by Suresh Naidu, Dani Rodrik, Gabriel Zucman
This essay really is a demonstration of how impervious economists and economics as a discipline are to fundamental criticism.
The criticisms are acknowledged but their response is to tout the need for "a broad and deep public discussion of new policy ideas". Apparently, they think "a policy framework" -- essentially a new coat of paint in a brighter color -- is all that is needed; economics as it is, is sound, but misunderstood. They think the problem with economics -- that economics is wielded as a dogma to support neoliberal policymaking -- is a matter of deceptive appearances.
They acknowledge that it looks bad for economics, as neoliberalism's unwavering policy sponsor and rationalizer.
In the eyes of many, the turn towards neoliberalism is closely associated with economic ideas. Leading economists such as Friedrich Hayek and Milton Friedman were among the founders of the Mont Pelerin Society, the influential group of intellectuals whose advocacy of markets and hostility to government intervention proved highly effective in reshaping the policy landscape after 1980. Deregulation, financialization, dismantling of the welfare state, de-institutionalization of labor markets, reduction in corporate and progressive taxation, and the pursuit of hyper-globalization—the culprits behind rising inequalities—all seem to be rooted in conventional economic doctrines. The discipline’s focus on markets and incentives, methodological individualism, and mathematical formalism all seem to stand in the way of meaningful, larger-scale economic and social reform. In short, neoliberalism appears to be just another name for economics.It has all been just a terrible misunderstanding, you see.
Many of the dominant policy ideas of the last few decades are supported neither by sound economics nor by good evidence. Neoliberalism—or market fundamentalism, market fetishism, etc.—is not the consistent application of modern economics, but its primitive, simplistic perversion.No True Scotsman?
Economics is in a state of creative ferment that is often invisible to outsiders.Yes, invisible. For decades.
Weirdly, though they claim that market fundamentalism "is not the consistent application of modern economics", they go on at length praising markets and economic analysis of markets as central to economics as a discipline and doctrine.
Economists study markets (among other things), and we naturally feel a certain pride in explaining the way markets operate to those who lack our specialized knowledge. When markets work well, they do a good job of aggregating information and allocating scarce resources. . . . The typical course in microeconomics spends more time on market failures and how to fix them than on the magic of competitive markets. . . . the “competitive equilibrium model” in which free markets are maximally efficient—even if they are not good for fair distribution—is the dominant framework only in introductory economics courses. Thoughtful economists (of which there are many) quickly move away from it. . . . Economists still have a strong bias towards market-based policy solutions, and the policy prescriptions endorsed by economists tend to be narrowly focused on addressing precise market failures. . . . Economics does have its universals, of course, such as market-based incentives, clear property rights, contract enforcement, macroeconomic stability, and prudential regulation. These higher-order principles are associated with efficiency and are generally presumed to be conducive to superior economic performance.Their core argument is that economics is more flexible than fundamentalist. Even a fairly stupid economist can produce an argument in favor of her own prejudices. And, this is treated as a feature, not a bug. No really, they make that argument! I quote:
. . . the science of economics has never produced pre-determined policy conclusions. In fact, all predictions and conclusions in economics are contingent: if x and y conditions hold, then z outcomes follow. The answer to almost any question in economics is “it depends,” followed by an exegesis on what it depends on and why. Back in 1975, in a collected volume entitled International Trade and Finance: Frontiers for Research, an economist named Carlos F. Diaz-Alejandro wrote: “by now any bright graduate student, by choosing his assumptions . . . carefully, can produce a consistent model yielding just about any policy recommendation he favored at the start.” Economics has become even richer in the intervening four decades. We might say, only slightly facetiously, that today the graduate student need not even be that bright!Oh, my, god. Just look at this reasoning -- in one paragraph, they go from "the science of economics has never produced pre-determined policy conclusions" to "any bright graduate student . . . can produce a consistent model yielding just about any policy recommendation he favored at the start" without noticing the contradiction!
Well, I was once a mediocre graduate student and I could tell them where they went wrong: it was at the beginning. Neoclassical economics, the economics of the market economy, is in the nature of a Big Lie, in Goebbels sense, that is, a colossal lie consistently adhered to. If you accept the premise of the lie, if you follow the White Rabbit, you will soon find yourself down the rabbit hole in Wonderland with no way out.
The White Rabbit, in this case, is the presumption that the political economy can be usefully understood to be organized by and as a system of markets. There are few actual markets in the actual, institutional economy, and pretending otherwise will rot your brain. Certainly, the institutional realism and turn to empiricism that the authors hold up as the great hope for the future will remain out of reach as long as they adhere, as they assiduously do in this essay, to the Big Lie that the political economy is a system of markets.
There may well be a great deal of value to salvage from economics as bits and pieces, once the architecture of the market is abandoned as the organizing principle and the intellectual structure collapses. But, these fools are not going to do anything but get in the way of that project.
