More Heterodoxy: Max Sawicky on 'Why Economics Sucks'

Max Sawicky (MaxSpeak, You Listen!) has been flexing his wings lately as Heterodox views on economics get more press. Here (condensed slightly) is his latest, titled The Ten Boxes of Heterodoxy, Why Economics Sucks (via TPM Cafe). Sawicky prefaces his remarks with, "I believe much of what follows is recognized by mainstream, orthodox economic doctrine. It's just that economists act as if it is not." Sawicky:

The Ten Boxes of Heterodoxy …

1. Supply and demand (1) … in practice obscures anything interesting that affects market conditions. It bespeaks militant, ideologically-based reductionism.….
2. S&D (2). The outcome in an supply and demand model in principle has no inherently attractive qualities, in and of itself, since it depends on the distribution of ability to pay. …
3. Gross Domestic Product (GDP). … Solemn assurances that GDP is not synonymous with economic welfare fall easily by the wayside. More GDP (and less leisure time, less environmental quality, a less sustainable economic future) is always better.…
4. Commerce versus The Market. …When the Federal government tries to organize markets with the buzzword of "competitive sourcing," the results are … comical. There is plenty of commerce, but there are very few markets, even though economists pretend they solve most of our problems.
5. In Search Of: The profit motive. Professors tell their gullible students that business firms maximize profits. This induces efficient use of resources and fortuitous allocation of capital. But if you study the economics of firms, even under orthodox auspices, you find out they don't maximize profits.
6. The deficit's gonna getcha. Years of braying about the evils of budget deficits have failed to be borne out by the purported consequence — high interest rates. The entire traditional macro apparatus fails to allow for the interventions of large foreign lenders who aren't dumb enough to believe what the textbooks say.
7. Capital fundamentalism. As with reductionism of the S&D model, growth modeling zeroes in on private capital accumulation, even though a) other factors are demonstrably important and beg for attention; and b) private capital accumulation may be a consequence of other factors, rather than a cause and appropriate object for policy. …
8. Every import is sacred. Regulation of markets is allowed, unless the market includes parties from different countries. Then it is strictly verboten.
9. The unnatural rate of unemployment. Economists used to say it was 6.0, maybe 5.5 percent. Lower would give rise to ruinous inflation. The huge social benefits of another couple of percentage points less unemployment were — are — implicitly discounted. Current rate is 4.5. 'Nuff said.
10. "Power? You want the political science dept." Power looms over economic transactions, except in economic theory. Workers do not hire capitalists. Consumers do not choose merchants. Shareholders do not choose managers. Voters do not choose elected officials. …

Go to Max's post (and site) for added wit, insight, rebuttals (as comments), rebuttals to rebuttals (more comments), and links to much more…

Comments

[Seth Baum]

Thanks for the link.

1 & 3 are fair points. GDP was never even supposed to measure welfare in the first place! Sawicky even supports the 'money is everything' frame himself by using the phrase 'economic welfare'. Why not just 'welfare'?

2 is basically a criticism of Pareto optimality. PO does have good qualities- it just doesn't have as many as we'd like it to.
http://felicifia.com/showDiary.do?diaryId=109

10 - A rare use of power in econ theory:
http://arielrubinstein.tau.ac.il/papers/77.pdf
Rubinstein deserves a lot of credit for his recent work questioning economics orthodoxy. See also
http://arielrubinstein.tau.ac.il/papers/73.pdf
http://arielrubinstein.tau.ac.il/papers/74.pdf

[c!]

Thanks for this as well. I think what first opened my eyes to some of the things talked about in the article was an excellent political economy course I took last fall. It picked up where my Econ 101 didn't trend: asymmetric information, regulatory capture, etc.

[Seth Baum]

I too was rather surprised by the internal debate within economics when I first learned of it last summer. In electrical engineering, we just didn't have such fundamental debates about the validity of our work: Either our gadgets functioned or they didn't, or either our models matched our experiments or they didn't. And if they didn't, we knew something was wrong and we tried fixing it.

Economics is a *much* harder field in the sense that it studies such ridiculously complicated systems that making sense out of it becomes an unreasonable request. However, I wish it had more humility about this.

Another good read is "The Story of a Reluctant Economist" by Richard Easterlin, a pioneer of the happiness surveys
http://www-rcf.usc.edu/~easterl/papers/RelucEcon.pdf