Mainstream economics and neoliberalism — what is the difference?
from Lars Syll
Oxford professor Simon Wren-Lewis had a post up some time ago commenting on traction gaining ‘attacks on mainstream economics’:
One frequent accusation … often repeated by heterodox economists, is that mainstream economics and neoliberal ideas are inextricably linked. Of course economics is used to support neoliberalism. Yet I find mainstream economics full of ideas and analysis that permits a wide ranging and deep critique of these same positions. The idea that the two live and die together is just silly.
The same Wren-Lewis has also felt it necessary to defend mainstream economics against critique waged against it from Phil Mirowski:
Mirowski overestimates the extent to which neoliberal ideas have become ’embedded in economic theory’, and underestimates the power that economic theory and evidence can have over even those academic economists who might have a neoliberal disposition. If the tide of neoliberal thought is going to be turned back, economics is going to be important in making that happen.
Wren-Lewis admits that “Philip Mirowski is a historian who has written a great deal about both the history of economics as a discipline and about neoliberalism’ and that Mirowski ‘knows much more about the history of both subjects than I do.” Fair enough, but there are simple remedies for the lack of knowledge.
You could start by reading this essay, where yours truly try to further analyze — much inspired by the works of Amartya Sen — what kind of philosophical-ideological-political-economic doctrine neoliberalism is, and why it so often comes naturally for mainstream economists to embrace neoliberal ideals.
Or maybe — if your Swedish is not too rusty … — you could read this book-length argumentation for why there has been such a deep and long-standing connection between the dismal science and different varieties of neoliberalism.
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Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
————— Michael Hudson ————–
Maria Alejandra Madi / Jack Reardon
————- Edward Fullbrook ————-
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Edward Fullbrook and Jamie Morgan
———— Armando Ochangco ———-
Shimshon Bichler / Jonathan Nitzan
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Real-World Economics Review Blog 
I agree economics has become the science of money and commerce. It shouldn’t be. It should be the science of pragmatic cooperation.
Its macroeconomics that is involved and it is contained within the science of human social evolution. This involves the topology of human affairs and where specifically there are gaps between our business connections, see SSRN2865571 “Einstein’s Criterion Applied to Logical Macroeconomics Modeling”.
Wren-Lewis claims that heterodox economists too often accuse that mainstream economics and neo-liberal ideas are inextricably linked. Wren-Lewis argues for the necessity to separate accusation on mainstream economics and one on neo-liberal ideas. I often observe such hasty and crude arguments in this blog. I do not think it is good for reconstructing economics itself. We can accuse both of them, but we should think which is more important in constructing a real-world economics. Accusation of neo-liberal ideas may support our efforts in search of alternative economics but such accusation alone leads us nowhere. To bring down the reign of neoclassical economics it is necessary to work in two spheres of contentions: (1) Neoclassical framework and theories are bankrupt as science (in relevance to the reality, logical incoherence, misunderstanding on how the market mechanism works, impossibility to implement neoclassical models into computer simulation, etc.). (2) A new theory is already constructed. Or in the case when it is not, make our greatest efforts to construct one. If Syll cannot work in the second sphere, it is much better to concentrate in the first sphere (than to behave as a political demagogue).
What is at stake is a Radical Paradigm change, as Asad Zaman pointed in his post of July, 19 in this Blog. Heterodox economists must concentrate their efforts on this paradigm change. In this view Lars Syll’s efforts in this blog is superfluous.
As for the accuracy of his counterargument, Syll’s is not well focused. He accuses Wren-Lewis not understanding that “why it [neo-liberalism] so often comes naturally for mainstream economists to embrace neo-liberal ideals.” He invites readers to read his essay: Amartya Sen on neo-liberalism. This is a good essay as an independent article, but this is not good evidence that neoliberal ideas come from mainstream or neoclassical economics. Syll points that there are two kinds of neo-liberalism: (1) libertarian tradition and (2) economistic tradition. It is evident that mainstream economists are in the latter tradition. However, what Syll explains in the second part of his essay (the part under the heading “The economistic tradition,” pp.15-20) is how Neo-Austrian economics and Public Choice theory came from one aspect of Adam Smith. Are these cases typical mainstream economics? Why couldn’t Syll argue more directly that neo-liberalism comes from mainstream economics? For example, why didn’t he argue that neo-liberal ideas come from Arrow-Debrue general equilibrium theory? I suspects that Syll is in fact admitting that it is not easy to refute Wren-Lewis’s contention. Wren-Lewis simply contended that there is no “inextriably linked” connection between “mainstream economics and neo-liberal ideas.” It is not easy to refute this proposition even if we do not like it.
absurd all one needs to do is see how companies like Google (not to mention the Big Banks, Big Acct) have captured their regulators and have effective monopolies, take these neolib corporations out of the mix an see how the economics reports shift.
Yesterday was an extremely special day. It was the 100th anniversary of the end of ww1, the hottest summer day in recent history causing enormous fires in all parts of the world, an exceptional degree of hostilities towards all kinds of immigrants (dual heritage, terrorist swaps, etc), a severe shortage of seasonal workers everywhere to pick rotting food. It was also a day of uniquely expressed solidarity by all people all over the world who were trying to either commemorate the dead or save the dying, some of whom losing their own lives on the way. Amongst them were medical professionals, aid workers, nurses, and coastguards.
So, please forgive this long posting. But I would like to combine previous ones on all matters and call a day really. A day of genuine solidarity with all peoples of the world, dead or living.
I shall take two geographies as an example: France and Morocco, simply because some colleagues and I (both publicly and privately) have had full discussions on this. So, here is a summary of key points, all relating to one day in human history, namely yesterday.
Please double check for yourself how a small, poor country colonised by the French, has managed to surpass France in tourism, maintained good relations with the whole world, sustained the production of excellent food for its own citizens, not to mention the millions of tourists who are fed up with visiting the same places over and over giving the only geography in the East (MENA) a chance. And how (Morocco as opposed to France and the rest of the great colonial powers ) has welcomed refugees from other countries in Africa too, integrating them in its labour markets. Please review the news (yesterday) of how this country managed to redirect its own citizens back home, while asking other countries to take on other refugees (Spain, and Italy are examples) who had taken the boat to cross the waters, lured by the images of a better future in Europe. And double check how Morocco has struggled to export any foods to anywhere, and how it has managed to ban coca-cola, and hopefully other poisonous products on its limited budget. Please also double check how it has managed to keep in check terrorist attacks (compare to France, UK, and the rest) to maintain the safety and security of not only its own citizens but of the tourists and visitors. And how it has managed on the same budget to provide excellent health care for both poor and richer people and excellent education for both. I have repeatedly pointed out that Spanish nurses and others now travel to Marrakech, for example, in search of a steady, decent income, which they can no longer secure in their own homelands.
It is extraordinary that while citizens of France and similar countries can travel the world freely and choose where to live, retire or take a break, citizens of its former colonies have almost zero chance of visiting another country, except Turkey, I believe. You should ask them directly the kind of treatment they receive there. For a more historical view, and once again, sticking to the same two geographies, please remember how a former head of IMF was disgracefully kicked out of Sofitel hotel a few years back on charges of sexually abusing young males in his private room. And where the alcoholic Churchill wrote the history of the war in the comfort of another hotel in the same city; his chambers are still kept for all to visit, as is his pipe, his hat and pen. And which city houses the memories of Yves Laurent, Pierre Berge and others in magnificent gardens of Majorelle Gardens. While we are at it, please take a real or virtual tour of the new “water museum” not far from the centre (the plaza) to see how this country has managed to record, with incredible accuracy and honesty, its own struggles and those of other Africans (especially women) to fight global warming on the one hand, and to stay as environmentally friendly as possible.
English remains the language of Globalisation. It is the one that has, is and will divide or unite us all. Swedish is not, as I am sure Lars would agree. I do, assure you though that the more languages one speaks, the more open-minded one becomes. And for the best of humanity, no language at all is needed. All you need is humility and genuine affinity with all progressive peoples on this planet. For other extremely important news, again relating to yesterday, please check page 26 of the latest issue of the Economist on the 70th anniversary of the National Health Service. It is entitled “The three myths of the NHS”. For an even more thorough understanding of Economics, please research the very history of this journal and how, when and why it changed its course in the late 1990s.
On that Economist NHS article. As usual, articles about “myths” are usually devoted more to spreading them than fighting them. The three myths are
1) It is a instantaneous creation of 1948. OK – that’s the only one of the three where the Economist is right.
2) “the NHS is a unique embodiment of compassion” OK, again not entirely unique, but it says “The NHS does a middling job of turning compassion into care” Baloney. For its bang for the pound, the UK NHS has afaik always been graded as the best in the world in efficiency. All of its problems are because not enough money is put into it.
3) “The final myth is that the Conservative Party is perpetually bent on selling off the NHS to the highest bidder.” This is no myth at all, but the truth as evinced by #2 – the right wing has been starving it of funds for decades and misappropriating every bit they can into their own pockets.
Neoliberalism is a strategy. Like the steps taken to win a battle. The steps don’t question why they battle must be fought. Neither does neoliberalism question why the battle to create an economy that depends on markets and rejects government involvement is fought. The “whys” come from culture – the sort of society considered good and necessary. Like liberalism before it, the cultural bases of neoliberalism are support for business-friendly ways of life and government. Supposedly economists compare and assess all the cultural bases for different sorts of economic arrangements. Economists thus assert that neoliberalism is the preferred economic organization. Study of these pronouncements show that economists are disingenuous. They have either been coopted through the acceptance of teaching or research jobs or been indoctrinated during their schooling. Breaking economists free is one part of a program to fix the multiple problems afflicting our societies today.
Ken, Neo Liberalism is indeed a strategy, for evil, but those interested in the “good” need a strategy as well. After Napoleon crushed Prussia at Jena-Auerstadt,in 1807, the Prussians reformers developed such a strategy to resurrect Prussia-Germany. One of the most influential reformers in education was Wilhelm von Humbolt who reformed German secondary education and created the University of Berlin (1810). Humboldt wished to use classical languages as media for the cultivation of this “inner self” not just to educate the individual but to prepared an entire ruling class for its leadership function, i.e., specifically in his time and place, the Prussian civil servants (Beamte). He considered the Beamtentum, to which he belonged, to be a general classs, charged in the Prussian Kingdom with looking after the public interest — not a special-interest group like businessmen that pursued its own selfish interests. To carry out this task the Beamte needed character more than cognitive knowledge. Humboldt expected a classical education in Gymnasien (secondary schools) to help instill in the youth of the directing classes a sense of honor, honesty, duty, and patriotism as well as a deep appreciation of culture, before they set off to the university to learn the cognitive subjects (mostly law at the time) needed to carry out administrative functions. Bildung (education) was first, then Ausbildung (training).
Although peculiarly Prussian Humboldt’s reform did not differ in intent much from the reigning educational philosophies of people running the English public schools, the French lycées and collèges, and private American liberal arts colleges. They could not have known that in the second half of the twentieth century one of the two cultures within the edifice of higher education would wither away and with it the vision of educating a nation’s elite morally.
We need reform strategies for US elites with developed programs to undo the effect of the educational reforms in economics and business schools have had on the leadership classes.
Robert, good assessment. Early American educators went to Germany to study educational practices. Much of the original US public schools reflected Humboltian notions. In fact, one or another version of Humboldt’s forms for education were the basis of US education up till the 1970s. But Humboltian values were almost from the beginning in conflict with first industrial and later financial capitalism, and today full-blown neoliberalism. The names changed but the purpose didn’t change – to keep wealth in the hands of a few. Since the 1970s “market” education has almost replaced Humboldt’s designs. Education focused ever more on research, innovation, product development, and marketing; even in the preparatory levels. The first signs were the creation of university research partnerships supported by new laws. The first such created just after WWII is Stanford Research Park. One result is the “market university” as an economic engine, first emerging in the US, and subsequently spreading around the world. In a 2012 study, Ståhle and Hautamäki doubted the long-term sustainability of what they termed a “contradictory science policy, “arguing for a return to a neo-Humboldtian approach to the university that would aim less for “innovation than for civilization” and reinstate the basic Humboldtian principles of academic freedom and autonomy for educational institutions, the pursuit of knowledge as a basis for both civilization and education (German Bildung), and unity in teaching and research. Of course, Billy Wilder made the same point more simply in his movie, “One, Two, Three.” C.R. MacNamara (James Cagney), known as Mac to his friends is Coca-Cola’s head of West Berlin operations, although he feels he deserves to be Coca-Cola’s head of European operations based in London. His life goes into a tailspin when he hosts Scarlett Hazeltine in his home for two weeks, the seventeen-year-old spoiled and party-loving daughter of his Atlanta based boss, Wendell Hazeltine. Scarlett marries Otto Ludwig Piffl, a staunch East German Communist. With her parents on the way Mac decides to make Otto into royalty (we all know how Americans love royalty). Commenting on the expense of doing this job Mac notes that Otto owes his $10,000 for the transition. To which Otto replies, “you mean I’ve been a capitalist for three hours and I already owe $10,000.” Mac’s reply, “That’s what makes our system work, everybody owes everybody.” We’re all in this together is how the US used to work. Now it works this way, everybody owes and supports the 1%. The end of both economics and education for American civilization, duty, honor, and obligation.
Recognizing that surviving neoliberalism is akin to surviving a religious dystopia.
Neo-liberalism is an ideology looking for justification. Every human system should be the integration of the practical, the ideal and the ethical because that is what wisdom is. Macro-economics is a johnny come lately pseudo-science that only came into being as Finance and its monopolistic paradigm was beginning to coalesce into its current world dominating and hypnotizing form….and that is precisely why it is so confused, unstable and does not “work”. As Michael Hudson laments, financialization is the bane of economics. What we need is a new paradigm that enables the re-retailization of economics and that recognizes that humans are not just marks, but matter. Math and science are an un-integrated and incomplete trinity-unity that requires Wisdom which is the human mental tool for cultivating self awareness-consciousness and so is also the best vehicle for paradigm perception as a component part of paradigms is a new consciousness.
Craig, IMV neoliberalism is one more strategy (ideology if you like) with the intent of ensuring that wealth remained in the “correct” hands. It’s not the first nor is it the last of such strategies. Economics (discipline) and economists are just minor functionaries in the process. Serving the role of technicians to ensure neoliberalism is routed to the right places and given the right veneer for the jobs at hand. The creators of neoliberalism attempt to use all social processes and artifacts the same way. Including science, mathematics, and government. But of all these economics and economists are the most compliant in carrying out the jobs needed to make neoliberal a bullet-proof strategy