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Superior Economists

from Peter Radford

Actually the paper I just read is called “The Superiority of Economists”. It’s another analysis of thee economics profession by Marion Fourcade, this time in association with Etienne Ollion and Yann Algan. It is well worth reading and fits neatly in the same analytical tradition as Fourcade’s 2009 book “Economists and Societies”.

The problem is that none of it is particularly surprising. The point being that economists, by asserting their superiority vis other social sciences have exposed themselves to greater scrutiny and criticism than their peers. This has, apparently, induced more soul-searching within economics than in those other social sciences. Along with the air of superiority that economists exude due to their self-proclaimed intellectualism, comes a big dollop of insecurity.

Which is a point worth making: economists, for all their arrogant assertion of the truths of their ‘science’, are a little insecure about something. Hence, perhaps, their brashness and lack of interaction with their peers. One of Fourcade’s findings is that economists are more isolated as a profession than those around them. They quote fewer non-economics papers and books in their own work, and are almost haughty in the disregard of insights that other social sciences take very seriously.

Which we all know.

Another point worth drawing attention to in the paper is the impact of finance and business schools. Plenty of us have discussed the emergence of the pseudo science that is modern finance, and its constant reciprocity with neoclassical economics. They are both based on absurd assumptions about human behavior, yet because of their insular character are almost immune to empirical attack. On the contrary, as Fourcade et al spell out, finance in particular has been a performative activity over the last thirty years as it attempts to bend the real world to approximate the theoretical, rather than trying to reflect or explain that real world. A torrent of so-called financial innovations are the end result of this performativity. We know how stable they all turned out to be.

Now here’s my nit-picking with the paper.

Buried right at the end, in the concluding paragraph, is this statement:

“Most modern economists have a strong practical bent. They believe in the ideal of an expert-advised democracy, in which their competence would be utilized and on display in high profile, non-elective positions in government and other institutions.”

I don’t agree. Economists don’t want an “expert led democracy” at all. They want a society led by Platonic philosopher kings, with economists being those very folk. Economists, those on the right anyway, don’t have time for democracy.

As you know, I have been on quite a kick lately [here, here, here, and here] criticizing mainstream economics as being fundamentally anti-democratic. I base this assertion on the utopian thrust in economics to describe an apolitical method of resource distribution – one in which politics, as expressed through government action, can only make things worse. As I see it the the centrality of markets in economic theorizing is an attempt to eliminate politics. And, since the emergence of democracy as our standard way of expressing politics institutionally, this implies at least a disdain for said democracy, if not an outright contempt.

Of course I realize that other economists, good for them, openly acknowledge the many flaws in real world markets. Indeed, so many such flaws have now been identified that we might reasonably ask which is the exception: the flawed market or the supposed flawless version? My money would be on the flawed one, but that’s for elsewhere.

The problem is that, as recently evidenced in Deirdre McCloskey’s critique of Piketty, hard core right of center economists just can’t let go of the flawless market version their beloved theory describes. Such flawlessness is not the result of some deep analysis, but is, in truth, the desired end point established a priori by their ideological bent. A bent that desperately needs the result of their theorizing to result in the establishment of perfection in markets and nothing but imperfection in governments.

Which is to say that such economists want to preclude the possibility that democratically elected government could possibly dabble around in the economy to good effect. This is an expression of simultaneous distrust of democracy and idolization of markets. It can be thought of no other way.

But that’s just me griping again. I appreciate Fourcade’s continued forays into the sociology of the economics profession. They help me understand the extent of the isolation the profession wallows in, and how far we have to go before the collective social sciences offer us a deep and holistic look into civil society. Unfortunately economics is holding us back at present. I wish that were not the case.

  1. December 3, 2014 at 1:41 pm

    Reblogged this on Taking Sides.

  2. Geoff Davies
    December 5, 2014 at 2:39 am

    “This is an expression of simultaneous distrust of democracy and idolization of markets. It can be thought of no other way.

    But that’s just me griping again.”

    Don’t sell yourself short Peter. Your conclusion is spot on, not just the griping of a malcontent, which they’d like to portray it as.

  3. December 7, 2014 at 10:26 am

    Gold-making, wine from water, M-C-M+, perpetuum mobile, free lunch, beating the stock market, and the perennial human dream
    Comment on Peter Radford’s ‘Superior Economists’

    The psychological and sociological underpinning of the economists’s role in society is based on the archetypical idea of something-for-nothing or the creation of value out of base stuff. In contradistinction to medieval gold-makers, however, economists claim that they are scientists and that they have found the principle of wealth creation. This guarantees that economists always have an interested and impressible audience.

    “… in the introduction to Book IV we read that Political Economy ‘proposes to enrich both the people and the sovereign,’ and it is this definition which expresses both what Smith wanted above everything and what interested his readers more than anything else.” (Schumpeter, 1994, p. 186)

    Of course, there was always the problem of credibility since physics has shown that because of the law of energy conservation something like value creation is impossible in principle. Physical reality is a zero sum game (with entropy ignored). This irritation was defused with the assertion that economics, too, is a science.

    “That Political Economy is a science which teaches, or professes to teach, in what manner a nation may be made rich. This notion of what constitutes the science, is in some degree countenanced by the title and arrangement which Adam Smith gave to his invaluable work.” (Mill, 1874, V.7)

    What, then, turned out to be the economist’s magic formula? It was exchange that squared the circle. Two agents exchange equivalents (remember physics) yet both increase their utility. No swindle, no exploitation, no environmental degradation, win-win all around through reallocation of goods. The elementary two-person value creation is then multiplied enormously by market exchange.

    What about the moral side of richness? The economists job description strictly excludes moralizing.

    “It has been well said by M. Say that it is not the province of the Political Economist to advise — he is to tell you how you may become rich, but he is not to advise you to prefer riches to indolence, or indolence to riches.” (Ricardo, quoted in Redman, 1997, p. 303)

    That the scientific content of economics was rather poor from the very beginning was not much of a problem.

    “But though the Wealth of Nations contained no really novel ideas and though it cannot rank with Newton’s Principia or Darwin’s Origin as an intellectual achievement, it is a great performance all the same and fully deserves its success.” (Schumpeter, 1994, p. 185)

    After all, anybody can see that something-out-of-nothing works on the stock market, the real estate market and other less spectacular places. But there is no free lunch (remember physics). What can be expected from non-economists? Should they care about whether general equilibrium theory is nonsense or not? As long as no economic crisis proves the contrary, the economists’s stories and claims are socially accepted.

    What about the scientific claims?

    The fact of the matter is, that economists have no scientifically valid theory about how the economy works.

    “Surely the greatest oddity in contemporary economics, granted that ‘Smith’s Problem’ is the central issue of economics, is the absence, more than 200 years after the publication of Smith’s Wealth of Nations, of an intellectually satisfying account of the modus operandi of the ‘invisible hand’; so the question whether actual monetary exchange economics are in some relevant sense self adjusting … not only remains to be resolved, it has yet to be seriously addressed.” (Clower und Howitt, 1997, p. 24)

    According to scientific criteria economics is a failure. Neither Classicals, nor Walrasians, nor Marshallians, nor Marxians, nor Keynesians, nor Institutionialists, nor Monetary Economists, nor Austrians, nor Sraffaians, nor Evolutionists, nor Game theorists, nor Econophysicists, nor RBCers, nor New Keynesians, nor New Classicals ever came to grips with profit (cf. Desai, 2008). Hence, ‘they fail to capture the essence of a capitalist market economy’ (Obrinsky, 1981, p. 495). See also: (2014b; 2014a).

    Economics is a proto-science and still stands where physics stood in the Middle-ages before the elementary concepts of force and mass were properly defined and clearly understood.

    The economist’s combination of sense of mission, flawed theory, and self-delusion is — not exactly superior — but certainly unique among the sciences.

    Egmont Kakarot-Handtke

    References
    Clower, R. W., and Howitt, P. (1997). Foundations of Economics. In A. d’Autume,
    and J. Cartelier (Eds.), Is Economics Becoming a Hard Science?, pages 17–34.
    Cheltenham, Brookfield, VT: Edward Elgar.
    Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume
    (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave
    Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=
    pde2008_P000213.
    Kakarot-Handtke, E. (2014a). Economics for Economists. SSRN Working Paper
    Series, 2511741: 1–29. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=
    2517242.
    Kakarot-Handtke, E. (2014b). The Three Fatal Mistakes of Yesterday Economics:
    Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792.
    Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On
    the Definition of Political Economy; and on the Method of Investigation Proper
    To It. Library of Economics and Liberty. URL http://www.econlib.org/library/
    Mill/mlUQP5.html#EssayV.OntheDefinitionofPoliticalEconomy.
    Obrinsky, M. (1981). The Profit Prophets. Journal of Post Keynesian Economics,
    3(4): 491–502. URL http://www.jstor.org/stable/4537615.
    Redman, D. A. (1997). The Rise of Political Economy as Science. Methodology and
    the Classical Economists. Cambridge, MA, London: MIT Press.
    Schumpeter, J. A. (1994). History of Economic Analysis. New York, NY: Oxford
    University Press.

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