Home > Uncategorized > Reflections: Perhaps we need to re-invent economics.

Reflections: Perhaps we need to re-invent economics.

from Peter Radford

It is easy to be partisan. It is easy to believe in sweeping utopian solutions. It is easy to delude yourself that what you think is what everyone thinks, or, perhaps, what they ought to think. This is why I recoil from anyone offering definitive answers to complex questions. The truth is never so easily teased from reality. A healthy does of skepticism helps to keep us grounded. It seems we need that protection especially right now.

Why now?

Because I feel we are going through a great transition during which much of what we know is quickly being made irrelevant by our changing environment.

The progressive wing in American politics suffered what appears to be an irreversible defeat back with the rise of Reagan. Of course it was not Reagan himself, after all he was a very narrow person and depended on image to project his message. It was the revolution in ideas that permeated society, his rise simply marked the triumph of those ideas. It was the same with Thatcher in the UK.

Looking back the so-called Reagan revolution was an attempt to contain the after effects of the progressive era immediately preceding his election. That progressive era itself was an attempt to bring alignment to a society that was trying to match its prosperity born of industrial prowess with its remaining and widespread inequities which were legacies of the pre-industrial era.

The early industrial inequity of class seemed to be fading away as the post-war boom saturated society with material wellbeing. Yes, in retrospect that conclusion was an error, I suppose it was inevitable that capital would find ways to fight back, but in the moment class issues had become decidedly old fashioned. Besides the existential threat posed by communism as represented by the Soviet Union provided a convenient backdrop against which class style confrontation could be characterized as unpatriotic. America had solved its class issues, not through politics, but through economics. 

That the economics in question was deeply social in nature, being based on the reactions to the Great Depression and World War II, was not a contentious topic except in the margins of academia and business where resentment built steadily. The redistribution and high taxes needed to pay for it were easily painted as attacks on freedom by the likes of Hayek and Friedman, but their voices fell on deaf ears as long as the economic engine purred along.

That ended as we know in the mess of the 1970’s. Simultaneous high inflation and higher unemployment, two things that social economics told us were incompatible, undermined confidence in the post-war consensus and opens the door for right wing economists and big business to launch a counter attack. Hence Reagan.

Everything since can be interpreted within the context of this right wing attack on society and democracy. The unique qualities of the American political system allowed minorities to press their opinions and stymie the majority. The influence of money in politics allowed business to buy elections and elected officials producing one of the most corrupt political systems anywhere — except, of course, that Americans refuse to acknowledge this corruption. Business now owns the political system and its hold has been cemented by Supreme Court decisions like Citizens United. So it is unsurprising for us to see the steady roll back of the prosperity of the middle class, a class whose very existence depended on post-war social economics.

Economics itself, as I have argued for years, fell into disrepute as it purged itself of allegiance to democracy and embraced the extraordinarily narrow definition of freedom propagated by Hayek and Friedman. If you think I am exaggerating then study Public Choice theory which appears to be a specific renunciation of democracy. Or, at least it seems that way if we believe the old phrase “we the people” implies that government is by and for the people. Which even in an imperfect democracy it surely does.

As economics became obsessed with freedom and individuality and as it drove out theories of social action it aligned itself more and more with business interests. It became an apologist for capitalism rather than an objective study of it. Yes, of course, some individual economists appear to have fought against the consequences of the odd definition of freedom that permeated economics, but they have been ineffective. Indeed, even those few most often adhere to the technology of right wing economics. Most still advocate versions of paraphernalia like general equilibrium, rational choice, micro-foundations, and so on all of which are designed to justify the inevitability of economic relations sanitized of social actions and power relationships.

When even your erstwhile progressives are regressive or unwilling to present a thorough alternative it is unsurprising that whole swathes of society suffer.

So as just as society shifted its progressive aim towards racial and gender inequities, and as enormous amounts of political energy were spent on those issues, economics was reversing course and abandoning its own progress. It became a willing agent of revision.

Perhaps this is not news. Most of you either don’t care or disagree, but I mention it only because, as we enter the great transition from the industrial to one best described as digital, where manufacturing and agriculture occupy an ever smaller part of our overall economic activity, and where experiential and information infused products dominate, that revisionist anti-democratic economics is rapidly becoming less relevant.

Economics cannot seal itself off from society and pretend, as people like Hayek and Friedman did, that the definitions and social relations of the high industrial era can be carried across the boundary into a digital era needing no adjustment. They do. For one thing, not to sound boring, but the entire ontology of the enterprise need refreshment. What are the objects that comprise an economy in this new era?

Perhaps we need to reflect on this.

Perhaps we need to re-invent economics.

This time not as a deliberately anti-democratic effort, but, I hope, as something less socially unaware.

  1. April 14, 2017 at 5:27 pm

    “That the economics in question was deeply social in nature, being based on the reactions to the Great Depression and World War II”

    Actually the economic theory of the New Deal was likely watered down a bit by the time WWII came around. We dropped from 10% growth per year pre-WWII to only around 4%-5% after. Had we “used up” industrialisation productivity to the point where FDR’s council would have had the same drop? That is possible, but I think a likelier explanation is that we started “Doing less” in the post-war period to help the economy along, especially with Ike, the first non-Democrat president since 1932, throwing himself into the mix.

  2. April 14, 2017 at 6:08 pm

    I wouldn’t be averse to abolishing economics as both a discipline and a profession, except as a party of history–economics will be a section of the library along with other sections devoted to religion, statecraft and international politics, sciences like vular darwinism and chomskyian linguistics, business and management, possibly art, military science, and finance— all of historical interest , but in the dustbin of history.
    Some borderline cases in physics and math like ether theories, nonstandard logics, may have their section not in history but maybe ‘unknown’—since noone knows what they are—science or history?

    Any current economist who does reasonable or good work will no longer be able to use that label (since, liike ‘christian’, ‘pacificst’, or ‘muslim’, and maybe even agnostic) doesnt really mean anything–its vauge Only disciplines described using specific scientifc terms will exist so economists will have to rename themselves scientifically (the way biologists do species, and mathematicians do abstractions).

    This would be analogous to anarchists who want to abolish the state, except here it would be economics and other fields and professions. (i guess one could take a moderate approach and permit a field of anarchist economics or free economics (or economics-free economics— an x without an x).

    the only way economics can be less socially unaware and not anti-democratic is if its done democratically as opposed to current competetive mode. (of course that may be impossible, because people basically dont know how to do anything other than compete at least half the time. and TINA. they want to do and get what they want and only cooperate and act democratically with others if its mutually beneficial.

    there’s no way to avoid being socially unaware somehwat. that means 2 things. it can mean ‘socially insensitive’ (just dont care or have empathy)—that can be healthy and a safety mechanism.
    Many or most progressives have limits on compassion and hence are insensitive at times. Alot of them pretend to be saints, but some people view them as ‘poverty pimps’ since they talk about poverty but stay away from it and make money from talk. this can be due to ‘compassion fatigue’. if one is democratic and tries to be socially aware one gets dragged down by what you are aware of — people living in states of physical and mental poverty, and often content to stay there because they have some comfort. Also not unwilling to make everyone be exactly like them–misery loves company, keeps away the m isery.

    . or it can mean ‘socially oblivious’—-one is just blind to the world . (i think many conservative economists are like this—they’ve never seen an involuntarily uenemployed person, seen any poverty or environmental damage its not around them. Their view may be you have to break eggs to get an omelet, and look on the positive side.
    men see only what they look at and they only look at what they already have in mind (F Celine—famous nazi collaborator).

    i wonder what a ‘thorough alternative’ that even ‘progressives’ are ‘unwilling to present’ might be, as well as the ‘re-invention of economics’. like reinventing the wheel? i wouldnt be surprised if people at mit and caltech are doing that (eg a radiation based wheel which may not even be round but does the same thing). i saw one economist promoting quine’s new foundations logic as a new paradigm to replace economics (as well as standard math based on ZFC). I think this might be more like the new boss, same as the old boss. One will get 1000 page books all using arcane formalism which claim to be a thorough alternative (read like Bourbaki books). It will a thorough alternative in the sense it is an alternative career.

    (I wouldn’t mind abolishing facebook and blogs too–replace subjective experiences with objective science (except that would have to go too, since it no longer means anything–scientist as a profession would also go in the history library. one could bring back natural philosophy , but too is a historically loaded and hence toxic term. )I guess its a mixture of wheat, and chaff. One person’s chaff is a bacterium’s food. And some people are allergic to wheat (like me to an extent). Maybe we don’t anymore news either. There is already plenty. (i have been perfectly happy out living off the grid and reading newspapers i found from the 40’s–probably still current events somewhere in the universe due to pony express. )

    Maybe i’ll re-invent econ in a 1000 page book filled with formalism. I could probably just scan alot of internet papers, wikipedia, etc. change and add a few things like chapter headings, and my name on the cover. Do like i science, for references i’ll scan ones in on-line papers –maybe 50 pages to show i’ve done my research. Have a 300 page math appendix where i introduce the notation and do the proofs–these can be scanned from JSL or notre dame j of formal logic (which had some weird stuff in it –eg Detlefsen of ND ) and physical review. .Add one on field experiments and applications— eg how my new theory solved ecological and social problems, and hence been experimentally confirmed.
    The last appendix might reformulate the theory in a way that those not into reading and mat formalism can learn it, in the manner of john cage’s song 4’55”. This will be 500 pages of blank paper interrupted with output of random number generators, decimal expansions, and cosmology data

    Yes, ‘ ‘what’ are the objects that comprise an economy’. So what? this was a profound discovering similar to shwoing that fermions and bosons are actually the same particle. Every particle is known to be one of these; one is a whole, and the other a fraction or part. Now we know the part and the whole are the same.
    In the past you had what, when, if , why , how, etc. but now we know its just what (and what is just too using standard utility maximization.)


  3. dmf
  4. April 17, 2017 at 10:09 am

    Peter, excellent piece. May I add a bit more? First, the original liberalism is a part of this story. Along with the Enlightenment the business class was created. Along the supporters of democratic movements this new class help push the Church and landed nobility from atop the social order of Europe. But the partners did not agree on many things. Mostly, they did not agree that societies could or ought to be democratic. In place of the Church and landed aristocracy business favored relationships by contract, individualism and individual enterprise, protection of private property, minimal constraints on business accumulation of wealth, small and non-interventionist government mostly controlled by business needs, and ending democratic choice making. Liberalism is the philosophy that justified all this as it was occurring.

    Second, British Common Law was important in establishing much in US law and commerce. These laws favored commerce by private citizens (subjects) even if sponsored by the Crown. May of the American colonies were set up as Crown colonies intended to enrich the Crown (the royal family). Being an American member of such an undertaking was very profitable.

    Third, the American setting was made up of those who gave allegiance to the Crown, those who wanted a limited democratic nation, and all the others who came mostly either to escape one sort or another form of persecution and those who wanted a chance for greater wealth. This last group mostly wanted just to be left alone to pursue their escape or their wealth. Molding a nation from these groups was difficult. A great deal of direct intervention (coercion), propaganda, and war was necessary. But the new business class thrived. The society was always in flux, only half stable at any time. Resources (land, timber, mining, labor, etc.) were abundant and poorly managed, speculation was rampant and even promoted, and the legal framework for business operations and violations of human rights was at best minimal, often nonexistent. This framework only began to collapse when corruption in government and business became extreme and literally billions was stolen from ordinary Americans, culminating in the Great Depression. Your story takes up there.

    Finally, one item of which I believe you take too little note is the role ordinary Americans play in this story. Sometimes dupes and often flim-flamed, but also often “educated” to accept the business-oriented society into which they are born. Most Americans can’t see many other options. Economists have certainly played their part in “controlling” Americans in favor of business. They invented an economic world full and complete that suited business and its supporter, and then worked to bring that “truth” to Americans. I’ve always objected to the name of this blog as I believe it’s based on a misunderstanding. Mainstream economics is not “unreal.” Rather, it’s one possible reality standing alongside other possible realities. The problem is that the reality of mainstream economics does not coincide with the realities of daily business or daily life in the US. The consequences of these differences are that many ordinary Americans hate mainstream economics, and many business persons ignore mainstream economics. That make mainstream economics mostly worthless, except for ideologues attempting to advance their ideologies.

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