One economics—and only one economics

I’m not at all clear as to why the World Economics Association chose to publish an interview with Dani Rodrik.

The WEA, after all, is attempting to fill “a huge gap in the international community of economists—the absence of a professional organization which is truly international and pluralist.” While Rodrik may meet the international criterion, he certainly isn’t an advocate of more pluralism in economics.

On the contrary, his entire approach can be summed up in his parting advice to young researchers:

Identify an intellectual consensus that has gone beyond what the theory and empirics can support and chip away at it. But do so without departing too much from the discipline’s accepted methods!

Now, as many of us have discovered, that may be good advice in terms of building a career within the discipline of economics—don’t step outside the boundaries of “normal science” or (the threat is implied) you’ll be duly punished. But it’s certainly not sound intellectual advice, at least in terms of conducting scholarly work—which, if anything, needs to be committed to honest thinking, “in the sense of not being afraid of the results it arrives at and in the sense of being just as little afraid of conflict with the powers that be.”

Otherwise, it would be like having a department of economics that characterized itself as being purely neoclassical (oh, wait, there is one) instead of open to a variety of perspectives and methods for conducting research and teaching students.

No, Rodrik is no guide to creating more pluralism in economics. But maybe that’s the ultimately ironic point of publishing the interview: it illustrates the narrow limits of debate currently enforced within mainstream economics.

Cartoon of the day

Special mention

 

Economist of the day

I was reminded today of Paul Baran (Marxist economist and author of The Political Economy of Growth) upon reading Chris Hedges’s essay on how and why liberal intellectuals sell out.

Here’s Baran (from a talk he gave in 1960) on the commitment of the intellectual:

What is an intellectual? The most obvious answer would seem to be: a person working with his intellect, relying for his livelihood (or if he need not worry about such things, for the gratification of his interests) on his brain rather than on his brawn. Yet simple and straightforward as it is, this definition would be generally considered to be quite inadequate. Fitting everyone who is not engaged in physical labor, it clearly does not jibe with the common understanding of the term “intellectual.” Indeed, the emergence of expressions such as “long-haired professor” and “egghead” suggests that somewhere in the public consciousness there exists a different notion encompassing a certain category of people who constitute a narrower stratum than those “working with their brains.”. . .

The desire to tell the truth is therefore only one condition for being an intellectual. The other is courage, readiness to carry on rational inquiry to wherever it may lead, to undertake “ruthless criticism of everything that exists, ruthless in the sense that the criticism will not shrink either from its own conclusions or from conflict with the powers that be.” (Marx) An intellectual is thus in essence a social critic, a person whose concern is to identify, to analyze, and in this way to help overcome the obstacles barring the way to the attainment of a better, more humane, and more rational social order. As such he becomes the conscience of society and the spokesman of such progressive forces as it contains in any given period of history. And as such he is inevitably considered a “troublemaker” and a “nuisance” by the ruling class seeking to preserve the status quo, as well as by the intellect workers in its service who accuse the intellectual of being utopian or metaphysical at best, subversive or seditious at worst. . .

It may be said that I am identifying being an intellectual with being a hero, that it is unreasonable to demand from people that they should withstand all the pressures of vested interests and brave all the dangers to their individual well-being for the sake of human advancement. I agree that it would be unreasonable to demand it. Nor do I. From history we know of many individuals who have been able even in its darkest ages and under the most trying conditions to transcend their private, selfish interests and to subordinate them to the interests of society as a whole. It always took much courage, much integrity, and much ability. All that can be hoped for now is that our country too will produce its “quota” of men and women who will defend the honor of the intellectual against all the fury of dominant interests and against all the assaults of agnosticism, obscurantism, and inhumanity.

Economist of the day

Economist Richard Wolff returns to Bill Moyers’s television show (as a follow-up to his previous appearance) to discuss a democratic alternative to capitalism.

BILL MOYERS: Here’s a synopsis, Richard, of a lot of similar questions that bring us to your book,Democracy at Work: A Cure for Capitalism. A viewer who identifies himself as a longtime fan of Dr. Wolff writes, “You’re passionate about workers’ self-directed enterprises. Can you explain briefly why you think these are the way to save capitalism? Critics say your alternative may work in theory but not in practice.”

RICHARD WOLFF: My point is that workers ought to be– all of us who work in an office, a factory or a store—ought to be in the position of participating in the decisions governing that enterprise. And I do that not only because I believe in democracy. And let me say that if you do believe in democracy, it’s always been a mystery to me why that democracy that you believe in doesn’t apply to the place where you work. After all, five out of seven days of every week, most of your adult life, you’re at work.

So if democracy’s an important value it ought to be at your job because that’s where you are most of the time. And democracy at the job means the following. If you have to live with the decisions that are made in a job, what you’re producing, what technology’s being used, what the health conditions of your workplace are, what’s done with the fruits of your labor, literally whether your factor or your office continues, since you have to live with those decisions you ought to participate, the basic idea of democracy.

So I like the idea of cooperative enterprises because it fulfills my value commitment to democracy. Whereas a capitalist enterprise doesn’t because it keeps all the decision making in a tiny minority. We all who go to work have to live with their decisions, but we don’t participate in them, not even to speak of the community that has to live with the decisions.

But the second reason is I see concrete results coming from an enterprise that was run by the workers collectively, and let me give you a few examples. First, most of us believe that if the workers themselves made a decision that they would close the enterprise and move it to China, I don’t think so.

I think that the whole running away of enterprises out of the United States was made possible because the decisions to close enterprises here and to open them in another part of the world where you could get away with paying workers much less was a decision that was very good for the folks who make the decisions, but not for the average workers there.

So if we had decision making made by the workers in place they wouldn’t undo their own jobs and they wouldn’t move. And that would make a very different economic system from the one we have today. Second example, suppose a technology was being considered by the corporate heads who make the decision, the board of directors, and it was one that wasn’t safe, it created too much noise, too much air pollution, despoiled the water, whatever. If it’s a bottom line decision of the typical sort the board of directors and the shareholders seeing profit using that technology might go ahead and use it because it’s profitable and that’s what they’re called upon to do, make profits.

If the workers collectively made the decision knowing that they had to breathe that air, they had to hear that noise, they had to live with that water and so did their spouses and their children and their neighbors, I bet you you’d get a different decision because they would weigh the costs and benefits of that decision differently. And my third example, although I could give you many, Bill, if you want them.

The third example, when it comes to deciding what to do with the profits, suppose instead the workers themselves made that decision democratically, how do we divide the profits?

You think they would give a handful of top officials wild sums of money to buy $40 million apartments on Fifth Avenue while everybody else was having to borrow money to get their kids through school? I don’t think so. I think that people collectively would distribute the wealth more to some than others for all kinds of reasons, but they would do it in a much less unequal way than we have in a capitalist system.

So I challenge all of those who are concerned with a more equal system, with less inequality, to come up with a better way of achieving it than having workers be in a position to make the decisions as to how we divide the profits because that is the single most important determinant of the inequality of income in our society.

 

Economist of the day

 

Economist Richard Wolff will be appearing on “Moyers & Company” TV show airing across the country starting Friday, 22 February [ht: ja]. The focus is on the Great Recession and is Part I of a 2-part series on what went wrong and how to fix it.

It’s great to see the kind of critical analysis offered by Wolff getting some well-deserved national media attention.

Generational theft meme

How did the Tea Party meme of “generational theft” go mainstream?

Last August, Robert Samuelson used the notion in his critique of government entitlement programs.

More recently, Geoffrey Canada, Stanley Druckenmiller, and Kevin Warsh joined forces to announce what they consider to be “several hard truths”:

Government spending levels are unsustainable. Higher taxes, however advisable or not, fail to come close to solving the problem. Discretionary spending must be reduced but without harming the safety net for our most vulnerable, or sacrificing future growth (e.g., research and education). Defense and homeland security spending should not be immune to reductions. Most consequentially, the growth in spending on entitlement programs—Social Security, Medicaid and Medicare—must be curbed.

And, if politicians don’t listen to them, “the greatest casualties will be young Americans of all stripes who want—and need—an opportunity to succeed.”

No, government spending levels are not unsustainable. And there’s no need to reduce discretionary spending or to cut entitlement programs. Not if we decide to get serious about taxing some of the enormous surplus captured by wealthy individuals and large corporations.

But that would mean recognizing the existence of class theft. So, to deflect attention from the hard truth of class injustice, the Samuelsons, Canadas, Druckenmillers, and Warshes of the world have decided to borrow the Tea Party slogan and attempt to focus our attention instead on the supposed struggle between generations.

Mainstream economists and the temple of doom

Giulio Romano, “La caduta di Giganti”

Mainstream economists are worried about their standing in the world—and rightly so. They failed to consider even the possibility of a crisis in the years before 2007-08, and they didn’t haven’t anything useful to offer once the crash happened.

They still don’t.

So, they’re concerned—about the level of disagreement among academic economists and between academics and the rest of the people. For, in their view, substantial disagreement indicates that normal science within economics is not working, either to create a consensus among academic practitioners or to convey that consensus to the great unwashed, uneducated masses.

Chrystia Freeland is comforted by the idea that “Economists. . .seek to objectively establish the truth and have a widely agreed-on body of knowledge about how the economy works.” While Greg Mankiw notes with evident concern that economists are absent from the list of bestselling authors on Amazon.

As it turns out, those two worries informed a panel at the recent American Economic Association meetings, “What Do Economists Think about Major Public Policy Issues?” (The webcast of the session can be viewed here.) One paper on that panel, “Views among Economists: Professional Consensus or Point-Counterpoint?” by Roger Gordon and Gordon B. Dahl [pdf], is the one that gave comfort to Freeland, since they find that there is “close to full consensus” among economists, at least in cases where the economic literature is large. The problem is that their finding is based on a very narrow survey, of 41 economists at 14 “elite” institutions. In other words, they found a consensus among a narrow slice of mainstream economists. That’s not much comfort, unless you already believe in the idea that the “best and the brightest” are the ones who have landed jobs at Harvard, Berkeley, and so on—and you can write off the views of nonmainstream economists who teach in economics departments outside the elite universities.

The other paper, “Economic Experts vs. Average Americans,” by Paola Sapienza and Luigi Zingales [pdf], actually confirms the basis of the second concern, that everyday economists often disagree with academic economists. They found, on average, a large (37 percentage point) difference between the two groups. In their view, “This difference does not seem to be justified by a superior knowledge of economists, but by a different way average Americans interpret the questions. Economists answer them literally and take for granted that all the embedded assumptions are true, average Americans do not.”

It seems both papers, for different reasons, provide cold comfort to those who are worried about the standing of academic economists. The only way they get a consensus among academic economists is by narrowly restricting the sample. And even when confined to that sample, they find a wide gulf between the views of academic economists and those of the general public.

What’s at stake in these disagreements is mainstream economists’ obsession with “science,” in the singular. Their view is that, if the protocols of science are followed, academic economists will come to substantial agreement—and, if they communicate their views effectively, the rest of the world will finally come around. What they simply can’t accept is the idea that economics is an agonistic field, both within and outside the academy—that there are incommensurable differences among the discourses produced by academic economists and between academic and everyday economists. So they spend their time worrying about the continued existence of those differences and attempting to stamp them out.

As they stand in the midst of the temple of doom and watch the giants falling.

Chart of the day

Economists may be worried that conflicts among them undermine their credibility—and so they seek to find areas of widespread agreement, limiting themselves to a survey of a few economists at a few elite universities.

However, the proverbial “person in the street” (as measured by the Pew Research Center) remains pretty consistent, from 1987 through 2012—that there is strong (or very strong) conflict between classes in the United States.

Austerity—not if but how much

Friends continue to remind me that, back in the day, when Obama first announced his plans to run for the presidency, I explained to them that, based on watching him in Illinois, he was one of the smartest and at the same time most moderate, middle-of-the-road Democrats around. He was not then, nor would he ever become, a “progressive.” Instead, he (along with much of the Democratic Party) was firmly in the middle of the mainstream consensus that austerity was inevitable. The only question was, how much?

Tim Duy, after witnessing Obama in the most recent negotiations over the fiscal cliff, comes to much the same conclusion.

From day one this has been a debate about the extent of the austerity, not a debate about austerity itself.  Does anyone have the sense that President Obama does not fundamentally believe in the pursuit of deficit reduction sooner than later?  I keep coming back to this observation from Bruce Bartlett:

In a little-noticed comment on Spanish-language television on December 14, Obama himself confirmed this typology of today’s political spectrum. Said Obama, “The truth of the matter is that my policies are so mainstream that if I had set the same policies that I had back in the 1980s, I would be considered a moderate Republican.”

I think this is correct and explains a great deal about why Obama refuses to use his leverage to pursue liberal policies and keeps inviting Republicans back to the negotiating table again and again on the budget. He wants a deal, he wants to cut spending and balance the budget if possible. This may or may not be a wise course for a Democratic president to follow, but that is who Obama is.

I frequently see commentators saying that Obama is terrible at the bargaining table, but I can’t help thinking that he is getting pretty much what he wanted.  Despite all the hate heaped upon him by the right, Obama just isn’t a progressive, and we shouldn’t expect him to seek a deal as if he was one.  After all, what progressive ensures a tax hike on the lower and middle classes (the expiration of the payroll tax cut with no offsetting cut elsewhere)?  Obama seems to believe the best deal is the one no one likes. . .

My guess is that Obama already knows that the outcome of that debate will be one in which he looks like he retreated over time.  But I also believe that the place he retreats to will be where he wanted to go in the first place; indeed, I suspect he never believed he would get 100% of the Bush tax cuts reversed in the fiscal cliff negotiations.  Note too that, to DeLong’s complaint, the next debate will again be an issue of how much austerity.  And expect that Obama will allow the negotiations to drag out to the eleventh hour, thereby forcing both Republicans and Democrats to choke down a meal – some combination of tax hikes and entitlement cuts – they both find distasteful.

But, we should remember, Franklin Delano Roosevelt wasn’t a progressive either. He and his administration moved in a more progressive direction, with the New Deal, because of sustained criticism from progressive economists, pressure from the left-wing of the Democratic Party, and, of course, organizing on the part of the Left and the threat of mass rebellion in the streets of America.

Their absence today makes the choice between two different paths to austerity the only game in town.

Haruspicy in the modern world

Will Self [ht: tm] claims, and with good reason, that neoclassical economics is the modern religion and its prophets are engaged in what can only be described as haruspicy.

Living in the Britain of the early 1980s, where entire industries were going to the wall and millions were losing their livelihoods, it seemed to me madly dogmatic to assign a numerical value to such obviously cultural and psychological phenomena. But while these spurious notions of human behaviour that informed the ex-cathedra statements of tenured economists stuck in my craw, it was their investiture as the sacred prognosticators of our collective destiny that finally convinced me they were false prophets.

And false prophets they remain. Anyone who consistently listens to the news media cannot ignore the regularity with which economics pundits are wheeled out to pronounce on this or that set of statistics. Following Mary Douglas, to say that this constitutes the divination of sacrificial entrails is not an analogy – that is precisely what it is. And yet the relation between economic data – which are often imperfect, and can only represent the state of an economy as it was some time in the past – and the future is tenuous at best.

The problem is, it takes a group of those who have been educated (or who have educated themselves) in the languages and traditions of the modern religion to develop a critique of it and its prophets—and then to join with other nonbelievers to move in a radically different direction.