Neoclassical economics and the severity of the coronavirus crisis.

6 Apr, 2020 at 20:01 | Posted in Economics | 3 Comments

This training in economics makes politicians and bureaucrats incapable of understanding a crisis like this. They are, however, very susceptible to the advice of economists. They therefore enacted policies that reduced our capacity to cope with a pandemic, crafted systems of production and distribution that drastically amplified its damaging impact when it did arrive, and ridiculed warnings of people like Garrett as “alarmist” and “Malthusian”. For these reasons, Neoclassical economics itself bears a heavy responsibility for the severity of the coronavirus health and economic crisis.

near-term-impact-on-india-incNeoclassical economists will of course ridicule this claim. One thing I’ve learnt from fifty years of fighting these well-meaning but deluded bastards is that they’re great at taking credit when the economic system is doing well, but quick to deflect criticism by feigning impotence when a crisis actually arises. After it, they will merrily throw around their favourite explanation for why they couldn’t have seen the 2007 Great Financial Crisis coming, that it was caused by an “exogenous shock” …

This isn’t because Neoclassical economists are inherently liars or weasels by the way: it’s because they have a paradigm that they sincerely believe does describe capitalism accurately, and as a result they can’t comprehend that in fact it doesn’t. So whenever their paradigm fails, as it did in 2007, they look for reasons why it didn’t really fail—such as that the crisis couldn’t have been predicted, and that criticizing them for not anticipating it was like criticizing a mathematician for not predicting next week’s winning Lotto numbers …

Economists cannot avoid responsibility for the fact that production is heavily globalized, both via the promotion by economists of free trade over self-sufficiency, and by their support for the relocation of production from the West to the Third World. Consequently, a disease like this hit the whole world when it hit just one country—though it helped that the one country initially was China, to which much of the world’s production was outsourced.

In the aftermath to this crisis, we have to revoke the carte blanche that economists were given to reshape the economy in the image of their textbooks. It’s time to let real sciences manage humanity’s impact upon this planet.

Steve Keen

3 Comments

  1. Steve Keen is the best.
    .
    “[Economists] have a paradigm that they sincerely believe does describe capitalism accurately, and as a result they can’t comprehend that in fact it doesn’t. So whenever their paradigm fails, as it did in 2007, they look for reasons why it didn’t really fail . . .”
    .
    Normal people are wrong about a lot of mundane things on a daily basis — I certainly am — but most of us learn from at some of our mistakes.

  2. […] via Neoclassical economics and the severity of the coronavirus crisis. — LARS P. SYLL […]

  3. Brilliant!


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