Home > Uncategorized > Populism and mainstream economics

Populism and mainstream economics

from David Ruccio

There doesn’t seem to be anything remarkable about mainstream economists’ rejection of the new populism.

Lest we forget, mainstream economists in the United States and Europe (and, of course, around the world) mostly celebrated current economic arrangements. As far as they were concerned, everyone benefits from contemporary globalization (the more trade the better) and from the distribution of income created by market forces (since everyone gets what they deserve).

To be sure, those who identify with different wings of mainstream economics debate the extent to which there are market imperfections and therefore how much interference there should be in markets. Conservative mainstream economists tend to argue in favor of less regulation, their liberal counterparts for more government intervention. But they share the same general economic vision—that capitalism is characterized by “just deserts,” stable growth, and rising standards of living.

Except of course in recent decades it hasn’t. Not by a long shot.

Inequality has skyrocketed to obscene levels (and continues to rise), leaving many people behind. The crash of 2007-08 shattered the illusion of stability—and now there’s a deepening worry of “secular stagnation” moving forward. And, while the conspicuous consumption of the tiny group at the top continues unabated, only rising debt keeps everyone else from falling down the ladder.

No wonder, then, that economic populists, especially those on the Right, are rejecting the status quo—and winning campaigns and elections (often in the form of protest votes).

For the most part, to judge by Brigitte Granville’s survey of a variety of Project Syndicate commentators’ responses to populism, mainstream economists remain blind as to “why so many voters have embraced facile policies and populist politics.”  

That’s pretty much what one would expect, given mainstream economists’ general commitment to the status quo.

But even when they admit that “much has gone wrong for a great many people,” as Margaret MacMillan does (“Globalization and automation are eliminating jobs in developed countries; powerful corporations and wealthy individuals in too many countries are getting a greater share of the wealth and paying fewer taxes; and living conditions continue to deteriorate for people in the US Rust Belt or Northeast England and Wales”), we read the spectacular claim that today’s populists—these “new, outsider political forces”—are wrong because they “claim to have a monopoly on truth.”

Now, I understand, MacMillian is a historian, not an economist. But the idea that populists are somehow the only ones who claim to have a monopoly on truth is an extraordinary diagnosis of the problem.

Think of the legions of mainstream economists who have lined up over the years to claim a monopoly on the truth concerning a wide variety of policies, from restricting minimum wages and approving NAFTA to deregulating finance and voting no on Brexit. They are the ones who have aligned themselves with the interests of economic and political elites and who, in the name of expertise, have attempted to trump democratic, public discussion of important economic issues.

It should come as no surprise, then, that mainstream economists—such as Harvard’s Sendhil Mullainathan—are so concerned that economists have been demoted within the new Trump administration. The horror! The chairperson of the Council of Economic Advisers is not going to be a member of the Cabinet.

Yes, it is true, business acumen is not the same as economic analytics. (I teach economics in a College of Arts and Letters, not in a business school—and, as I remind my students on a regular basis, I’m the last person they should turn to for investment or business advice.) But that’s a far cry from claiming a monopoly on the truth, which is only available to those who speak and write in the language of mainstream economics.*

If mainstream economists finally relinquished that claim—and, as a result, spent more time both learning the languages of other traditions within the discipline of economics and listening to the grievances and desires of those who have been sacrificed at the altar of the status quo—perhaps then they’d have something useful to contribute to the larger debate about where the world is headed right now.

 

*According to Andrea Brandolini, the late Tony Atkinson understood this: “‘Economists are too often prisoners within the theoretical walls they have erected’, he recently wrote discussing austerity policies, ‘and fail to see that important considerations are missing”

  1. Grayce
    March 3, 2017 at 3:27 pm

    “‘Economists are too often prisoners within the theoretical walls they have erected.”
    Isn’t that the sorry truth of so many tightly held beliefs that create “mind-forged manacles” in
    any discipline?

  2. Craig
    March 3, 2017 at 4:38 pm

    The mental process of contention and absence of progress is arrogance and refusal to look.

    The mental process of Integration-Wisdom and actual progress is open mindedness to truth, but only truth, in opposing ideas, theories and paradigms. Integration-Wisdom is also perceiving importances and primacies which is what distinguishes it from mere compromise and ineffectualism.

    We don’t need economics. What we need is a Wisdomics.

  3. Enquiring Mind
    March 3, 2017 at 5:06 pm

    Economics seems to be influenced by mind-forged monocles, too. Squint with one eye, keep the other eye shut tight, and all you get is a headache.

  4. March 5, 2017 at 6:05 am

    Let’s consider these questions pragmatically. Per Charles Sanders Peirce, the Maxim of Pragmatism is,

    Consider what effects that might conceivably have practical bearings we conceive the object of our conception to have: then our conception of those effects is the whole of our conceptions of the object.

    Translated thus. We need to stop all the arguing about which set of assumptions is correct or true, even if it were possible to determine such, which it is not. I don’t care if economists are blind, arrogant, or just plain evil. It matters little whether economic theory and economists are wise or civilized. What matters is the practical (everyday and repeated) effects we conceive economists’ theories and actions as having. For example, we know economic theory continues to alter human understandings of themselves and the non-human world. We also know economics often fosters selfishness and actions that are harmful to the evolutionary status of homo sapiens. In addition, economics creates the situation in which narrow and inflexible decisions are more common and difficult to change. We can design ways to address these and the other effects of economics. But the first step is to identify the effects.

    • robert locke
      March 5, 2017 at 4:06 pm

      “But the first step is to identify the effects.”

      If we are interested in identifying the effects, where do we conduct our investigations. I’ve always felt that it is best to begin with the people living in an economy and, accordingly, tried to look at active and passive members of a society in terms of specificities of place and time. Governments and informed individuals produce mountains of information that is crucial to identify effects. But economists begins with assumptions and methods that prevent us from identifying effects.

      • March 5, 2017 at 8:09 pm

        Robert, I think I agree with you. Economic assumptions include that markets always work better than any other form of economic arrangement and that they always make everyone better off. Effects, however do not support these assumptions. Force economists to focus on effects. Design and implement policies, then check the effects. The Brookings Institute has a program called “evidence based policy.” Problem is all the reports Brooking’s publishes about the program focus on assumptions for policy, not the results (effects) of policy. This is an example of what needs to change.

  5. March 8, 2017 at 5:04 am

    I actually quite like that analyses by M Macmillan of the populists— ‘new , outsider, political forces’ who ‘think they have a monopoly on the truth’, unlike her and the rest of the experts who didnt’ see Trump or brexit coming. She is just humble, and as an expert knows ‘much as gone wrong for many people’. (Maybe she could write an academic treatise bestseller saying that—noone else knew or noticed). I wonder where these ‘outsiders’ came from? Mars? Mexico? eastern europe? She probably din’t see them at Oxford.
    Maybe she could solve these problems by building a wall and a moat around Oxford, make it a castle, and make the empire of knowledge great again. Then the humble dons who don’t claim to have a monopoly on truth can keep their monopoly on finding it within their ivory tower. Likely come up with a good expert solution–‘i know, let them eat cake’.

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