Sweden Debates the Future of Economics’
the Sunday October 10th issue of Sweden’s number one newspaper, Dagens Nyheter, a
debate was opened by PAER contributor Peter Söderbaum regarding the future of the Bank of Sweden’s
Award in Economics in memory of Alfred Nobel.
Dagens Nyheter, DN-Debatt, Sunday October 10, 2004-10-10
The Nobel Prize
in Economics – barrier for new thinking
the award should be withdrawn or it should be admitted that the presumption
of economics as value-neutral is false, writes professor of economics.
Most Nobel Prize winners in
economics belong to the neoclassical school. But many are those who question
the dominance of this theory with its narrow-minded focus on economic growth
and markets. The Prize in Economics has become an obstacle for new
perspectives. One possibility is to withdraw the prize, the other is to admit
that economics has ideological content. In the latter case, the economics
award should be treated as being in the same category as the Peace award,
writes Peter Söderbaum.
The Nobel Prizes in
physics, chemistry and medicine are not uncontested but have become
reasonably respected. Lately, the Bank of Sweden’s award in memory of Alfred
Nobel has been added and instituted. It has been argued that economics is an
established discipline comparable to physics and chemistry and with similar
ideas of good science and scientific progress..
Economists can refer to a
distinct paradigm, that is a clear theoretical perspective. The tendency is
to stick to this perspective, and today there is a monopoly position for
neoclassical economics at almost all university departments of economics. Its
theories are useful for some purposes, for instance, as a way of
understanding financial and monetary policy.
Confronted with the present
challenges related to sustainable development, the limitation to the
neoclassical paradigm is a problem. Viewing humans as consumers maximizing
their self-interest is not very constructive if you wish to discuss issues of
environment and survival. Focusing on profit maximization in business will
not make it easy to understand the present debate about corporate social
responsibility, environmental certification of organizations and similar
phenomena. Interpreting economic phenomena and relationships in terms of markets
and prices and monetary indicators is not always a good strategy.
Neoclassical economists can
of course continue to refer to their conceptual framework and turn their
arguments in the best possible way. But a problem that they cannot get away
from is that economics, just as other social sciences, is both science and
ideology. As an example, focusing on the role of consumer and her
self-interest is not neutral in value terms.
One of the scholars who
received the Bank of Sweden’s Award in Economics in memory of Alfred Nobel, Gunnar Myrdal, repeatedly
argued that “values are always with us” in our research. This being the case,
it becomes problematic from a democratic point of view to stick to one and
only one paradigm at a university Department of Economics. The ideological
features and character of this paradigm mean that the department plays a role
of political propaganda centre; “human beings are consumers, forget about
other roles as citizen, professional…” “anything connected with business can
be reduced to a matter of maximum monetary profits”, etc..
The solution to this is a
pluralistic attitude, that is, open-mindedness to different possible
theoretical perspectives compatible with different valuational
or ideological points of view. Just as economists otherwise celebrate
competition, this should also be applied to their own discipline. The Bank of
Sweden’s Prize in Economic Sciences in memory of Alfred Nobel unfortunately
has become an obstacle for new thinking.
Even prize winners that present and
support theories that could be connected with a criticism of neoclassical
theory, for example Douglas North and Amartya Sen, tend to – for tactical reasons, it seems – profess
themselves adherents to orthodoxy. Gunnar Myrdal is the exception
among prize winners, with his outspoken criticism of the mainstream and clear
declaration in favour of institutional theory.
Today a lot is happening
internationally in developing institutional theory, social economics,
feministic economics, ecological economics, etc.. Ecological economics can be described as
“business management and economics for sustainable development” and in this
field neoclassical theory holds a minority position.
Adhering to neoclassical
theory with its focus on economic growth in GDP-terms is perceived by an
increasing number of people as ‘unsustainable’. For several years this has been a focus of
the post-autistic economics review, which also stresses the
limitations of mathematics as a language for economics. Books are now being published, with
contributors from many countries, that caution new students in economics
about the narrow-mindedness of the textbooks they are exposed to.
The problem is that these
textbooks legitimise simplistic thinking about economic growth and markets in
a situation where instead a multidimensional and ethically open analysis is
needed. To systematically propagate this simplistic economics to countries
such as Russia and China is irresponsible.
Against this background,
one possible way of acting is to withdraw the Prize in Economics in memory of
Alfred Nobel. The alternative is to admit that economics much like other
social sciences has a specific ideological content and therefore belongs to
the same category as the Peace Prize.
This would make it natural
to return to the term ‘political economy’, the language used in the 19th
century. It would also make it clear
that the project to develop a ‘pure’ economics has been a failure.
With this change, the idea
becomes one of identifying potential winners of the prize who, through their
research and other actions, have contributed something to humanity. Choosing people who claim to have developed
models useful for predicting shareholder values would then become more
I am sure that there are
those who see markets of different kinds as the salvation of the world, but
there also are quite a number of citizens who are less enthusiastic about market
Peter Söderbaum is
Professor of ecological economics, Mälardalen
Peter Söderbaum, “The Nobel Prize
in Economics – barrier for new thinking”,
economics review, issue no. 28, 25 October 2004,
article 5, http://www.paecon.net/PAEReview/issue28/Soderbam28.htm