The Summer of Alternative Economic Theories

There is clearly something wrong with economics as it is taught and practised, even if products of the University of Iowa working in minor parts of the federal reserve system think that it is too clever for most people to understand.

Over the past thirty years, physics-based mathematics, aided and abetted by highly limited formulae of correlation, and a good deal of self-interested bull, have characterised the profession's appearance to an increasingly befuddled public. A pantheon has been created, stretching from Adam Smith and David Ricardo through Leon Walras and Alfred Marshall and beyond.

This pantheon has been sweetened (if that is the appropriate word) by the moral and intellectual efforts of non-economists, like Friedrich Hayek, and by a determined rejection of the Keynesian settlement. This pantheon has then been all but worshipped, and whole professional and academic careers have been built upon its purported ideas, despite the economic ruin into which a good part of the world is sinking as a consequence of following them.

In the abstract, however, it is very difficult to argue with the theories that underlie economic policy in the west. That isn't just because of the domination of the engines of power and influence by liberals; it is also because of their intellectual strength. How does one deal with people who have an answer for everything which seems, at least on the face of it, utterly rational?

Modern physiocrats, as good ideologues, point to models based on the maximisation of utility by the self-interested, rational individual, and the mathematicisation of the behaviour of that individual as unarguable. If one accepts the premises of diminishing returns, comparative advantage, and the insuppresable nature of the price mechanism and markets, one cannot argue against liberal economics logically. You can cavil; you can point to flaws and misunderstandings; but you have ultimately to reject their view of human nature and start again if you want to get away from the marketeers, and the record of people who try to do so has not been a good one.

That's a powerful thing that the economic liberals have on their side--the failure and human cost that has been created by attempts to reject, through governmental means, their orthodoxy. I wonder how much of this was the result of the political and physical isolation of naysaying countries, and how much the consequence of dirigisme and state action, but that's a post for another day.

I think that people who are uncomfortable with capitalism and the market as it has developed should expose themselves to theories claiming to be alternatives, in order to assess whether they are or not.

There are, to my mind, at least six candidates for the role, although all of them are in their way flawed. Robert Prechter's elaboration of the Elliot Wave, which he's called Socionomics, seems an obvious one; Erik Reinert's 'other canon' of evidence-based economics another.

A second group of alternatives are the variations on neo-Keynesianism and anti-maths associated with rich men like George Soros and Nassim Taleb, and expressed through their vicars de jour, John Cassidy and Pablo Triana. I've been enjoying their works, and have written a little bit about them already. I haven't found them fully satisfactory, but I suspect that's because they tend to argue negatively, and I've missed any positive suggestions.

Both groups are the products of people who clearly believe in the system at hand, but who want to change its focus. I suppose that the proper metaphor is religious; somewhere between an old unknowing and a new belief, some economists create way stations in which to wait out their failures before a rebalancing. A bit like Obi-Wan hiding out beyond the Dune Sea, but with an expense account from Bail Organa.


There are two religious traditions that I'd like to get to grips with, too; Islamic finance (especially its modern iteration of 'meccanomics', of which I am highly suspicious) and distributism.

I can't bring myself to wade through various green or socialist traditions, or to dwell on anarchism or libertarianism, but I do want to spend a good bit of the spare time I'll have this summer in the library when I'm not in the gym. I spent last Friday pleasantly in the Radcliffe Science Library in Oxford--of which more later--, and will be hiding out at the British Library next week. I promise to blog.

If any of my readers have ideas, let's have them. Those who would seek an alternative to whatever capitalism has become can't trade on slogans or fuzzy thinking forever. In a small way, I want to use the time before the west wakes up to how far sunk the boat is thinking about why we got to where we are. For how, well, read any of my posts on the unfolding economic crisis since 2007.

If the crowd of anti-religious, 'class free', hyper-individual ideologues who have a grip on discourse in the western public sector are not challenged, properly, more disasters like the dollar reserve system, the euro as it stands, the national debt, the abuse of derivatives, the privatisation of profit and the socialisation of corporate debt, will flow. They'll steal and tax and burn through money lit only by the righteous and increasingly obvious glow of their own self interest. They'll salivate about exclusion and we'll end up in even bigger resource wars, explained to us by a bought and paid for media and a political class barely worthy of the name.

They'll eat people's lives up in depression and taxes, and when those who did have the time to think clearly were asked, 'why did you ignore it?', all we'll have is the comfort of saying 'I couldn't think of a way to argue with them, and they couldn't be told they were wrong'. That's no place to be at all.

Comments

Hi,

Great post, I like this post.
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So would you put my blog too, on you...

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Martin Meenagh said…
Many thanks, Anais (if I may). I will add you too.
BobFromBrockley said…
I reckon Anais was lying... But seriously, did you see this at LRB re distributism:
http://www.lrb.co.uk/v32/n08/jonathan-raban/camerons-crank
Martin Meenagh said…
Lol, but she has such a nice picture. I mean, bloggers don't lie....

Anyway, come one come all, so long as they are minimally courteous. Thanks for the link Bob, and also for the heads-up to the Luxemburger anarchist. I'm back later and will look them up.

As for the weekend matter, I may be double booked and am a tad skint, but will try to alter things! All the best, hope all is well