There was a recent article in The Nation on “Heterodox Economics.” It was followed by an online discussion at the Talking Point Memo Cafe, involving several more or less famous economists such as James Galbraith and Brad Delong. The discussion happened only a week ago. You should be able to find it on the TPM Cafe site, if you are in any way an economics junky.
In any case, the discussion led me to Post-Autistic Economics, a website which has a fine, brief discussion of what is wrong (in their opinion) with current, neoclassical economists, who suffer — apparently — from physics envy and want economics to be as mathematically rigorous as theoretical physics.
This is from the Post-Autistic site: a description of neoclassical economic theory…
The dream of a determinate model of the economic universe was realized in the 1870s by William Stanley Jevons and, especially, by Léon Walras, both of whom were in part physicists by training. Called the model of general equilibrium, this elaborate mechanistic metaphor, proudly devoid of empirical content, remains the grand narrative of economic theory for students and economists everywhere.
The model, which invariably is expressed in language so metaphorical that it would make a good poet blush, works by laying down a priori, like Euclidean geometry, a set of axioms.
1. The economic universe is determinate.
2. It exists in a void rather than in an ecosystem.
3. All relations in an economy are self-regulating, in the sense that any disturbance “sets in motion forces tending to restore the balance”.
4. These “forces” result exclusively from the behaviour of isolated individual agents.
5. The behaviour of these agents conforms to certain mathematical properties. For example, consumer choice is characterized by transitivity (if X is preferred to Y and Y to Z, then X is always preferred to Z), completeness (out of the set of all possible bundles of goods given her income, she considers her preference between every pair of them) and independence (consumers are not influenced by the choices of other consumers).
Why do I care about this stuff? Because what I read about economics in the media sounds insane, and I want to understand why it’s insane. How do people come to conclusions that strike me as obviously wrong? The simple answer is, neoclassical economists are shills for the status quo. But I want a more detailed answer.
There are a number of things about the above premises which strike me as odd. Society is not made up of isolated individuals, but of complex relationships. This is especially true of modern capitalism, which includes the entire world, full of all kinds of people organized into all kinds of groups. Premise four reminds me of Thatcher’s famous remark that “there is no such thing as society, there are only individuals and families.”
Premise three is also extremely weird. Capitalism is most dynamic system humans have ever created. It is all about change: scientific, technological and social. The change is so rapid that it’s obvious to everyone except small children. Remember before the Internet, when no one had personal computers? Remember when you had to call the public library to get the answers to questions, instead of simply googling?
I remember luxury passanger trains in the US, transatlantic steamers, the arrival of TV and jet planes, Detroit when it was a city full of car plants instead of empty lots and boarded up buildings. I remember when half the industrial production in the world was in the US, when there were no freeways in the Twin Cities and no suburban sprawl, when the south was segregated by law, women were supposed to stay home and raise kids, and everyone gay was in the closet.
Government intervention has smoothed out the business cycle and made panics and depressions less deep and obvious. Social movements such as Civil Rights, Feminism and Gay Rights have made society more humane.
But the rapid technological and social change continues. I don’t think you can say capitalism is self-balancing. Maybe feudalism was, and maybe traditional tribal societies were. But capitalism? Is the deindustrialization of America an example of self-regulation? Is NAFTA’s destruction of the rural economy of Mexico (through flooding Mexico with cheap, subsidized American corn) an example of a system that tends to restore balance?