It is therefore not surprising that in seeking to make of this equation something more exact than its nature permits of, economists have managed to create more disagreement than unity of opinion, for there is not one term in the formulas they employ that is not open to a host of objections, based both on theory and on fact.

Frédéric Bastiat
Economic Harmonies

Today’s quote pertains to the impossibility there is in calculating the limit beyond which the population cannot grow, not because of proper analysis in reasoning ceteris paribus but because of the complexity of life that explains why an evolving feature will make other features evolve in a more or less unpredictable way.

Beyond the population problem, this is a note that is applicable to numerous economic phenomena and, according to me, one of the major source of misunderstanding between classical economists and Keynesian economists (or worse, constructivists, the latter being a soft version of these). Both use ceteris paribus reasoning on a regular basis in order to assess the dynamic set by an action or a policy. However, the constructivists allow themselves to ignore their own ignorance and pretend they can establish explanatory equations (or Excel models) that would allow them to act on one or the other variable to obtain a specific result on the economy as a whole. Classical economists do not show such a hubris and refrain from establishing macroeconomic models in order to justify this or that policy to be conducted. Ceteris paribus reasoning allows to understand phenomena, it does not allow to predict a measured outcome.

If one takes a simple example such as the relationship between interest rates and unemployment, it is clear that lowering interest rates will create an incentive to increase investment and thus, favour employment, all other things being equal. However, to pretend that lowering a central bank policy rate by one percentage point will allow to reduce unemployment by a certain number of individuals is sheer witchcraft – the lowered rate may as well increase the monetary base to such an extent that price inflation will prohibit employing new staff in companies in which increasing production costs will create a stranglehold. Both phenomena are possible, one is lucky and the other one is unfortunate – to pretend that the result can be known in advance is presumptuous and the classical economist refuses to take the risk of deteriorating the situation through his recommendations.

Other quotes from Population:
Malthus – Ignorance – Reality – Prevention – Hubris – Wealth

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