Sack the Economists

… and disband their departments

The honourable Alan Greenspan testifies before...

The honourable Alan Greenspan testifies before the House Financial Services Committee. (Photo credit: Wikipedia)

[My silence for some time here has been mainly because I was focussed on re-packaging my economic ideas in a form that might gain more traction.  So, there is a new book manuscript of the above title.  It will help to promote it (to publishers) if I have readers’ reactions.  Therefore, if you will undertake to give me feedback, I will supply you with the draft MS (120 pages, 2.2 Mb pdf).  You don’t have to be expert, it’s for a general audience and so I want feedback from that audience.  Most helpful to me will be comments on its readability and interest.  Of course any discussion of its arguments are also welcome.]

Here is the first part of the introductory chapter.  I will post more in a few days.

Chapter 1.  Economists Don’t Know What They’re Talking About

In 1994 Paul Ormerod published a book called The Death of Economics1.  He argued economists don’t know what they’re talking about.  In 2001 Steve Keen published a book called Debunking Economics: the naked emperor of the social sciences2, with a second edition in 2011 subtitled The naked emperor dethroned?3.  Keen also argued economists don’t know what they’re talking about.

Neither of these books, nor quite a few others, has had the desired effect.  Mainstream economics has sailed serenely on its way, declaiming, advising, berating, sternly lecturing, deciding, teaching, pontificating.  Meanwhile half of Europe and many regions and groups in the United States are in depression, and fascism is making a comeback.  The last big depression spawned Hitler.  This one is promoting Golden Dawn in Greece and similar extremist movements elsewhere.  In the anglophone world a fundamentalist right-wing ideology is enforcing an increasingly narrow political correctness centred on “free” markets and the right of the rich to do and say whatever they like.  “Freedom”, but only for some and without responsibility.

Evidently Ormerod and Keen were too subtle.  It’s true their books also get a bit technical at times, especially Keen’s, but then they were addressing the profession, trying to bring it to its senses, to reform it from the inside.  That seems to have been their other mistake.  They produced example after example of how mainstream ideas fail, but still they had no effect.  I think the message was addressed to the wrong audience, and was just too subtle.  Economics is naked and dead, but never mind the stink, just prop up the corpse and carry on.

Oh, but look!  The corpse is moving.  It’s getting up and walking.  Time to call in John Quiggin, author of Zombie Economics:  how dead ideas still walk among us4.  Perhaps he’ll show us how to shoot it in the head, or whatever it takes to finally stop a zombie.

Well, I think it’s clear we can’t be too subtle.  We need to speak in plain English, to everyone, and get straight to the point.  Economists don’t know what they’re talking about.  We should remove economists from positions of power and influence.  Get them out of treasuries, central banks, media, universities, where ever they spread their baleful ignorance.

Economists don’t know how businesses work, they don’t know how financial markets work, they can’t begin to do elementary accounting, they don’t know where money comes from nor how banks work, they think private debt has no effect on the economy, their favourite theory is a laughably irrelevant abstraction and they never learnt that mathematics on its own is not science.  They ignore well-known evidence that clearly contradicts their theories.

Other academics should look into this discipline called economics that lurks in their midst.  Practitioners of proper academic rigour, like historians, ecologists, physicists, psychologists, systems scientists, engineers, even lawyers, will be shocked.  Academic economics is an incoherent grab bag of mathematical abstraction, assertion, failure to heed observations, misrepresentation of history and sources, rationalisation of archaic money-lending practices, and wishful thinking.  It missed the computational boat that liberated other fields from old analytical mathematics and overly-restrictive assumptions.  It is ignorant of major fields of modern knowledge in biology, ecology, psychology, anthropology, physics and systems science.

Though many economists themselves may not realise it, economics is an ideology rationalised by a dog’s breakfast of superficial arguments and defended by dense thickets of jargon and arcane mathematics.  The ideology is an old one:  the rich and powerful know best, the rest of us are here to serve them.

The latest guise of this ideology is called neoliberalism (and also known as economic rationalism, market fundamentalism, Thatcherism, Reaganism and neoconservatism).  It espouses “free” markets and minimal government:  just the ticket for the rich and powerful to do what they want.  “Freedom”, in this world view, does not really mean freedom, it means freedom of the rich from restraints imposed by the rest of us, usually through government.  It means freedom to manipulate markets, the media and society for the benefit of a minority.  It severely constrains the freedom of most of us.  Neoliberalism is the sun-worship of the modern Pharaohs.

These claims may be a little controversial.  While many will instantly recognise truths from their own experience, others might say yes, but not all economists are so ignorant.  Well, it’s true I have overstated the case.  Only most economists are so ignorant.  So I’ll refer to mainstream economics, to distinguish it from various marginalised schools of thought and individuals, some of whom do actually have something useful to say about how economies work.  For the in crowd, I’m talking about neoclassical economics, the economics built around the abstract neoclassical theory, the one that predicts economies are usually close to equilibrium and market crashes are impossible.

However everything I have said is true about mainstream, neoclassical economics.  It is pseudo-science, and its adherents have no idea how economies work.  That is why they allowed the US sub-prime mortgage bubble to blow up and burst, precipitating the Global Financial Crisis, and why they are making things much worse with austerity policies.  Plenty of people saw the Global Financial Crisis coming, and warned about it, and plenty of people are now pointing out how austerity only makes things worse.  But mainstream economists are blinded by irrelevant concepts and gross ignorance, and can see none of this.

I do not mean to malign economists personally, they are undoubtedly genuine people wanting to improve the world.  However they have been sorely misled.  They have been pumped full of equations and required to master difficult mathematical manipulations.  This has left them and their professors little time to critically examine assumptions, history, relevant observations, other fields of knowledge and alternative possibilities.  Most will have moved into a busy job and never had much chance to reflect on such things.  However the profession collectively, and its leaders, are guilty of intellectual laziness, at best, and more plausibly of hubris.  University professors are supposed to be continually renovating their field, bringing in new knowledge and new approaches, identifying inadequacies, finding more useful conceptions.

If you think I am being a bit harsh, I am not alone in this judgement.  Here is a relatively “respectable” economist (meaning he was able to get at least a good second-rank academic job, at the University of Texas, in spite of his views).  His name is James Galbraith5, and yes he is the son of the famous iconoclastic Harvard economist John Kenneth Galbraith.

Leading active members of today’s economics profession… have formed themselves into a kind of Politburo for correct economic thinking. As a general rule – as one might generally expect from a gentleman’s club – this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen. … They oppose the most basic, decent and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not re-examine their ideas. They do not consider the possibility of a flaw in logic or theory. Rather, they simply change the subject. No one loses face, in this club, for having been wrong. No one is dis-invited from presenting papers at later annual meetings. And still less is anyone from the outside invited in.

This remains the essential problem. As I have documented – and only in part – there is a rich and promising body of economics – theory and evidence – entirely suited to the study of financial crisis and its enormous problems. This work is significant in ways in which the entire corpus of mainstream economics – and including recent fashions like the new “behavioral economics” – is not. And it brings great clarity to thinking about the implications of the Great Crisis through which we are still passing today. But where is it, inside the economics profession? Essentially, nowhere.

It is therefore pointless to continue with conversations centered on the conventional economics, futile to keep on arguing with Tweedledum and Tweedledee. The urgent need is instead to expand the academic space and the public visibility of ongoing work that is of actual value when faced with the many deep problems of economic life in our time. The urgent task is to make possible careers in those areas, and for people with those perspectives, that have been proven worthy by events. The followers of John Kenneth Galbraith, of Hyman Minsky and of Wynne Godley can claim this distinction. The task now is to increase their numbers and to reward their work.

There have been severe critics of mainstream economics for a very long time.  Steve Keen3 cites in particular Piero Sraffa6 writing in 1926, John Meynard Keynes7 writing in 1936, and Hyman Minsky8 writing in 1977, but he also recites the names Blatt, Garengani, Goodwin, Kalecky, Kaldor, and Veblen “to name a few”.  These people were not just criticising aspects of economics, they were saying that the central theory of free markets, which is known as the neoclassical theory, was wrong.

More recently, here is US economist and commentator Dean Baker9, co-winner of the Revere Award of the World Economics Association and co-director of the Center for Economic and Policy Research in Washington DC:

The news that the UK, with negative growth in the fourth quarter of 2012, faces the prospect of a triple-dip recession, should be the final blow to the intellectual credibility of deficit hawks. You just can’t get more wrong than this flat-earth bunch of economic policy-makers.

They’re pretty much batting zero. They failed to foresee the collapse of housing bubbles in the US and Europe and its consequent downturn. They grossly underestimated its severity after it hit. And their policy prescription of austerity has been shown to be wrong everywhere that applied it: in the US, the eurozone and, especially, the UK.

By all rights, these folks should be laughed out of town. They should be retrained for a job more suited to their skill set – preferably, something that doesn’t involve numbers, or people.

So most economists should be retrained for a job more suited to their skill set.  (But not for poetry, or we might end up with more Vogon poetry, the third-worst poetry in the universe.  On reflection, poetry relates to people and their perceptions, so economists can be ruled out of that profession too.)  If any economists can demonstrate that their favourite theory bears some passing resemblance to the real world, they should be allowed to apply for another job using some of their present skills, but not as an economist, nor in an economics department.

Economies are not separate from societies, much less dominant over societies.  Economies are the way societies make their living.  If there is any pretence of democracy, then a society can choose to be however it wishes, and the economy would then, sensibly, be tailored to support that kind of society.  So an economy is a subordinate part of a society.  In a functioning biosphere, a human society is in turn subordinate to the biosphere, at least if it desires its descendants to be around for anything like as long as its ancestors.

Therefore the term economics needs to be superseded by something more expansive.  The old-fashioned term political economy at least allows that human society is involved, if we generously interpret politics as the means by which we arrive at collective decisions.  So Departments of Political Economy could be allowable, at least until we arrive at a more concise title than the Department of People, Societies and the Ways They Make Their Livings.

The less benighted ex-economists might then apply to be Political Economists.  Many of them would still fall at the second hurdle, due to the culture shock of encountering scholarly integrity, whereupon they too would be consigned to the communes and salt mines.  Those few economists who made it into a new department would be stimulated and guided by their encounters with academics from other fields, who would bring knowledge, creativity and rigour.

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9 thoughts on “Sack the Economists

  1. Kevin Cox

    I agree the term economics needs to be superseded with a new name. If we think of economics as a product then we could look for inspiration to those who have introduced new innovations into a market place. Better still we could look for a word (or make up a word) that describes what economics attempts to study. Political Economics nor any other name that uses the word economics is a good idea. Economics is dead and it needs to be buried.

    We need a name that better reflects the human activity that economics attempts to describe. The word economics comes from the Greek words meaning “administrative rules of the household”. What we need is a word that will come to mean the administrative rules of co-operating communities. Perhaps there is something from biology and the study of ants and bees or the study of species that have a mutual dependence? Perhaps there is something from the work of people like Nowak who popularised the name SuperCooperators? Perhaps we can make up a word and register it as a domain name where people can freely discuss the rules of co-operating communities?

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  2. Geoff Davies Post author

    Interesting approach Kevin. I thought of “working together”, but that’s already taken: synergy. That would give us synergology. Ugh. What’s the latin equivalent? Co-operate perhaps. Also taken. Perhaps we should break from that approach and try Yolngu or Japanese or something. Euskadi (Basque) – they have the best cooperatives.

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  3. Tony Dickson

    Some thirty odd years ago I became frustrated with the way that the counter culture had appropriated Gaia theory; turning it into a mystical fantasy. It was obvious to me that aesthetics, sentimentality and ethics were no match for orthodox economic preoccupations or dogma.
    My response was to write an economic rationalists version of Gaia. Three years ago, inspired by the GFC, I dusted off the essay and updated it a little. It may be of interest (or not).
    I mention this because in it I addressed the same question as Kevin about the need for a different nomenclature with which to consider economics.

    The extract below is illustrative of my thinking.
    “It is my view that economics is not so much a dismal science as a Clayton’s one, in that like the Law, it is an entirely human construct. Current economic theory and practice gives every appearance of being wholly preoccupied with human affairs, to the exclusion of the “real world”. By “real world” I mean the biosphere upon which we are totally dependent, but which does not need us at all.
    This economic tunnel vision renders many assumptions and much analysis and modelling, quite arbitrary and subjective. Only by embracing the complex realities of the whole planet can economic methodology achieve a bona fide objectivity. This failure of process goes to the very core of our dissociation from the ecological systems that sustain us.
    Many years ago this economic self possession inspired me to appropriate the term “homocentric”. The usual definition of this word borrows from the Greek “homo” to provide the meaning of a common centre. Substituting the Latin meaning of “homo” gives an entirely different, but very apt description of the disciplines of both economics and law. Indeed, our increasingly urban society has become almost entirely homocentric.
    [It should be recognised however, that unlike economics, legal innovation has made significant contributions in environmental law, as well as the nascent conceptual development of animal rights.]
    While on the subject of linguistics, it is worth considering another comparison between the Law and economics, the second part of which derives from the Greek nomos, meaning “law”. It is a tenet of legal wisdom that the essence of the Law is experience (i.e. custom) and not logic. Contrast this with the alternative to economics: ecology, the essence of which, as its name suggests, is the same as other “real” sciences. My point is metaphorical and admittedly somewhat laboured, but its main purpose is to introduce the idea of ecology as the new economics. ”

    I have only just discovered this blog, but after only a brief sample I can see we are of one mind.
    Are you familiar with the recent statement by Lord May (ex chief scientist of GB) to the effect that industrial economics is “a faith based discipline”?
    Re the extract posted, whilst I agree entirely with your sentiment, I think it would be more persuasive if you gave the reader a more substantive indication of why you are so at odds with the discipline of economics. It is difficult to find the balance, but the generalities may loose the casual reader.
    I look forward to delving deeper into your writing.

    Cheers, Tony.

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  4. Dave Gordon

    You have it almost right, the sad reality is that the “old boys” who run the Academic Economics Departments know exactly what it is they are doing. They are fulfilling their role as the learned ones who justify the greed and avarice of the powerful. As pointed out by Noam Chomsky and others. Humanities great problem is that our democratic institutions have been overrun by Sociopaths. As have the Economics Departments of our Governments, universities etc. There has never been any great social change in society without some resort to violence, the flag of the victors fly over the ruins of society in most cases. These people will not let go of what they consider their rightful place in society willingly.
    The fact that life is symbiotic at almost every level is the key to the undoing of the evil of “mainstream economics” nothing happens without the rest of us. Just stop!!! Everything, go and have a picnic, and stay having a picnic until democracy is finally achieved.
    By the way I loved reading The Nature of the Beast.
    Regards Dave Gordon.

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  5. Tony Dickson

    Dave.
    I am not sure I fully agree with you. “Over run by sociopaths” seems a little hyperbolic; not exactly a novelty for Noam at his height. However, as I understand it, sociopathy is a pathology at the extreme end of a continuum of narcissism. I would certainly agree that politics is an occupation of some attraction to the self possessed. It may well be that as our society becomes ever more self possessed and self indulgent, it is inevitable that our political culture reflects the trend.
    It is at least arguable that this affluence induced narcissism, together with technological innovation is distorting our concept of the very nature of “democracy”. The twenty-four hour news cycle, constant polling and social media have led many people to view democracy as being the immediate expression of the desires of the majority. My fear is that mob rule is almost as large a threat to “democracy” as is fascism. Of course, it is easy to view one as the tool of the other and the Nazi’s did have a penchant for dressing up.
    I tend to the view that the Westminster System of governance is not a bad one. Rather than mob rule, it is based on the idea that the people elect leaders, who then lead. If that leadership is considered unsatisfactory, the people have a periodic opportunity to elect new leaders.
    Essentially, democratic polities get the governance they deserve; cynical manipulations by the capitalist media notwithstanding. The Australian electorate is wilfully ignorant, apathetic, self interested and politically illiterate. Alan Jones understands this perfectly well. I agree with Chris Master’s notion of citizenship, as articulated in “The Years That Made Us”, which may be contrasted with the more urbanised “consumers” of today.

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  6. Pingback: The Economics of Innocent Fraud : Galbraith right or wrong? | K. Krishnamurty

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