Euthanasia of the functionless economist

There can be no doubt that capitalism, like virtually all past socio-economic systems, sustains and promotes a hierarchical structure of concentrated wealth. That such a system can continue to exist in an era of at least formal democracy is an amazing thing which is at least partially explainable by the widespread public acceptance of the ‘discipline’ that calls itself ‘economics’.

This may be a bit harsh, but I think main stream economics is best thought of as a grouping of charlatans that practice a trade of status quo justification that offers virtually no insight into the nature of our world.  Here are some of the reasons I think, to paraphrase Keynes, we should ‘euthanize the functionless economist’.

Underlying Assumptions and Methodology

The real world is almost completely ignored within a cult of complex mathematics in which everything is somehow in equilibrium.   Economics views the private sector as above reproach while seeing the public sector as unprofitable and parasitic.  Motives of greed and acquisitiveness are reclassified as ‘interests’.  The benefits of individual material gain are judged to outweigh the deterioration in the moral quality of society, justifying the complete commercialization of life.  It assumes that individuals are totally motivated by hedonistic greed while ignoring the widespread contradicting literature in psychology, anthropology, and sociology.  Society is seen as nothing more than the sum of individuals with institutions and culture having no fundamental influence.

Economics appeals to abstract market mechanisms as the rightful determinant of how purchasing power should be distributed but ignores the vast distortions arising from unequal power that essentially disable those very mechanisms.

The Labor – Capital Relationship

The overwhelming majority of people work as employees but the true nature of this relationship is completely obscured in economics.  Capital and labor are portrayed as equal agents operating within a free and balanced labor market.  The reality of unequal power is ignored.

According to widely accepted mathematical models, unemployment is, incredibly, impossible.

Economists universally promote labor ‘flexibility’.  Except for the ever popular trickle down benefits, flexibility serves only the interests of the employer at the expense of the employee by maximizing both employer control in the workplace and profitability.  The human costs of ‘flexibility’ – insecurity, loss of community spirit due to rootlessness, etc. – are completely ignored.

Power

Economists refer to ‘the market’ as if it were some idealized local farmers market versus the reality of oligopoly driven by speculation and power expansion.  Capital and Land become ‘factors of production’ on par with those who actually perform the work.  In the era of passive ownership, as Keynes noted, interest rewards no genuine sacrifice any more than the rent of land.

Crises

Economics has completely failed in predicting and explaining this and past crises.  The ever rising debt prior to our current crisis was largely praised within economic circles as utility maximizing behavior whereby households rearrange income flows over their lifetimes to smooth consumption.  Markets couldn’t lead to crises since they are by nature efficient and in equilibrium.

Trade

The concept of comparative advantage ignores the harmful effects on high wage labor and the reality that the location of production is largely determined by wage levels.    The many adverse affects from national competition such as rising international tensions and pressures on living standards are assumed away.

Monetary / Fiscal Policy

Economics fully accepts the doctrine of financial orthodoxy whereby society must obtain purchasing power through private spending, taxes, or borrowing.  The generation of purchasing power through direct monetary creation, strongly opposed by wealth, is forbidden.  The reason economists would forbid this, though, is not at all consistent.  The only options offered for our current dilemma is austerity now through debt reduction or austerity later in return for some spending now.

Conclusion

I think it’s largely true that the only valuable contributions made by economists are from those who’ve been highly critical of the conventional wisdom.  This is certainly the case for the  near revolutionary Keynes but his insights were quickly buried.  Keynes wouldn’t recognize the homeopathic Keynesianism practiced today by such ‘left’ economists as Paul Krugman and Joseph Stiglitz.

In an excellent article on the dangers of economic thinking, Robert Wade quotes Harvard economist and Nobel Memorial Prize winner Wassily Leontief on the state of US economics in 1982: ‘Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data without being able to advance, in any perceptible way, a systematic understanding of the structure and the operations of a real economic system.’  Wade also notes a survey of US graduate students in economics in the late 1980s which showed that only 3% thought that ‘having a thorough knowledge of the economy’ was ‘very important’ for achieving success in the profession, and 68% thought it ‘unimportant’.

These people are worse than useless; they do great harm to our society.