Neoclassical economics is without scholarly integrity. It does not belong in universities. It certainly should not be the dominant source of policy advice to governments.
Most scholarly disciplines, be they history, physics or ecology, have a conception of appropriate standards by which the evidential basis of an argument is presented and the reasoning leading to conclusions is explained. The goal is to shed light on the workings of the world, and a criterion for a successful study is that observations or records are consistent with the study’s conclusions.
Neoclassical economics, the strand of economics that has dominated world policies for several decades, fails these criteria. Its conclusions are regularly contradicted by developments in the real world. A dominant criterion for a successful study is that its logic is internally consistent; it thus confuses mathematics with the science it claims to be. It is variously claimed that assumptions on which a theory is based don’t matter, or that the better the theory the more unrealistic the assumptions, or that all theories are wrong. It imagines its theories are useful approximations to reality, and fails to appreciate that more reasonable assumptions can lead to radically different conclusions, so its theories may be deeply misleading.
Analyses of the economic effects of global warming by prominent economists are based on patently invalid arguments, profound ignorance of the global response to solar energy and basic misrepresentation of scientific sources. Their conclusion that the effects are minor is egregiously in error and use of their analyses to advise governments has placed the world in peril.
Economist Steve Keen has published a critique (and summary) of analyses by William Nordhaus and others of the effects of global warming on the global economy. Those analyses, incorporated into official IPCC reports, suggest the effects of global warming are minor. Keen’s critique reveals the analyses to be absurdly deficient, reflecting not only profound ignorance but patently invalid arguments and a lack of scholarly integrity.
I attended the New Economy Network Australia conference in Melbourne recently (19-21 Oct). There I met in person Karl Fitzgerald who does a spot call Renegade Economists on radio 3CR , and with whom I’d done an interview a few years ago. We didn’t manage an interview at the conference, but did one by phone a couple of days later.
I found NENA to be a very diverse group very engaged with each other. They even listened to my pitch about The Little Green Economics Book and bought copies. There are so many people and groups doing good things, my impression is that NENA is likely to spread rapidly and link us into a more powerful movement. It was just their third annual conference.
[This is a more technical post, addressed to those interested in re-making the field of economics into something relevant, informed and capable of self-improvement.]
Debates about whether economics is or can ever be a science appear frequently on the Real World Economics blog, such as making economics a relevant science. Perhaps more in the subsequent comments than in the articles themselves, there are some recurring confusions and misconceptions, such as whether mathematics should be involved, about what the role of mathematics might be, about “prediction” as a necessary part of a science, about the role of assumptions and approximations, about whether any study involving people can ever be a science and, fundamentally, about what science really is.
I have commented in passing on this topic before, for example here, but in this comment I’d like to offer a more focussed discussion.
Non-mainstream economists are all-too aware of the failure of mainstream economists to anticipate, let alone avoid, the Global Financial Crisis and the ensuing Great Recession. The mainstream profession is also failing to fix the problem, and is actually making it worse.
It is hard to get alternative views heard, and the mainstream carries on almost totally unperturbed, despite being centrally responsible for a global disaster. This is of course extremely frustrating.
After reading yet another cri de coeur from yet another frustrated economist, I thought perhaps we need to spell out the message in all bluntness
Readers of this blog will have encountered the idea that near-equilibrium neoclassical economic theory is irrelevant to dynamic, far-from-equilibrium, real modern economies, and that the body of theory built around the neoclassical assumptions is full of inconsistencies. You will also be familiar with the idea that money and debt play central, dynamic roles in modern economies.
Yet it can be argued there are other equally fundamental flaws in the broader stream of theory and practice that might be called mainstream economics.
– See more at: http://www.debtdeflation.com/blogs/2013/12/07/sack-the-economists/#sthash.oWYTzwRS.dpuf
The honourable Alan Greenspan testifies before the House Financial Services Committee. (Photo credit: Wikipedia)
[My silence for some time here has been mainly because I was focussed on re-packaging my economic ideas in a form that might gain more traction. So, there is a new book manuscript of the above title. It will help to promote it (to publishers) if I have readers’ reactions. Therefore, if you will undertake to give me feedback, I will supply you with the draft MS (120 pages, 2.2 Mb pdf). You don’t have to be expert, it’s for a general audience and so I want feedback from that audience. Most helpful to me will be comments on its readability and interest. Of course any discussion of its arguments are also welcome.]
Here is the first part of the introductory chapter. I will post more in a few days.
Chapter 1. Economists Don’t Know What They’re Talking About
In 1994 Paul Ormerod published a book called The Death of Economics1. He argued economists don’t know what they’re talking about. In 2001 Steve Keen published a book called Debunking Economics: the naked emperor of the social sciences2, with a second edition in 2011 subtitled The naked emperor dethroned?3. Keen also argued economists don’t know what they’re talking about.
Neither of these books, nor quite a few others, has had the desired effect. Mainstream economics has sailed serenely on its way, declaiming, advising, berating, sternly lecturing, deciding, teaching, pontificating. Meanwhile half of Europe and many regions and groups in the United States are in depression, and fascism is making a comeback. The last big depression spawned Hitler. This one is promoting Golden Dawn in Greece and similar extremist movements elsewhere. In the anglophone world a fundamentalist right-wing ideology is enforcing an increasingly narrow political correctness centred on “free” markets and the right of the rich to do and say whatever they like. “Freedom”, but only for some and without responsibility.
Evidently Ormerod and Keen were too subtle. It’s true their books also get a bit technical at times, especially Keen’s, but then they were addressing the profession, trying to bring it to its senses, to reform it from the inside. That seems to have been their other mistake. They produced example after example of how mainstream ideas fail, but still they had no effect. I think the message was addressed to the wrong audience, and was just too subtle. Economics is naked and dead, but never mind the stink, just prop up the corpse and carry on.
[I expanded the introduction to the original post and sent it to Real World Economics Review Blog, where it is now posted.]
The challenge, and reactions to it
Many economists, and more non-economists, agree that economics needs new ideas, given the comprehensive failure of the mainstream to foresee the Global Financial Crisis and its continuing failure to lift the US and Europe out of deep recession or depression.
In a previous article on The Conversation, Stephan Lewandowsky asked, why do people reject science? I’m going to take a slightly different angle and consider how people are able to reject climate science in the face of strong evidence.