Critical thinking is not always appreciated
from Peter Söderbaum
Economists like other people are political economic persons guided by their ideological orientation. We are eager to become accepted in some social groups. Just as political parties often are afraid of departing too much from one another, an economist may prefer a comfortable life by positioning herself close to other economists with respect to conceptual framework and ideology. Accepting the norms and standards of neoclassical economics is rewarding and constitutes a natural way of life. And since students are not exposed to any alternatives to neoclassical economics, the acceptance of neoclassical theory is not necessarily the result of a conscious choice. At some stage, however, a person may feel that she or he is locked into this theoretical perspective and category of economists.
“Critical thinking” within a discipline, and in the academy generally, is supposed to pave the way for improvements of a paradigm and even new theoretical perspectives. But critical thinking is not always appreciated.
Economics, ideological orientation and democracy for sustainable development
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Real-World Economics Review Blog 
I just read this!!
“The Senate Resolution To Condemn MMT: Here Are Some Better Candidates For Condemnation by John T. Harvey ,Professor of Economics at Texas Christian University :
”I can hardly believe that I am typing this. A resolution has been forwarded in the Senate to condemn an economic theory:
“Recognizing the duty of the Senate to condemn Modern Monetary Theory and recognizing that the implementation of Modern Monetary Theory would lead to higher deficits and higher inflation.”
I guess on the one hand that we should be happy that anyone is even aware of Post Keynesian economic theory. Scholars in this area have toiled largely in vain for going on a century (marking Keynes’ General Theory in 1936 as the starting point). So maybe there’s no such thing as bad publicity???
But, to suggest that MMT is anything radical or dangerous–especially to the point of requiring an official Senate condemnation–is just plain bizarre. The resolution references the work of a number of mainstream economists in support of the condemnation, but I’ve already addressed that elsewhere. Instead, I’d like to suggest a few more candidates for inclusion in this new movement:
1. Milton Friedman’s Monetarism: How about the school of thought that supported the policies that led to what is still the highest rate of unemployment (nearly 11%) since the Great Depression? The October 1979 Monetarist Experiment at the Fed caused officials to believe that it would be a good idea to raise the Federal Funds rate, which is essentially the wholesale price of money that banks charge each other, to over 17%. The prime rate that banks offered to their very best customers was over 20%. And all this based on a theory that completely misunderstands how the financial sector actually works. I have always found it kind of amusing that in Friedman’s classic exposition of the theory (the one where the helicopter drops money out) he actually engages in fiscal and not monetary policy! The helicopter does not change the form in which people hold their assets (monetary policy), it raises their income (fiscal policy).
THIS is a dangerous theory, as we have already been shown.
2. Trickle Down Economics: Trickle is right. The idea that helping the rich helps the rest of us is just slightly off. But a little rewording fixes it: helping the rich helps the rich. Trickle down economics is based on the idea that the wealthy are somehow the engines of growth, that they invest and consume and that helps everyone else. False. They save, which doesn’t help everyone else. Sure, they do some of that saving in the form of buying stocks and bonds, but none of that truly helps firms get the finance they need. Banks fulfill that role and they don’t need anyone’s savings to do it. Furthermore, firms don’t want to invest unless they think someone will buy what they are making. That’s what the poor and middle class do. In 2012, for example, the top 20% of income earners spent 60% of their income; the bottom 80% spent 90%. It’s the latter who really drive the economy and that’s one of the reasons we are struggling now. Condemn it!!!
3. Neoclassical Macroeconomics: You know all those economists cited in the Senate resolution? They are Neoclassicals. They assume that the economy automatically fixes itself and they believe that the financial sector is sufficiently unimportant to leave out of formal models. I feel like people must think I’m lying when I say that because it seems so insane. But let me give you just a couple of examples. Christina Romer, former head of Obama’s Council of Economic Advisors, writes in a piece on business cycles:
“The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy theoretically could stay forever.”
In other words, the system is stable and it automatically tends to create a job for every willing worker. Don’t worry, be happy. Any problems we encounter are due to random shocks (more on that below!). But, even then, the economy acts like one of those inflatable punching bags with the weight on the bottom: it bounces right back. And here’s another Nobel Laureate from a paper after the Financial Crisis where they are trying to address the fact that their models typically omit a financial sector:
“Given both the prominence of debt in popular discussion of our current economic difficulties and the long tradition of invoking debt as a key factor in major economic contractions, one might have expected debt to be at the heart of most mainstream macroeconomic models– especially the analysis of monetary and fiscal policy. Perhaps somewhat surprisingly, however, it is quite common to abstract altogether from this feature of the economy (emphasis added).”
What a horrific but totally accurate confession. He and his coauthor then go on to assume that banks loan out people’s savings. They don’t (well, they do, but it’s minor), they create new money via credit. That is a much more fascinating and dangerous process. Neoclassicism omits it, but Post Keynesianism and MMT do not.
How about we condemn theories that omit financial sectors?
4. Real Business Cycle Theory: This popular Neoclassical theory is so bad that even a recent Neoclassical Nobel Laureate condemned it (and, apparently, received a lot of flak for doing so). Paul Romer (no relation to Christina) writes that Real Business Cycle Theory attributes
“fluctuations in aggregate variables to imaginary causal forces that are not influenced by the action that any person takes.”
In other words recessions are caused by “stuff.” He calls this “Post-Real” economics, because economists are past worrying about how the economy really works. And he goes back to Friedman to assign blame for how our discipline justifies such an approach (see “positivism”). I’m all for condemning this one, too–anyone else?
If the Senate is going to get into the condemning-economic-theory business, I have some much better candidates for them. These have already caused real and serious damage. How about attacking them rather than theories aimed at increasing the welfare of the average American by employing models that reflect how the real world actually operates?”
https://www.forbes.com/sites/johntharvey/2019/05/03/the-senate-motion-to-condemn-mmt-here-are-some-better-suggestions-for-condemnation/amp/?fbclid=IwAR3ogJKTTR8Ov4CMuI6Ey8OZRcYFR0eh9-n86n2BEoc5TKC8bc4jKbu0FMohis!
An example of critical thinking:
Quantity calculus proves that neoclassical quantitative analysis which claims theoretical validity is a category error. Each determination of a neoclassical production function can only be a representation of a single data set. This explains why there are so many different forms. In essence they are merely arbitrary equations.
” In essence they are merely arbitrary equations.”
Did you notice how many equations are presented without supporting data too?
:D
““Critical thinking” within a discipline”, is always a good idea!
A short cut for improving economics is looking outward to other disciplines and binging others input in, or copying whats good. This means not having to reinvent the wheel. People outside of economics are doing a lot of critical thinking about economics. Many, of those people have learned things directly applicable to economics and have good training in critical thinking. For example, accounting, business, engineering, and sciences to name a few.
Perhaps also learning from other cultures would also be a good shortcut.
Wikipedia tells me that: “The basic axiom of quantity calculus is Maxwell’s description of a physical quantity (measure) as the product of a “numerical value” and a “reference quantity.”
Quantity calculus is the standard term, although a better term might be “quantity algebra” (unless calculus is specifically utilized(?)). Many orthodox economics equations tend to be of a pseudo quantity algebra nature. Quantity calculus is based on the concept that a physical quantity, unless it is dimensionless, has a value equal to the product of a numerical value (a pure number) and one or more units.
A new paper “Quantity Calculus, Fundamental Constants, and SI Units” by Barry N. Taylor Scientist Emeritus, National Institute of Standards and Technology, Gaithersburg, USA, tells us;
“A paper we published in this journal (Journal of Research of the National Institute of Standards and Technology) in 2011 shows in detail how, with the aid of the quantity calculus, the current International System of Units (SI) can be viewed as being founded on seven reference quantities, now called defining constants. The motivation for that paper was the likely adoption in the not-too-distant future of a revised SI (referred to as the “new SI” at the time) explicitly based on seven defining constants, three of which would be the same as for the current SI but four of which would be different. Sufficient progress has now been made in the required experimental work that such a revised SI is now expected to be established by the 26th General Conference on Weights and Measures (CGPM) when it convenes 13-18 November 2018 and which will come into effect on 20 May 2019, World Metrology Day.”
Yes, I resisted my spell checker’s effort to change that to “Meteorology” which strangely perhaps is not the study of meteors. ;)
Money is a numerical value of notional type. Its formal designation might be in dollars (for example). A dollar is not a reference quantity. It is not one of the seven reference quantities in the International System of Units. Neither are “Utils” or “SNALTs” reference quantities. These are erroneously claimed, by neoclassical economics and Marxist economics respectively, to be real quantities to which dollars refer. However, they are not real reference quantities nor can they be derived from real reference quantities. (See Bichler, Nitzan, Fix et.al.)
On the face of it, this posits strictly that any quantity calculus in economics must nowhere refer to dollars or any other monetary unit.
The issue of dimensionless quantities is perhaps a little more subtle. I must mention here I am not a mathematician, albeit I can do arithmetic and simple algebra. I assume that a dimensionless quantity in economics if derived via an equation where money units (themselves not reference quantities) cancelled (as denominator and numerator), then in this case, the ratio could still not be regarded as a genuine ratio of reference quantities and hence not a true or proper dimensionless quantity in scientific or quantity calculus terms.
However, as I am not a mathematician I an open to valid correction.
One might stress that only small integer exponents are allowed for quantities found in abstract equations. This is why all production functions can only be a concrete expression of a data set.
English please, I did say I wasn’t a mathematician. :)
What real quantities are these equations modelling? In addition, are they modelling any notional (non-real) quantities… like money?
Rather than arguing about minute linguistic issues in English (a relatively easy language to perfect) we should learn critical thinking from outside the English-speaking world. Perhaps our imaginations would stretch a little further from entrenched positions and how they have proved to be useless time and time again. The world does include (as mentioned by our colleague above) other cultures rich in histories of sacrifice in search authentic knowledge.
Oops! I dropped an “of” in the end. It must be my English.
Helen,
I don’t believe it is a minute linguistic issue. There are genuine concepts involved. My “English please” is really a plea to receive a translation from specialist into generalist language. When writing in English, “English please” is an idiomatic request for plain non-specialist language. It’s always open to Frank Salter to decline and say, “No, you are not really going to understand this unless you learn more about mathematics.”
The same might be the case if I asked someone to explain Hegelian-ism to me in English. They might say that it’s possible or they might say, “No, you have to become adept in German and indeed in “Philosophical German” before you can understand Hegel.
And it’s right here that I admit, with a little chagrin (distress of mind caused by humiliation, disappointment or failure) that I am a mono-linguistic English speaker. ;)
No Problem at all, in that case excuse my French!
The real irony is that critical thinking has been dead for a long time, regardless of what language we speak or don’t.
And, you shouldn’t feel humiliation or any other negative feeling whatsoever. English is, after all, the language of Globalisation. I only wish English-speaking Economists would take on board this basic fact and write about other Economists who are silenced in the rest of the world. Again, no disrespect intended to anyone.
To return to the key point, the revival of CRITICAL THINKING is the difficult task ahead. But personally, I remain sceptical on the whole.
I definitely am not an academic of any sort but it seems to me that a great deal of the conversation to reform economics, has lost sight of the reality, that people are the actors that play out the economic charade. Secondly believing I have a free will, I have found it necessary to think and apply a form of critical thinking to all the things that confront me on a daily basis. OTHERWISE I think i am in danger of becoming a mindless moron, who accepts the political economic garbage of a self serving elite. Ted
You are definitely not a moron. Far from it. The real morons are the “know it all” academics who serve no one but their funders and recruit others to regurgitate the same useless, misleading, outdated and derailing arguments over and over again in the name of a “slightly new angel” to an old problem. They should all resign. In fact, one is better off staying outside academia altogether, with occasional participation only where a reasonable dialogue is taking place.
When I was a young man deciding what to do in life, I decided to become an academic, because I did not want to be involved in the world of money. It turned out that the world of money invaded academia in a big way, to my sorrow and that of others, but my career as a professional historian, if it has been hampered by various orthodoxies in the historians’ establishment, has been one in which serendipity can thrive.
Peter, in your book, you say that “critical examination of” stands for an attempt to evaluate the different contributions negatively as well as positively. You also, emphasize that “Critical thinking” within a discipline, and in the academy generally, is supposed to pave the way for improvements of a paradigm and even new theoretical perspectives. But critical thinking is not always appreciated. You continue, The pluralism strategy advocated in this book will make life easier for all of us. If economists understand that new thinking is part of our mission as economists and that values and ideology are always involved, then a degree of pluralism will more easily be accepted and even encouraged.
In his paper, “Why Has Critique Run out of Steam? From Matters of Fact to Matters of Concern,” Bruno Latour shows that critique has “run out of steam” because it tries to focus on “matters of fact,” rather than “matters of concern.” I highly recommend reading this paper. It will give you a hundred or more new insights on critique. It is published in “Critical Inquiry 30 (Winter 2(04)”, University of Chicago. Latour writes there, “My question is simple: Should we be at war, too, we, the scholars, the intellectuals? Is it really our duty to add fresh ruins to fields of ruins? Is it really the task of the humanities to add deconstruction to destruction? More iconoclasm to iconoclasm? What has become of the critical spirit? Has it run out of steam? Quite simply, my worry is that it might not be aiming at the right target…My argument is that a certain form of critical spirit has sent us down the wrong path, encouraging us to fight the wrong enemies and, worst of all, to be considered as friends by the wrong sort of allies because of a little mistake in the definition of its main target. The question was never to get away from facts but closer to them, not fighting empiricism but, on the contrary, renewing empiricism. What I am going to argue is that the critical mind, if it is to renew itself and be relevant again, is to be found in the cultivation of a stubbornly realist attitude-to speak like William James-but a realism dealing with what I will call matters of concern, not matters of fact. The mistake we made, the mistake I made, was to believe that there was no efficient way to criticize matters of fact except by moving away from them and directing one’s attention toward the conditions that made them possible. But this meant accepting much too uncritically what matters of fact were. This was remaining too faithful to the unfortunate solution inherited from the philosophy of Immanuel Kant. Critique has not been critical enough in spite of all its sore scratching. Reality is not defined by matters of fact. Matters of fact are not all that is given in experience. Matters of fact are only very partial and, I would argue, very polemical, very political renderings of matters of concern and only a subset of what could also be called states of affairs. It is this second empiricism, this return to the realist attitude, that I’d like to offer as the next task for the critically minded. To indicate the direction of the argument, I want to show that while the Enlightenment profited largely from the disposition of a very powerful descriptive tool, that of matters of fact, which were excellent for debunking quite a lot of beliefs, powers, and illusions, it found itself totally disarmed once matters of fact, in turn, were eaten up by the same debunking impetus. After that, the lights of the Enlightenment were slowly turned off, and some sort of darkness appears to have fallen on campuses. My question is thus: Can we devise another powerful descriptive tool that deals this time with matters of concern and whose import then will no longer be to debunk but to protect and to care, as Donna Haraway would put it? Is it really possible to transform the critical urge in the ethos of someone who adds reality to matters of fact and not subtract reality? To put it another way, what’s the difference between deconstruction and constructivism? ‘So far,’ you could object, ‘the prospect doesn’t look very good…”