Economic Alchemy

When I got the idea to write this article, I thought it would be good to do a little research on alchemy. After a bit of reading from various Wikipedia entries, my favorite source for encyclopedic information, my ignorance on the subject was apparent. However, what I learned only reinforced my premise.

Alchemy was considered a serious science and was a forerunner to modern chemistry. Until my mini-education on the subject, I associated alchemy with the search to find ways to create gold from common metals - a practice called transmutation. However, alchemists also sought an "elixir of life" which would supposedly cure all disease and a universal solvent which would dissolve any material. Many believed that these goals could be achieved by discovering the philosopher's stone which has received new fame in the Harry Potter series. The common theme here is man's search for ways to get around the realities of life.

Sure, it would be really cool if we could take some copper and nickel, mix it up with some mysterious substance, and somehow create gold. This would be great - especially if a) no one else knew your secret and b) the mysterious substance cost substantially less than gold. Man has always tried ways to cure disease, feel younger, and even live forever. Many of the greatest minds in history spent their lives seeking these solutions. Today, we believe that these things do not exist and will not be found. It is safe to say that alchemists attempted to cheat some of the basic laws of humanity by artificially creating wealth and avoiding the inevitability of death.

Today, we have economists and politicians. It's hard to say which group is closer to being the modern day equivalent of the alchemists. Anyone who has taken the most basic of economics courses knows that there is no free lunch. Unfortunately, it takes effort to create value. There is a cost to everything. We cannot wave a magic wand and make all of our pain go away. Politicians use the pseudo-science of macroeconomics to help fulfill their collective desire to solve the problems of the collective (or, at least their constituencies). Economists are only happy to oblige them with more pseudo-science. This creates a reinforcing cycle of rhetoric and statistics which are used to support the politicians' goals and the economists' egos.

Now, clearly, there are exceptions to the rule. Not all politicians and (macro)economists are the same. In fact, some exhibit common sense and recognize that the basic laws of (micro)economics extend throughout an economic system. Alas, there is no free lunch even for the government, and not even the government can allow us to escape death and disease. No amount of hope and optimism will change this reality.