From "Fake News" to Fake Economics: Nobel Prize Committee Rewards a Faker

by Harley Schlanger, Rogue Money:

Media censorship and outright lying as a means of social control are not new tactics, as there is a long history of oligarchs using control of media and education to keep people ignorant of the events and processes which shape their lives, making it easier to control them.  The British Empire has survived by employing such measures.  The ability to sustain authoritarian control over a subject population is the subject of George Orwell's "Nineteen Eighty-Four," published in 1949, in which people at mass rallies were led in chants such as "Ignorance is Strength."  One of the maxims of the fictional government imagined by Orwell was "He who controls the past controls the future.  He who controls the present controls the past."  This is a slogan which describes well the intent behind the proliferation of Fake News today.

This was the subject of a tract published in 1953 by Bertrand Russell, the evil proponent of the British Empire.  Lord Russell wrote, "Education should aim at destroying free will so that pupils thus schooled will be incapable...of thinking or acting otherwise than as their schoolmasters would have wished....It is for a future scientist...to discover exactly how much it costs per head to make children believe that snow is black" (from "The Impact of Science on Society").   

One arena of "Fake News" is the coverage in the mainstream media of economic and financial "news."  For the propagandists of "neo-liberalism", who dominate the media and the economics profession, stock market and other bubbles represent economic growth; credit for infrastructure investment is axiomatically condemned as "wasteful spending"; free trade enforced by a banker's dictatorship maximizes everyone's freedom; and austerity is the path to prosperity.  It is from such precincts that the people are being told that President Obama is responsible for a "robust recovery" from the Crash of 2008, while ignoring the buildup of new bubbles, including levels of debt and leverage which far exceed that which triggered the 2008 crash.

Lord Russell would no doubt be quite pleased that the repetition of such nonsense dominates the field of economics today.  For today's respected economists, snow has indeed become black!

WHAT IS "NUDGE" THEORY

It is therefore not surprising that this year's Nobel Prize for Economics was given to Richard Thaler, a "behavioral economist" and leading promoter of Sophistical Tomfoolery known as "nudge theory."  In 2008, Thaler published "Nudge: Improving Decisions About Health, Wealth and Happiness," which was co-authored by his colleague at the University of Chicago, Cass Sunstein.  The University of Chicago's Economics Department was founded as an outpost of British free trade, specifically to organize opposition to the protectionist policies of American System President William McKinley.  In announcing the award, the Nobel Committee said Thaler's work "has built a bridge between the economic and psychological analyses of individual decision making," which has provided a "more realistic analysis of how people think and behave when making economic decisions."

Their work was inspired by that of two Israeli behavioral psychologists, Daniel Kahneman and Amos Tversky.  Kahneman was awarded the Nobel Economics Prize in 2002.  Tversky and Kahneman argued that human beings are not just occasionally irrational, but systemically irrational! 

Thaler and Sunstein define a "nudge" as "any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives."  It is based on the belief that positive reinforcement and indirect suggestions, in the form of a "prompt", can alter behavior, to bring people into compliance with policy goals without the use of force.  A "nudge" in the right direction is necessary, they believe, because people are inherently irrational, and allow "gut instincts" to supplant rational choices.  After the announcement of his being awarded the Nobel prize, Thaler identified the vote for Brexit as an example of this problem, describing it as an "irrational" action, that is, against the self-interest of residents of the United Kingdom. 

Another example of irrationality given by Thaler is that of people who spend for consumption, rather than saving.  In Thaler's world, people must be wealthy enough to be able to make a choice, and need only a gentle push to convince them to do so.  In reality, according to a study reported on CNN in January 2017, nearly 60% of Americans could not cover an unplanned expense of $500.  They do not save NOT due to inherent irrationality, but because they do not earn enough to cover their minimal costs, and must use credit cards to pay for basic expenses, often being forced to choose between buying food, or paying for medical care.

There are now more than seventy-five governments which have established "nudge units" to shift the economic behavior of their citizens.  Among the most prominent is the agency set up by former British Prime Minister Cameron, for which Thaler personally served as an adviser.  U.S. President Obama brought in Sunstein to administer a "Behavioral Insights Team".  One of his tasks was to overcome the resistance of Americans to the insurance swindle and medical triage program known as "Obamacare".  Sunstein, who ran the Office of Information and Regulatory Affairs from 2009 to 2012, is described by many who know his relationship with Obama as one of the former President's "controllers," while his wife, Samantha Power, was a leading proponent of regime change wars when she was Obama's Ambassador to the United Nations.  It should be noted that such wars, including that which overthrew the Qadaffi government of Libya and that targeting the Assad government, which plunged Syria into a brutal, murderous civil war in which the U.S. was on the side of terrorists, are hardly examples of "nudges" to attain a desired goal. 

If the reader is beginning to get the idea that "nudge theory" is more a euphemism for psychological manipulation and social engineering than a scientific concept, then perhaps more forceful nudging is required!   

THE UNDERLYING FRAUD OF NUDGE THEORY

A memo written by EIR economics editor Paul Gallagher on October 10 exposes "nudge theory" as a reaction to the fraudulent theory which preceded it, Efficient Market Hypothesis (EMH), or "rational market theory", which was discredited by the series of bubbles which popped in 1987, from 1998 to 2000, and again with the crash of the housing bubble in 2008.  EMH theory argues that the price of a financial asset fully reflects all available information, and is, therefore, based on an entirely rational evaluation.  This goes back to Austrian school economist, Friedrich von Hayek, who said markets are the the most effective way of aggregating pieces of information, to determine value.  But if EMH were a valid hypothesis, there would never be bubbles! 

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