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Post-Autistic Economics Network
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from Soundings spring 2005
Post-Autistic
Economics Edward Fullbrook (University of West of England, UK) © Copyright: Edward Fullbrook 2005 These
days people like to call neoclassical economics ‘mainstream economics’
because most universities offer nothing else. The name also backhandedly
stigmatizes as oddball, flaky, deviant, disreputable, perhaps un-American,
those economists who venture beyond the narrow confines of the neoclassical
axioms. In an attempt to understand how this has happened, the first half of
this article very roughly traces the strange history of economics from the
1870s through to the recent challenge to the neoclassical hegemony from the
Post-Autistic Economics movement, henceforth PAE.
The second half surveys some of the substantive dimensions of PAE, a movement that began in Paris in the summer of 2000
and now involves thousands of economists worldwide in a long-term effort to
free economics from its neoclassical straitjacket. Physics envy The
origins of neoclassical economics are not what an outsider might think.
Though today it cavorts with neoliberalism, it
began as a honest intellectual and would-be scientific endeavour. Its patron
saint was neither an ideologue nor a political philosopher, nor even an
economist, but Sir Isaac Newton. The founding fathers of neoclassical
economics hoped to achieve (and their descendants living today believe they
have) for the economic universe what Newton had achieved for the physical
universe. Its aim was to fashion an economic model
in the image of Newtonian mechanics - in
which economic agents could be treated as if they were particles obeying
mechanical laws. In principle it would be possible to describe the behaviour
of such agents simultaneously, by a solvable system of equations. This
narrative required the treatment of human desires as fundamental data: like
the masses of physical bodies in classical mechanics, they would not be
affected by the relations being modelled. It was to this end - not to the
understanding of economic phenomena - that homo economicus or economic man and the
hedonistic calculus were invented. Thorstein Veblen sums up the core metaphysic as follows: *the human material with which the inquiry is concerned is
conceived in hedonistic terms; that is to say, in terms of a passive and
substantially inert and immutably given human nature … The hedonistic
conception of man is that of a lightning calculator of pleasure and pains,
who oscillates like a homogeneous globule of desire of happiness under the
impulse of stimuli that shift him about the area, but leave him intact. He
has neither antecedent nor consequent. He is an isolated definitive human
datum …1* With
this construct at its centre, the dream of a determinate model of the
economic universe was realised in the 1870s by William Stanley Jevons and, especially, by Léon
Walras, both of whom were in part physicists by
training: it was called the model of general equilibrium. And this elaborate
mechanistic metaphor, proudly devoid of empirical content, remains today the
grand narrative of economic theory, for students and economists everywhere. The
model, which invariably is expressed in language so metaphorical that it
would make a good poet blush, works by laying down a priori, like Euclidean geometry, a set of axioms:
Veblen
and Keynes At
the very end of the nineteenth century, Thorstein Veblen launched a counter-revolution against the growing
domination of the neoclassical approach in economics. Besides critiquing the
neoclassical assumptions, he analysed institutions as well as isolated
individuals, emphasised emergent social phenomena, argued that habit
influenced economic choice more than rational calculation, rejected all forms
of reductionism, and stressed the importance of knowledge in economic
evolution. This approach steadily gained adherents in the years leading up to
the first world war, and in 1917 one its leaders, John R. Commons, was
elected president of the American Economics Association (AEA).
The following year this new school was christened ‘institutional economics’
at the AEA meetings, and was embraced by the
association as a means of making economic theory capable of addressing the
problems of economic development that would follow the conclusion of the war.2
In the 1920s the Institutionalists came to rival
the Neoclassicals in the US, but in the 1930s their
numbers declined. Like neoclassical economics, institutional economics had no
explanation of, or solution to, the calamity that had befallen capitalist
economies. In
stepped John Maynard Keynes. He offered a new theoretical interpretation of
capitalist economies, which both explained their collapse and pointed to
practical measures that would - without interfering with their general
principles - get them going again and keep them functioning smoothly. Given the
dire straits of capitalism and the growing fear of revolution, not even
neoclassical economists dared for long to keep Keynes’s theory from being
given a try. When it was shown to work, that, at one level, ended the
argument. Henceforth, in the basic management of the economy, all American
presidents would be Keynesians. But at the theoretical level, which in the
neoclassical tradition means theory that is axiom-led rather than
empirically-led (otherwise their axioms would have been abandoned long ago), the
argument had only just begun. In 1946 Keynes died and neoclassical economists
began their counterinsurgency. This time they would not be satisfied until
most economics departments in the world had been cleansed of economists who
voiced non-neoclassical ideas. The Pentagon Keynes
had trained at Cambridge University as a mathematician. In his mid-twenties
he wrote Treatise on Probability, a
book that was lauded by Whitehead and Russell (‘it
is impossible to praise too highly’), and launched what has become known as
the ‘logical-relationist’ theory of probability.
When he turned his attention to economics, he was shocked by the way
mathematical economists abused mathematics, especially when they applied them
in meaningless ways to unsuitable phenomena, and he made no secret of his
professional contempt for their empty pretentiousness. But these economists
were soon to have their revenge. Led by Paul Samuelson in the US and John
Hicks in the UK, they set about mathematicising
Keynes’s theory. Or, more accurately, a part of his theory. They left out all
those bits that were inconsistent with the neoclassical axioms. Their end
product was a formalised version of Keynes that is like a Henry Miller novel
without sex and profanity. This bowdlerised version of Keynes, called
‘Keynesianism’, soon became standard fare in undergraduate courses. Even
graduate students were discouraged from reading the primary text. With the
real Keynes out of the way and Veblen and all the
other free spirits forgotten, the road was now clear to establish a
neoclassical tyranny. Following
the second world war, the United States increasingly came to determine (one
might say dictate) the shape of economics worldwide, while within the United
States the sources of influence became concentrated and circumscribed to an
absurd degree. This state of affairs, which persists to the present day, was
engineered in significant part by the US Department of Defence, especially
its Navy and Air Force.3 Beginning in the 1950s it lavishly funded
university research in mathematical economics. Military planners believed
that game theory and linear programming had potential use for national
defence. And, although it now seems ridiculous, they held out the same hope
for mathematical solutions of ‘general equilibrium’, the theoretical core of
neoclassical economics. In 1954 Kenneth Arrow and Gerard Debreu
achieved for this mathematical puzzle a solution of sorts, and it has been
the central showpiece of academic economics ever since. Arrow’s early
research had been partly, in his words, ‘carried on at the RAND Corporation,
a project of the United States Air Force’.4 In the 1960s, official
publications of the Department of Defense praised
the Arrow-Debreu project for its ‘modeling of conflict and cooperation whether if be [for]
combat or procurement contracts or exchange of information among dispersed
decision nodes.’ In 1965, RAND created a fellowship program for economics
graduate students at the Universities of California, Harvard, Stanford, Yale,
Chicago, Columbia and Princeton, and in addition provided postdoctoral funds
for those who best fitted the mold. These seven
economics departments, along with that of MIT - an institution long regarded
by many as a branch of the Pentagon - have subsequently come to dominate
economics globally to an astonishing extent. Two examples will show what I
mean. The American Economic Review (AER), the Quarterly
Journal of Economics (QJE), and the Journal
of Political Economy (JPE) have long been regarded as the world’s three most prestigious
economics journals; being published in these journals adds the most value to
an economist’s CV, and most helps an economics department’s ranking and
research funding. A study has been made of the affiliation of the authors of
full-length articles appearing in these journals from 1973 through 1978.5
For the QJE
it found that the eight departments with the most articles were the seven
favoured through RAND by the US Department of Defence plus MIT, and that this
Big Eight accounted for 77.3 per cent of the articles published. In the JPE all of the
RAND Seven were in the top ten and, together with MIT, accounted for 63.1 per
cent of the articles published. In the AER the top eight contributing
departments were again the RAND Seven plus MIT, which together accounted for
59.3 per cent of the articles published. Even within this Big Eight there was
an astonishing concentration of success. In the QJE, which is controlled by
Harvard, 33.3 per cent of the articles were by Harvard-affiliated authors. In
the JPE,
controlled by Chicago, 20.7 per cent of the articles were by
Chicago-affiliated authors. In the AER, nearly half of whose editorial board during these
years was from, in rank order, Chicago, MIT and Harvard, 14.0, 10.7 and 7.1
per cent of the articles were by authors from these departments respectively.
About 70 per cent of the board members were from the Big Eight, as were
nearly 60 per cent of the members of the nominating committees for officers.
As Canterbery and Burkhardt
argue, it is unsurprising that these departments are seen as ‘distinguished’:
‘The “best” departments are those who publish in their own journals, which
are “best” since they publish the “best” departments. As they comment, this
academic incest would be considered genetically unsound if it involved
biological reproduction (p28). A
glance through the 2003 edition of Penguin’s Dictionary of Economics illustrates the accentuated continuation
of this tiny all-powerful closed shop. The dictionary has entries for 29
living economists. Of these, 26 - 89.7 per cent - are from the US, or have
had all or the most important part of their careers there. Think about that:
26 for one country and 3 for the rest of world. And that is in a British
publication by a team of three British authors. And what are the affiliations
of the 26 US economists? 100 per cent of them have either taught at or
received their PhD from one of the Big Eight. The post-autistic economics movement In
Paris in June 2000, a group of economics students wrote a short petition
lambasting their curriculum and stating what they wanted instead. They passed
their document among friends and posted it on the web. To everyone’s
amazement, especially the students, their little protest has turned out to be
a tipping point of sorts. Like the late Soviet Union, mainstream economics is
caught in a time warp, and when reality catches up with such worlds the
events that follow nearly always take everybody by surprise. There
was a bit of conceptual genius at work in the French students’ petition. For
forty years most critiques of economics had been filtered through sets of
ideas such as Popperian falsification, Kuhnian paradigms, Lakatosian
research programmes and related notions. The students’ petition ignored all
that. Instead it assailed mainstream economics for failing to illuminate most
of economic reality (hence the term ‘autistic’), and identified the causes as
the establishment’s commitment to viewing the world only through the narrow
neoclassical point of view; its prohibition of critical thinking towards that
system of belief; and its preoccupation with meaningless formalism. The
solution was simple and realisable if given the political will: dump most of
the maths, drop the prohibition on critical thinking and introduce ‘a
plurality of approaches adapted to the complexity of objects analysed.’ The
students were making - they may not have realised it but their mentor Bernard
Guerrien must have - a major epistemological point.
They were breaking with the previous century’s philosophy of science (which
had included its application to economics), which had preoccupied itself with
situations of transition - transition between theories that highlighted the
same aspects of some corner of reality, but offered different conclusions and
agendas. Thus Karl Popper’s The Logic
of Scientific Discovery argued for falsification as the ideal and
operative criteria for change of theory allegiance; others, most notably Imre Lakatos and Thomas Kuhn,
argued for other criteria. The epistemological concern of the French students
is a fundamentally different one. They have identified a situation in which
one theory illuminates a few facets of a domain, while its practitioners
suppress other theories that illuminate some of the many facts that their
theory leaves in the dark. In such a situation the solution is not
abandonment of a theory or research programme, or a paradigm shift, but
pluralism. The
history of economics is diverse, but the idea of pluralism is nevertheless
anathema to economists. Beginning with the French Physiocrates
in the mid eighteenth-century, economists of all varieties have been inclined
to believe that their approach to economic phenomena reveals, if not the
whole truth, at least all of it that is worth knowing. It is with these broad
conceptualisations, which are called ‘schools’, rather than with subject
areas, that economists form their primary professional identity. The assorted
teachings and members of these schools are labelled orthodox or heterodox
depending on whether their school is the dominant one or not. Until very
recently economists of all varieties have been comfortable with this
quasi-theological scheme of things. The
French students asked that their economics education be oriented primarily
toward understanding the world’s economic problems (globalisation,
inequalities, environment, technical progress, etc). Any ‘school’s’ teaching
would be welcome to the extent that it threw light on the real world.
Likewise, implicitly, a school’s members would not be welcome if they did not
place the pursuit of empirical understanding ahead of the inculcation of
articles of faith. Furthermore, and this is extremely important, the
inclusion of different ‘schools’, with their different conceptual viewpoints,
would neutralise the ideological implications that every conceptual system,
by design or accident, contains. No strong precedent existed for this demand,
and its novelty, coupled with its self-evident reasonableness, came as a
shock for economists, orthodox and heterodox alike. Traditionally
non-neoclassical schools of economics have quarrelled among themselves hardly
less than with the neoclassical. But in the mid-1990s a peace movement began.
Under the banner ICARE (Confederation of Associations
for the Reform of Economics) (later changed to ICAPE,
with ‘Pluralism’ substituted for ‘Reform’), it sought ‘to promote a new
spirit of pluralism in economics, involving critical conversation and
tolerant communication among different approaches’. ICAPE’s
pluralism in the mode of a council of churches was several giant steps away
from what the French students were proposing, but it helped to decontaminate
the p-word and breakdown blind acceptance of the simplistic Popperian and Kuhnian, us or
them, notions of science. So when the ideas of the French students were
spread through the profession internationally by the Post-Autistic Economics Newsletter (now Review) they fell on partially prepared ground. The
speed with which the free email-delivered PAE Newsletter/Review picked up subscribers and became a focal point
for the radical reform of economics surprised everyone, especially its
editor. Nor does the momentum show signs of decreasing. The journal now has
8000 subscribers, mostly academics but also many economists employed in other
capacities. Its website - www.paecon.net
– receives 5,000 visitors a month. Policy implications The
neoclassical monopoly in the classroom and its prohibition on critical
thinking has meant that it has brainwashed successive generations of students
into viewing economic reality exclusively through its concepts, which more
often than not misrepresent or veil the world, especially today’s world.
Nearly all of these neoclassical notions have a bearing on judgements about
social, cultural and economic policy. Consequently, if society were to learn
to think about economic matters outside the neoclassical conceptual system,
it would almost certainly choose different policies. One of PAE’s projects has been to expose some of the many
conceptual lunacies of today’s mainstream, both in terms of the concepts it
uses and the concepts it lacks. Drawing on recent essays by PAE economists in A
Guide to What’s Wrong with Economics (especially the chapters by Michael
A. Bernstein, Geoffrey Hodgson, Peter Söderbaum,
Hugh Stretton, Richard Wolff, Robert Costanza, Herman E. Daly, Jean Gadrey,
and myself), I am going to briefly consider some of these concepts.6
Neoclassical
economics regards competition as a
state rather than as a process. It defines perfect competition as a market
with a large number of firms with identical
products, costs structures, production techniques and market information. But
in real life competition is a process by which firms continually seek to
re-establish the conditions of their own profitability. To compete in a
market requires firms to seek out and exploit differences between them in
production, technology, distribution, access to information and awareness of
trends in consumption. These differences are the essential dimensions in
which competition takes place. However, once the neoclassical conception of
competition becomes embedded in the student’s mind, appreciation of
real-world competition, and hence the policies that might enhance it, becomes
logically impossible. Neoclassical
economists love to talk about freedom
of choice. But this is pure rhetoric, because they define rationality in
a way that eliminates free choice from their conceptual space. By rationality
they mean that an agent’s choices are in conformity with an ordering or scale
of preferences. The ‘rational’ agent chooses from among the alternatives
available the one which is highest on his ranking. Rational behaviour simply
means behaviour in accordance with some ordering of alternatives in terms of
relative desirability. In order for this approach to have any predictive
power, it must be assumed that the preferences do not change over some period
of time. So the basic condition of
neoclassical rationality is that individuals must forego choice in favour of some past reckoning, thereafter acting
as automata. This conceptual elimination of freedom of choice, in both its
everyday and philosophical meanings, gives neoclassical theory the
hypothetical determinacy that its Newtonian inspired metaphysics require.
Without indeterminacy there can be no choice. Without determinacy; there is
no neoclassical model. This is far from just an academic matter, because society
needs an economics that is able to address questions regarding freedom of
choice. No terms in neoclassical economics are more sacrosanct
than rational choice and rationality. Everyone identifies with
these words, because everyone wants to think of themselves as rational. But
few people realise that economists give these words an ultra eccentric
meaning. Neoclassical economics begins with an a priori conception of markets and economies as determinate
systems that, by the action of individual agents alone, tend towards an
efficient and market-clearing equilibrium. This requires that the individual
agents, like the bodies in Newton’s system, behave in a prescribed manner. Neoclassicalists have then gone on to deduce the
particular pattern of behaviour that would make their imagined world
logically possible, and named it ‘rational choice’ or ‘rationality’; they
have then declared that that is the way real people behave. But, thankfully,
they don’t. Everyday economic actors do many things that, in the neoclassical
meaning of ‘rational’, are ‘irrational’. Many common consumer behaviours are
prohibited under the neoclassical notions of rational choice and rationality,
including: looking to the choices of other consumers as guides to what one
might buy; buying a stock because you believe other people will be buying it
and so increase its value; spending your money in a spirit of spontaneity
rather than stopping to calculate the consequences and alternatives up to the
limits of your cognitive powers; indulging a taste for change, that is,
buying something that you did not previously prefer. All these actions are
considered outside the scope of analysis of neoclassical economics. These failings all connect with another. For
neoclassical economics is by its own axioms incapable of offering a coherent
conceptualisation of the individual
or economic agent. It cannot
explain where the preferences that supposedly dictate the individual’s choice
come from. The preferences cannot be explained through interpersonal relations,
because if individual demands were interdependent they would not be additive,
and thus the market demand function - neoclassicalism’s
key analytical tool - would be undefined. And they cannot come from society,
because neoclassicalism’s Newtonian atomism
translates as methodological individualism, meaning that society is to be
explained in terms of individuals and never the other way around. This
leaves an awful lot unexplained. For in the main, despite the neoclassical
axioms, we all tend to categorise and classify according to prevailing
cultural norms. Likewise our tastes and preferences for this and that reflect
the social conventions and institutions with which we interact. Consequently
individual choice is unavoidably and inextricably bound up with historically
and geographically given social worlds. An economics that has nothing to say
about the formation of economic tastes and preferences is silly and
irresponsible, especially in an age of consumer societies, and in a world now
threatened with climate change or worse. For
half a century neoclassical economics has hidden its ideology behind the
notion that it calls positive economics.
This is the idea that it contains no value judgements because it mentions
none. Of course such a notion belongs to an intellectually more naive age
than today, but it nonetheless persists as an effective tool of
indoctrination of undergraduates. The fact that neoclassical economics
requires a highly restricted focus in order to maintain its atomist and determinist
metaphysics compels it to make many extreme judgements about what is and is
not economically important. There is not space here even to list them. But
one key example is its notion of ‘economic man’ - an acutely ideological
term, as it emphasises some roles and relationships and excludes others; by
allowing only decisions based on utility maximisation, it excludes other
forms of ethics. As an economic agent, each individual acts in many roles,
not just market ones, and is guided by his or her ‘ideological orientation’.
That orientation may be founded on utilitarianism or not. It may, for
example, be based on social and environmental ethics. PAE
economists do not believe that economists have the right to select one ethics
as the ‘correct’ one for framing economic analysis. Furthermore, the
neoclassical insistence upon the utilitarian ideology legitimises a kind of
‘market ideology’ and ‘consumerism’ that increasingly appears dangerous to
society, and sidelines the debate about sustainable development. Like
rationality, nearly everyone thinks
efficiency is a good idea. Neoclassical economists adore using this word,
especially when addressing the public. But the meaning of ‘efficiency’ always
depends on what you choose to count. For example, suppose five firms all
manage to lower by the same amounts the production cost and selling price of
a standard product that they all produce. One does it by cutting its workers’
pay, another by working them longer hours, another by getting materials at
lower prices from a poorer country, another by replacing some of its workers
with robots, and another by inventing machinery improvements that allow it to
cut work hours with no loss of output, profit, jobs or pay. Are all of these
changes equally efficient (or inefficient)? A neoclassical economist will
answer yes, because the five firms all end up producing the same product at
the same cost and selling it at the same price. For them that is all that
matters. The
prevailing mainstream also holds that in the realm of public affairs this
concept of ‘efficiency’ can and should determine the net balance between the
positives (total benefits) and negatives (total costs) that would result from
an economic policy or act. In place of public debate, economists would
substitute ‘cost-benefit analysis’. But any such analysis depends on the
consequences selected and the kinds of ‘measurements’ made. No efficiency
claim is ever based on an identification of all the consequences, and
quantitative guesstimates of the future inevitably have a crystal-ball
dimension. In the final analysis, ‘efficient’, like ‘beautiful’, is little
more than a way of expressing a positive opinion. Mainstream
economics, and in consequence most policy dialogue, also conflates two very
different meanings of economic growth
that are in common usage, with GNP mistakenly taken to be a measure of both.
There is quantitative growth,
meaning an increase in the quantity of production and consumption, and there
is qualitative growth, meaning an improvement in
well-being. For example, an epidemic may lead to growth of medical
expenditure and hence increase GNP but not well-being. Pollution and
congestion lead to huge expenditures to escape them (e.g. commuting from the
suburbs, double glazing, air filters, security measures), the creation of new
industries and an ever larger GNP, but they also decrease well-being.
Quantitative growth that causes negative qualitative growth can also be
called uneconomic growth. This is
both a reality and a concept with which policy-makers must come to terms, the
sooner the better. Closely
related to these new anti-neoclassical concepts is another one, sustainable development. This refers
to the physical scale of the economy relative to the ecosystem. Ecological
economists view the economy as an open subsystem of the larger ecosystem
which is finite, non-growing and, except for solar energy, materially closed.
This point of view compels asking questions regarding scale. How large is the
economic subsystem relative to the earth’s ecosystem? What is its maximum
possible size? What is its most desirable size in terms of human welfare?
These questions, around which policy decisions will and must increasingly be
made, are not found in standard economics textbooks. Neoclassical economics
can not accommodate the concept of sustainable development, because, if it
was adopted as a goal it would require that goods be valued in part by their
contribution to that goal and not solely on their contribution to individual
utility maximisation. The
close to monopoly position of neoclassical economics is incompatible with
normal ideas of democracy. Economics has some of the qualities of a science,
but because of the very nature of its subject matter, it is forever and
fundamentally ideological. It is best not to deceive oneself and others about
that. The preoccupation of economics with values and worldly acts means that
in a democratic society it has a moral responsibility to promote the
exploration of economic knowledge from more than one point of view, so as to
make possible the informed and intelligent debate and discussion that
democracy requires. But the hegemony of neoclassical economics means that
departments of economics have become political propaganda centres. In 2002,
Joseph Stiglitz, a recent winner of the Nobel Prize
for Economics, wrote in The Guardian
that economics as taught ‘in America's graduate schools … bears testimony to
a triumph of ideology over science’. Is this a legitimate use of public
funds? What is certain is that it is a dangerous state of affairs, but one
that is now being challenged. The PAE movement
immodestly seeks over the next ten years a revolution: the transformation of
economics into a genuinely pluralistic enterprise wishing to contribute to,
rather than subvert, democratic processes. The success of this movement
depends in part on other disciplines and professions withdrawing their
patronage from the neoclassical hegemony, in favour of the now thousands of
economists working for the new order. Notes 1. Thorstein Veblen, ‘Why is Economics not an Evolutionary Science?’, Quarterly Journal of Economics, Vol.
12, 1898, p373. 2. Geoffrey M. Hodgson, How
Economics Forgot History, Routledge 2001, p155. 3. This paragraph draws heavily on Michael A. Bernstein, ‘Rethinking
Economics in Twentieth-Century America’, in Edward Fullbrook (ed), The Crisis in Economics, Routledge
2003. 4. Kenneth Arrow, Collected
Papers of Kenneth J. Arrow: Volume 1: Social choice and Justice, Harvard
University Press 1983, p1. 5. E. Ray Canterbery and Robert J. Burkhardt, ‘What do we mean by asking whether economics
is a science?’, in Alfred S. Eichner
(ed), Why Economics Is Not Yet a
Science, Macmillan 1983. 6. Edward Fullbrook (ed), A Guide to What’s Wrong with Economics,
Anthem Press 2004. |