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The “Dismal Science” and Getting Back to Da Vinci’s Methodology

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“Make sure that the book on the Elements of Machines with its practice comes before the demonstration of motion and force of man and other animals, and by means of these you can prove all your propositions.” – Leonardo Da Vinci

One of the things that most bothers me about economics is the supposed need to intermingle the normative with the positive, ie, the descriptive with the prescriptive.  We see it in almost all modern schools of economics.  Austrian economists build an idea of a world they envision (mainly a gold standard) and design an understanding of the world largely based on what they want and not what we have.  Market Monetarists have done this recently with NGDP Targeting and their models that eliminate banking from our world.  I only single these schools out because they are obvious examples, but the entire profession is guilty of similar exercises.  I believe this is a flawed framework resulting in vast misunderstandings and flawed conclusions.  It need not be this way.

For instance, Leonardo Da Vinci isn’t best known for his influence on the field of medicine, but his influence was vast.  And what’s interesting about Da Vinci was his rather unusual approach to medicine.  Da Vinci did not expect to solve all the problems of the human body.  Rather, he wanted to understand the human body.

Da Vinci viewed the human body as a machine and as one of the first anatomists he was able to provide the world with a better understanding of how this machine functioned.  How its pieces worked together, how it was built, how it changed, etc.  To Da Vinci, it was all about finding out what IS, not what CAN be.  The real genius of Da Vinci in this approach was that he took a simple approach.  He knew that the understanding of the human body was poor and the only way he could better understand how it worked and what caused it to do certain things, was to figure out precisely how the machine worked.  And so he became one of the first true anatomists and provided the world with invaluable understanding of the machine.

The “dismal science” need not be so unscientific.  Unfortunately, most of its practitioners are trying to be Hippocrates and not Da Vinci.    And like the surgeons of the days of Hippocrates, they do not know how the system works and while they might believe they will “do no harm” they might as well be swinging an axe with their eyes closed….That’s bad news for the rest of us because the economic machine will never get cured so long as we continue to fail to understand how it actually works….

While I am far from a Da Vinci I do approach the world of economics from a similar position.  For whatever reason, I have never had a great deal of interest in solving the problems with our current system.  Some people criticize me for that (perhaps rightfully so), but I don’t see how we can fix the problems if we don’t even understand them.  Because of this, I am interested in better understanding how the machine works so that I can perhaps help spread an understanding to those who can solve problems with our current system.  It is my hope, through MR and a true focus on understanding how the system actually works, that we can provide as close as possible to a purely positive approach to economics.  I know this is a bold task, but through focusing on the understanding of the monetary system we can then provide others with a foundation from which our problems can be solved…..


Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering asset management, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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58 Responses

  1. Colin, S.Toe says

    Agree on both the importance and the resistance of the Academe’s role.

    (Aside: Maslow did not really succeed; ‘humanistic psychology’ never developed scientific rigor, and had no presence at the U. of C. in the ’80’s’. The true successor to behaviorism was ‘cognitive psychology’, which was an improvement, but became nearly as limiting in its overemphasis on statistics, and avoidance of social and emotional aspects. Real progress since has come from outside the discipline – from the neurosciences. And your ‘temple/priesthood’ analogy is straight out of Weber – whose groundbreaking work has seen at best limited development in any of the social sciences.)

    The one factor you may be overlooking is real-world crisis/change. If the GFC/Great Recession is just a prelude to the kind of transformations the world saw in the half century or so after 1914, academics – and politicians – will have change forced upon them.

  2. Cullen Roche says

    Of course, “it depends”…. :-)

  3. geerussell says

    So if deficits are used to mix time with money, something good should come of it :)

  4. beowulf says

    “Unless we assume that as a country we will simply squander time and not use it to innovate and produce other things.”
    ha, squander time and not use it to innovate and produce other things =
    output gap and unemployment

  5. geerussell says

    There’s something else the CAD gives us:

    If you were unconstrained by time you could, in theory, consume all that the producer can produce. Theoretically, this chicken and egg story can go on forever. Of course, the greatest luxury of all is quite finite. We are always constrained by time. The entrepreneur offers us the opportunity to take advantage of the ultimate luxury by giving us more time.

    Unless we assume that as a country we will simply squander time and not use it to innovate and produce other things, it should be a net positive, no?

  6. JK says

    Thanks for the response Michael.

    It seems like in the story that you tell, when you have someone else make something for you, it builds their skills while yours (can) deteriorate.

    In the realm of international trade, a country like Saudi Arabia could be a good example. Suppose no one their worked or studied, they just sold oil to the world, collected money, and then imported all of their consumption.

    The problem then becomes if demand for oil every drops off, the Saudis have no “skills” build up?

    Bringing it back to the U.S. and China…

    Is there no problem with a current account deficit, even a very large one.. SO LONG AS the country with the current acccount deficit doesn’t turn into my hypothetical Saudi Arabia above. That is, if the CAD country invests wisely in it’s own population’s education and skills?

  7. Michael Sankowski says

    Well, I was going to respond to you with something like “The policy proposals aren’t really MMR, but I think…” but you beat me too it.

    One thing very important to understand is not everything is easily measured by money, and the CAD seems to have a bunch of issues related to non-monetary value.

    If you look at the math, a CAD is someone giving you something for free. If you look at the real world exchange, you’re giving up making something in exchange for having someone else make it for you.

    Now, before I make this point, I want to make a brief observation. I could pay you to work out for me, but the point of working out isn’t to increase aggregate muscle tone and health in the wider population. The point of working out is to increase my muscle tone and health.

    The CAD gives us real world goods, but sometimes the aggregate goods owned isn’t the most important thing. Sometimes making something has value above just the physical goods produced. Doing something allows the possible capability of doing something better, and this possible real world value does not get reflected in the market transaction of money for real world goods.

    Now, this is not in the accounting, but any pragmatic evaluation of exchange needs to take this into account. As far as I can tell, this value is entirely outside of any economic evaluation and school. This value is ignored even though economists will go through many years of schooling in areas of highly concentrated learning environments. You’d think they’d pick up their heads and see how geographic concentration of factors and skill enhancement by building on prior knowledge are important parts of an economic transaction.

    When I build something and sell it, I don’t just get some money, I also can improve my skills to build the next generation even better.

    Our friend Ramanan likes Lord Kaldors take on this, and I do too.

    You there Ramanan?

  8. JK says

    Sorry. It just occurred to me that I was asking for MMR policy proposals but one of the main reason of starting MMR was to get ouf of the prescriptive and stick to the descriptive.

    Can I rephrase my question? What is the danger in an ever expanding trade deficit with China?