Whether economics can be a science, and whether mathematics has a place in economics or economic science, seem to be vexed questions among heterodox economists. Having been a natural scientist for over four decades and thought hard about the nature of science and the place of mathematical models within it, I would hope to offer some clarification on these issues. After discussion, this post will be put in a permanent page.
The long, and slightly modified, version of Eight Elementary Errors of Economics is now on SteveKeen’s Debtwatch. Reblogged on Business Spectator, 22 June and The Bull 23 June. I consolidated two of the previous points and added what is now the final point on emergent wealth of land. See also on Real World Economics Review Blog, 7 June, with long discussion.
Post edited 4 July: the full modified version now follows, so it’s all consolidated here.
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.
[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.
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.
[This is a draft. Over the next week or so I will be revising, adding links and making other versions to send to any news outlet that might take them.]
Here is the climate news. The real climate news.
So far the world has warmed about 0.6°C. If currently advised reductions of greenhouse gas emissions were realised there would still be a 90% chance global warming will exceed two degrees Celsius (2°C). 2°C used to be regarded as the threshold of “dangerous” climate change, but new science has shifted that threshold to only 1°C. 2°C is now regarded as the threshold of “extremely dangerous” climate change. At that level, global warming effects would be widespread and severe.
However, somewhere between about 2°C and 4°C lurks a tipping point, beyond which global warming will run beyond human control, driven by natural feedback mechanisms that drive temperatures higher, perhaps to 6°C or 8°C, no-one knows. 4°C would already be “incompatible with an organised global community”. Higher temperatures could result in the extinction half or more of the world’s species and much of the human population.
A complete manuscript of The Nature of the Beast is available for comment. It is under a password, so as not to upset potential publishers, and so I can keep track of who is looking at it. I would love to have feedback of any kind.
Use the Books and Downloads menu above, or go here.
A sample, the first 16 pages, can be downloaded without password.
[After a 6-month break I have returned to working on The Nature of the Beast. A new version of Chapters 1-4 is available for download and comment – use the links at the top. More will follow soon. To whet your appetite, here is a sample, from the Introduction.]
The Global Financial Crisis, also known as the Great Recession, is the biggest economic malfunction since the Great Depression. You might think that those in charge when it happened, and those who designed the economic system within which it occurred, would have been chastened and purged, to be replaced by those who saw the crash coming and those who warned that the design of the economic system was prone to such failures.
However few of those responsible have been purged, and few seem to have felt chastened. Rather, they claim that no-one could have seen the crash coming. If that were true, what exactly has the economics profession been doing for the past eighty years? Everyone knows there was a Great Depression. Would it not be a top priority to figure out how it happened, so we might see the next one coming, or better still avoid the conditions that would trigger a depression? One might think so, but that is not how the great bulk of the profession has spent the past eighty years.
Extracts from Economia.
The writing of Economia was essentially completed in 2003. It was obvious then that the global financial system must come to crisis within a few years.
The Global Financial Crisis, serious as it is, is only part of a deeper crisis reaching to the core of how modern economies are conceived and managed. The problem is not just that financial markets have acquired excessive power and are greedy, corrupt, unstable and destructive. It is not even that the GFC has not yet shown us its worst, as Steven Keen argues (Declaring victory at half time). It is that mainstream economists have fundamentally mis-identified the nature of the beast they are dealing with.
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