They do not mill about in parks and try to sell you their books. They have never staked out airports to try to give you flowers. They do not offer to read your aura or save you from the disembodied spirits of ancient aliens. Instead, they congregate in universities, preying upon our young. They appear on your TV and in your newspapers. They are trying to bend your mind to their way of thinking and co-opt you into their world view.
They are … the economists.
Economics is supposed to be the dismal science; an exercise combining mathematics and sociology to describe and predict how we go about the production and consumption of goods, the allocation of capital and resources, and government policies towards business. Instead, sometimes it seems more as though economists wish to retreat into cults and go to war with each other for airtime and adherents.
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Let us examine, then, some of the ways in which economics and economists can deviate from the scientific roots of the discipline.
Simplistic Answers for Complex Problems
Cults offer you the "liberating" trade-off of surrendering your decision-making and simply accepting whatever the leader says. Economists boil down the intricacies and complexities of economics and human interaction into simplistic models and pithy political directives. Whether it is "inflation is always and everywhere a monetary phenomenon" or "capital is dead labor", economists love to offer easily-digestible one-size-fits-all sound bites.
By design, these models have built-in limitations. Scientists and academics understand that models have to be simplified versions of reality - if they were not simplified, it would be impossible to analyze and understand the underlying mechanisms. Unfortunately, while these models often work well in the controlled environment of theory, they sometimes appear to break down when exposed to real life and all of its glorious eccentricities and complications.
Does this mean that all economic theory is bogus? No. What it means is that investors must always remember that theories are built upon idealized situations and that real-world experiences can be different (in other words "your mileage may vary"). (To learn more, check out The History Of Economic Thought.)
Sharply Divided Sects
Economics can also appear cult-like when you see the sharp divides between schools of thought (or sects, if you prefer). Every science has differences of opinion and schools of thought that divide its practitioners, but I dare say that most physicists and biologists do not divide themselves as sharply as Keynesians, monetarists and Marxists (just to name a few of the many). When listening to economists, it is critical to understand the sect to which they belong, as that has everything to do with shaping their view of how to address public economic policy.
Of course, some of this divide may be because of the level of theory that goes into economics. It simply is not practical to hand over a country to a group of economists and let them run the country by their pet theories and "prove" that they are right. In contrast, scientists can often run reproducible experiments that quickly answer the questions and so opposing schools of thought generally do not linger for long.
Focus On Fundamentalism and Orthodoxy
It generally follows that to have enduring sects members must hew to orthodoxy. You do not see too many monetarists acknowledge any role for government stimulus to revive an economy or smooth over recessions. Likewise, Keynesians seem to regard acting exclusively through monetary policy during recessions as fiddling while Rome burns.
Because these theories are based upon simplified and cleaned-up assumptions, there very well may be room and validity to both approaches. Said differently, and apart from demonstrated laws of nature (like, say, Newton's three laws), there are very few cases of there being only one true path to follow. You will not, however, often hear that from the economists themselves - in their world, you must be true to your school. (To learn more, see Monetarism: Printing Money To Curb Inflation.)
Economics can also appear especially cult-like when its practitioners seemingly call upon mystical authority for validation. To those who have not studied economics, concepts like the "invisible hand" can seem rather similar to the sprites and faeries that used to be blamed for spoiled milk and missing tools in medieval Europe. Likewise, appealing to the notion that people are rational and make rational decisions seems to fly in the face of most people's everyday experience - yet, rationality is a cornerstone of most Western economic theories.
In fact, there is nothing mystical at all about the invisible hand or the mechanisms of the marketplace; these "appeals to authority" are simply just shorthand for explaining complex processes. To the uninitiated, however, they appear like appeals to faith in a system that is beyond the ken of man. (For more, see Adam Smith: The Father Of Economics.)
Promulgates a Value System
One area where I actually do think economics comes close to religion is in how often economists promulgate value systems through their theories and recommendations. Marxism advocated a certain sort of forced equality, while capitalism values the opportunity for individuals to rise above the crowd. Other systems assert that the good of the state is the paramount moral objective, while still others promote the virtues of the individual and personal agency.
Generally speaking, science is not supposed to concern itself with what is "good", but rather simply what is true. While a large percentage of us may agree that private ownership of property and the right to freely exchange labor and goods as we see fit is "good", that is a collective emotional evaluation. Unfortunately, this seems like an intractable problem of economics - at the end of the day, there has to be some objective to the whole enterprise, and whatever that objective is (equality, individual wealth, maximum freedoms, stability, et. al) will reflect the values of the theorist.
It Is Not a Religion
Of course, we are not actually suggesting that economics is equivalent to religion. Economics does not draw its authority from a top-down higher power; there is no mysticism, and no origin myth. What's more, although economists can hold on to their pet theories far longer than they should, the overall discipline is falsifiable and changes in response to reality - communism and mercantilism, for instance, have been roundly rejected (though you could argue China has synthesized the two into something new).
Nevertheless, investors must maintain their skepticism. Just as anybody reading this would likely not abandon their family, friends, and professions because of an encounter with some Rama-lama-ding-dong in the city park, do not abandon your common sense and judgment when you read dueling economic editorials or listen to flannel suited-smackdowns on business TV. (To learn more, see our Economics Basics Tutorial.)
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