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Sweden debates the economics prize

from Peter Söderbaum

Newspaper debate in Dagens Nyheter (DN) about the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel

The debate started with an article by Bo Rothstein October 11 and ended with final comments by Rothstein October 19, 2015. Below are the titles of the 6 articles in English (and also in Swedish if someone wants to check the translation)

It is not realistic for me to translate all 6 articles to English and I am not sure if that would be correct from a copyright point of view. My own article which is the only contribution by a heterodox economist is however translated in its totality. Other articles are summarized by me below.

Bo Rothstein 2015-10-11 “The Economics Prize is against the spirit of Nobel´s will”( In Swedish: Ekonomipriset i strid med andan i Nobels testamente) Available paper and web

Bo Rothstein, a respected professor in political science initiated the debate. As a member of the Swedish Academy of Sciences he expressed his concerns about the “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. The award may be incompatible with the spirit expressed in Alfred Nobel´s will. There are signs that students of economics are affected negatively in a moral sense where even corruption is a possibility. Rothstein therefore recommends a moratorium for the economics prize until a careful study has been carried out about the options for the future.

Jan-Erik Lane 2015-10-14 ”Rational economists refrain from corrupt behavior” (Rationella ekonomer avstår från från korrupt beteende) (paper and web)

Jan-Erik Lane is a professor and is connected with the “New Public Management” approach. He questions Rothstein´s criticism of the economics prize and defends neoclassical theory with its “rational choice” theory and Economic Man assumptions. Economists are said to be conscious about the implications of the assumptions they make and there are alternatives to the most frequent assumptions.

Jan-Erik Lane finally sees it as an advantage that the economics prize has stimulated a debate about the discipline of economics.

Lars Calmfors 2015-10-15 ”Why the economics prize may be provocative” (Därför provocerar ekonomipriset) (paper and web)

Lars Calmfors is professor emeritus in economics. He has been head of the National Institute of Economics Research and is now part of public debate in Dagens Nyheter and elsewhere. Calmfors lists some of the many arguments that have been raised questioning the economics prize and admits that there are some problems but essentially defends the prize. According to him it is functioning well and respected internationally.

Peter Söderbaum 2015-10-19  ”The economics prize suffers from neoclassical monopoly (Monopol för neoklassisk teori skadar ekonomipriset) (only web)

It is a good thing that we have a debate about the economics prize ”in Memory of Alfred Nobel”. Bo Rothstein is on the right track when he discusses how the moral behavior of students of economics

may be affected in future professional roles with corruption as one of the possible implications. But the problem with the economics prize has to be discussed at a more fundamental level writes Peter Söderbaum.

One of the early winners of the economics prize, Gunnar Myrdal, repeatedly argued that values are always present in economics research and education. Economics is science but at the same time values and ideology. Criticism of economics may then refer to its scientific and/or its ideological aspect. Unfortunately Myrdal´s colleagues in economics have not understood or accepted this message.

Today one kind of economics, so called neoclassical theory, is dominating research and education to such a degree that one can refer to a monopoly. We are at the same time facing a scientific and an ideological monopoly. There is a role for neoclassical theory with its conceptual framework and ideology in a democratic society. What is unfortunate is the monopoly position for neoclassical theory and how it affects recruitment of researchers and lecturers, other incentives such as the economics prize included. Today there are several schools of thought that represent alternatives to neoclassical theory but which largely are excluded from university departments of economics. This is a case of scientific as well as ideological discrimination.

Just as is the case of the established Nobel Prizes, the Bank of Sweden Prize claims to encourage research contributions that benefit humankind. These judgments presumably include ideological elements. What are the important problems today when it comes to survival and welfare for people (and perhaps for ecosystems)? Is it economic growth in GDP-terms (which is essential in neoclassical theory) or is it climate, biological diversity, pollution of land and water? The central role of value issues suggests that the Bank of Sweden Prize should rather be compared with the Nobel Peace Prize.

Neoclassical theory is useful for some purposes but not for all purposes. Economic theory always starts with simplifying assumptions. There is a tendency, for example, in neoclassical theory to reduce all impacts to their monetary dimension. GDP-accounting is one example, Cost-Benefit Analysis another. Is this “monetary reductionism” appropriate when the big challenges are of a non-monetary kind (climate, biodiversity etcetera). Monetary trade-off reasoning appears questionable in relation to these issues.

Bo Rothstein´s proposal to scrutinize the economics prize from ideological and other viewpoints is pressing. For me it is also about how the economics prize tends to cement the present state of monopoly at university departments of economics. A more open and democratic economics where different schools of thought are considered is urgently needed. Today many students and scholars internationally call for a more pluralistic economics. My own interest is “ecological economics” which can be described as “economics for sustainable development”. Neoclassical economics has been in a monopoly position in a long period when development increasingly has become unsustainable. Should we be content with the perspective of neoclassical economists in relation to these challenges?

It may be noted that United Nations recently has acknowledged 17 different “sustainable development goals” where economic growth plays a less prominent role. These goals point in the direction of multidimensional analysis. From a democratic point of view, economics needs to mirror different versions of ideological orientations among citizens and politicians. The debate about the economics prize should therefore at the same time focus on options for economics as a science. The present scientific and ideological indoctrination at national and global levels, for example through the economics prize, need be replaced by a pluralist attitude where different schools of thought can coexist. Only in this way may the legitimacy of the prize be strengthened.

Peter Söderbaum, professor emeritus, ecological economics, Mälardalen University, Västerås, Sweden

Olof Johansson-Stenman och Erik Mohlin 2015-10-19 ”There is no scientific support for Rothstein´s arguments”(Rothsteins påståenden saknar vetenskapligt stöd) (only web)

A fourth comment to Bo Rothstein´s article was signed by two younger economists Olof Johansson-Stenman, Gothenburg University and Erik Mohlin Lund University. They argue that Rotstein´s concerns lack scientific support and point to difficulties in finding evidence of how students in economics may differ in ethical values from other students as a result of education.

Closing remark by Bo Rothstein 2015-10-19  ”Prominent economists point to the problem with ethics in economics” (Framstående ekonomer lyfter problemet med bristande etik) (only web)

In his closing remarks Bo Rothstein comments upon each of the four replies that he has received. When commenting upon my article he discusses how economics needs to be broadened and less isolated from other social and humanistic sciences. Jan-Erik Lane´s arguments that rational economists avoid corruption because it is irrational to go against the law is dismissed by pointing to the fact that some of the worst corrupted countries have instituted laws against corruption.

In other parts of his closing remark, Rothstein points to actors within the economics discipline who do not hesitate to see problems in how economists are educated. Rothstein even points to the Chair of the prize committee this year, Tore Ellingsen, and his judgments about economics “students as being relatively selfish”. Such selfishness is potentially dangerous for others that students are supposed to serve in different professional roles.

The question which comes back again and again in Rothstein´s text is as follows: Does a discipline that performs badly in relation to public interests deserve a prize in the name of Alfred Nobel?

  1. December 2, 2015 at 9:58 pm

    QUESTION:” Does a discipline that performs badly in relation to public interests deserve a prize in the name of Alfred Nobel?”
    Why not ? That same discipline can also reverse its performance and perhaps perform in a manner to benefit all mankind.
    Have the American financial system rush to the rescue with a generous and flexible legal funding that no other country could match.
    Not a bailout.
    Not a cost to all the taxpayers.
    Not an increase in deficit spending.
    Rather a magic economic proven golden bullet, (Bernanke should get Noble for this).

    A simple change in direction of doing something for the common bettering of all the people. Especially those in need now.
    The FEDS did in fact QE for the Private For Profit Banks.
    The FEDS made direct purchase of bank assets.
    Reverse “ an economic recovery program that has privileged the recovery of financial markets and corporate profits has fueled the increase in wealth inequality, in the United States and across the world.”, reverse that program, make it fund “…a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”
    “Capitalism is the “best” system to date devised by mankind. As it is administrated, perhaps, is where the “flaw” is manifested. If capitalism used its Central Bank properly,that is for the betterment of the common good, with equality and justice for all, capitalism would be the best ways and means to help “form a more perfect union….”, Pontifical Council.
    Create an honest Central Bank that shall fund-
    ““We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…””

    When a honest Central Bank uses “QE” for the betterment of the community in a capitalistic economy, it will be the greatest system ever devised by mankind.

    FREE DOWNLOAD: “The Role Of Money”


  2. Larry Motuz
    December 2, 2015 at 10:02 pm

    Economics should not have a “Nobel” as long as it remains solidly unscientific. Neither ‘micro’ nor ‘macro’ have empirical foundations. They are axiomatic-deductive. That only means that they are only as good as the assumptions they are based upon. They lack the vital handmaid of any science: namely, induction from evidence to verify or falsify the foundations.

  3. Paolo Leon
    December 2, 2015 at 11:03 pm

    Any discipline has its own moral norm, but economics has lost it long ago. It is not so much the deductive problem, but the fact that most of the Economics Nobel prize winners are neoclassical or new classical: and this type of economics is devoid of any deontology. The judges of the prize are also responsible: on the basis of their choices of the last 20 years, they would have never given the Nobel to Sraffa, Robinson, Pasinetti, Minsky, and many others. If Keynes was here, he would also be ignored.

  4. December 3, 2015 at 12:35 am

    If we put aside the issue of whether economics is a real science or a pseudo-science or a pre-science, there remain two uncomfortable issues — of having a prize named after a person who would never have agreed to having his name attached to such an award (he hated economists), and also having such an award lavishly funded by a powerful vested interest pushing its own ideological agenda and operating on behalf of an industry which was born in a state of sin.

    • Larry Motuz
      December 3, 2015 at 4:29 am

      Actually, the central problem with economics is its deontology: A focus upon right or wrong actions based on its curious definition of ‘rational behavior’ solely based upon maximizing preferences.

      This ignore the consequences of choices made, elevating Aesop’s Grasshopper to the status of rational whereas providing for the forseeable future by deliberating about the consequences of one’s choices in the ‘now’, and choosing the option that best provides for one’s needs, is what rationaility is all about. The ‘Ant’ is absent in the current mainstream framework. So also is any provision for human needs are essential to economic rationality.

      • Larry Motuz
        December 3, 2015 at 4:31 am

        Pardon the typos: ignore should be ignores; are should be ‘as’.

  5. December 3, 2015 at 1:09 am

    Whoever solves the riddle and describes prosperity during a gentle population decline with full education and declining material consumption per capita will transform economics. A new story will alter reality. That’s the way things work.

    Eco studies are among the most honorable. Copycat mechanistic abstract reduction of the living aspect of biology entangled with entropy and big bang is irrefutably impossible and cannot be considered a topic for study by any rational being.

    • Larry Motuz
      December 3, 2015 at 4:33 am

      I will be doing this soon.

  6. December 3, 2015 at 2:19 am

    The first question is who invented economic thinking and actions, if they exist at all. It was not economists. Professional/Academic economists owe allegiance and respect to the inventors of the actions and ways of life they study. Name me one economist who can trace out these origins of her/his profession. There aren’t any. Professional economists depend on the writing and thinking of other professional economists to make the discipline they call economics. This is not only disrespectful but impedes understanding of economic thinking and actions, if these actually exist.

    • Larry Motuz
      December 3, 2015 at 4:43 am

      Sadly, most are unaware that it was mathematicians who redefined economics. The marginal revolution was their contribution, albeit it was a disaster, for it ignored values-in-use and replaced these with value-in-exchange. Utility is a syncretic notion rather than a well-defined concept. It bridge and weaves together too very different notions: 1) that people would like to get satisfaction from their consumption activity and 2) that, since benefits from use exist, the very existence of any benefit can be conflated with getting some satisfaction.

      Thus, utility is a notional percept with no actual definition or measure. And ‘welfare’, being defined as only existing for consumers who have an ability to pay, leaves out the reality that little or absolute inability to pay implies little to no welfare maximization. Consumers vanish if they have no ability to pay. But, human beings don’t, and their well-being is something the neoclassics and Austrians have completely ignored.

  7. December 3, 2015 at 1:47 pm

    Swedish muddle
    Comment on ‘Sweden debates the economics prize’

    The full title of the Prize is: “Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”.

    The key word is Science and the title suggests that economics is a science. This is definitively not the case. Science is well-defined by the criteria of formal and material consistency.

    “Research is in fact a continuous discussion of the consistency of theories: formal consistency insofar as the discussion relates to the logical cohesion of what is asserted in joint theories; material consistency insofar as the agreement of observations with theories is concerned.” (Klant, 1994, p. 31)

    Economics does not satisfy the criteria of formal and material consistency. Worse, economists violate scientific standards since Adam Smith. There is no exception: Walrasian, Keynesian, Marxian, or Austrian economics is provably false.

    The sole criterion of science is true/false and scientists tackle only those problems that can be clearly and objectively decided. Science is fundamentally different from politics or religion or philosophy, which apply the criteria good/bad or like/dislike.

    The argument ‘There are signs that students of economics are affected negatively in a moral sense where even corruption is a possibility’ is therefore slightly beside the point.*

    Economics is a failed science and because of this there can be no prize that strongly suggests that economics is in the same category with the genuine sciences. Economics is what the genuine scientist Feynman called a cargo cult science.** The economics “Nobel” is an insult to genuine scientists and this is sufficient reason to abolish it as soon as possible.

    However, the Swedes have granted the economics “Nobel” for the wrong reasons, so it does not matter that they abolish it now for the wrong reasons.

    Egmont Kakarot-Handtke

    Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT:
    Edward Elgar.

    * See ‘Political economics and intellectual corruption’

    ** See ‘One entirely sufficient reason for the shutdown of economics’

    and ‘Economics is a scientific zombie waiting to be put down’

    and ‘Profit and the collective failure of economists’

    • Larry Motuz
      December 3, 2015 at 5:30 pm

      Excellent! We have far more in common than you believe.

  8. December 3, 2015 at 5:58 pm

    Criticisms of economics covers a very broad spectrum from the purely ideological (should people be/are they selfish maximisers) to the highly technical (why did stresses in the financial system blow up at this time and in this manner). Lay people especially attack the field from the flanks. I think these criticisms are unproductive in the sense they’re asking the wrong questions. They’re asking what went wrong after economics has been miss-applied.

    A more useful debate, which requires at least some knowledge of economics, is to challenge it in the centre. Economics is a technology to evaluate and help construct policies, markets, property, etc. with the aim to improve the welfare of society, or rather the welfare of the group that’s doing the evaluating and constructing. Is economics effective at this? Is the employment of economics captured by narrow interests? These are better questions, in my view.

    Why did the financial crash happen in 2008? I don’t know. I don’t care. Asking economists to predict if a fragile system would fail when it did is a bad kind of prediction to try and make, or rely on. The better economists would have told you in detail what imbalances built up stresses or made the system fragile, and they remain largely unlistened to.

    Does minimum wage improve overall welfare? How much, and what are good and bad parameters? Does a small co-payment improve healthcare cost efficiency while maintaining outcomes? There should not be debate or opinions or these. These are questions that economics should be able to answer with reasonable accuracy. Because it doesn’t, or appears unwilling to give clear answers due to capture, the public loses patience with economics and starts asking bad edge-case questions.

  9. December 4, 2015 at 7:07 am

    The six main reasons for the abolition of the Economic Sciences Prize

    (i) With regard to the explanation of how the monetary economy works economics has not produced anything in more than 200 years that satisfies the well-defined criteria of science.

    (ii) With regard to methodology and the ethics of self-governance/self-control the traditional economic schools (Walrasian, Keynesian, Marxian, Austrian) regularly ignore or violate scientific standards.

    (iii) Economists bear the intellectual responsibility for the social devastation that has been caused by mass unemployment since the Great Depression.

    (iv) With regard to the underlying scientific performance the economics “Nobel Prize” is not comparable to the genuine Nobel Prize. With the so-called Law of Supply and Demand economics reaches not even the level of the Law of the Lever. De facto, the economics “Nobel Prize” is an imposture and an insult for genuine scientists.

    (v) With regard to the general public the Economics Prize fosters the superficial impression that economics is a science, which is definitively not the case.

    (vi) The Economics Prize is by no stretch of the imagination in the spirit of science or of Alfred Nobel.

    Egmont Kakarot-Handtke

  10. December 4, 2015 at 6:00 pm

    It is clear from the discussion so far that there are many ideas about economics as conceptual framework and theory and about a well-functioning economy.

    Is economics a science? Is economics a science comparable to physics and chemistry? The answear by many mainstream (neoclassical) economists is probably “yes”. They believe in some kind of value-neutrality.

    As I see it economics is a science but a social science and social sciences differ in some respects from natural sciences. Our approaches are specific in value and ideological terms and we should be ready to openly discuss these value issues. In a democracy no one can claim that one particular economics paradigm is the only “true” theoretical perspective.

    I am not saying that value, ethical or ideological issues play no role in physics and chemistry. I am only arguing that these issues are accentuated in social sciences and adding a partly different complexity to the study of economics.

    Peter Söderbaum

  11. Franklin Chiemeka Agukwe
    December 12, 2015 at 4:44 pm

    What an awesome post. Actually I have gone through some awarded works in economics and found them to be ridiculous. Most of the works are something that I can sit down in my room and write. On a closer investigation I found out that it had to do with academic qualification other than impact. Professors and Phd holders in economics are the only ones at advantage to win prizes because of their academic qualification and not because of impact. In other words if you are a professor in economics or a Phd holder and you are relatively popular in the academic community then even if you write non sense you can win the prize. But out there are researchers who have conducetd and still conduct serious research yet are never noticed. One of the most ridiculous worsk awarded in economics is PROSPECT THEORY. Even a little child can stay in his room and write such work but because the author is a Phd holder and professor he was awarded for a non sense work

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