There has been a lively discussion of Eight Elementary Errors of Economics at Real World Economics Review Blog. Here are a couple of exchanges that raise good points. (If these commenters respond further I will post them here, in fairness to them.) There has also been discussion of history, science, love and other topics. You might like to have a look.
[This is my most recent attempt to encapsulate the deep flaws in mainstream economics, and the sensible alternative struggling for recognition. Posted 7 June at Real World Economics Review blog, with a lively discussion following.]
The Global Financial Crisis, the extreme inequality of wealth world-wide, the materialism of modern life and the dire state of the planet are not accidents, nor just unavoidable consequences of the nature of things. They are the result of the modern practice of economics, which makes elementary errors of accounting, evidence, perception and theory.
English: ANU School of Music, LLewellyn Hall. (Photo credit: Wikipedia)
[Although this is a relatively local issue, it is symptomatic of the venality of the neoliberal dominance of Australia and much of the world. The Vice Chancellor of ANU recently proposed to downgrade the School of Music from top-class performance to vocational training. Published in City News 5 June.]
Defenders of the Australian National University School of Music have come up hard against the utilitarian attitudes of the ANU Council, which refused last week to question the Vice Chancellor’s plan to gut the School. The Council is a politicised body, and Australian politics has itself largely lost interest in excellence.
[Extract from The Nature of the Beast]
Most people don’t deal much with abstract ideas and theories, yet ideas exert a powerful influence on societies and history. Societies and civilisations have come to grief because they held ill-adapted ideas. What idea was it, for example, that led the Easter Islanders to obsessively build huge stone effigies even as the ecosystem of their island was collapsing around them? Richard Dawkins, in The Selfish Gene (1976) invented the term meme for key ideas. Memes are to cultural evolution as genes are to biological evolution. A very powerful meme abroad in the world today is that free markets are the best way to organise economies. Where did this meme come from? Is it serving us?
The Nature of the Beast: how economists mistook wild horses for a rocking chair.
Mainstream free-market economics fundamentally mis-identifies the nature of market economies. Its record is of retarded growth followed by disaster. It counts costs as positives instead of negatives. It is blind to how the present banking system destabilises the economy. It is relentlessly materialistic and adversarial. It ignores most of what we know about real people and the real world.
The result is pseudo-scientific gobbledygook, and the unstable, inequitable, undemocratic, destructive and unsustainable mess known as the global economy.
The Nature of the Beast draws out the real nature of market economies using modern knowledge of systems, human behaviour, ecology, biology and physics. It points the way to stable, prosperous, democratic market economies that can support people, societies and the living world into the indefinite future.
[ The three earlier posts “How free-market fundamentalists are hopelessly wrong” are extracted from a paper that is now published by the World Economics Association in an on-line conference on Economics in Society, the Ethical Dimension. The full text of the paper follows, covering more deficiencies of the mainstream and some new modelling illustrating a more useful approach. A pdf can be downloaded here (300 kb) ]
A profession that claims to understand economies, and that has gained power over the greater part of our societies, has big responsibilities. The fundamental responsibility is to ensure its perception of economies gives some useful guidance to the behaviour of real economies. Here mainstream economics fails utterly, and has been failing for a long time. Worse, it actively resists alternative views that might overcome its failings. Ethics do not come much worse than that.
In Part I we saw that readily available evidence shows clearly that economic performance in the free-market era that began around 1980 was already poor, even before the disaster of the Global Financial Crisis. Here we look at the theory that underlies the free-market rhetoric, the so-called neoclassical theory.
Australia’s commentariat is thickly populated with right-wing guardians of the doctrine of free markets. Many of them have been groomed by right-wing think tanks in a long-term campaign to drag our perceptions to the right. Chris Berg and Sinclair Davidson, of the Institute of Public Affairs, are regulars on the ABC’s The Drum Opinion. The campaign has been highly successful, as the free market mantra has taken over both sides of politics and dominates economic discussion.
However it is very easy to demonstrate the doctrine is hopelessly wrong. The evidence is clear that free markets have retarded growth. The theory underlying the doctrine is plainly and absurdly unrealistic. The Global Financial Crisis was caused by financial markets building up mountains of debt, yet debt and money are absent from mainstream economic models and, apparently, from economists’ thinking. Hence their blindness to the GFC’s approach, its cause and its remedy.
These problems will be covered in a three-part series. First, the evidence.
[Published 7 Feb on ABC’s The Drum Opinion.]
Gina Rinehart’s evident intention to own large chunks of our media is focussing many minds on the question of media ownership. However most of the discussion does not properly recognise the special role of the media in our society, and canvasses only variations on concentrated ownership by very rich people, usually with an implication that ownership by government is the only alternative.
The media are the means of social conversation in large societies. They deserve to be accorded special status, like the courts. Ownership could be widely distributed among those served by each outlet.
Recently we broke the glass carafe on our drip coffee maker. Yes I know it’s very last-century, but I still like drip coffee. A search on line revealed that that model was no longer manufactured, even though the basic design has been stable for decades. The carafe of a related (read “different-shaped”) model cost about $35, excluding the hassle of ordering and delivery. The local shop had a whole new coffee maker for about $40. So of course we threw away the perfectly good old model, sans carafe, and got the new one.
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