Real World Economics: A Post-Autistic Economics Reader: 1 (Anthem Frontiers of Global Political Economy and Development) - Hardcover

Hardcover

ISBN 10: 1843312476 ISBN 13: 9781843312475

Verlag: Anthem Press, 2007

Inhaltsangabe

An engaging, important text calling for the reform of economics and pushing for the discipline to become an honest and effective tool for democracy.

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Edward Fullbrook is a Visiting Research Fellow at the School of Economics, University of West England.

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Real World Economics

A Post-Autistic Economics Reader

By Edward Fullbrook

Wimbledon Publishing Company

Copyright © 2006 Edward Fullbrook, editorial matter and selection; individual chapters
All rights reserved.

ISBN: 978-1-84331-247-5

Contents

List of Contributors, xi, 
Introduction Edward Fullbrook, 1, 
Part 1: The nature of the enemy, 
Part 2: The faux Nobel Prize, 
Part 3: Realism versus illusion, 
Part 4: Pluralism versus monism, 
Part 5: Saving the planet from neoclassical economics, 
Part 6: Case histories, 
Part 7: Is anything worth keeping in microeconomics?, 
Part 8: Some big ideas, 
Part 9: Putting ethics into economics, 
Part 10: Student voices, 
Appendix: Students in rebellion, 
Index of names, 493, 

CHAPTER 1

THE RAND PORTCULLIS AND POST-AUTISTIC ECONOMICS

Edward Fullbrook

These days people like to call neoclassical economics 'mainstream economics' because most universities offer nothing else. The name also backhandedly stigmatises as oddball, flaky, deviant, disreputable, perhaps un-American, those economists who venture beyond the narrow confines of the neoclassical axioms. In an attempt to understand how this has happened, the first half of this section very roughly traces the strange history of economics from the 1870s through to the recent challenge to the neoclassical hegemony from the post-autistic economics movement, henceforth PAE. The second half surveys some of the substantive dimensions of PAE, a movement that began in Paris in the summer of 2000 and now involves thousands of economists worldwide in a long-term effort to free economics from its neoclassical straitjacket.

Physics envy

The origins of neoclassical economics are not what an outsider might think. Though today it cavorts with neoliberalism, it began as an honest intellectual and would-be scientific endeavour. Its patron saint was neither an ideologue nor a political philosopher, nor even an economist, but Sir Isaac Newton. The founding fathers of neoclassical economics hoped to achieve for the economic universe what Newton had achieved for the physical universe (and their descendants living today believe they have). Their aim was to fashion an economic model in the image of Newtonian mechanics – in which economic agents could be treated as if they were particles obeying mechanical laws. In principle it would be possible to describe the behaviour of such agents simultaneously, by a solvable system of equations. This narrative required the treatment of human desires as fundamental data: like the masses of physical bodies in classical mechanics, they would not be affected by the relations being modelled. It was to this end – not to the understanding of economic phenomena – that homo economicus or economic man and the hedonistic calculus were invented. Thorstein Veblen sums up the core metaphysic as follows:

The human material with which the inquiry is concerned is conceived in hedonistic terms; that is to say, in terms of a passive and substantially inert and immutably given human nature ... The hedonistic conception of man is that of a lightning calculator of pleasure and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated definitive human datum ...

With this construct at its centre, the dream of a determinate model of the economic universe was realised in the 1870s by William Stanley Jevons and, especially, by Léon Walras, both of whom were in part physicists by training: it was called the model of general equilibrium. And this elaborate mechanistic metaphor, proudly devoid of empirical content, remains today the grand narrative of economic theory, for students and economists everywhere.

The model, which is invariably 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:

• The economic universe is determinate.

• It exists in a void rather than in an ecosystem.

• All relations in an economy are self-regulating, in the sense that any disturbance 'sets in motion forces tending to restore the balance.

• These 'forces result exclusively from the behaviour of isolated individual agents.

• The behaviour of these agents conforms to certain mathematical properties. For example, consumer choice is characterised 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 a consumer's income, she will consider her preference between every pair of them) and independence (consumers are not influenced by the choices of other consumers).

To their credit, few economists have tried to provide empirical support for these axioms. Instead this is a realm in which formalistic expediency rules. The entities of the model, and the relations between them, must be conceived in a way that makes them isomorphic to those of Newton's model of the physical universe. The exigencies of the grand metaphor rule even when the model is (as in the pedagogically popular Marshallian tradition) applied piecemeal and non-mathematically to individual markets. An example of such formalism is the elementary and ubiquitous notion of market demand for a product. Because a macro mass is in fact an additive function of its micro masses, neoclassical economics defines market demand as the additive function of the demands for product X of individual agents. But this assumes that everyone's demand for a product is independent of everyone else's demand for that product; for example, that one's choice of a disco is not influenced by whether it is crowded or dead empty. Without such an assumption of independence (that is, the absence of all inter-subjective effects) market demand as understood by mainstream economics does not exist. But as everyone knows – even neoclassical economists when they are off-duty – strong inter-subjective effects in markets are the rule rather than the exception in consumer societies. However, in spite of such obvious and widespread empirically observable difficulties, the metaphors of neoclassicalism have remained dominant.

Veblen and Keynes

At the very end of the nineteenth century, Thorstein Veblen launched a counter-revolution against the growing domination of the neoclassical approach in economics. Besides critiquing the neoclassical assumptions, he analysed institutions as well as isolated individuals, emphasized emergent social phenomena, argued that habit influenced economic choice more than rational calculation, rejected all forms of reductionism, and stressed the importance of knowledge in economic evolution. This approach steadily gained adherents in the years leading up to the first world war, and in 1917 one its leaders, John R Commons, was elected president of the American Economics Association (AEA). The following year this new school was christened 'institutional economics' at the AEA meetings, and was embraced by the association as a means of making economic theory capable of addressing the problems of economic development that would follow the conclusion of the war. In the US in the 1920s the Institutionalists came to rival the Neoclassical but in the 1930s their numbers declined. Like neoclassical economics, institutional economics had no explanation of, or solution to, the calamity that had befallen capitalist economies.

In stepped John Maynard Keynes. He offered a new theoretical interpretation of capitalist economies, which both explained their collapse and pointed to practical measures that would get them going again and keep them functioning smoothly without interfering with their general principles. Given the dire straits of capitalism and the growing fear of revolution, not even neoclassical economists dared for long to keep Keynes's theory from being given a try. When it was shown to work, that, at one level, ended the argument. Henceforth, in the basic management of the economy, all American presidents would be Keynesians. But at the theoretical level, which in the neoclassical tradition means theory that is axiom-led rather than empirically-led (otherwise their axioms would have been abandoned long ago), the argument had only just begun. In 1946 Keynes died and neoclassical economists began their counterinsurgency. This time they would not be satisfied until most economics departments in the world had been cleansed of economists who voiced non-neoclassical ideas.

The Pentagon

Keynes had trained at Cambridge University as a mathematician. In his mid-twenties he wrote Treatise on Probability, a book that was lauded by Whitehead and Russell ('it is impossible to praise too highly'), and launched what has become known as the 'logical-relationist' theory of probability. When he turned his attention to economics, he was shocked by the way mathematical economists abused mathematics, especially when they applied them in meaningless ways to unsuitable phenomena, and he made no secret of his professional contempt for their empty pretentiousness. But these economists were soon to have their revenge. Led by Paul Samuelson in the US and John Hicks in the UK, they set about mathematicising Keynes's theory – or, more accurately, a part of his theory. They left out all those bits that were inconsistent with the neoclassical axioms. Their end product was a formalized version of Keynes that is like a Henry Miller novel without sex and profanity. This bowdlerised version of Keynes, called 'Keynesianism', soon became standard fare in undergraduate courses. Even graduate students were discouraged from reading the primary text. With the real Keynes out of the way and Veblen and all the other free spirits forgotten, the road was now clear to establish a neoclassical tyranny.

Following the Second World War, the US increasingly came to determine (one might say dictate) the shape of economics worldwide, while within the US the sources of influence became concentrated and circumscribed to an absurd degree. This state of affairs, which persists to the present day, was engineered in significant part by the US Department of Defence, especially its Navy and Air Force. Beginning in the 1950s it lavishly funded university research in mathematical economics. Military planners believed that game theory and linear programming had potential use for national defence. And, although it now seems ridiculous, they held out the same hope for mathematical solutions of 'general equilibrium', the theoretical core of neoclassical economics.

In 1954 Kenneth Arrow and Gerard Debreu achieved for this mathematical puzzle a solution of sorts, and it has been the central showpiece of academic economics ever since. Arrow's early research had been partly, in his words, 'carried on at the RAND Corporation, a project of the United States Air Force'. In the 1960s, official publications of the Department of Defence praised the Arrow-Debreu project for its 'modelling of conflict and cooperation whether if be [for] combat or procurement contracts or exchange of information among dispersed decision nodes'. In 1965, RAND created a fellowship programme for economics graduate students at the Universities of California, Harvard, Stanford, Yale, Chicago, Columbia and Princeton, and in addition provided postdoctoral funds for those who best fitted the mould. These seven economics departments, along with that of MIT, an institution long regarded by many as a branch of the Pentagon, have subsequently come to dominate economics globally to an astonishing extent. Two examples will show what I mean.

The American Economic Review(,AER'), the Quarterly Journal of Economics (QJE), and the Journal of Political Economy JPE) have long been regarded as the world's three most prestigious economics journals; being published in these journals adds the most value to an economist's CV, and does more than anything to help an economics department's ranking and research funding. A study has been made of the affiliation of the authors of full-length articles appearing in these journals from 1973 to 1978. For the QJE it found that the eight departments with the most articles were the seven favoured through RAND by the US Department of Defence, and MIT, and that this Big Eight accounted for 77.3 per cent of the articles published. In the JPE all of the RAND Seven were in the top ten and, together with MIT, accounted for 63.1 per cent of the articles published. In the AER the top eight contributing departments were again the RAND Seven plus MIT, which together accounted for 59.3 per cent of the articles published. Even within this Big Eight there was an astonishing concentration of success. In the QJE, which is controlled by Harvard, 33.3 per cent of the articles were by Harvard-affiliated authors. In the JPE, controlled by Chicago, 20.7 per cent of the articles were by Chicago-affiliated authors. In the AER, nearly half of whose editorial board during these years was from, in rank order, Chicago, MIT and Harvard, 14.0, 10.7 and 7.1 per cent of the articles were by authors from these departments respectively. About 70 per cent of the board members were from the Big Eight, as were nearly 60 per cent of the members of the nominating committees for officers. As Canterbery and Burkhardt argue, it is unsurprising that these departments are seen as distinguished': 'The "best" departments are those who publish in their own journals, which are "best" since they publish the "best" departments.' As they comment, this academic incest would be considered genetically unsound if it involved biological reproduction (p. 28).

A glance through the 2003 edition of Penguin's Dictionary of Economics illustrates the accentuated continuation of this tiny all-powerful closed shop. The dictionary has entries for 29 living economists. Of these, 26 – 89.7 per cent – are from the US, or have spent all or the most important part of their careers there. Think about that: 26 for one country and three for the rest of world. And that is in a British publication by a team of three British authors. And what are the affiliations of the 26 US economists? All of them have either taught at or received their PhD from one of the Big Eight.

The post-autistic economics movement

In Paris in June 2000, a group of economics students wrote a short petition (see Appendix I) lambasting their curriculum and stating what they wanted instead. They passed their document among friends and posted it on the web. To everyone's amazement, especially the students, their little protest has turned out to be a tipping point of sorts. Like the late Soviet Union, mainstream economics is caught in a time warp, and when reality catches up with such worlds the events that follow nearly always take everybody by surprise.

There was a bit of conceptual genius at work in the French students' petition. For 40 years most critiques of economics had been filtered through sets of ideas such as Popperian falsification, Kuhnian paradigms, Lakatosian research programmes and related notions. The students' petition ignored all that. Instead it assailed mainstream economics for failing to illuminate most of economic reality (hence the term 'autistic'), and identified the causes as the establishment's commitment to viewing the world only through the narrow neoclassical point of view; its prohibition of critical thinking towards that system of belief; and its preoccupation with meaningless formalism. The solution was simple and realizable if given the political will: dump most of the maths, drop the prohibition on critical thinking and introduce 'a plurality of approaches adapted to the complexity of objects analysed'.

The students were making a major epistemological point – they may not have realised it but their mentor Bernard Guerrien must have done. They were breaking with the previous century's philosophy of science (which had included its application to economics), which had preoccupied itself with situations of transition – transition between theories that highlighted the same aspects of some corner of reality, but offered different conclusions and agendas. Thus Karl Popper's The Logic of Scientific Discovery argued for falsification as the ideal and operative criteria for change of theory allegiance; others, most notably Imre Lakatos and Thomas Kuhn, argued for other criteria. The epistemological concern of the French students is a fundamentally different one. They have identified a situation in which one theory illuminates a few facets of a domain, while its practitioners suppress other theories that illuminate some of the many facts that their theory leaves in the dark. In such a situation the solution is not abandonment of a theory or research programme, or a paradigm shift, but pluralism.

The history of economics is diverse, but the idea of pluralism is nevertheless anathema to economists. Beginning with the French Physiocrates in the mid eighteenth-century, economists of all varieties have been inclined to believe that their approach to economic phenomena reveals, if not the whole truth, at least all of it that is worth knowing. It is with these broad conceptualisations, which are called 'schools', rather than with subject areas, that economists form their primary professional identity. The assorted teachings and members of these schools are labelled orthodox or heterodox depending on whether their school is the dominant one or not. Until very recently economists of all varieties have been comfortable with this quasi-theological scheme of things.

(Continues...)

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Details zur Ausgabe

• Verlag: Anthem Press
• Erscheinungsdatum: 2007
• Sprache: Englisch
• ISBN 10: 1843312476
• ISBN 13: 9781843312475
• Einband: Tapa dura
• Anzahl der Seiten: 512
• Herausgeber: Fullbrook Edward
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar