I just love this well-written and funny summary of what is so frustrating about studying economics and its bag of “tricks.” For the few students not so prone to robotic regurgitation of core economic models taught by a mostly naive economics profession (in terms of their own poor training outside standard model economics), this will hit home. For the rest, I hope it is an eye opener.
Below is an excerpt from: What’s wrong with Economics, published by
I want to understand the big relationships in our world. I want to learn the reasons of unemployment and inequality; how to design successfull economies and how to prevent financial crises. I am as passionate about economic issues as one can be and this is why I have been studying economics for the last 5 years. Unfortunately, to say that I am a little unsatisfied with my major would be a strong understatement – I am deeply frustrated. In this post, I’ll try to explain why that is and what’s wrong with the current state of economics.
It might all have began with physics envy: In the history of the discipline, the early economists tried to follow the approach of physics in describing the world through mathematical equations to depict economic behavior. This approach seemed so precise, so objective, so scientific. Therefore, the most common tool of the contemporary economist are mathematical-theoretical models. And this is how it works: First, assume that everyone is homo oeconomicus – perfectly rational, future-knowing, completely egoistic, emotionsless and constantly trying to maximise one’s “utility” (usually that is to maximise consumption and minimize the amount of work). Second, assume that all goods are identical, markets are in equilibrium and that there is perfect competition between profit-maximising firms. Third, assume that money doesn’t have any effect on the “real” economy so you can neglect banks and financial markets. And voilà – you have a foundation to begin your economic analysis!
Lino goes on to reveal the sleight of hand used in all the “tricks” by economists in front of students, which reads like a consumer guide to a defective, but expensive in more ways than one, product. My only issue with the article is that Lino does not attempt to situate the profession and its bag of “tricks” that pass as science inside a social system we know as capitalism, and explain why these actors performing on stage in this ongoing magic show don’t get replaced for not “fully and fairly” teaching economics year after year?
While not the full explanation, standard model economics of the core curriculum underpins the ideological needs of business schools and a corporate dominated (increasingly in academia) globalized capitalist world. And while I run the risk of slipping into a functionalist argument, there is no question an important purpose is served by retaining the core economics curriculum — it renders the world through the standard model, which legitimates the dominant social order (and there are big corporate dollars backing its pro-market, anti-government message). Because of this role played by standard model economics, very rarely do you see this dominant (though not necessarily analytical consistent) model taught by contrasting it with serious scholarship of alt paradigms, like post-Keynsian, Marxian and even Austrian economics. Lino is too generous to suggest that only later do you learn of these “heretical” traditions. I would say, if you are lucky, or perhaps determined enough because your parents were Lefties (or Austrians), you might find out. Regardless, most students get locked into a standard model career track outside of which you are at a competitive disadvantage – an insidious form of group think and self-reinforcing nepotism. As far as I know, I was probably one of only a handful of faculty in the United States teaching alt concepts like Marxian primitive accumulation, underdevelopment and neo-colonialism, history of capitalist crises, the ‘invisible foot’ of free markets, and so on, inside an economics department. Oh, and, I was purged for that, I should mention as a disclaimer. You will find these concepts taught OUTSIDE economics departments, by the way.
Read Lino, and if you are considering becoming an economics major, think hard about parting with your money in exchange for what is a mathematically impressive, yet arguably not very scientific, bag of “tricks” ~JS
Postscript: Watch out for the pseudoscience of agent based simulation, the ultimate slight of hand, which is becoming one of the best adult video games available to some gulllible economists (and students). All multi-agent simulations are specification dependent (impose what you want) and thus highly subjective to tweaks and data mining, to say nothing of the unreality of it all. Beware of the sim-fetish economists who, with fancying and impressive algorithms, claim to be explaining how the economy actually works. Heck, with enough tweaking, we could probably simulate a revolution if we impose the correct agent attributes and have interactive parameters that generate a complex system outcome that produces the end of capitalism. Try getting a job with these ’emerging properties’. ~JS