- 30 Nov 2022 17:56
#15257355
Economics is going through a crisis at the same time the global economy is changing dramatically.
That's annoying, to put it mildly. At the same time we need guidance desperately, the people we would ordinarily turn to are having something of a meltdown.
"Much has been written about the failure of neoclassical economic theory (NCT), so I won’t belabor the point, but I do want to highlight what is too rarely said – that the central concept of NCT, economic (Pareto) efficiency is empty in theory and practice.
The great feat of neoclassical economics has been to convince people that there is a vantage point to view society, separable from concerns with equity and distribution. This vantage point, defined as economic efficiency, supposedly allows one to see if society as a whole is better off, such that decisions to produce a particular array of goods and services could be made in the interests of everybody, irrespective of how little one had, thus separating efficiency decisions from equity ones. However, if prices are not defined according to the exact dictates of what economists call “perfect competition,” then private profitability tells us nothing about the comparative social advantages and the consequent “efficiency” of producing, let’s say, more yachts for rich people instead of more rice and beans for poor people. Similarly, to argue that the allocation of resources can be “efficient” even if half the world is starving to death is ridiculous, but that is exactly what neoclassical economics says.
There is no reason to stubbornly hang on to NCT and its justification for capitalism in the way that even critical neoclassical economists like Krugman, Reich, Rodrik, and Stiglitz do.
Much of the work referenced above explicitly talks about the need to move beyond capitalism, to find a new modality of social organization. But even some that doesn’t can be transformative. A movement started by French female scholars, called Democratizing Work, has gone global with an op ed published in dozens of newspapers around the world and signed by over 5000 researchers calling for “democratizing firms, decommodifying work, and remediating the environment.” Noted economists like Thomas Piketty and Dani Rodrik are supporting this.
Economics does not have to be the dismal science. A focus on alternative economic practices opens up a world of possibilities. Let me close with a quote from Arundhati Roy: “Another world is not only possible, she is on her way. On a quiet day, I can hear her breathing.”
https://evonomics.com/klees-neoclassica ... omes-next/
https://evonomics.com/klees-neoclassical-economics-failed-what-comes-next/
That's annoying, to put it mildly. At the same time we need guidance desperately, the people we would ordinarily turn to are having something of a meltdown.
"Much has been written about the failure of neoclassical economic theory (NCT), so I won’t belabor the point, but I do want to highlight what is too rarely said – that the central concept of NCT, economic (Pareto) efficiency is empty in theory and practice.
The great feat of neoclassical economics has been to convince people that there is a vantage point to view society, separable from concerns with equity and distribution. This vantage point, defined as economic efficiency, supposedly allows one to see if society as a whole is better off, such that decisions to produce a particular array of goods and services could be made in the interests of everybody, irrespective of how little one had, thus separating efficiency decisions from equity ones. However, if prices are not defined according to the exact dictates of what economists call “perfect competition,” then private profitability tells us nothing about the comparative social advantages and the consequent “efficiency” of producing, let’s say, more yachts for rich people instead of more rice and beans for poor people. Similarly, to argue that the allocation of resources can be “efficient” even if half the world is starving to death is ridiculous, but that is exactly what neoclassical economics says.
There is no reason to stubbornly hang on to NCT and its justification for capitalism in the way that even critical neoclassical economists like Krugman, Reich, Rodrik, and Stiglitz do.
Much of the work referenced above explicitly talks about the need to move beyond capitalism, to find a new modality of social organization. But even some that doesn’t can be transformative. A movement started by French female scholars, called Democratizing Work, has gone global with an op ed published in dozens of newspapers around the world and signed by over 5000 researchers calling for “democratizing firms, decommodifying work, and remediating the environment.” Noted economists like Thomas Piketty and Dani Rodrik are supporting this.
Economics does not have to be the dismal science. A focus on alternative economic practices opens up a world of possibilities. Let me close with a quote from Arundhati Roy: “Another world is not only possible, she is on her way. On a quiet day, I can hear her breathing.”
https://evonomics.com/klees-neoclassica ... omes-next/
https://evonomics.com/klees-neoclassical-economics-failed-what-comes-next/
Facts have a well known liberal bias
- By Potemkin
- By Puffer Fish