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Economics beyond neoliberalism

from Lars Syll

We welcome Naidu, Rodrik, and Zucman’s contribution and the debate it has inspired. We share much of their agenda for an economics “beyond neoliberalism” …

imagesNonetheless, we believe that Naidu, Rodrik, and Zucman do not go far enough in their calls for reform. The vision they paint is still focused on the discipline of economics and anchored in the core ideas of neoclassical theory that dominated the field in the twentieth century …

The behavioral economics critique of the rational actor model has become mainstream. Yet despite this, much economic modeling, including much policy modeling, continues to use rational choice assumptions. There remains a perception that rational choice is a “good enough approximation” and that there is no acceptable alternative model … But if economists widened their view to include neuroscience, cognitive science, anthropology, social psychology, evolutionary biology, computer science, and philosophy, they would see that, over the last few decades, there has been a revolution in behavioral science that should have a major impact on economics.

Instead of asocial, transactional, self-regarding utility maximizers, real humans are intensely social, highly cooperative, and other-regarding creatures who make decisions inductively, heuristically, mimetically, and through group reasoning … Economics needs to embrace what other fields have learned about behavior, networks, institutions, culture, evolution, and non-equilibrium systems …

Our point is to encourage the field to go further, faster. Economics needs to embrace what other fields have learned about behavior, networks, institutions, culture, evolution, and non-equilibrium systems. To date the infrastructure of the economics profession—journals, funding bodies, hiring and tenure committees— has been largely closed to these ideas and approaches. If economics is to reform and move beyond neoliberalism, this needs to change.

Brian Arthur, David Colander, Alan Kirman, et al.

  1. March 22, 2020 at 10:00 pm

    I fully support this. Most of us are hoping for a best case scenario outcome to the current crisis, but it’s important also to imagine the worst case scenario, with so many people becoming sick that major systems start collapsing – supply chains, etc. Each day that the crisis gets worse, people’s awareness that we need a completely new approach to the way we run our world and our economy will increase. We need to be planning NOW how we will rebuilt the economy along the approach described here, as soon as recovery begins, which could be in six months, or more likely in two or five years time.

  2. Helge Nome
    March 23, 2020 at 1:46 am

    I think we are about to learn the difference between what is a need and what is a want

  3. Ken Zimmerman
    April 4, 2020 at 4:40 pm

    Sounds wonderful. But doesn’t take into account the cooperative networks that have evolved since Reagan, et al cursed us with the blessings of neoliberalism. Sorry to quote Upton Sinclair again but it seems to fit here. “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” There are literally thousands of economists with secure (even in the COVID 19 crisis) and well paying jobs in academia, corporations, banks, foundations, and even government who may find it difficult to hear what’s being said here. What’s the plan to break down and destroy these networks? After all, their destruction is a prerequisite to the changes proposed here. Isn’t it?

    • Robert Locke
      April 5, 2020 at 12:07 pm

      Saint-Simon said so, two centuries ago (see my comment on losetlose.

      • Ken Zimmerman
        April 5, 2020 at 4:18 pm

        Robert, would you please direct me to those comments? Can’t seem to find them on my own. Thanks.

      • Robert Locke
        April 6, 2020 at 8:33 am

        The Comment I made to Ruccio’s post, which is as follows:

        In 1819 Saint-Simon launched the journal, l’Organisateur, on which he,Thierry and Comte all participated.

        The opening letter in l’Organisateur was a scathing indictment of the current holders of power – the clergy, wealthy owners of industry, aristocracy, government and civil service, whom Saint-Simon characterised as useless idlers.He went on to claim that if they were all to die it would not harm France at all, while if the leading scientists, artists and skilled workers – the real producers of wealth – were to die then the country would truly suffer.”

      • Ken Zimmerman
        April 6, 2020 at 11:47 am

        Thanks, Robert. Got it. Saint Simon is, in my view certainly correct. As history demonstrates.

        Dave, I don’t understand your “‘ju-jutsu’ turnover!” You really believe bankers are that stupid?

      • April 6, 2020 at 4:22 pm

        Ken, I’ve reached out to you twice recently as a would-be friend, appreciating both your Tarde history and now your fair challenge here. In case you didn’t follow the ju-jutsu link, and in case others here haven’t, here’s the relevant bit:

        “”Jū” can be translated to mean “gentle, soft, supple, flexible, pliable, or yielding”. “Jutsu” can be translated to mean “art” or “technique” and represents manipulating the opponent’s force against themselves rather than confronting it with one’s own force”.

        Perhaps you are so literal-minded that you cannot see how this applies to political/economic power? I put quotes round your word ‘plan’ because this is is strictly a method or strategy that can be used in a plan in similar situations, like mathematically, adding is a method of aggregating any items of the same type. The type of issue here is an imbalance of power. There is a precedent in the case of whistle-blower Clive Ponting vs. Mrs Thatcher, who directed the judge that there was no defence against Ponting’s having breached the Official Secrets acts by revealing that Mrs Thatcher had misled Parliament by denying she knew the Argentinian warship had left and was still going away from the combat zone she had declared. The jury defied the judge and used the power of court to clear Ponting anyway. The relevance of this is that there are many more apparently powerless non-bankers than there are bankers.

        I would add that bankers and presidential candidates are human, so I don’t think they are all stupid. At least some of them are open to friendly if not hostile persuasion, even if others like only the sound of their own voice.

        (That last is an allusion to Chesterton in “The Return of Don Quixote” educating an educated trades union leader about what beer-drinking men are talking about in pubs! Lighten up a bit, Ken. There was still fun as well as the wisdom of Soddy and Stamp and Robert the Bruce’s spider to be had during Britain’s 1926 general strike. “Try, try, try again”)!

      • April 6, 2020 at 5:28 pm

        Perhaps this from yours on 4th April is why you didn’t understand, Ken: ” “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” But I thought you were retired? Why worry about salaries when the alternative is your having maintained your own credit-worthiness letting you buy whatever you need on account?

        From the same place: “[Lar’s post] doesn’t take into account the cooperative networks that have evolved since Reagan”.

        I disagree. Different words, same meaning: “To date the infrastructure of the economics profession—journals, funding bodies, hiring and tenure committees— has been largely closed to these ideas and approaches”.

        The need is not to destroy the co-operative networks but to have them sharing a different message: “Our point is to encourage the field to go further, faster. Economics needs to embrace what other fields have learned about behavior, networks, institutions, culture, evolution, and non-equilibrium systems”.

        Those who run “the infrastructure of the economics profession” need to stop worrying about where their funding is coming from. That is why they and their bankers need persuading that “giving credit where due” is as costless, simpler and much more honourable than the present Ponzi money.

    • April 6, 2020 at 10:20 am

      Ken’s challenge: “What’s the plan to break down and destroy these networks? After all, their destruction is a prerequisite to the changes proposed here. Isn’t it?”

      In answer to Robert’s Saint-Simon, there is more to life than wealth, but belief that wealth is power is the reason for the wealthy to exercise it and the poor to think themselves powerless. Killing off the wealthy is no solution. As the banker Lord Stamp is said to have said in the 1920’s:

      “”Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again.”

      My “plan” is therefore to destroy the credibility of money (demonstrably made out of nothing) giving lenders blackmail power over debtors. The fact is that we buy things on credit, and the understanding that the rich are stealing our IOU’s leaves them responsible for the debts they hold, and vulnerable to blackmail in their turn. A sort of “ju-jutsu” turnover!

      https://en.wikipedia.org/wiki/Jujutsu

  4. Ken Zimmerman
    April 7, 2020 at 11:54 am

    Dave, I recognize the use of persuasion, deception, guile, and moral expectations to win over direct power, physical, political, and economic. That’s not the issue here. The issue here is simply this. If I ask you to decide or take an action I desire on promise or threat of the future income you need to support yourself and/or your loved ones, what’s the likely outcome? Donald Trump practices this approach every day. When he tells laid off workers that their future job security and wages depend on them voting for him. When he tells pensioners and social security recipients that only he can save their pensions and social security. When he denies money and supplies to deal with a pandemic to some states while granting it to others. He wants worship. If he’s granted that perhaps he will help those who give it. Perhaps not. Soft approaches or misdirection have not historically been effective at changing either the desires or actions of autocrats. Five million Germans died defending Hitler. Why? I’m 100% in favor of ordinary persons being invested with making all the decisions for themselves about their lives and the direction of their society. Easy to say. But in actual societies with actual people sometimes very difficult to achieve. Killing the most vulnerable, family and friends, starving people into submission, or just convincing people the cause of “dear leader” is the best use for their lives is going on in the US and elsewhere right now. I’m not certain any sort of ‘ju” can overcome this. A political and economic revolution is needed now. Maybe Thom Hartmann’s suggestion in his posting today is one we should consider. Give the red states what they want. The conservative way of life they insist on. The blue states will go their own way. Since the blue states have economically subsidized the red states since the end of WWII, Thom believes this is an experiment worth considering. I like the idea.

    As to changing the structure and message of the cooperative networks that support economic “science” and economists, historically such changes require a couple of generations to implement. Even with little opposition. And I don’t believe we can assume no opposition. So, figure on 50 years to make the changes. That’s 50 years of chaos, brutal conflict, and societal uncertainty. How do ordinary people survive this kind of situation?

    Of course, I could be mistaken on all this. Want to experiment?

    • April 8, 2020 at 4:32 pm

      You are mistaken on this. The point is not stirring up revolution among the many but undermining the credibility of the Trumps of this world by appealing rationally to (rather than threatening) their key supporters, some few of whom are likely to be reasonable.

      • Ken Zimmerman
        April 11, 2020 at 10:40 am

        My aim is not revolution, unless it is necessary to ensure that economic and political inequality is reduced to a minimal level. It’s impossible to embarrass sociopaths, like the Trumps. It’s also impossible to appeal to the “reason” of sociopaths. To their fear of destruction might work. If they believe you’re a genuine threat to it. How else do you plan to “undermine” their credibility or their power?

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