A lead article on page 1 of the Wall Street Journalearly this week said that the price of crude oil is not much influenced by inventory levels or demand patterns but mainly is due to stock movements that go up and down for technical reasons. Exactly! I have know this all along.

Isn’t it obvious? In the first place, there is no “law” of supply and demand. What’s in the ground is in the ground and it doesn’t fluctuate daily. When economists speak of the supply of oil, they mean only what oil producers release in accordance to what they perceive to be in their own best interests. Laymen are right to be confused by this quasi-technical sense of the word “supply.” Why bother calling that by the misleading name “supply”? That word should be reserved for long term shifts of the true availability of a commodity. I would prefer to call the word “supply” as it occurs in “supply and demand” by the the term release. As for “demand,” there is no such thing. No one says, “Give me 10,000 barrels of oil or I’ll blow your head off.” What fluctuates is interest in purchasing a commodity (for a variety of reasons, including, I suppose, its price), not an insistence upon having it. Thus: release and interest is a better description of what happens than the metaphor supply and demand.

In the second place, economics is a pseudo science and the expression “law of supply and demand” deceives people into supposing that price shifts have a certain inexorability. No such thing. Suppose I have the last 5 pencils in the world and millions of people want one of them. How does that “drive” the price up? Nothing stops me from holding a lottery and giving the pencils away at the same old price. Economists say that would be foolish and like to define rational man as “homo economicus”, meaning that it is irrational not to proceed in a self-interested way. Moreover, they say nobody does proceed irrationally, and that is why price movements are inexorable. This is the prevailing myth of economics and, in particular, of capitalism.

Economists are intruding into the world of psychology. Economists, envious of physical scientists, try to blow us away with fancy “utility functions” and other mathematical tools, all designed to make it seem they know something about human behavior the rest of us don’t. Instead of “homo economicus,” we could just as easily have homo reciprocans, which states that human beings are primarily motivated by the desire to be cooperative, and improve their environment. That, too, would be a mistake because it goes too far in the opposite direction. Humans are too complex to sum up as just one thing and not another.

What is true of oil price movements is true of other commodities as well. We should get rid of such metaphors as “drives” and “law,” and recognize that there are only tendencies, with so much randomness in them that they cannot be summed up by false and glib pronouncements by economists. As it stands, is it any wonder that economists and market “analysts” are so much better at post hoc explanations than at genuine ones?

Several readers criticized my two posts on socialism. I am surer than ever that I was right. Comes the revolution, we won’t eat caviar but we will have good bread on every table.

CLICK HERE, please.