Mainstream economics — a form of brain damage

3 Oct, 2022 at 09:43 | Posted in Economics | 10 Comments

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It is difficult to understand why mainstream economists keep on using their unreal and irrelevant models! Sure, you get academic accolades and give the impression of having something deep and ‘scientific’ to say, but that should count for nothing if you’re in the truth business. As long as that kind of modelling output doesn’t come with the accompanying warning text “NB! This is model-based results based on tons of more or less unsubstantiated assumptions,” we should keep on scrutinising and criticising it.

Yours truly appreciates scientists like David Suzuki. With razor-sharp intellects, they immediately go for the essentials. They have no time for bullshit. And neither should we.

10 Comments

  1. metaecongary,
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    “To move economics out of ideology it is essential to think about a person seeking own-interest — a joint self & other-interest, with sacrifices essential in both domains…”
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    You have not removed ideology, you have merely shifted the ideological constraints to fit your ideology. Nothing wrong with that but let’s be clear what you are doing.
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    Suzuki deals with the idea of externalities as if economists ignore them. Not all economists do. Externalities are results of economic behaviour not accounted for by the strict (standard private interest based) model. It doesn’t mean they are necessarily discounted.
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    Externalities are generally of a character such that they are difficult to value. It doesn’t mean they should be ignored, they are just sometimes difficult to value.
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    Externalities can also have the characteristic of a public good or public bad, i.e. that is their consumption/production is possible without having to pay for them (simple definition).
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    The standard model uses the private production possibilities function and the private indifference map.
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    A model could be constructed using a social production possibility function and a social indifference map. In this way, those outcomes which were externalities to the standard model become internalities of the social economic model.
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    In the standard model, the private marginal cost function is the supply curve. In the social model, the social marginal cost curve is the supply function. If the externalities (in the standard model which are now internalities in the social model) are bads, the social marginal cost curve will be higher than the private marginal cost curve. This means that fewer bads will be produced.
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    If these externalities are really bad and have an extremely high cost they will not be produced at all.
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    Generally, how a model is constructed and premised is given by values and ideology. Ideology is never far away when considering either standard or non standard versions of the economic model.
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    Models are not bad in themselves. How they are constructed depends on how they are premised and on the values of the modeller.

    Comment by Henry Rech— 3 Oct, 2022 #

    • “A model could be constructed using a social production possibility function and a social indifference map. In this way, those outcomes which were externalities to the standard model become internalities of the social economic model.”

      This could be problematic because you are assuming that social preferences are the same as individual ones (that there is a representative agent) or that it is simply an aggregation of individual ones. There could be major behavioural implications if you are assuming rationality.

      My main point would be fine if you do this, but first check what other schools of thought might say about it and what other disciplines might say (eg psychologists on individual rationality, sociologists on social behaviour). As you say you must make your ideology that your reasoning is based on explicit.

      Comment by Nanikore— 16 Oct, 2022 #

    • Nanikore,
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      “This could be problematic because you are assuming that social preferences are the same as individual ones”
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      Where do I say this? In fact I assume that they are probably not the same otherwise what would be the point of the differentiation.
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      As usual, you are wont to create the straw man.
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      Why don’t you focus on exactly what I wrote not what you think I might have written so that you can construct argument refuting it for no other reason that there would be nothing to discuss otherwise.
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      I was making some general points about externalities and how they might become internalities and how economic bads might be priced and what the effect on the output of these bads might be.
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      And I was not crusading for the standard model per se. The standard model is a highly abstract construction premised by a bunch of highly unrealistic assumptions. However, it some has utility, even if just pedagogical.

      Comment by Henry Rech— 16 Oct, 2022 #

      • It is not what you say, it is what you don’t say. This is not straw: it is very fundamental to understanding what we are really trying to achieve. And this was the bigger point: it is being explicit about the moral philosophical implications of what one is suggesting. I assumed from your reference to things like social “indifference maps” suggests utilitarianism à la Bentham and Mill. Immediately this will raise questions such as welfarism, impartiality and aggregation, relative vs absolute gains. I was not at all trying to be overly critical or dismiss your proposal – it was more questioning and curiosity than anything else. What kind of society and its expression of what it should be is implied by your social indifference map? Do you agree with the Utilitarian view of what it is and what it should be? I am basically repeating a lot of what Haldane said on a previous post in this blog: people just need the critical education to understand what the moral philosophy behind neo-classical microeconomics (and today macroeconomics) is to be able to put into context and properly evaluate it. A very general point. Secondly, is not so much whether economists consider the environment – nobody disputes that or that they spend a lot of time studying externalities (although in a specific context of market failure, rationality and other fundamental assumptions of what constitutes a society in neo-classical economics). It is how they are considered. i suspect the complaint of Suzuki is a very simple one: too much abstraction with tautologous and irrelevant material at the expense of trying to really understand the environmental issues themselves. It is something from his own experience: and I directly saw myself the frustration many climate change scientists had with economists when I worked in a foreign policy branch of a cabinet office. And this comes back to the issue of the subject’s engagement with other areas and its openness and ability to communicate with other fields of knowledge.

        Perhaps we need fewer indifference maps and maybe more thinking outside the Edgeworth Box. These things can become a distraction. While I appreciate governments need numerical values in budgeting for environmental policies, I am not sure that abstract geometric gadgets are that helpful – even if they can be made to show whatever people want them to show. Ultimately one has to ask what is the point of them? In my experience they do not contribute to wide and deeply informed knowledge and understanding and raise more questions than they answer (and worse- actually stop us asking the questions). Other social sciences don’t feel the need to use such devices to such an extent, I don’t see why economics has to.

        Having said that I agree with your closing statement: it is one pedagogical tool. It just shouldn’t be the only one or one that people feel they have to use.

        Comment by Nanikore— 17 Oct, 2022 #

        • Nanikore,
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          I pretty much agree with everything you say (you started to lose me in the penultimate paragraph), I am just not sure why you had to say it.
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          I was merely making the very simple point that models can take account of externalities and social preference.
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          “Other social sciences don’t feel the need to use such devices to such an extent, I don’t see why economics has to.”
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          In the real world of economics there are such things as the price of goods. The other social sciences don’t have to deal with such precise data. Models are an attempt to explain such phenomena. Without them absolutely no sense can be made of such data. And they need not be rigid abstractions and they are not sacred cows.
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          If you toss out models and toss out other empirical data relevant to a particular point in time (because it cannot be certain what applies now will apply in the future) what are you left with? Rudderless nothing.
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          Economic practitioners and academics are collecting fancy salaries on false pretences. They should go lay bricks or do some other socially usefully function.

          Comment by Henry Rech— 17 Oct, 2022 #

  2. Albert premier Jason Kenney weighs in on David Suzuki:
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    Kenney Fires Back At “Environmental Hypocrite” David Suzuki 2
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    Comment by Ahmed Fares— 3 Oct, 2022 #

  3. OTTAWA — Green sage David Suzuki has some expensive tastes for someone who wants to shut down the carbon economy within a generation.
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    QMI Agency has learned that Suzuki, who’s made a name for himself fighting for the environment and against development, owns four homes, including one property he co-owns with a fossil fuels company.
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    His primary abode is a sprawling mansion in the Kitsilano neighbourhood of Vancouver, worth approximately $8.2 million.
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    At Occupy Vancouver, Suzuki extolled the virtues of his anti-corporate agenda and condemned excess.
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    He owns another slightly more modest property in the Kitsilano neighbourhood. Its value is listed as $1.01 million.
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    Suzuki owns a waterfront property on the Quadra Island area off the B.C. coast, that appears from photos to be something of a cottage getaway, complete with boat dock. The property is valued at $1.1 million.
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    Perhaps most interesting is a property on Nelson Island of which Suzuki is one of several co-owners listed on a B.C. land title registry, another of which includes Kootenay Oil Distributors.
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    source: https://torontosun.com/2013/10/10/david-suzuki-a-man-of-property

    Comment by Ahmed Fares— 3 Oct, 2022 #

  4. Mainstream (Micro)economics is an ideology favoring an ego-based pursuit of self-interest. So, it cannot be a science of economic choice, because humans do not have only (albeit primal) self-interest: It is a single interest theory which supports an ideology of self-interest only, not only in the market but in the government (as in public choice theory). As Behavioral (e.g., in Dual Interest Theory in Metaeconomics) and Neuroeconomics makes clear, confirming it empirically, humans have the capacity for empathy (Adam Smith fully understood it, as in the notion of the sentiments) which must temper the arrogance of self(interest)-love (as Smith said it). So, to move economics beyond ideology and back to science is actually a straight-forward fix: Just recognize the inherent, evolved dual interest, and think about economic choice as finding balance in a joint self & other(shared with others, yet internalized)-interest. To move economics out of ideology it is essential to think about a person seeking own-interest — a joint self & other-interest, with sacrifices essential in both domains — and, writ large, it is about finding good balance in a joint person & community, I & We, market & government. The economic question now turns to finding the best point on the political (economic) ideology scale, turning it into an empirical question. It is now about searching for sufficient reason represened in facts(scientific-method source) & ethics (empathy sourced) to believe in a particular economic policy. In said frame, it is again a science.

    Comment by metaecongary— 3 Oct, 2022 #

    • Economics as science is focused on representing, analytically, in the theories and models, the notion of empathy-based other(shared with)-interest being essential to tempering the inherent excesses of the ego-based self-interest. Economic efficiency cannot be achieved by maximizing self-interest, and, to believe so, is to believe in an ideology. Economic efficiency can only be achieved with good balance in a joint self & other-interest, the latter tempering the former. Said balance is also essential to peace (minimal political economic chaos), and, yes, essential to happiness. Try Dual Interest Theory in Metaeconomics (Google It, or, go here for starters https://www.metaeconomics.info/what-is-dual-interest-theory ).

      Comment by metaecongary— 3 Oct, 2022 #

  5. Prabhat Patnaik has a good explanation:

    Mainstream bourgeois economics which is what occupies a hegemonic position in the academic world today is often criticized for being “unreal”, for proceeding on the basis of assumptions that obviously do not correspond to reality. This criticism however, though valid, does not capture its real intent, which is to serve as a means of camouflaging imperialism. The theoretical content of mainstream bourgeois economics is to advance a set of propositions about the functioning of capitalism which deny any need for, and hence any role of, imperialism in capitalist development. Since imperialism has in fact been a crucial element in the functioning of capitalism, these propositions, needless to say, are “unreal”; but simply underscoring their “unreal” character is not enough. This “unreal” character serves a purpose; and this fact must not be missed.

    From: https://peoplesdemocracy.in/2019/0317_pd/economics-and-imperialism

    Comment by V. Ramanan— 3 Oct, 2022 #


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