Home > Uncategorized > Neoliberal economic theory is covertly racist

Neoliberal economic theory is covertly racist

from John Komlos

Mainstream economics –as taught to well over a million students a year in the U.S. alone –is replete with implications that feed into structural racism.[i] That should not be misinterpreted to imply that economists themselves are racist. 

Rather, the market fundamentalism they promulgate have the unintended consequence of providing ample justification for maintaining the economic status quo which privileges the well-to-do but finds most minorities at the lower end of the social-economic hierarchy . . . . [In the U.S.] Blacks are 1.8 times and Hispanics 1.5 times as likely to be poor than their share of the population. Consequently, there is a racial bias in poverty. To be sure, the ethnic face of poverty in other countries differs and that implies that my argument is context dependent. That is not to deny the destructive nature of white poverty as well (Case and Deaton, 2020).

Mainstream economic theory today is basically an apotheosis of theoretical markets without, however, revealing the “Achilles heels” of their real counterparts. These discrepancies include concepts that are trivialized in conventional textbooks especially by U.S. authors: basic needs, bounded rationality, conspicuous consumption, culture, discrimination, endogeneity of utility functions, ethics, externalities, hyperbolic discounting, ideology, imperfect and asymmetric information, imperfect foresight, incomplete contracts, intuition, Knightian uncertainty, manipulation of consumers, missing markets, monopolies, oligopolies, opportunistic behavior, Pavlovian conditioning, power disparities, relative incomes, social interaction, social norms, transaction costs, unconscious mind and much more – that hinder real markets from functioning with the ease they do on blackboards. These issues are treated mostly as epiphenomena in the dominant neoclassical theories and particularly at the undergraduate level. 

Market fundamentalism does not have to be overtly racist in order to be structurally racist: “contemporary sociology considers racism as individual and group-level processes and structures that are implicated in the reproduction of racial inequality in diffuse and often subtle ways” (Clair and Denis, 2015, p. 857). This is the essence of colorblind, covert, implicit, institutional, laissez-faire, structural, or systemic racism. That makes neoliberal economic theory covertly racist as the unintended consequence of the seemingly neutral assumptions upon which it is based. The unwarranted assumptions underlying the theory contribute to keeping disadvantaged groups disadvantaged. This is racism without racists (Myers and Ha, 2018, p. 54). This has immense implications because economic theories have a powerful impact beyond the ivory tower, insofar as they seep into the media and dominate popular discourse on Mainstreet as well as in the halls of Congress.

Covert Racism in Economics

[i] However, there are notable exceptions (Friedman, 2018, Goodwin et al., 2015, Hill and

Myatt, 2010, Schneider 2019).

  1. Ken Zimmerman
    May 2, 2021 at 1:16 am

    Neoliberal economists announce to all, whether they want to hear it or not regularly, those who are wealthy and powerful deserve both, and more due to their greater intelligence, commitment, foresight, and competitive spirit. They deny that prejudices of any kind, racial, ethnic, gender, political, etc. play any part in such determinations. Referencing to the old Grouhcho Marx’s joke, these economists want us to believe their theory rather than our eyes. Each day our own experiences both as ‘formal’ scientists and in everyday interactions force us to face many instances in which these and many other prejudices determine our chances in life and who and what we become. What does that make neoliberal economists? At best idiot savants. At worst dangerous liars and propagandists.

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