One of the most ignored sentences in all of science is found in Newton’s Principia, in which he wrote: hypotheses non fingo. Or, I don’t make hypotheses. Philosophy of science, from Newton’s time onward, has pretended that Newton was Descartes, and that he used the Hypothico-Deductive method – and even, in the time of Popper, that science simply rids itself of induction. Of course, Newton was strongly inductionist, seeing himself as Bacon’s successor there, believing that when the numbers finally came out in your description of natural phenomena, you could get rid of the hypothesis; he was not a logick chopper, no Aristotelian he; and was very finicky about dividing conjecture from what he thought was law (in the draft of the Principia, he changed the term hypothesis of motion into law of motion). Newton was entirely consistent in this. When corresponding about his color theory with Pardies, he wrote: “… it is to be observed that the doctrine which I explained concerning concerning refraction and colours, consists only in certain properties of light, without regarding any hypotheses by which those properties might be explained. For the best and safest method of philosophizing seems to be, first to enquire diligently into the properties of things, and to establish those properties by experiments and then to proceed more slowly to hypotheses for the explanation of them. For hypotheses should be employed only in explaining the properties of things, but not assumed in determining them; unless so far as they may furnish experiments. For if the possibility of hypotheses is to be the test of the truth and reality of things, I see not how certainty can be obtained in any science; since numerous hypotheses may be devised, which shall seem to overcome new difficulties.”
Newton succinctly outlines the shape and tenor of economics in that last sentence.
LI was oddly reminded of Newton by the mood and reporting of economic news last week. It was perhaps the most absurd misreporting of any phenomena we have seen since April and May 2003, when the reporting from Iraq was pitched on an equally absurd plane. Indeed, the two events are linked. In both, the mathematics differed wildly from the reporting. In 2003, the mathematics involved an absurdly understaffed occupying force; absurd estimates, or non-estimates, of the cost of the occupation; absurd estimates of the Iraqi “contribution” thereto; absurd underestimates, or non-estimates, of re-building the infrastructure. All of which sank into the background as the strummers of euphoria – reporters, spinners, the usual cast of highly paid liars – created a thick text of delusions. A different set of highly paid liars, but a branch of the same general establishment, looked at the numbers churned out last week by the Executive branch and became positively giddy. Why, there was 0.6 percent growth in the GDP in the first quarter! And employment came roaring back to the extend that there was only a drop of 20,000 jobs in April! And inflation has been nipped in the bud by, well, by magic!
One has only to refer to the numbers to see how insane, and how malicious, this chatter is. An 0.6 percent growth rate that is prompted almost wholly by a business inventory buildup would usually not be good news. An inventory buildup is usually announced as: unsold goods. Which leads to the question of why the doggies aren’t eating their dog food. Which would lead one to plunge into other dimensions of the numbers put out by the Commerce department – the drop in earnings; the rising interest rates for credit cards, auto loans, student loans and mortgages, even as the Fed has put a huge pipeline between the money it has borrowed at one rate and the banks that it loans to at a cheaper rate – which is a way of simply giving the banks money, but pretending not to. This is the largest and quickest government bailout of the wealthy in history. It is also one of the most underreported – where is the headline reading: Government gives Hedge Funds unlimited access to Tax Dollars? Those stories, of course, are re-written so that they are properly oblique, and put in the business section, to be read by those in the know. At the same time that we read the financial crisis is over, we also read that the Fed’s new policy is to accept almost anything for collateral – auto loans, student loans. The absurdity of this policy is in stark contrast with the reporting on individuals making deals with lending companies to refinance their houses. There, of course, it is all about keeping up, with the finest and most Tartuffian references to integrity and morality, the need to pay back, and fucking promptly. I enjoy the outraged comments of householders when these stories appear in the Post – they attach to some errant payer, some holder of two mortgages and a downsized position, and compare life stories – their own of rectitude and all the Prot virtues, the errant payer’s one of Roman debauchery on an undeserved credit line. While, all the while, it is the banks, the financial institutions, the “equity management” companies who own the mortgages who are getting the real deal. And not for chump change. It is important, in trying times in the great era of Inequality, to keep the lens on the small farsidish adventures of the ne’erdowells, and away from the biggest giveaway in U.S. history – except to greet Bernanke as a genius for having produced conditions in which excess inventory will fight excess dollars in the world championship of peekaboo inflation.
The numbers point to numbers down the road that will not be euphoric – and will be underreported as usual, although of course you will register them in your stomach, your routines, in the grocery line, in the mail from the power company. Looking at the employment numbers, for instance, one can venture a cautious, Newtonian hypothesis – a midstream thing, used to explain properties, not model them – that the revision of the numbers will add an extra sixty thousand or more to the unemployed number. Of course, Wall Street quants know this. But they also know that it is best not to know it, and – as Newton points out – if you use hypotheses to mold your data, why, you can come up with any picture you want. We are living, truly, in anti-Newtonian times, and in those times, the truth comes out from the tv marionettes only by accident. So LI was pleased that a truth actually came out of the mouth of Hilary Clinton – which must have surprised both the truth and Hilary – when she said, this weekend: “Elite opinion is always on the side of doing things that really disadvantages the vast majority of Americans.”
She should know, since her husband makes his whole and entire living being paid to consult with elite opinion to keep that project going.