This piece has been a long time coming. I’ve grappled with economics in the last 3 years, but it has come to a head in the last 3 months, while I have been trying to understand it academically – which was driven by a desire to “know thine enemy”. I see economics as embedded in a wider paradigm – a tool employed by political groups and ideologues to further reinforce their messages. That is not to say that economics cannot be radical, yet the work of Marxist, socialist and green economists is rarely aired, and neoclassical economic theory dominates and underpins political rhetoric in our capitalist world. It is all-pervasive: used to justify the systemic erosion of our rights and autonomy, narrowing our vision and perspective, and telling us how we should think. So, this is my case against economics. When I say economics, I generally mean neoclassical economics – I do not mean to disregard the work of radical economists, who are working against an inherently conservative and slow-witted discipline, but sadly they are a minority voice against the clamour and neoliberal din.
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The only part of Thomas Carlyle’s dismissal of economics as the “dismal science” that I disagree with is the ‘science’ part – economics is not even worthy of that title. It is a pseudo-science that propagates the illusion of scientific authenticity by using numbers and graphs to make it look cleverer than it is. Economics as a way of thinking about social decisions and choice is useful – as a framework it makes sense because the majority of what economics has to say about the world, and about human behaviour, is intuitive. However, the use of graphs that show very little, symbols that mean nothing, and numbers that ascribe irrelevant ‘value’ to incomparable things like human happiness is absurd, and fatally misleading. Even economists question how you can place a value on human happiness, wellbeing, or in econo-jargon, ‘utility’. For instance, the use of π to symbolise ‘price’ is a case-in-point. What other purpose is there to using this symbol (instead of, I dunno… ‘P’??), other than to legitimise a non-science, to make it look important and difficult, and ultimately make it appear inaccessible and unattainable for the poor proles who never studied Greek at school.
The first problem with neoclassical economics is its elitism… It presumes that there is a specialist group, the master of its arcane language and techniques, who are the only ones who can successfully solve economic problems
(Ward, 1979: 301)
Neoclassical economics is the science of the society of the rising bourgeoisie
Economics constantly tries to validate itself as a science, like the kid at school on the peripheries of the in-crowd, desperate to prove themselves. Economists like Drakopoulos inadvertently illustrate my point – in a 1997 paper he discusses how the debate over the possibility of inter-personal comparisons of utility and the rise of ‘positivist’ (objective) traditions from more physical, traditional sciences forced a move to adopt more scientific methods. The marginalism movement, which included economists such as Vilfredo Pareto (who was a fascist – just sayin’), attempted to boost the scientific credentials of economics, branding it a mathematical pursuit, which was ‘value-free’. Drakopolous notes that the definition of ‘value-free’ had to change to fit economic practice – changing what was once subjective into an ‘objective science’ – how very scientific.
[The notion of] value seems…quite devoid of operative meaning
It is true that “economists know the price of everything and the value of nothing”. By their own admission, economic valuation techniques are flawed – take the example of Twyford Down. Reliance on pricing methods to investigate the alternative uses of the area, namely build through an Area of Outstanding Natural Beauty or build a more costly underpass beneath it, yielded predictable results. Of course, economic rationality won out, and the Tory government voted to cut their financial costs rather than protect an irreplaceable environmental resource, which was shockingly undervalued by economic analysis. The decision sparked the massive roads protests of the 1990s, and although valuation techniques have since improved, they are still highly contentious and riddled with many inaccuracies.
Commodifying and marketising something as essential to human life as the environment, and turning the destruction of our planet into something as trivial as an ‘externality’ belittles the essential role environmental resources play in human life. David Suzuki considers conventional economics to be a “form of brain damage”, because it reduces environmental issues to trifling matters that are simply conundrums, to be ‘internalised’, rather than truly pressing global problems. I do not mean to be a doomsayer, because the framing of such issues is highly deterministic of the outcome, and problematising things doesn’t solve anything, but environmental issues like the destruction of vast swathes of land as a result of open cast mining, the devastation of rainforests or contamination of enormous bodies of water are genuinely potentially disastrous problems.
The father of modern economics, Adam Smith, recognised the difference between marginal value (AKA market price) and true value (consumer surplus), in his discussion of water and diamonds. The true value of water is incommensurably larger than that of diamonds, yet the market price does not reflect this because water is far more plentiful than diamonds are. Diamonds, a highly valued commodity, only fetch such ludicrous sums because there is a limited supply of them. Were we to discover an easier and cheaper method of diamond extraction, the price would collapse and the rich would have to find some other way to display their ostentatious wealth. The market needs scarcity to exist, so it manufactures it. The same is seen in privatisation struggles – transnational corporations granted concessions (often in developing countries with inadequate infrastructure) manufacture scarcity discursively. It is an entirely political endeavour, designed to justify privatisation of the resource, and the appropriation of property rights to goods like water from the people who use it traditionally and/or the public utilities that supply it cheaply. Without scarcity, markets cannot make money; therefore economics is bound up with political representation of resources as finite and scarce – this creating a case for enclosure of the commons in the name of ‘efficiency’.
If economists are wont to change the definition of value, and if they fail so spectacularly to value even market goods with a price, how can we trust economic valuations of non-market, inherently immeasurable, resources like environmental resources? Economic analysis so regularly conflates price with value that public goods are virtually always undervalued. For instance, the notion that you can estimate the value of a resource for which there is no market (like the recreation value of a forest, peace and quiet, trees, birds in the sky, just the knowledge that the Amazon is there…) by looking at the house prices in an area sounds like utter nonsense to me. Like someone drew an idea from out of thin air and the rest of the economic community decided to run with it. For real, this happens: an example that springs to mind is Garrod & Willis (1992), who estimated the value of broadleaved trees by this ‘hedonic pricing’ method. Turns out we don’t like conifers, and we do like deciduous trees. Simple. But the answers do tend to the obvious when you strip away all the heterogeneity by making so many assumptions.
That politicians and policy-makers give economic analysis so much credence is terrifying, when one considers the enormity of the assumptions underpinning it. Consider one of these: perfectly competitive markets. In an ideal economic world, there are no monopolies, oligopolies or monopsolies (like Tesco, Walmart, or the ‘Big Six’), no companies are unscrupulous (like virtually any transnational corporation – many buy into unethical practices, whether it’s workfare, investment in the arms trade, or paying overseas workers peanuts to work in horrific conditions); they are all homogenous, rational entities that maximise economic profit and nothing else. Economics smoothes over everything, and removes any complicating detail that alters the outcome from the ideal economic model. McFadden (1998) comments on economists’ unswerving determination to defend oversimplified models, such as ‘Chicago Man’, who is an ideal rational individual that functions perfectly in an ideal, perfectly competitive market. Despite repeated evidence from psychology, lab studies, and even economic research, the fallacy of economic man is still relied on for economic analysis. Economics keeps its head in the sand and stubbornly sticks by its flawed theoretical constructions, despite multiple lines of evidence attesting to their limitations.
Take another simplifying assumption: that of symmetric information. In the real world, people don’t know everything about the things they want or need to buy. Companies in a capitalist system spend millions on PR and advertising, to overhype the shiny, consumerist, ‘desirable’ characteristics of their latest products, and conceal the fact that the mine they bought their aluminium ore from is run by local militias who employ child soldiers to brutalise their workers, who, incidentally, they also pay a pittance to extract said ore under dangerous conditions. To some extent, the assumption of economic rationality is correct – companies do care about their bottom line. In fact, that is all they care about: huge corporations will relocate to developing countries where they can escape taxes and pay their workers much less. Big manufacturing industries that have recently closed down operations in the UK to do just this have cut thousands of jobs, many of which employed largely working class people. It sounds bad – yet economic theory suggests that there is a silver lining, and that the market will create a socially beneficial outcome. Supposedly, trimming production costs will translate to lower prices in the product market for consumers, which is better for everyone… right? Outside of the perfect world of economic theory, however, this does not hold true. Prices increase, while profits continue to rise, and the money lines the bank accounts of rich shareholders, while ordinary people in the UK and across the world struggle to pay the rent.
Recent increases in energy bills illustrate this perfectly – of course the corporations blame it all on green taxes, distracting from the vast dividends they pay shareholders. It is part of a sustained onslaught of rhetoric about ‘austerity Britain’ and how we’re ‘all in it together’. Tory dogma tells us that we must all tighten our belts – take fewer hours at work, agree to zero-hours contracts with no paid holiday, pension or sick leave, work longer hours and postpone retirement until we’re dead. It’s part of a systemic assault on the unemployed and disabled, who, because they require the assistance of a state welfare system, must be demonised and stigmatised by the red tops as ‘lazy, cheating scroungers’. The Daily Mail is the right hand puppet of the Tory government, just as the police are its bulldogs, protecting private property and tightening restrictions on protest. They stir up fear and hatred in an attempt to turn us against each other to distract from the shitstorm around us. Police keep us in check, to protect us from ourselves. They are necessary because people are angry – they are seeing bankers receiving unprecedented bonuses and politicians like Maria Miller claiming for their second homes at the expense of ordinary people, and even when they get rumbled, getting away with a slap on the wrist. At the same time, horrific tragedies can happen in the developing (and developed) world as a result of the negligence and incompetence of capitalism. A failure to enforce rigorous safety standards in the mining industry recently led to the death of at least 245 miners in Turkey: a shocking demonstration of the criminal negligence of companies who trade off the health and safety of their employees against increasing their profit margins by minute quantities.
Economics takes no account of the day-to-day corruption of capitalism. Power, money and greed warps people, and they distort the playing field. Economics may be a framework to evaluate decisions, but it is used to defend the powerful and further invalidate the weak. By focusing on things that provide financial rewards rather than social benefits, which are inherently difficult to quantify in an economic framework, the very system is biased towards things, towards commodities, towards money. And everyone knows, money can’t buy you happiness.
Depending on whether you accept the idea that you can compare the welfare of individuals (I would suggest that you can’t – how do you objectively measure happiness, pleasure, pain or welfare?), you belong to opposite sides of an ideological divide within economics. Economics is a discipline in ethical turmoil – one the one hand, positivist economics rejects any decision that requires interpersonal comparisons of welfare because these require value judgements to be made. In the words of W. S. Jevons: “every mind is…inscrutable”. On the other sits the school of thought that thinks comparing such personal values is meaningful. Although there are debates within any discipline, there are rarely debates about such fundamental tenets. This internal contradiction surely says something about the integrity of its claims – it’s hard to trust a framework that causes such distinct differences of opinion.
In a market economy the regime of property rights implies the very opposite of Marx’s charge. The market provides access to the means of production for all those who can afford to participate
Economics doesn’t give a fuck about equity. Decisions are made and analysed on the basis of economic efficiency. Of course, efficiency is the realm of economics – but equity – that’s political, and economics ‘doesn’t do politics’. Yet economics is political, no matter how hard it tries to deny it. All decision-making involves politics because decisions require trade-offs to be made, and different variants and schools of economic thought are used to justify certain perspectives on the world. Neoclassical economics is an ideology unto itself, wholly bound up with neoliberalism and elitist ways of perceiving the world. It is deployed by conservatives to justify the destruction of the welfare state, deregulation and Thatcherism. Economists like Winston are shamelessly neoliberal, promoting deregulation, privatisation, and free-market principles despite their glaringly obvious failings. Equity is an optional add-on – an afterthought – for neoclassical economists. Whereas Marxist economics is embedded within a wider social analysis, neoclassical economics codifies the status quo. Marx presents a human analysis of relations and interactions that goes beyond graphs and statistics and meaningless, incommensurable numbers. The sickening reliance on free market principles is hopelessly entrenched across the world, and shamelessly facilitates the pillaging of culture and environment, and the exacerbation of vast inequalities between and within nations.
A centralised state capable of doing all the shit jobs is an essential part of most free-market economics. The state gets to build the infrastructure, mend leaky pipes, bear the significant costs of maintaining the power lines and pay the admin costs on tax collection, while private companies reap the considerable benefits of private control, often to the detriment of the consumer. Water privatisation (a fad for global financial institutions like the IMF and World Bank in the late 90s and early 00s) is a perfect illustration – people pay more money for lower volumes of worse quality water. The same is true for the railways – public utilities may have their failures, but the hikes in rail fares seen since privatisation, coupled with the failure to improve services meaningfully demonstrate that the private sector is far more incompetent and greedy. So: libertarians would have a state that picks up the pieces, and merely serves to enforce property rights and correct market failures when they (inevitably) occur. Correcting market failures with regulations and taxes requires a state and strong, centralised bureaucracy. But what if there was no state? Marxist economics is accepted as a doctrine because it is still founded in the institution of the state. Alternatives, such as anarchist economics, are rarely discussed – they are not compatible with economists’ worldviews. Environmental problems are frequently transboundary, and hence are governed by no overarching state (except, maybe the EU, but let’s not get all Nigel Farage). Perhaps then, the discipline of environmental economics has something to learn from anarchist economics – how to function without government. Crack out the Kropotkin, I say.
Remoteness from ordinary people and the privilege of academic life acts to reinforce this [conservative political] tendency
Economics is conservative enough as a discipline that even radical economists are fairly middle-of-the-road. With some notable exceptions (Kropotkin, Bakunin etc.), radical economists are reformist, rather than critical of the system as a whole. Anarchist, syndicalist or Marxist economists who advocate abolition of the wage system are often ostracised by the mainstream profession, and their ideas are rejected as heretical or ludicrous. The rest of them tend towards conservatism and careers in the World Bank and IMF, writing nonsensical, Westernised, ill thought through and often devastating policy that has severe impacts on people in the developing world.
Economists are conservative, and work within the capitalist system to validate it. Economic justifications are more often than not the clincher of political decisions, making economics inseparable from politics and ideology. The people that present it as an objective discipline serve to mislead and misrepresent what is essentially merely an interesting way of looking at human behaviour. Economics is an over-simplified framework that is used to prop up neoliberal policy and political rhetoric, which makes it invariably bound up with the capitalist status quo. It’s no wonder that an economics degree can get you so far in politics – economics is the study of business as usual, after all.
Capitalism is a permanent state of war, a constant struggle which can never end.” “It’s not always the same people doing the fighting
(Houellebecq, 2003: 284)