The Guardian newspaper has issued a series of articles about academic economics in the past few weeks. They include Mainstream economics is in denial: the world has changed, Economics students need to be taught more than neoclassical theory, and Orthodox economists have failed their own market test. I limit comments here to that last piece, by Seumas Milne, as Mr. Milne seems most intent on pegging the economics critic crankometer, but Mr. Milne’s themes are repeated in the other articles.
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Every mainstream science which touches on political or religious ideology attracts more than its fair share of deniers: the anti-vaccine crowd v mainstream medicine, GMO fearmongers v geneticists, creationists v biologists, global warming deniers v climatologists. Economics is no different, but economics cranks differ in that they typically make false claims about the content of economics itself, as opposed, or as a prelude, to false claims about the way the world works. That target sometimes making it hard for non-economists to differentiate crankery from solid criticism.
Here, then, are some symptoms of bad critiques of economics:
- Treats macroeconomic forecasting as the major or only goal of economic analysis.
- Frames critique in terms of politics, most commonly the claim that economists are market fundamentalists.
- Uses “neoclassical” as if it refers to a political philosophy, set of policy prescriptions, or actual economies. Bonus: spells it “neo-classical” or “Neo-classical.”
- Refers to “the” neoclassical model or otherwise suggests all of economic thought is contained in Walras (1874).
- Uses “neoclassical economics” and “mainstream economics” interchangeably. Bonus: uses “neoliberal economics” interchangeably with either.
- Uses the word “neoliberal” for any reason.
- Refers to “corporate masters” or otherwise implies economists are shills for the wealthy or corporations.
- Claims economists think people are always rational.
- Claims financial crisis disproved mainstream economics.
- Explicitly claims that economics is not empirical, or does so implicitly by ignoring empirical economics.
- Treats all of economics as if it’s battling schools of macroeconomics.
- Misconstrues jargon: “rational.”
- Misconstrues jargon: “efficient” (financial sense) or “efficient” (Pareto sense).
- Misconstrues jargon: “externality“.
- Claims economists only care about money.
- Claims economists ignore the environment. Variant: claims economics falters on point that “infinite growth on a finite planet is impossible.”
- Goes out of its way to point out that the Economics Nobel is not a real Nobel.
- Cites Debunking Economics.
In 2002, I wrote a small piece noting that Steve Keen’s novel criticism of economics in his book Debunking Economics is simply wrong (Debunking Debunking Economics). Part of that novel criticism is Keen’s claim that the standard analysis of the competitive model is mathematically wrong, and if one does the math correctly, one finds that the competitive equilibrium and the collusive outcome are the same. Which is an extraordinary claim! Everyone has been just doing the math wrong for well over a century, and if we were to do the math correctly we’d find that all industry structures actually behave as if the industry were monopolized, under textbook assumptions. Again, it’s important to emphasize this isn’t an appeal to some more complex model, or to empirical evidence, or criticism of some unrealistic assumption in the standard model: Keen’s claim is that this theoretical result follows from textbook assumptions if one merely does the math correctly.
Brian Milner is a “a senior economics writer and global markets columnist” at Canada’s largest and arguably most highly respected newspaper, the Globe and Mail. Milner doesn’t understand what economists mean by the word “efficient,” doesn’t understand the elements of the efficient markets hypothesis (EMH), and, worst, uncritically repeats nonsense from David Orrell, whose awful anti-scientific screed I reviewed here. Why oh why, as Brad DeLong likes to say, can’t we have a better press corps?
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A short article I wrote in 2002 regarding the novel arguments in Steve Keen’s Debunking Economics has been hard to track down for a while, so I’m making it available here.
Unfortunately, the link to Keen’s paper on the first page is broken. I attempted to get the paper from Keen’s site, but it’s now behind a paywall! I think the paper was called “A 75th Anniversary Gift for Sraffa,” but I failed to locate a copy.
An alert reader of yesterday’s post regarding David Suzuki’s ongoing confusion over the concept of an “externality” pointed me to an interview with Professor Suzuki in a magazine called Common Ground. Suzuki helpfully clarifies precisely what he thinks “externality” means, so we no longer have to infer from context:
I won’t go into a long critique, but currently nature and nature’s services – cleansing, filtering water, creating the atmosphere, taking carbon out of the air, putting oxygen back in, preventing erosion, pollinating flowering plants – perform dozens of services nature to keep the planet happening. But economists call this an ‘externality.’ What that means is “We don’t give a shit.” It’s not economic. Because they’re so impressed with humans, human productivity and human creativity at the heart of this economic system. Well, you can’t have an economy if you don’t have nature and nature’s services, but economics ignores that. And that’s an unbelievably egregious error.
(emphasis added). I agree someone’s made an “unbelievably egregious error,” and repeated it countless times to countless people.
David Suzuki owes the community of economists, and his audiences, an apology and an unequivocal retraction.