Thoughts and actions
Recently, I’ve been questioning a lot about the decisions I’ve made in life. Without a doubt, some things I’ve written online have had an impact—temporary or permanent—on my (future) career and life overall. My genuine search for answers to fundamental puzzles in money, banking, and interest rates has led some to label my economic views as “heterodox,” a term I only heard from a friend two weeks ago on a train from Semarang to Jakarta. At this point, I still can’t be certain that my current answers to these puzzles—reflected in everything I’ve said or written—are correct. My views are constantly evolving as I meet new people, read new books, and crunch new data. This is probably the hardest part of learning social sciences.
My previous background in software development was much simpler. It was easy to tell if you were moving in the right direction: code either works or doesn’t work. Economics, on the other hand, is a social science where it’s very easy to get lost. Theories rarely fit real-life phenomena. I remember a couple of semesters ago, my professor in an Indonesian economic history class, Prof. Dorodjatun Kuntjoro-Jakti, a prominent Indonesian economist, told the entire class: “In theory, there’s no difference between theory and practice, while in practice there is.”
My pursuit of answers in monetary economics also led me to question why universities teach what they do today. Their fundamental mistakes in explaining how the banking business truly works and how money is created are so profound that I realized I couldn’t make any progress without building my foundations from scratch. This meant delving into books from decades, even hundreds of years ago, drawing insights from figures like Henry Dunning Macleod, Joseph Schumpeter, and Hyman Minsky, many of whom are largely forgotten in modern economic discourse.
I mostly blame the Federal Reserve, the International Monetary Fund, and central banks in general for this matter. Their textbooks, statements, and policies have led to this confusion. I find monetary economics—compared to other fields in economics—full of jargon and complex transmission mechanisms. But somehow, I don’t see that as a coincidence. It is a strategic effort to preserve their power. As John Kenneth Galbraith put it, “the study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it.”
Most people don’t know where their money really comes from. Ask any random Indonesian on the street or on commuter lines “who creates money?” and they’ll likely say Peruri (the mint), Bank Indonesia (the central bank), or admit they don’t know. Yet, the vast majority of money is created out of nothing by commercial banks when they make a loan. If someone has the ability to create at no cost something anyone can use to buy anything they wish to possess, they most probably won’t tell anyone how they do it. Money is a sleight of hand, and magicians never reveal their tricks.
This realization has made me an acute skeptic, especially in economics and politics. I’ve often thought, “What did I miss? How did I become so skeptical? Is this skeptical thinking good for me or my career?” Just a week ago, a friend from work, who was just accepted into a top American economics master’s program, told me my career would surely be stalled if I kept writing about these “heterodox” views, despite my genuine search for truth.
For a while, I’ve been wrestling with the question of optimism versus skepticism about the status quo. But somehow I woke up this morning at 1:30 AM for no reason and realized I’d been asking the wrong question. It’s not about whether I’m skeptical or optimistic about the status quo; it’s about what I do with it. As Linus Torvalds famously said, “Talk is cheap, show me the code!”
I believe everything I’ve written so far is supported by sufficient empirical evidence, based on what I’ve learned, or at least rests on a logical framework consistent with real accounting practices. I am still very prone to errors; I can easily misinterpret data or incorrectly apply empirical methods. But the core question now is whether I am a mover or a spectator in this game, regardless of the veracity of the status quo. It’s incredibly easy to write things these days. With AI, a five-year-old can be more articulate than Shakespeare, or something to that effect. However, the genuine effort required to collect, analyze, and draw insights from data still qualifies someone as a mover, even if the insights derived are incorrect. Again, that’s the messy part of social science.
The choice between being a mover and a spectator, and between being a skeptic and an optimist, are entirely unrelated. The most crucial aspect of being a mover is their genuine effort to challenge the status quo. The results of this effort usually determine whether they eventually become a skeptic or an optimist. I once emailed Olivier Blanchard, the author of a prominent macroeconomics textbook, about the Phillips Curve, a relationship between inflation and unemployment I’ve repeatedly found difficult to identify in Indonesia. He responded to my email with data from the United States, which I found rather uninteresting. But ultimately, I still can’t even come close to replicating his findings on the Phillips curve for the Indonesian context. That, perhaps, makes me a skeptical mover and Blanchard an optimistic mover. Actions differentiate movers from spectators, while the results, outcomes, or findings we choose to believe separate skeptics from optimists.
It’s important to note, however, that movers don’t necessarily have a net positive impact on society or on their personal careers. However, from a broader perspective, being a mover is far better than being a mere spectator—someone who accepts the status quo without question. Spectators are those who don’t ask enough critical questions. They simply put their heads down and study without questioning whether what they’re learning is true or even remotely useful. They might achieve good grades and successful careers. But they pose a greater threat to society because they amplify the biases inherent in the status quo. If the dominant paradigm recommends poor economic policies, spectators will almost certainly make things worse.
Although I wasn’t entirely satisfied with Blanchard’s answer, the final line of his email was quite interesting:
“Continue to question facts and statements. This is the sign of a good researcher.”