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Tower of Babel

from Peter Radford

I have quoted Gombrowicz before, allow me to repeat myself – or, rather him, – once more. Only this time at more length:

“I stopped by the cafe where a group of young poets, Concreto-Invencion (or maybe it was the group Madi), gather every week. There were always ten poets yelling at each other in a passionate exchange at one of the tables. Yet this cafe has terrible acoustics and at this hour is full of people. You can’t hear a thing. So I said: wouldn’t it be appropriate to move to another cafe? … but these words drowned in the general racket. So I shouted them again, once, twice, and I kept on shouting into the ear of my neighbor until I realized that they were probably all shouting the same thing – but they could not hear each other. Strange people these poets. To gather together every week in one place in order not to be able to make themselves understood in the matter of moving to another cafe …”

I have the same reaction.

Non-mainstream economists seem to gather together for the sole reason of exchanging the same opinion all the time. That opinion bounces back and forth symbolically. It becomes a totem of allegiance. It is invariant. Indeed it is the one thing we can rely upon: mainstream economics – whatever that truly is – sucks. It is absurd. Silly. Unrealistic. It does grave injustice to the world as we know it. Yet it endures.

Its endurance is abetted, of course, by its critics who take little responsibility for discussing something else. Like their own ideas. Or those of others who might have useful input into a new economics, but who aren’t economists. Like historians, for instance.

Now, I realize I am doing great disservice to those who have dedicated their lives to living on the fringes of what passes for economics. For this I apologize. But we must progress. Plurality is perilously close to babel too. We must be careful that we do not choose plurality for fear of making a choice. There are wrongheaded heterodox ideas too. They must be weeded out. Or ignored.

For this latter ability – ignorance – we can lean heavily on the lessons learned by the mainstream economists: they have developed a supreme capacity to ignore anything they find inconvenient. They simply sweep it aside contemptuously as having no great import. They then march onwards secure that their ignorance provides them with sufficient cover against the charge of disregarding an issue. Such issues, they argue on these occasions, were examined and cast aside as unimportant.

High amongst the pantheon of those given the task of this incorporating ignorance into the mainstream was Milton Friedman. Indeed there are moments when I see Friedman as leading the charge towards ignorance.

Why am I thinking all this?

Because I have just read the review of “Saving Capitalism: For the Many, Not the Few” by Robert Reich, in the Holiday issue of the New York Review of Books written by Paul Krugman. Deep inside this review Krugman suddenly springs open a door onto the ignorance of which I speak when he says this:

“Economists struggling to make sense of economic polarization are, increasingly, talking not about technology but about power”

As if any discussion of the economy could possibly ignore power. Krugman goes on to to argue that power, in its suitably cleansed personas and technically neutered guises of monopoly, monopsony, or oligopoly have always been part of the mainstream’s analytical arsenal. Then he says:

“But what does this matter? Milton Friedman, in a deeply influential 1953 essay, argued that monopoly mattered only to the extent that actual market behavior differed from the predictions of simple supply-and-demand – and that in fact there was little evidence that monopoly had important effects.”

Friedman had a habit of writing ‘deeply influential’ essays that exonerated economics from taking reality too seriously. After all his preferred system of thought operated far more smoothly if we all simply assumed it as being right all along, and that any glitches could be ‘safely ignored’ as irrelevant. Such ignorance, as they say, is bliss. Especially if it expedites the incorporation of all that fancy mathematics we want to display in order to demonstrate the rigor of our work.

What is particularly sublime in Friedman’s intent is to ignore as much as he could about the actual workings of the origins of supply. Economists generally fall into this trap so perhaps I ought not blame Friedman too much. Supply in maintream economics is generally distorted and simplified out of recognition until it pops up as a function and not an activity or process subject to the whims of power.

This contrivance – a deliberate veil of ignorance over ugly reality – is necessary in order to facilitate the smooth workings of models that subjugate all else to the magic of markets. For, if we want to believe that outcomes in our economy are all the result of ‘forces’ that are both inexorable and objective, and are thus unarguably and unassailably ‘fair’ or ‘efficient’, we must first of all prevent the taint of power intruding into their formation.

And monopoly is not just a taint, it is a great big blot.

So we treat it as an exception set aside for those who are curious to go study at their leisure. Meanwhile we assure the less curious that the market – which without the taint of power is now portrayed as a warm bath of impersonal objective interaction – cannot be improved upon. It just cannot.

Unless we are at business school where we teach that the market exists to be manipulated in whatever way we like in order to extract every last drop of ‘profit’. It is not that warm bath but is a vortex of dastardly competition, corporate intrigue, and manipulation. In other words it is a veritable clearing house for power relations.

And since the real world of supply is more affected by those who are trained to distort markets than by those who are trained to adore markets, guess which education reflects the real world?

All economics, every last part of it, ought to begin with power relations as a central aspect of explanation. Power is not an exception. It is the rule.

But now I sound like one of those poets in Gombrowicz’ favorite cafe: shouting myself hoarse with exactly the same message that my fellow poets are also shouting.

And what’s the point of that?

 

  1. December 1, 2015 at 8:25 pm

    Thanks for the comments about historians. Most troubling for me, as a historian about economics is that economists, even non-mainstream ones assume that what they think they perceive and “know” is just simply there, required no actions on the part of anyone to be there, and will be there even if the economist turns her/his gaze to something else, which is assumed to “be there” just the same. Historians simply can’t do this. Historians are confronted with thousands (perhaps millions in this age of super data) of streaming points of “something.” Printed materials, from newspapers to journals to government reports; “eyewitnesses;” journalist reports of many sorts, court actions, laws, etc. How to make some sense of these is the first question in the historian’s mind. The parts have no inherent logic. Historians use time, the passage of time to sort them out, put them in boxes, and then try to negotiate some sort of “story” out of them. But contrary to what even many historians want to believe, and many economists it seems have to believe human life is not a linear, beginning to end “story.” It is many possible stories, depends who telling them. Once that is recognized then it’s possible to write history with some sense of humility and respect, and some usefulness. Economists largely write only one story, and then wonder why many others outside economists can’t or won’t follow it. And rather than changing their story, economists simply ignore or denigrate those who can’t follow the “logic of simply economic reality.”

  2. December 1, 2015 at 9:57 pm

    Wait! Let’s go back to that loud cafe. It was wonderful to be in such boisterous agreement. I saw one woman with oink cheeks sit down so enthusiastically she and her chair went over backwards. She held her drink with not the slightest of spill — and graciously accept instant help to her feet.

    The entire establishment grew silent as she raised her café olé. We need a new story, she said into the inviting silence. We need to model infinitely accelerating qualities of cosmic biology.

    The silence remained stunned. What kind of future relieves Earth stress with a gradually declining population? Bedlam returned. Organic cacophony wove into living human sculpture.

    Human capitalism capitalizing on human resources. Maximum health, education, fun and security to live free yields a gently declining population enjoying rebounding Earth health. Simple accounting has been obscured by charlatans seeking fame and wealth.

    Economists have a new story to write. It is about eco. When it is done, economics will be more than science, it will interact with government in the information age as a caretaker of democracy. Economics will become the sixth of a seven branch government.

  3. December 2, 2015 at 10:13 am

    Economics is a scientific zombie waiting to be put down
    Comment on ‘Tower of Babel’

    Heterodox economists sometimes wonder why Orthodoxy, which is patently absurd/silly/unrealistic, endures (see Intro). The sad fact of the matter is that it is clueless Heterodoxy itself that keeps obsolete Orthodoxy straying around.

    Orthodox economists are well aware that their stuff is junk but they know also that Heterodoxy cannot do better. Hence, there never was any lack of sneering challenges “… if you think you can do better with a non-neoclassical model …, then you are quite welcome to try.” (Boland, 1992, p. 19)

    Obsolete Orthodoxy endures for one single reason: the lack of something better. Orthodoxy is a scientific zombie waiting to be put down, however, “There is no evidence to suggest that economists abandon degenerating programs in the absence of a progressive alternative.” (Weintraub, 1985, p. 148)

    Obsolete Orthodoxy clutches at a shipwreck and cannot let loose. “There is no alternative that is so obviously superior that it would justify everyone abandoning the current orthodoxy.” (Hausman, 1992, p. 255)

    Economics is still at the proto-scientific stage of ‘Babylonian incoherent babble’ (Davidson) because of a manifest ‘failure of reason’: “… we may say that the … omnipresence of a certain point of view is not a sign of excellence or an indication that the truth or part of the truth has at last been found. It is, rather, the indication of a failure of reason to find suitable alternatives …” (Feyerabend, 2004, p. 72)

    A sure indicator of Heterodoxy’s own disorientation is the plea for pluralism — a pluralism of admittedly false theories, that is. Because “If you believe in the correctness of your ideas, you do not want pluralism; you want your ideas to win out because they are correct.” (Colander et al., 2007, p. 308)

    An explanation of the failure of economics, though, is by no means an exculpation. Economists violate scientific standards on a daily basis by the endless recycling of refuted theories “… suppose they did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.” (Hands, 2001, p. 404)

    This malpractice is long known but has never been rectified “In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941, pp. 369-370)

    The tragedy of Heterodoxy is that it is well aware of all blunders but has no idea of how to escape the cul-de-sac.

    The first step in the right direction is a clear distinction between theoretical and political economics. The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the actual economy works. From the viewpoint of science political economics is worthless, no matter what the agenda is.

    Theoretical economics has from the very start been hijacked by the agenda pushers of political economics. Smith and Ricardo defined themselves as political economists, Marx and Keynes were agenda pushers, so were Hayek and Friedman, and so are Krugman and Varoufakis.

    Below the political surface there is no difference between Walrasians, Keynesians, Marxians, or Austrians. All these approaches fail to satisfy the well-defined criteria of science. As a general rule, economic policy proposals have no sound theoretical foundation.

    The original task of Heterodoxy is — not to waste time criticizing scientifically incompetent write-offs but — to fully replace all this junk by a superior paradigm.*

    “The moral of the story is simply this: it takes a new theory, and not just the destructive exposure of assumptions or the collection of new facts, to beat an old theory.” (Blaug, 1998, p. 703)

    Egmont Kakarot-Handtke

    References
    Blaug, M. (1998). Economic Theory in Retrospect. Cambridge: Cambridge University
    Press, 5th edition.
    Boland, L. A. (1992). The Principles of Economics. Some Lies my Teacher Told Me.
    London, New York, NY: Routledge.
    Colander, D., Holt, R. P., and Rosser, J. B. (2007). Live and Dead Issues in the Methodology of Economics. Journal of Post Keynesian Economics, 30(2):
    303–312. URL http://www.jstor.org/stable/27746800
    Feyerabend, P. K. (2004). Problems of Empiricism. Cambridge: Cambridge University Press.
    Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary
    Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.
    Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge:
    Cambridge University Press.
    Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL http://www.jstor.org/stable/1824735.
    Weintraub, E. R. (1985). Joan Robinson’s Critique of Equilibrium: An Appraisal. American Economic Review, Papers and Proceedings, 75(2): 146–149. URL
    http://www.jstor.org/stable/1805586

    * For a start see cross-references Paradigm shift
    http://axecorg.blogspot.de/2015/02/essentials-cross-references.html

  4. blocke
    December 2, 2015 at 2:24 pm

    “Non-mainstream economists seem to gather together for the sole reason of exchanging the same opinion all the time. That opinion bounces back and forth symbolically …mainstream economics – whatever that truly is – sucks. … Yet it endures. … Its endurance is abetted, of course, by its critics who take little responsibility for discussing something else. Like their own ideas. Or those of others who might have useful input into a new economics, but who aren’t economists. Like historians, for instance. … I realize I am doing great disservice to those who have dedicated their lives to living on the fringes of what passes for economics”

    Why should economics be defined by mainstream economists? And those who disagree with them be called heterodox, a pejorative term that relegates them “to living on the fringes of what passes for economics.” Everywhere, even on the rwer blog, the opinions of mainline economists are quoted and discussed almost exclusively, Smith, Richardo, Walras, Marshall, Keynes, etc. for the past, Friedman, Greenspan, Samuelson, Krugman, etc for the postwwii contemporaries.

    It is a conceit of mainline economists that the heterodox live “on the fringes of what passes for economics,” and it is an historically inaccurate conceit. So-called heterodox economists have simply asked different questions about economic matters than mainline economists, and have spent their lives answering them – without much help from the latter’s fund of knowledge spelled out in their classical and neoclassical schools of thought. For the heterodox, mainline economics operates “on the fringe” of what passes for useful economic analysis.

    To illustrate: historians interested in great power rivalries during the 19th century and the relative shifts in balance of power among nations (the decline of France and the rise of Germany) cannot assess the relative role that industrial development played in power relationships with the instruments of a mainline economics based on an analysis of markets, not nations A focus on nations instead of markets is not antiquated. Most people today are concerned with the relative performance of industrialized, undeveloped, and developing nations. The toolkit of mainline economic theory is not of much use when clarifying such issues.

  5. December 2, 2015 at 3:23 pm

    ” To gather together every week in one place in order not to be able to make themselves understood”
    Quote Frederick Soddy, “So elaborately has the real nature of
    this ridiculous proceeding been surrounded with
    confusion by some of the cleverest and most
    skillful advocates the world has ever known, that
    it still is something of a mystery to ordinary
    people, who hold their heads and confess they
    are ” unable to understand finance “. It is not
    intended that they should.”(The Role Of Money)
    ****”There never was an idea stated
    that woke men out of their stupid indifference
    but its originator was spoken of as a crank.”
    — Oliver Wendell Holmes, Sr.
    (1809-1894) American Poet
    Source: Over the Teacups, 1891
    .*** BUT, why not read and challenge a Noble Laureate ?
    ******Excerpt from http://en.wikipedia.org/wiki/Frederick_Soddy
    “In four books written from 1921 to 1934, Soddy carried on a “quixotic campaign for a radical restructuring of global monetary relationships”[this quote needs a citation], offering a perspective on economics rooted in physics—the laws of thermodynamics, in particular—and was “roundly dismissed as a crank”[this quote needs a citation]. While most of his proposals – “to abandon the gold standard, let international exchange rates float, use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends, and establish bureaus of economic statistics (including a consumer price index) in order to facilitate this effort” – are now conventional practice, his critique of fractional-reserve banking still “remains outside the bounds of conventional wisdom”[this quote needs a citation]. Soddy wrote that financial debts grew exponentially at compound interest…”
    http://archive.org/stream/roleofmoney032861mbp/roleofmoney032861mbp_djvu.txt

    Frederick Soddy writings, namely “The Role Of Money”
    (Entire book as a free download… http://archive.org/details/roleofmoney032861mbp)

    *THE K.I.S.S. SOLUTION TO DECREASE INEQUALITY GAPS, POVERTY, and NATIONAL DEBT.
    IN EIGHT WORDS – -A CAPITALISTIC ECONOMY WITH A HONEST CENTRAL BANK.

    WHY WOULD YOU NOT WANT PROSPERITY FOR YOURSELF AND YOUR CHILDREN ?

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