Economics and ideology

They try so hard, don’t they, to demonstrate that economics is a science—and that economists aren’t driven by politics?

The latest is Dylan Matthews, writing about the same paper by Roger Gordon and Gordon B. Dahl. But then, after concluding that disagreements among economists are not driven by politics, Matthews undoes the entire argument:

One shouldn’t read too much into this. The Booth surveys, while surveying both apparent liberals and apparent conservatives, omit people on the true fringes of both sides. There aren’t any Marxists or post-Keynesians on the left, and there aren’t any Austrians or ultra-libertarians on the right. The survey’s left flank is Emmanuel Saez (who supports very high taxes on the rich but is basically a social democrat) and its right flank is Robert Hall (who invented the flat tax, which, while radical in its way, has a lot of real supporters in American politics). But the study does confirm that the economics profession has a coherent mainstream consensus, with many shared beliefs about the subject, a consensus that holds across party and ideological lines.

Indeed! There is general agreement within the mainstream consensus because the discipline of economics has a mainstream consensus (whether or not it is “coherent” is another story). It’s that consensus that serves as the basis for surveys of mainstream economists and the content of mainstream economics textbooks and hiring in mainstream departments and publications in mainstream journals and research funding by mainstream agencies and. . .Well, you get the picture.

It’s a consensus marked by neoclassical and Keynesian economics, whose practitioners still battle over the specific meaning of that consensus—and exclude everyone else. My own view, for what it’s worth is not that economists’ political positions determine, in any simple fashion, their economic theories and approaches. The lines of causality run in both directions.

Richard Wolff, to my mind, put it best: we choose economic paradigms—and, at the same time, economic paradigms choose us.

One aspect of the southern question

Reading today’s New York Times article on the debt crisis in Sicily, after months of pernicious punditry (not to mention official pronouncements from European bankers and nostrums from mainstream economists) supporting additional austerity measures in southern Europe, I was reminded of Antonio Gramsci’s 1926 essay, “Some Aspects of the Southern Question.”

He wrote,

It is well known what kind of ideology has been disseminated in myriad ways among the masses in the North, by the propagandists of the bourgeoisie: the South is the ball and chain which prevents the social development of Italy from progressing more rapidly; the Southerners are biologically inferior beings, semi-barbarians or total barbarians, by natural destiny; if the South is backward, the fault does not lie with the capitalist system or with any other historical cause, but with Nature, which has made the Southerners lazy, incapable, criminal and barbaric – only tempering this harsh fate with the purely individual explosion of a few great geniuses, like isolated palm-trees in an arid and barren desert.

Now, the focus is on the social development of Europe but the ideology remains the same: if southern Europe is in the midst of a debt crisis, the fault does not lie with the capitalist system or with any other historical cause, but with Nature, which has made the Greeks, Spaniards, Portuguese, and Sicilians lazy, incapable, criminal, and barbaric.

The Big Lie

Wall Street, in the person of New York Mayor Michael Bloomberg, is doing it. Neoclassical economists like Raghuram Rajan are, too. So are right-wing think tanks, such as the American Enterprise Institute.

They’re all lying about the causes of the financial crisis:

that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.

That’s what Barry Ritholtz correctly understands to be the Big Lie. And he does a superb job challenging it and providing an alternative account of the causes of the crisis.

But what’s interesting, at least to me, is that the Big Lie is being repeated in so many different quarters, from the corporations themselves through hired guns in right-wing think tanks to academic economists. I’m not particularly drawn to conspiracy theories, and I don’t believe there’s a gigantic hand—visible or invisible—behind the Big Lie. Instead, I think it’s an example of how ideology works.

What all the Big Liars share is the idea that capitalism works well without any extra-market intervention, and that the only way a crisis can occur is if government entities decide to change the “natural” workings of the market—perhaps in some noble but ultimately misguided attempt to correct growing economic inequality.

It’s precisely that ideology, which serves the interests of the 1 percent, that is currently being challenged by the movement of the 99 percent.