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Can we move on?

from Peter Radford


I am hardly alone in ranting on about economics, but it never changes. How can it? The intellectual honesty required to make the sort of shift needed to recapture the discipline’s honor simply doesn’t exist. Its practitioners are too deeply embedded and ingrained. Its students are too intimidated by the burden of its closed social pressures.

Nowhere is there a leader willing to take on the mantle of righting the ship. So it continues to wallow low in the water, not sinking but adrift. It has become an aimless enterprise being more and more revealed as nothing but a combination of artless technique and ideological objective.

When we think of economics nowadays we think of applied mathematics. Applied to certain problems, in certain ways, within certain boundaries, and only against certain data.

Economics has become a small minded sub-discipline designed to produce analysis of small issues or problems that can be contained within the massive restrictions of the subject’s edifice. 

This is why, perhaps, none of its younger tyros attack big problems anymore. All of them apply their undoubted intelligence against microeconomic targets in the vain hope that accumulating answers at the micro level will somehow aggregate into macro changes.

They have all, in other words, been cowed by the absurdity of the micro-foundations zealotry of the older generation. Apparently they are unaware of the hollow nature of the micro adventure. I have always thought that the micro-foundations project was foolhardy. After all garbage-in is garbage-out. Bedside it represents a stubborn refusal to take on board some of the more modern and exciting insights of evolution, complexity, and chaos thinking. Not least amongst which is the idea that reality is multi-layered with phenomena emerging at one level without cause from the effects of other layers.

In contrast to other fields of study that cover related territory: sociology, politics, and even business management, economics has the look of a tired fusty old attic full of well worn stuff that we no longer need in order to function. It has become a place to collect and continue to admire old ideas. It is a sort of living museum. A tribute, if you like, to the days when taking in simple ways about capital, land, and labor could be thought of as cutting edge. Or where oddities like a production function could be seen as something to explore and not simply to ridicule as a caricature of real life.

Economics has failed.

It has failed, for instance, to ‘explain’ the phenomenon of growth. For a discipline that has been in existence since our modern surge to prosperity began it has been almost silent on why that surge began. Or what it consists of. Or what drives it.

The old iconic model of Solow tells us that most of growth has causes outside of economics — it is a residual not a result of the attributes of the model. It took until the late 1980’s for economics to realize the technological change is an attribute within an economy and not something that occurs outside only to influence the economy subsequently.

Sure, there have been alternative voices to talk about real economies rather than the pretend ones that dominate economic theory, but those voices have been shouted down.

And on the results that matter: managing a real economy, economics has failed miserably. It still doesn’t understand growth: it has no unified theory capable of going back in time to cover both the pre-growth era and our modern surge. It still ignores the role of information or knowledge in the creation of wealth. It has nothing much to say about the environment or sustainability. It is a one-trick pony capable only of discussing problems that fall within the purview of its optimizing, individually based, and closed system perspective.

In other words it has little to say, or relevance, about the real world.

But it sure talks a lot. Proudly and even arrogantly. Perhaps a little too much. Perhaps because it is, at heart, a failed project that wants no one to realize that failure. Perhaps because our professors of economics just want to make a living and have nothing else they can do.

After all re-training an economist could prove difficult.

I read a few years ago that professors of mathematics were increasingly concerned that math has become so deeply specialized that in some areas there are too few people knowledgeable enough to judge whether what was being taught and written about was in anyway correct, valuable, or worthy in any way. Only those who taught it could judge. So they continued to award degrees to students, who then taught and awarded degrees to other students and so on.

The difference between economics and pure mathematics is that economics presumes to have practical knowledge. It argues that it understands how societies can accumulate and allocate wealth. It argues that it understands that mechanics of exchange. And it stands in judgement over policy making that affects hundreds of millions of lives. So we all care whether economics is valuable. Or, at least, we ought to care.

And what do we have?

An attic full of cobwebs, old ideas, outdated tools, incoherent junk that we have forgotten how to use, and faded memories of long ago issues that have little of no relevance to today.

No amount of ridicule or laughter can clear that attic or spruce up those ideas. It is a stubborn place all of its own. It is content within the comfort of the past.

So be it.

We move on.

  1. October 18, 2016 at 2:02 am

    Yes to every way tou say these things, Even so. We who understand the need for growth in a dynamic socioeconomic culture can with no loss of face change the discussion to infinite qualitative growth on a finite planet. Is such a theory possible? I believe it already exists and is impossible to disprove.

    • October 19, 2016 at 12:03 pm

      “Yes” to most things Peter says above, but “No” to his undiscriminating reference to mathematics.

      I’ve long argued that Hume beggared the system by denying energy (the elan vital of Bergson that Louis references below) and the possibility of communication (of our adapting ourselves and thus our actions to signals from the environment). Fritjof Capra, however, takes that a step further back: to Newton’s assumption of a linear Cartesian universe in which (contrary to the the Biblical story and Big Bang Einsteinian physics), matter and its motion already exist, so creation, evolution and finitude are superfluous. Which ties in with what I’ve also said previously: the multi-dimensional Gibbsian matrix mathematics on which e.g. the production function of modern economics is based, is still Newtonian (using linear Cartesian coordinates) and so unbounded, whereas the expanding curved space of Einsteinian mathematics is delimited by Bubble’s Bubble and geometries such as those of our Earth, in which the ancient coordinates of latitude and and longitude are not linear but circular. It seems the difficulty with these was not in the mathematics but in its use for measurement of distance, now resolved with sufficiently accurate ways of measuring and coordinating time, hence the mathematics of Fourier spectrum analysis and the topological equivalents of algorithms and logarithms that spawned information and chaos theory.

      As for what Garrett is arguing for, to “change the discussion to infinite qualitative growth on a finite planet”, I entirely agree. However, one achieves that not by increasing Cartesian accuracy but by untangling and understanding the topological feedback loops in human communication. This began to happen in the 1960’s with the development of hi-fi musical reproduction, enabling us to control quality, expand diversity, make our own recordings and so choose for ourselves what we have in our record collections. This all points me to a Schumacher-type “Small is Beautiful” future in which we mass-produce materials, provide local production facilities and produce what we need as we want to.

  2. louisperetzperetz
    October 18, 2016 at 9:13 am

    In France only 20 % are industrial products. So it is possible to have economics increasing towards infinite. Of course they are human services and Culture, including communication as numeric. New employment is growing in shows, going from microeconomics to macroeconomics.

  3. Gerson P. Lima
    October 18, 2016 at 10:53 am

    Therefore, why we, the said heterodox economists, do not stop wasting time with mainstream oddities and realize that “Probably the best conclusion about what real world economists ought to do is to form a research group devoted to find and develop “the” Real World ECONOMIC THEORY that could theoretically lead to a DEMOCRATIC ECONOMIC POLICY ‘with sufficient credibility to attract both electoral backing and active support to resist the hostility from global elite’s selfishness”.

  4. ShellB
    October 18, 2016 at 2:40 pm

    I’m not an economist,but have always been interested, yet baffled by the traditional economists’ interpretation of “the economy.” But once I found Real-World Economics Review, (hallelujah!) I realized that what was missing, was the real world common sense. The way I see it, Peter, RWER and all,YOU are the leaders who must “right the ship.” That, or the current system must crash and burn, before a new one can take it’s place and then the leaders shall arise.

  5. louisperetzperetz
    October 19, 2016 at 9:05 am

    The French philosopher Bergson said that it was an “élan vital” (running life) which grows towards …anything we know. Economics theories are only found to explain where the human life could run. Of course you can explain a logical theory, almost scientific, but what to do about the psychological one? What I say in my book, is an explanation coming from system’s laws of mechanics value moving as vectors since money was invented. I think that this explanation makes ordo-economists and heterodox ones agreeing both. But, unhappily, it is not a theory because as ShellB said, I am not an economist, only an “informatics man” with my human common sense.

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