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Economics as ideology

from Lars Syll

capitalism-works-bestAlthough I never believed it when I was young and held scholars in great respect, it does seem to be the case that ideology plays a large role in economics. How else to explain Chicago’s acceptance of not only general equilibrium but a particularly simplified version of it as ‘true’ or as a good enough approximation to the truth? Or how to explain the belief that the only correct models are linear and that the von Neuman prices are those to which actual prices converge pretty smartly? This belief unites Chicago and the Classicals; both think that the ‘long-run’ is the appropriate period in which to carry out analysis. There is no empirical or theoretical proof of the correctness of this. But both camps want to make an ideological point. To my mind that is a pity since clearly it reduces the credibility of the subject and its practitioners.                   Frank Hahn

  1. deshoebox
    July 2, 2022 at 7:43 pm

    Poor Mr. Hahn. It’s actually worse than he thinks. It recently became clear to me that economics “as a science” has been deliberately cultivated and steered to ensure there will be a plentiful professional class of economists who will not understand certain things and who will never ask certain kinds of questions. This is not a conspiracy theory. It is supported by a great deal of evidence about the intentional distorting of thought and the marginalization of non-conforming theories throughout the history of economics.

    • Andri Stahel
      July 3, 2022 at 3:30 pm

      Yes, you’re absolutely right. In a recent article, I showed that actually, economists are the equivalent of medieval theologians. Both had (and in the case of economists still have) a central ideological function legitimizing the hegemonic structures. Using, actually, the same misplaced methods. It is, thus, a paradox that economists, having adopted the mechanistic methodology inherited from Galileo and Newton that brought down medieval theology as a way of access to truth, ended up becoming the new theologians. More about this here http://www.paecon.net/PAEReview/issue97/Stahel97.pdf

  2. July 2, 2022 at 9:21 pm

    Economics is not just an ideology it is a belief system like a religion. This must be so because neither any economist or accountant has a definition of economic value grounded in reality. The International Accounting Standards Boards has all sorts of standards but not one identifying or defining economic value. As a result market prices/costs have become self-referential not tethered to reality and subjected to Presidential tweets, whims and/or fashions of the moment.
    A more detailed critique is presented in my article: “Correcting Central Bank Failures” at: https://www.longfinance.net/news/pamphleteers/correcting-central-banks-failures/ This was written to provide the public a context for raising questions and/or answers to the Round Table discussion on “How should Central Banks conflicts of interest be managed?” that I have organised free online next Thursday July 7th at 3 pm London time. The event is being hosted, chaired and recorded by Alderman Professor Michael Mainelli, a past Sheriff of London and includes two former advisers to the Bank of England. Details and access to the event and/or recording is provided by the Financial Services Club at: https://www.longfinance.net/events/all-events/how-should-central-bank-conflicts-be-managed/

  3. Julian Hinton
    July 3, 2022 at 2:01 am

    He’s only just realizing this? I think it would be more fruitfully analyzed as a cult or religion. ‘Ideology’ is a bit ambiguous in moral terms. Some would argue that it is possible or perhaps necessary to have a ‘good’ ideology, in the tradition of George Sorel.

  4. Jesper Jespersen
    July 3, 2022 at 5:57 am

    Very important!
    When and where did Frank Hahn write this statement?

    • Meta Capitalism
      July 3, 2022 at 7:08 am

      Petri, Fabio and Hahn, Frank 2003, 27-28, General Equilibrium: Problems and Prospects. Routledge.

  5. yoshinorishiozawa
    July 3, 2022 at 1:39 pm

    In the introduction for sales promotion for the book General Equilibrium. Problems and Prospects, edited by Fabio Petri and Frank Hahn (2002), and from which the citation comes, it is stated as follows:

    General equilibrium theorists including Michio Morishima, Michael Magill and Martine Quinzii debate strengths, weaknesses and possible futures with leading thinkers such as Herb Gintis, Pierangelo Garegnani and Duncan Foley, who seek to explain the rejection of general equilibrium.

    Herb Gintis and Duncan Foley are introduced as opponents to General Equlibrium. But, in my understanding, they have gone over to equilibrium framework by generalizing some minor aspects.

    See

    Gintis, H. (2007) The Dynamcis of General Equilibrium. The Economic Journal 117: 1280-1309.

    Foley, D. (2017) Crisis and theoretical methods: equilibrium and disequilibrium once again. Working Paper 03/2017.

    Equilibrium concepts enhance the explanatory power of economic theories in contrast with the limitations of disequilibrium dynamical systems analysis and agent-based modeling. (in Abstract)

    At this level I am far from without company, and an important part of my thinking has been shaped by the “post-Walrasian” school of economics.

    Note: “Post-Walrasian” school stands for Bowles and his followers.

  6. Andri Stahel
    July 3, 2022 at 3:31 pm

    Yes, you’re absolutely right. In a recent article, I showed that actually, economists are the equivalent of medieval theologians. Both had (and in the case of economists still have) a central ideological function legitimizing the hegemonic structures. Using, actually, the same misplaced methods. It is, thus, a paradox that economists, having adopted the mechanistic methodology inherited from Galileo and Newton that brought down medieval theology as a way of access to truth, ended up becoming the new theologians. More about this here http://www.paecon.net/PAEReview/issue97/Stahel97.pdf

  7. Grayce
    July 4, 2022 at 3:34 pm

    Someone sponsors the mythmakers. That is, they could not survive in such great numbers without income. Colleges, lectureships, speaking fees–someone wants to hear it. And so it is proliferating. Buckminster Fuller said you cannot defeat an existing paradigm. You must make a new one and nudge out the old. So what is the better version? Or, is that the wrong question? Is there a version of Economics that makes sense? Is there an entirely different paradigm to help people undersatnd the world of give and take over time intervals?

    • Julian Hinton
      July 5, 2022 at 12:46 am

      Here’s one example: “Steve Keen argues that economics needs its own Reformation. In Debunking Economics, he eviscerated an intellectual church – neoclassical economics – that systematically ignores its own empirical untruths and logical fallacies, and yet is still mysteriously worshipped by its scholarly high priests. In this book, he presents his Reformation: a New Economics, which tackles serious issues that today’s economic priesthood ignores, such as money, energy and ecological sustainability. It gives us hope that we can save our economies from collapse and the planet from ecological catastrophe.”

    • yoshinorishiozawa
      July 7, 2022 at 3:02 pm

      Dear Grayce,

      you are right. “You cannot defeat an existing paradigm. You must make a new one.”

      Please read Lars Syll’s post on January 31, 2018
      https://rwer.wordpress.com/2018/01/31/what-is-wrong-with-neoclassical-economics/
      and my comments (the first of the Replies). My comment starts with this:

      As usual, Lars Syll is right in his criticism on neoclassical economics but he is forgetting one important thing: It takes a theory to beat a theory.

      I have pointed it in many occasions but Lars has no ear or eye to understand this simple fact.

    • Meta Capitalism
      July 8, 2022 at 9:02 am

      Someone sponsors the mythmakers. That is, they could not survive in such great numbers without income. Colleges, lectureships, speaking fees–someone wants to hear it. And so it is proliferating. ~ Grayce

      .
      Years ago Politico Magazine published an article by some billionaire named Nick Hanauer titled The Pitchforks Are Coming… For Us Plutocrats. It became a Ted Talk. He also published a book called The Gardens of Democracy.
      .

      True Self-Interest Is Mutual Interest

      Self-interest may be a basic human condition and a constant in politics, but how we conceptualize self-interest has, at key moments in history, changed fundamentally—The Enlightenment was one such moment; the science of our current age is giving us another—We compare and contrast these old and new stories of systems, causation, and agency—The fundamental shift of this second Enlightenment is from atomized individualism to networked interdependence, and this forces a new concept of self-interest (Liu, Eric; Hanauer, Nick. The Gardens of Democracy (pp. 20-21). Sasquatch Books. Kindle Edition. https://a.co/0tu6wn7)

      Gardenbrain vs. Machinebrain

      The failure of our politics to keep pace with reality—The way ideology prevents adaption—New science gives us new sight about how the world works—What must follow is a new story: about self-interest, the meaning of citizenship, the nature of the economy, and the role of government—The gardens of democracy (Liu, Eric; Hanauer, Nick. The Gardens of Democracy (p. 4). Sasquatch Books. Kindle Edition. https://a.co/hjPGMz4)

      .
      Mainstream economic (ME) ideology (propaganda), in the name of “science” no less, taught that human beings were rational selfish calculating “utility” maximizers. Now some (not all) complexity theorists claim to have THE new theory because they have ME’s
      homo economicus caricature and replaced it with another caricature:
      .

      The dilemma of these offshoots lies in having accepted the false premise of the orthodoxy to which it proposes to serve as the alternative. The conceit is of a dispassionate search for timeless truth, once again pursued by “relaxing restrictive assumptions” in the interest of “greater realism”. Thus, for example, in complexity theories agents follow simple rules and end up generating intricate and unpredictable patterns, nonlinear recursive functions give the same result, the variance of returns turns out to be non-normal, and so forth. But once the starting point is taken to be the neoclassical competitive general equilibrium model, these exercises are largely drained of insight and relevance. The behaviorists can tell us that real people do not appear to fit well into the portrait of autonomous, selfish, commodity-obsessed pleasure-seekers that is “economic man”. The complexity theorists can tell us, as Arthur (2021) does, is that a system constructed from confections of interacting agents may be unstable. These things, even the dimmest observer of real-existing capitalism already knew.(Fullbrook, Edward ; Morgan, Jamie. Post-Neoliberal Economics (pp. 133-134). World Economics Association Books. Kindle Edition. https://a.co/hUfoRLa)

      .
      One bad, erroneous caricature replaced by another bad erroneous caricature of human nature and human behavior will not solve our real-world problems.
      .

      Buckminster Fuller said you cannot defeat an existing paradigm. You must make a new one and nudge out the old. So what is the better version? Or, is that the wrong question? ~ Grayce

      .
      I would submit that the “it takes a theory to beat a theory” nonsense is putting the cart before the horse. It is conflating a narrow use of models and theory within with the purpose and meaning of economics reducing it to a form of conceited scientism that has a antiquated understanding of not only what social science is buy how science itself should be done. But I digress.
      .

      Is there a version of Economics that makes sense? Is there an entirely different paradigm to help people understand the world of give and take over time intervals? ~ Grayce

      .
      I believe a new version is emerging and could list many sources, but for now only cite the one above. There are many others.

  8. yoshinorishiozawa
  9. yoshinorishiozawa
    July 7, 2022 at 3:23 pm

    The following is a part of evidencebas‘s comment:

    I would particularly like to highlight “avoid wishful thinking” in Yoshinori’s negative list, in #4. We need to apply this to ourselves, as well as to our opponents. When our investigations lead to a conclusion that we don’t like, i.e. it doesn’t fit well with our own values and political beliefs, it is painful. But to accept that the conclusion is correct because it is what the evidence says shows that we are doing science not ideology, which is good.

    I wonder how many readers there are in this blog, who care about doing science. It seems to me that many are criticizing economics as ideology simply by his/her own ideology.

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