the cause of the Great Depression?” No conceivable experiment could answer such a question, even given a time machine (unlike, say, “Who shot JFK?”) but I think such questions are nevertheless important to our understanding of what to do next.
The best answer I have to such questions is to posit experiments in which we rewind history to a particular date, and re-run it a million times, performing some specific miracle (such as putting money into a billion carefully-chosen wallets) on half a million of those occasions, and gather statistics on how the miracle affects economic indicators.
I have a somewhat better way. Place economics on a sufficiently rigorous empirical foundation, so that it is (let us say) somewhere near the level of quantum physics.
Having done this (monumental) task, we can now answer questions about historical events in economics as well as we can answer questions about historical events in physics—e.g. “Why is that laser red?” “Why did those interference fringes form here and not there?”
Placing it on an empirical foundation would be an enormously difficult task, but fortunately it’s not particularly necessary since, like geometry, you can put it on an a priori foundation stemming from some basic observations about human nature.
Human beings tend to prioritize according to some simple, general rules, and natural selection ensures that those few who throw too big a curveball don’t propagate. So you can take those rules and extrapolate them into a description of how a group of human beings will react to various economic pressures.
”Man, Economy, and State”, By Rothbard, is probably the best and most complete analysis to date.
To answer the original example question, the primary role of “underconsumption” in the Great Depression was that politicians could use it as a boogey-man to justify seizing control of the money supply and the manufacturing and agricultural sectors of the economy and running them in a manner to further their own interests at the expense of the general population. “The People’s Pottage” (terrible title, I know) by Garett Garrett has a good, blow-by-blow description of the sequence in which this was done and how each takeover was used to manufacture justification for the next.
How do you apply this approach to questions like “to what extent was underconsumption the cause of the Great Depression?” No conceivable experiment could answer such a question, even given a time machine (unlike, say, “Who shot JFK?”) but I think such questions are nevertheless important to our understanding of what to do next.
The best answer I have to such questions is to posit experiments in which we rewind history to a particular date, and re-run it a million times, performing some specific miracle (such as putting money into a billion carefully-chosen wallets) on half a million of those occasions, and gather statistics on how the miracle affects economic indicators.
I have a somewhat better way. Place economics on a sufficiently rigorous empirical foundation, so that it is (let us say) somewhere near the level of quantum physics.
Having done this (monumental) task, we can now answer questions about historical events in economics as well as we can answer questions about historical events in physics—e.g. “Why is that laser red?” “Why did those interference fringes form here and not there?”
Placing it on an empirical foundation would be an enormously difficult task, but fortunately it’s not particularly necessary since, like geometry, you can put it on an a priori foundation stemming from some basic observations about human nature.
Human beings tend to prioritize according to some simple, general rules, and natural selection ensures that those few who throw too big a curveball don’t propagate. So you can take those rules and extrapolate them into a description of how a group of human beings will react to various economic pressures.
”Man, Economy, and State”, By Rothbard, is probably the best and most complete analysis to date.
To answer the original example question, the primary role of “underconsumption” in the Great Depression was that politicians could use it as a boogey-man to justify seizing control of the money supply and the manufacturing and agricultural sectors of the economy and running them in a manner to further their own interests at the expense of the general population. “The People’s Pottage” (terrible title, I know) by Garett Garrett has a good, blow-by-blow description of the sequence in which this was done and how each takeover was used to manufacture justification for the next.