NECESSARILY WANKY RESPONSE TO INDIGNANT DERRIDA-DERIDING ECONOMIST
Even blogorrhoeaics crave the words of others (just to fill the gap while we're inhaling, mind) and derrida derider has taken eloquent exception to my rant on neoclassical economics - as theory and as public relations.
Least I can do is take polit[ish] exception to the polit[ish] exception.
I don't actually think dd took on most of the points I mentioned (make up your own minds), but I shall try to respond to his (?) as he made 'em. I can tell it's gonna bring out the wordy wanker in me already, for which I apologise (it's a blogorrhoeaic symptom I like to think I usually manage to control with medication, but the bottlo closed three hours ago).
DD commences his indignation thus:
"One of the interesting things about this sort of rant is the way it sets up straw men. I know NO economists - even the most right wing ones - who think markets always work perfectly (the right wingers generally hold rather that government intervention, for political economy reasons, tends to be an even worse failure)."
I don't think the straw man is of my manufacture here (I do plead guily to the 'rant' charge, natch). I did not say economists hold that markets always work perfectly (which is not to say we do not make policy sensible only on the premise that they do), I merely said markets *never* work perfectly, and that in some sectors the very notion of this [un]critical ideal is downright dangerous. As I hold that the labour market itself falls into this latter category, that's a problem from my point of view. Even Paul Samuelson's standard text (THE mainstream economics uni textbook par excellence for nearly forty years, I think you'd agree) lists enough *inherent* imperfections to *undermine the very idea* (although I admit he doesn't seem to think so). 'Differential power / assymetrical information' is good shorthand for most of 'em, and 'sticky prices' takes care of the rest.
When first I took an interest in economics, the labour market argument was between the lefty 'structural tendencies' crowd (the likes of Baran and Sweezy, Harvey, Braverman and, more recently and rather intriguingly, Brenner) and the 'our-statistics-say-there-aren't-any-structural-tendencies' crowd (eg. the Johnsonian Council of Economic Advisers). I never saw the famous CEA stats (although I dare say I could read some of 'em - I used to be a dab hand at stats before I took up alphabetising spice-racks), but the fact remains the west was never to see an *honest* four-per-cent unemployment level again.
As for the old 'market-failure-beats-government-failure' argument; well, we could argue about Californian, Kiwi or South Australian electricity, Yorkshire water (I've lived in Yorkshire, dd; the idea of water shortages there boggles the very mind), British rail, US telecom (and Cable TV), financial deregulation and diverse equity markets I suppose. Something's rotten in the state of actually existing economics, and I'd appreciate your take before I go off at the mouth.
Anyway, whatever you think of government failure, market failure sucks summat 'orrible.
"As I noted on John Quiggins' blog, I think Gittins' article
a good one (though he does seriously underrate the
sophistication of, and the diversity of opinion within, the
IMF). But most economists would respond "of course, of
course, we know that anyway" to most of the points in
the article; the public image of what most economists do
is quite a long way from reality."
What's a long way from reality is the arguments we get in the media and, contrary to your protestations, at school. I have attended a couple of the wonderful Don Lamberton's annual 'Society, Technology and Economic Policy' conferences, and the apre-prepared-papers-and-polite-questions-from-the-floor pub conversation always gets to the issues we're discussing now. Every young economist (and not a few old ones) I talked to admitted blithely in pubs what they typically did not say - indeed effectively contradicted - in their formal presentations. Why is that? Who was it that defined 'discipline' as 'the set of things you're not allowed to do or think?
"The point is that a competitive market is generally only a
STARTING POINT for analysis (and by no means the
only starting point used). Yes, neo-classical economics
has a much more pessimistic view of human motivations
than some other disciplines - but that's because, for all
its faults, economics is principally concerned with
humans as experience (and indeed, evolutionary
reasoning) indicates they are, not as we might like them
This 'evolutionary reasoning' itself starts from somewhere, too, dd! Lewontin doesn't start from there. Neither does Levins. Neither did Stephen Jay Gould. Even Singer is asking some big questions, I reckon. Having long followed your erudite contributions to Ozplogistan's comments boxes, I doubt we need to go these particular yards, but all that sociobiology/evolutionary psychology stuff is hardly unassailable, is it? Unselfconsciously methodological individualism, ahistorical and unsubstantiated essentialism, nature/nurture-as-either/or-dichotomy etc etc (I mean, look at John Ray's blog and see where this stuff takes you!). Lukes nails the starting point from a political-philosophical pov - Levins and Lewontin nail it from the pov of dialectic (they proffer, as the CEA did, lots of beaut variance tables, multivariate correlations and regressions; and critique 'em out off the ground with some pretty compelling complex systems thinking, much as the CEA's Marxist critics critiqued the CEA) - and Ian Watt's *Myths of Modern Individualism* joins Michel Foucault's (less enjoyable, imho) tomes in historicising the relatively recently invented strands of individualism that lie at the root of much of this evolutionary psychology nonsense.
And no, I don't consider myself a post-modernist - just a modernist trying to think like some modernists have done since Vico ( ... if not since Heraclitus).
"And given our instincts for individual survival and
prestige, Adam Smith was right to be amazed that we
can often set up market rules that harness our
selfishness to others' benefit (the quote from Adam
Smith that you refer to - the one starting "Men of
business seldom meet together ... without the
conversation turning to some contrivance to ... raise
prices", so far from being "never quoted by market
economists" is taught to pretty well every first year
Well, I was never taught anything but the bits about invisible hands, bakers, butchers and pins. Samuelson forgets to quote the 'men-of-business' line, for a start.
"And another thing that gets under my skin - the way
non-economists misunderstand the role and underrate
the importance of good, hard, technical modelling (Paul
Krugman, BTW, has written at length on this). Keynes
could never have written the General Theory without this
modelling, for instance. The maths is what prompts new
insights, generates hypotheses for testing (yes,
economics aspires to be a Popperian science) and also
ensures that the internal logic is rigorous. Without
modelling, you risk serious shortfalls in all of these.
BTW, non-neoclassical models tend to need much
A Popperian science wouldn't allow 'add-factors' anywhere near it, would it? Anyway, when stuff gets 'falsified', is it rejected? What have supply-demand curves to do with this 'information' stuff upon which we're told our brand new economy depends? Arrow and DeLong are two economists who have come up with reasons why they shouldn't. But where are those reservations showing up in policy debate? Kenneth Boulding and Robert Babe thought the whole idea of 'equilibrium' ridiculous in information economics. Where does that show up?
And A. T. Hadley wrote a book called *Economics* in 1896 - long before Paul Samuelson came up with the idea - and in it he wrote of the fabled price mechanism "The price which will induce new competitors to enter the field is also much higher than that which will lead old ones to withdraw. No concern will quit competition as long as it can pay an appreciable part of its interest charges. It is better to lose part of your interest on every piece of goods you sell than to lose the whole of it on every piece you do not sell. As long as the price received more than covers the expense of wages and materials , each of the old factories will continue to compete. Even if it changes ownership by foreclosure it will remain in operation. But, on the other hand, no new competitor will be called into being unless the price is high enough to afford a liberal profit, after paying interest, maintenance, and other charges on fixed capital invested under modern methods. Thus prices, insteadof constantly tending to gravitate toward an equitable figure, oscillate between two extremes. The rate of production, at figures which give a fair profit, is usually either much larger than the rate of consumption, or much smaller. In the former case, prices are unremunerative and unjust to the producer; in the latter case, they are oppressive to the consumer. The average price resulting from such fluctuations may perhaps be a fair one; but the wide changes of price are disastrous to all parties concerned." [Thanks go to the PEN-L mailing list's Eugene Coyle for finding that gem]
I mean, how much bloody falsifying does it take, ferspewingupapint? Bugger Popper! We should be talking Kuhn ...
And I'm obviously not attacking all economists, dd - indeed I'm using members of the profession to show up the way economics shows up in debate and policy. The public are effectively being fed an authorised, tendentious and homogenised pap. We're not being told how radical are critiques within the discipline, nor how ignored such criticisms effectively are.
"Economic modelling is NOT mainly about predicting what
next months exchange rate will be, but about trying hard
to understand how bits of the world work. Pace Marx, but
describing the world is a necessary prelude to changing
That's not 'pace' Marx at all. He had no problem with describing the world. He merely thought that understanding came from acting in the real world rather than constructing it from abstract principles (you refer to the eleventh of eleven mutually sense-making theses, after all). For Marx, changing the world was the point, but describing it was hardly forbidden. He did spend a fair bit of time in the reading room trying to do just that, no?
"The data problems you point to are real - and I agree
they are underrated. But any rational approach,
economic or otherwise, as to what is to be done will
suffer from this."
I agree. So let's make as big a point of that in economic policy publicity as it is in reality, eh? As a practising economist, you might hear plenty of these reservations, perhaps, but out here in democratic-polity-land, we hear only the certitudes and see only the 'objective' numbers.
From where I type, this is how Windschuttle makes his yards against his phobic others, btw. He presents the certitudes and 'objective' numbers, and Reynolds and co honestly reply that doing history is a little more problematic than Windschuttle would have it be. Just as it's the job of historians to put us wise to this, so is it the job of economists to put us wise when we're fed the raw material with which we're obliged to conduct our democratic conversation.
"The type of atheoretical time-series based macro
modelling which you criticise, that seeks to predict the
future without _understanding_ the present or past, is in
fact very unfashionable these days for just the reasons
you point to. Blame the engineers for developing this
approach - we economists just borrowed it holus-bolus
That's not a fair cop at all, dd! I could (and would) as easily argue that, in their pathetic attempts to attain the status of natural scientists, economists borrowed stuff that had bugger-all to do with what they're supposed to be thinking about. Weaver did that when he pinched Shannon's 'communication' model from the realm of computers and telecommunications and applied it to the realm of human communication. Same daft aspiration. Same daft result. I don't blame Shannon for that as much as I do Weaver ...
"Bluntly, economics as it is practised has its problems,
but economists as a group are much less narrow than
you seem to think. No doubt the economic approach can
never explain life, the universe and everything. But it
can and has explained much which was shrouded in
sociological and political dogma. People who speak of
'economic imperialism' in these cases remind me of
those worthy divines over the centuries who said "Oh,
science is all very well but our religion is needed
because science can never explain X" and then, when a
rational, testable explanation for X was produced,
proceeded without blinking to say "Oh, science is all very
well but it can never explain Y ..."."
I've no problem with science, dd.