Why Krugman and Stiglitz are no real alternatives to mainstream economics

19 March, 2017 at 13:48 | Posted in Economics | 8 Comments

verso_978-1-781683026_never_let_a_serious_crisis__pb_edition__large_300_cmyk-dc185356d27351d710223aefe6ffad0cLittle in the discipline has changed in the wake of the crisis. Mirowski thinks that this is at least in part a result of the impotence of the loyal opposition — those economists such as Joseph Stiglitz or Paul Krugman who attempt to oppose the more viciously neoliberal articulations of economic theory from within the camp of neoclassical economics. Though Krugman and Stiglitz have attacked concepts like the efficient markets hypothesis … Mirowski argues that their attempt to do so while retaining the basic theoretical architecture of neoclassicism has rendered them doubly ineffective.

First, their adoption of the battery of assumptions that accompany most neoclassical theorizing — about representative agents, treating information like any other commodity, and so on — make it nearly impossible to conclusively rebut arguments like the efficient markets hypothesis. Instead, they end up tinkering with it, introducing a nuance here or a qualification there … Stiglitz’s and Krugman’s arguments, while receiving circulation through the popular press, utterly fail to transform the discipline.

Paul Heideman

Despite all their radical rhetoric, Krugman and Stiglitz are — where it really counts — nothing but die-hard mainstream neoclassical economists. Just like Milton Friedman, Robert Lucas or Greg Mankiw.

The only economic analysis that Krugman and Stiglitz  — like other other mainstream economists — accept is the one that takes place within the analytic-formalistic modeling strategy that makes up the core of mainstream economics. All models and theories that do not live up to the precepts of the mainstream methodological canon are pruned. You’re free to take your models — not using (mathematical) models at all is considered totally unthinkable —  and apply them to whatever you want — as long as you do it within the mainstream approach and its modeling strategy. If you do not follow this particular mathematical-deductive analytical formalism you’re not even considered doing economics. ‘If it isn’t modeled, it isn’t economics.’

straight-jacketThat isn’t pluralism.

That’s a methodological reductionist straightjacket.

So, even though we have seen a proliferation of models, it has almost exclusively taken place as a kind of axiomatic variation within the standard ‘urmodel’, which is always used as a self-evident bench-mark.

Krugman and Stiglitz want to purvey the view that the proliferation of economic models during the last twenty-thirty years is a sign of great diversity and abundance of new ideas.

But, again, it’s not, really, that simple.

Although mainstream economists like to portray mainstream economics as an open and pluralistic ‘let a hundred flowers bloom,’ in reality it is rather ‘plus ça change, plus c’est la même chose.’

Applying closed analytical-formalist-mathematical-deductivist-axiomatic models, built on atomistic-reductionist assumptions to a world assumed to consist of atomistic-isolated entities, is a sure recipe for failure when the real world is known to be an open system where complex and relational structures and agents interact. Validly deducing things in models of that kind doesn’t much help us understanding or explaining what is taking place in the real world we happen to live in. Validly deducing things from patently unreal assumptions — that we all know are purely fictional — makes most of the modeling exercises pursued by mainstream economists rather pointless. It’s simply not the stuff that real understanding and explanation in science is made of. Just telling us that the plethora of mathematical models that make up modern economics  “expand the range of the discipline’s insights” is nothing short of hand waving.

No matter how many thousands of technical working papers or models mainstream economists come up with, as long as they are just ‘wildly inconsistent’ axiomatic variations of the same old mathematical-deductive ilk, they will not take us one single inch closer to giving us relevant and usable means to further our understanding and possible explanations of real economies.



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  1. Hello. I like your website. I am learning from it. I have one suggestion, which is this: if you want to reach a more general audience of non-professional economists, you should try to use simpler language. I personally struggle to understand some of what you write – example: ‘closed analytical-formalist-mathematical-deductivist-axiomatic models’.

    If you think of your audience as smart people with absolutely no technical economics knowledge, and try to write in such a way that they can understand your point, your writing will have more impact.

    Perhaps pick some relative of yours that you know well, and who you consider to be highly intelligent and interested in such things, but who has no actual education in these matters. This could be your mother or father, uncle or aunt, cousin, or sibling – whoever seems reasonable in your view. Write as if that one person was your audience, and you want them to understand your point. It makes writing more difficult but your writing may end up having more influence.

    In any case, thank you for the blog. I read it, enjoy it, and learn. Respectfully,

  2. the urge of mainstream economists to “write down” a model is a sad behavioral tic

  3. Mirowski is best when criticizing neoclassical theory, including the approaches by Krugman and Stiglitz. However, by considering almost all social phenomena and theories, and even the room for deviating opinions, during the latest decades as expressions for neoliberalism he certainly goes too far. His Russian nesting-doll interpretation of the development of economics and society, tracing it back to the formation of the Monte Pelerin Society in 1947, is a conspiracy theory that can be questioned indeed.

    • In the latest issue of Fronesis (54/55, 2016) we have a couple of articles on the connection between neoclassical economics and neoliberalism. One is a translated article of Mirowski, where he also comments on the ‘conspiracy theory’ accusation that has been lodged against his interpretation of neoliberalism …

      • Yes, but the critique is still valid after Mirowski’s defence. Conspiracy theories can occasionally be fruitful but I think that he has lost all proportions in Never Let a Serious….Furthermore, in his new project he claims on loose grounds that the price in economics to the memory of Alfred Nobel is a price in neoliberalism… Once again he returns to that notorious meeting in the Alps in 1947. But Mirowski’s Machine Dreams is a masterpiece. He is excellent when analyzing and criticizing mainstream economics in light of the history of science.

  4. Lennart Erixon, if you don´t see the connection between Neo-Liberalism and Neo-Classisism, I don´t see how to reach you. It seems that you have a real “Blind Spot”! Friendly, Jan Milch.

  5. Jan Milch – do you really suggest that neoclassical economists such as Krugman and Stiglitz are neoliberal economists? Not even Mirowski puts en equality sign between neoclassical and neoliberal economics. Mirowski is not completely clear about the relation, but he probably assumes that neoclassical economics has been absorbed by neoliberal ideas and interests.

    • Yes, Lennart, with all respect, I consider Stiglitz and Krugman as maybe not pure Neo-Liberals, but Lennart, they are the same type of economists, in my view. They got to the same schools, read the same books,learn same utility theory, and are of basically the same sort! Of course, there are grades in Hell, and Krugman and Stiglitz of course I don´t accuse them to be a Lucas or a Hayek! But they share the same worldwiew in my view! Friendly Greetings, Jan Milch.

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