“Against economics”
David Graeber, an anthropology professor at LSE, in his review of Robert Skidelsky’s book “Money and Government: The Past and Future of Economics” launches a full attack against economics and economists. A few of his arguments:
There is a growing feeling, among those who have the responsibility of managing large economies, that the discipline of economics is no longer fit for purpose. It is beginning to look like a science designed to solve problems that no longer exist.
We now live in a different economic universe than we did before the crash. Falling unemployment no longer drives up wages. Printing money does not cause inflation. Yet the language of public debate, and the wisdom conveyed in economic textbooks, remain almost entirely unchanged.
Mainstream economists nowadays might not be particularly good at predicting financial crashes, facilitating general prosperity, or coming up with models for preventing climate change, but when it comes to establishing themselves in positions of intellectual authority, unaffected by such failings, their success is unparalleled. One would have to look at the history of religions to find anything like it.
Surely there’s nothing wrong with creating simplified models. Arguably, this is how any science of human affairs has to proceed. But an empirical science then goes on to test those models against what people actually do, and adjust them accordingly. This is precisely what economists did not do. Instead, they discovered that, if one encased those models in mathematical formulae completely impenetrable to the noninitiate, it would be possible to create a universe in which those premises could never be refuted.
Against Economics
By: David Graeber – London School of Economics
The modern business cycle theory
[M]odern business cycle theory does resemble a “shed full of broken tools.” Many of the assumptions baked into most macroeconomic models are either provably false or highly improbable. This renders macroeconomic models of very limited use in a crisis; quantitative easing was an impromptu, seat-of-the-pants policy, and many central bankers reverted to older and simpler models when crunch time came. Macroeconomists are very far from a general understanding of how recessions and inflation work; many younger scholars are going back to the drawing board, studying the nitty-gritty details of how consumers and businesses behave in the hope that one day a better theory can be constructed.
Critics of Economics Fight a War That Ended Long Ago
By: Noah Smith – Bloomberg
The microeconomic foundations
There is probably more than a grain of truth in Graeber’s belief that there was a political and ideological subtext in the demand for microfoundations by New Classical macroeconomists, but the success of the microfoundations program was also the result of philosophically unsophisticated methodological error. How to apportion the share of blame going to mistaken methodology, professional and academic opportunism, and a hidden political agenda is a question worthy of further investigation. The easy part is to identify the mistaken methodology, which Graeber does. As for the rest, Graeber simply asserts bad faith, but with little evidence.
Graeber Against Economics
By: David Glasner – Federal Trade Commission
