On mainstream economics and neoliberalism

mirowskiOne of the most intriguing questions facing the merry band of wanderers interested in the philosophy and history of economics is how mainstream economic approaches appear to have emerged relatively unscathed from the Global Financial Crisis.

Casual observers might well find this a bit of a puzzle. A body of knowledge that professed itself unable to shed any light on one of the most profound social events of recent human history, even though it was squarely in the middle of the relevant intellectual terrain, is on the face of it paradoxical.

Of course, the response from the cognoscenti, bolstered by unfalsifiable doctrines such as the efficient markets hypothesis, is that events such as the GFC are fundamentally unpredictable. So economics cannot be held deficient for failing to do so. And, anyway, mainstream economic ideas such as incentive-incapability in markets subject to significant information asymmetries can do a good job of explaining key aspects of the crisis in retrospect. If that’s any help.

Less enlightened souls might retort that had economists stepped out the ivory tower, removed their theoretical blinkers, and spent a bit more time getting down on the frontline trying to understand the way institutions and behaviours were changing in an increasingly financialised economy then perhaps they wouldn’t have been quite so surprised when a Global Crisis they considered theoretically impossible actually happened. [Read more...]

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On signs you’re reading bad criticism of economics

Constructive criticismA couple of weeks ago Chris Auld’s blog carried a post entitled 18 signs you’re reading bad criticism of economics. Auld is seeking to help the reader differentiate bad criticism from ‘solid’ criticism. The post generated plenty of debate below the line and was retweeted into my timeline several times.

I’ve been thinking about the post for a few days. There are a whole bunch of issues tangled up in Auld’s 18 signs. Some of them are relatively technical points. Some of them are rather more far-reaching.

I have a suspicion that underlying Auld’s distinction between good and bad criticism there is the division between internal and external critique. That is, good criticism is internal criticism – it is generated from within a particular academic community by people working from within broadly the same intellectual paradigm. External criticism originates, surprisingly enough, from outside that paradigm. We generally find that economists – like most people – are rather more tolerant of and amenable to internal than external critique.

Auld dismissed bad criticism as crankery, which is a label that mainstream economists have a tendency to apply rather indiscriminately to perspectives that differ too much from their own. One person’s crankery is another person’s foundational critique. But if proponent and critic operate from profoundly different social ontologies then most likely all that will result is mutual incomprehension. That doesn’t necessarily make criticism from a non-mainstream economic perspective wrong. Except from the perspective of the mainstream economist, of course.

I won’t run through Auld’s points in detail, but I wanted touch on all of them. [Read more...]

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Free to schmooze

4303825588_a862e74ce0_mI was intrigued yesterday when a tweet with the hashtag #freedomweek crossed my Twitter timeline. I was even more intrigued when I had a look at the hashtag itself.

You may all know all about this already, but it turns out Freedom Week is a type of summer school held at Cambridge University and organised by the Institute for Economic Affairs and the Adam Smith Institute. It appears to be an occasion for the simple certainties of undiluted libertarianism to be imprinted upon impressionable young minds. You know the sort of thing that goes along with this Manichean view of the world: it’s got to be market fundamentalism (good) because everything else is “socialism” (bad, very bad).

One of the most interesting analytical questions is how political ideas are transmitted and ideologies sustained and reproduced. It is particularly intriguing when the ideas themselves have in the past been written off because they had been superseded by more sophisticated understandings. And it is perhaps, on the face of it, puzzling how it happens when the ideology, though internally coherent, provides an account of the social world that is persistently at variance with a plausible critical reading of events.

Talk of the heroic entrepreneur; the creative and innovative power of freedom-loving markets; and the sanctity of private property may be all very well as an abstract theoretical exercise. But it bears very little relation to the way society actually operates. That is nothing to do with the dead hand of the state and everything to do with being an inadequate representation of society – a representation that is almost entirely blind to the nature of real world market economies. Adam Smith had a much better understanding of the economy than most of his nominal disciples. But then he was a political economist rather than an economist. [Read more...]

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The reopening of the economic mind?

Where is the revolutionary thinking in economics? That was one of the first questions posed by a speaker at the Festival of Economics held last weekend in a very damp Bristol. It is also one of the most pressing and the most intriguing.

I was among the hardy souls who bought a season ticket for the event and got a feel for the range of material covered. But rather than review the whole event I want to consider the issue of revolutionary thinking – posed as part of the session on The future of capitalism – in the light of the discussion in the last session on Economics in crisis.

The question about revolutionary thinking was part of a discussion reflecting upon the way in which paradigm shifts in economic thinking are associated with previous economic crises. Most notably, the rise of Keynesianism occurred in the aftermath of the Great Crash of the 1920s and the adoption of monetarism – and neoliberalism more broadly – took place after the apparent breakdown of Keynesianism and the appearance of stagflation in the 1970s. Where is the new thinking – the reconceptualisation of the macroeconomy and the role of the state – to go alongside the current crisis? [Read more...]

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