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Economists: A Profession at Sea

from Edward Fullbrook

This week’s Time magazine, of all places, has a splendid hard-hitting longish article by Robert Johnson (Institute for New Economic Thinking).  It includes an acknowledgement that a prestigious segment of the profession has been financially corrupted.  Here is some of the article followed by a link to the remainder.

Economists: A Profession at Sea

How to keep economists from missing the next financial crisis.

By Robert Johnson

After the financial crisis of 2008, the Queen of England asked economists, “Why did no one see the credit crunch coming?” Three years later, a group of Harvard under­graduate students walked out of introductory economics and wrote, “Today, we are walking out of your class, ­Economics 101, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.”

What has happened? Rebellion from both above and below suggests that economists, who were recently at the core of power and social leadership in our society, are no longer trusted. Not long ago, the principal theories of economics appeared to be the secular religion of society. Today, economics is a discipline in disrepute. It’s as if our ship of state broke from its stable mooring and unexpectedly slammed into the rocks. How could things have gone so spectacularly wrong? And what can be done to repair economics so economists can play a productive role in helping society?

As the Oscar-winning documentary Inside Job illustrated, there is a very lucrative market for false visions of financial-market behavior that legitimate the desires of participants to be unshackled and make more money. But good policy prescriptions are public goods that represent the social good and not just the concentrated financial interests. Unfortunately, as economists beginning with the work of Adam Smith have repeatedly shown, public goods are under­provided in the marketplace. In addition, the reputation of the economics profession is itself a collective good, and those who have tarnished it are not adequately penalized for the damage they do to their fellow professionals when they accept large sums of money in return for marketing a perspective that benefits vested interests.

These are problems that some within economics have been aware of for a long time, but the discipline as a whole has been unable to address them. The onus is on the profession to face these challenges and help lead society off the rocks.

How to Save Economics

first, economists should resist overstating what they actually know. The quest for certainty, as philosopher John Dewey called it in 1929, is a dangerous temptress. In anxious times like the present, experts can gain great favor in society by offering a false resolution of uncertainty. Of course when the falseness is later unmasked as snake oil, the heroic reputation of the expert is shattered. But that tends to happen only after the damage is done.

Second, economists have to recognize the shortcomings of high-powered mathematical models, which are not substitutes for vigilant observation. Nobel laureate Kenneth Arrow saw this danger years ago when he exclaimed, “The math takes on a life of its own because the mathematics pushed toward a tendency to prove theories of mathematical, rather than scientific, interest.”

Read more: http://business.time.com/2012/01/19/economists-a-profession-at-sea/#ixzz1ju8eAEzK

  1. January 19, 2012 at 5:10 pm

    The issue is more problematic than stated by the author. The problem is a fundamental one. It is that economics, as taught by the Neo-liberals, is on wrong footing. It is basically a science fiction based on so many unrealistic assumptions-including perfectly competitive market, perfect information, independence of future and current costs and prices…etc.

    With science fiction one can come up with a story, but of course one can not predict the future!! And it does not help the current situation either.

  2. January 19, 2012 at 5:18 pm

    The profession has been a flag waver for the oligarchy ever since (and including) Adam Smith

    • benp
      January 20, 2012 at 10:48 am

      Er, Karl Marx?

  3. Alice
    January 20, 2012 at 10:11 am

    The suggestion that the economics profession has been financially corrupted is correct along with many governments, government departments and lower levels of government like local councils.

    Once upon a time in my distant memory it was considered very inappropriate for public servants to mix it with private business interests.

    It is inappropriate because corruption was the risk then behind the moral and ethical and practical division between the public sector and the private sector and that is an important stance we somehow now seem to have forgotten, giving rise to such corruption.

  4. January 20, 2012 at 4:08 pm

    Corruption is not only financial. A lot of corruption in academia, and a lot of the pure fraud that goes on under the banner of “rigor” and “scientism” and physics–like penis–envy, has to do with the kinds of personalities that seek power, audiences, status, avoidance of tangible work, structure and the interests they acquire: narcissism, megalomania, egomania, petit-bourgeois individualism, posturing, faux certitude, backroom intrigue, cronyism, nepotism, ideology, quid-pro-quo-ism, etc. The old saying that “academic poitics is so vicious because the stakes are so small” is incorrect in that the stakes, real versus faux education among other things, are not so small at all even if some of the academics demonstrate themselves often to be so small and petty.

    One cannot reform a funamentally corrupt paradigm and 3 x 5-card idea of epistemology and science from within that which is fundamentally rotten in nature, structure, intent and application. And it finally comes down to the old union song: “Which side are you on?” because any “neutrality” or purported “value-free” “Science” with a cap[ital “S” is the comfortable and safe–for awhile–“neutrality” of an insulated moral eunuch and petit-bourgeois careerist.

    Neoclassical stuff is not just rhetoric, ideology or “economics as religion”. It is far more treacherous in its axioms, hypothetico-deductivism, mathematics adding more mortis than rigor, rhetorical intentions and applications in policies. It represents a mental prison into which undergrads are often confined without their awareness while those who propagandize the theoretical system know exactly what they intend and what they are doing–and calling it all “education”.

  5. January 20, 2012 at 6:12 pm

    I agree with you entirely Jim. I say religion exactly because the Neo-liberals have certain framework of mind which they think it is “god given”.

  6. March 25, 2012 at 9:07 pm


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