Hoping against HOPE
from Susan Feiner
If you thought that the major journal in economics devoted to economic thought (History of Political Economy or HOPE) was devoted to thinking about the thoughts of the great thinkers in economics, you’d of thought wrong.
Big sigh.
The latest issue of the journal arrived in yesterday’s mail. Cracked it open eagerly, hoping against HOPE, I scanned the TOC. For 15 years this journal hasn’t had an article on Marx! —no need to think about his thoughts, right?—so I smiled when I saw “Comparative Advantage and the Labor Theory of Value.”
First page. Ricardo. Not Marx. Oh well.
Flipped to the bibliography. What! No Steedman. An article in the leading field journal for historians of economic thought that completely overlooks the work of Ian Steedman? Come on.
It is just not possible that neither the editors nor the reviewers of this journal are ignorant of Steedman’s work. He’s no touchy feely “radical.” He deploys the math beloved of economists when it shows how markets set us free. But Steedman’s work shows the opposite. That trade between nations can lead to “negative gains” (or, for the untutored reader, losses). That is, under perfectly reasonable assumptions ‘free trade’ between nations may make both nations WORSE off.
WTF! This is the history of economic thought? Suggested new journal title: History of Willfully Ignorant Economics (HOWIE).
Kicking myself. Reflecting. The surprise passes. Comparative advantage is a staple of economist’s fantasies. ‘Trade theory’ rests on thinking about exchange under conditions of permanent full employment. Drop this assumption and there’s nothing left to talk about.
Exercise over. Final exam cancelled. Go home.
Neoclassical economics is from the ground up such a compilation of absurd nonsense that neoclassical economists have to avoid any serious discussion about their assumptions (and even their logic sometimes). Any serious discussion would expose them to ridicule.
For the same reason it is so difficult to discuss most economic theories. They are pieces of nonsense embedded in a system where reality and the laws of logic are irrelevant and nonsense is the norm.
I think that is why real world economics and the World Economics Association are so important. Because in the field of economics there simply is almost no scientific discourse. It may sound strange but IMHO that is the way it is.
It is sad that this even seems to extend to HET.
NC is not “nonsense from the ground up.” The nonsense is a “harmonious” overlay that represses analytical results that don’t conform to the ideological program. The nonsense is a relic from pre-”political arithmetick” 17th century alchemical thinking that has become petrified over the centuries by the infusion of “free trade” and vulgar political economy truisms.
What governs the willful ignorance of economists fantasies is not a modern version of alchemy. It is literally a fossil of the old alchemy.
Well, whether or not neoclassical economics is nonsense from the ground up (I do think it is) would be a great topic for another discussion.
However any discourse governed by “willful ignorance”, as you describe it, is no longer a scientific discourse. And it is bad that even in the realm of HET willful ignorance seems to reign. I had always thought neoclassical economists removed HET from the curriculum precisely because it exposed students to non neoclassical thinking.
If my neighbor is unemployed, why would I do my own typing when I can earn much more avoiding the typing and hiring a secretary? If trade among countries makes them worse off, then why do they do it? Why do people not all grow their own food, if trade makes them worse off?
Fred Foldvary:
Nobody claims that trade never makes the traders better off. That would be silly.
Many do claim that trade always makes the traders better off. That is silly.
I don’t want to open a discussion about it in this place, but here are just some thoughts:
Ad 1: Suppose ten of my neighbours are unemployed and I do only need one secretary (or only one secretary is economically viable). What happens to the other nine neighbours?
Ad 2: Countries are not people. Maybe the trade makes certain persons in both countries better off and others worse off.
The reason people dont grow their own food Fred is because they can trade but if and when they cant (trade disruptions and disasters do happen) – one growing season is longer than it takes to starve. All countries should grow their own food as much as possible. Relying on global food markets is folly.
I’ve thought about this labor theory of value theorem : The only labor worth saving has already been invested wisely. Energy, environment and resources are what must be considered first in all other cases; this is what determines required labor intensity and shapes the entire civilization.
In contrast, corporatism harvests civilization and destroys the planet for resources.
If Portugal specializes in wine, even if cloth would cost less than in England, and England in cloth, even if wine (!) would cost less, everybody’s happy? not necesssarily in the same magnitude, otherwise income distribution world wide would not look so abysmally bad.We should remember that in barter, even if both traders are otimizing, they do so individually, which implies that equilibrium in the exchange is not optimum for the sum of both the traders: otherwise we would never understand why income distribution is always skewed.
PLeon
Even if Portugal specializes in wine and Englad specializes in cloth,
its just not that appallingly simple. Comparative trade compares two goods and ignores the multitude of other factors that affect trade except for the one thing that neoclassical economists have become so obsessed with (you guessed it – price price price). They ignore the weather, they ignore wars, they ignore time it takes for the two goods to be traded, they ignore just about every other variable and assume price is the ONLY driver of trade.
The US specializes in civil litigation and will pursue other countries who specialize on the basis they are being denied access to the markets of both cloth and wine. Similarly, the exporting airline or shipping company or insurance company has a large global monopoly (so tragically common these days) charges both the cloth companies and the wine companies to land their goods or for insurance or for exchange rate risk.
The now owners of both countries recently privatised airports recognising the lucrative trade that is passing through its airports, decides to up the landing fees and charges. Both cloth and wine goes up in price and both countries are trapped because they have permitted alternatives in domestic production to ail and die. Portugal is clothless without England and England is wineless without Portugal (now that is a tragedy!)
Dear all…
The other perspective that seems to be lacking in this discussion is the historical perspective of the economy itself (the object of study, not the analytical tools…). That, together with the «agents motivations»… What was right (or true) yesteryear may be wrong today or in the future. The case of the infamous Methween Treaty (that cut short, at its roots, the incipient industrialization process in Portugal) is a case in point.
IMHO, the issue of free trade being advantageous (or not) for all trading partners (nations) really depends on both geographical and historical circumstances, a condition that conventional neoclassical economics simply ignores. On the other hand, I contend that neoclassical economics is as wrong as euclidean geometry… How about that?…
All reasons why I never pursued Economics further, after a double-major MBA in Econ/Finance at one of the top 5 schools in the country. There seemed absolutely no logic in the Econ field. Lots of reasoning, but no logic. I kept arguing with my Professors about how all these things seemed wrong to me in both the theory and practice – and they just looked-down on me condescendingly, like, ‘Honey, just memorize the text.’ One notable exception … Robert Kavesh. God bless him!
Susan: “Steedman’s work shows the opposite. That trade between nations can lead to “negative gains” (or, for the untutored reader, losses)”.
@ #12. “Lots of reasoning, but no logic”.
This is the point, isnt it? Economists remain untutored in the logical foundations of mathematics. The existence of negative numbers only became established half a century after Adam Smith. For too many economists negative numbers still don’t exist, only positive quantities.