The Mainstream Reaction to this Torrent of Criticism

These criticisms are not new. They are echoes of criticisms that were directed against political economy, Ricardo and Mill and then neoclassical economics from its beginnings with Walras, William Jevons (1835–82) and Carl Menger (1840–1921). These criticisms came in particular from the German and English historical schools in the nineteenth and early twentieth centuries. These schools attacked the claimed universalism and abstract scientism of these economic schools, seeing economic phenomena as dependent on their historical, social and institutional context. They therefore saw the study of economic phenomena as a normative, historical and social discipline. The transition from classical to neoclassical economics brought a new mathematical formalism and the abandonment of interest in the institutional and historical underpinnings of the market system—and an intensification of the belief in the ahistorical, scientific and value-free nature of economic discourse. While neoclassical economics exercised a strong influence from its beginnings, it was only in the post-World War II period that it established itself finally as the dominant school across the profession. These criticisms have failed to dent the enthusiasm that economic fundamentalists and economists more generally have for that school. Rather, the response to the torrent of criticism has been to reassert belief in the hard core of the neoclassical research program—acceptance of which is now mandatory for any ‘true’ economist.[13]

None of this would matter if economics were merely an academic game for theorists fascinated by the intellectual beauty of their formal systems. Very few, however, study economics as an intellectual game. Rather economists are looking for insights into how to manage economic affairs. That is what they claim to have found. Consequently, this descent into scientism and scholasticism is simply not good enough. By default, neoclassical economics now provides the underlying political legitimisation for our market system and for the drift to the political Right to which I drew attention in Chapter 1. Consequently, it is unreasonable for economists to ignore the fundamental flaws in the dominant school of economics—flaws that give a false view of how the economy really operates—as if they are of little account. Paradoxically, the criticism has inspired many economists to argue more strongly for action to perfect markets—and in particular for the removal of social constraints such as minimum wages—rather than to criticise their fundamental theoretical framework.

Nor is it good enough for economists to say that, while neoclassical economics could be flawed, it is up to the critic to provide a better account—particularly when there are competing perspectives struggling to get attention from mainstream economists and policy makers, and when dissenters are purged from the profession and the policy discourse. This is a scandalous attitude given the frequently realised potential for economic advisers to ruin the lives of their fellow citizens—particularly the most vulnerable. Why shouldn’t economists want to have a better understanding of the operation of the economic system? Why wouldn’t we want to have a better understanding of the sources of human welfare and happiness and to reflect that better understanding in our policy decisions?

Importantly, what mainstream economists generally mean by a better account is another set of mechanical, deterministic, linear equations that will not disturb their mechanical, deterministic world. Indeed, the desire for closure and certainty and an abhorrence of open, indeterminate systems probably accounts for some of the continuing attraction of neoclassical economics and its Newtonian metaphor. In any event, as Phillip Ball reminded us recently, the tenets of neoclassical economics—which are the starting points for economic training—are gross caricatures that have hardened into rigid dogma. ‘[N]eoclassical theory is such an elaborate contrivance that there is too much at stake to abandon it.’[14] Nevertheless, Ormerod believes that what is required is the reconstruction of economic theory virtually from scratch[15] —a reconstruction that abandons the core assumptions of neoclassical economics and its Newtonian metaphor. Furthermore, Australian political economist Evan Jones has suggested that the past century of economic conceptualisation has been a complete waste of time. Mainstream economics has simply failed as a predictive and explanatory research program.[16]

What we are confronting here is the struggle between an increasingly discredited but entrenched ‘normal science’ with its particular ideological baggage, and new economic paradigms offering fresh and hopefully more realistic and more fruitful insights. These insights could involve elements of the neoclassical program but those elements will be useful only in a significantly different conceptual framework. As Kuhn has warned us—and as Galileo’s experience demonstrates—such struggles are not easily resolved, involving as they do significant threats to the intellectual, social and political standing of existing mainstream economists. In addition, it is hard to give up ways of thinking that have been central to one’s professional life; and no one wants to be told that they have wasted their lives talking rubbish. The result is that abandoning such false beliefs requires something akin to a religious conversion. For most economists, this vehement criticism of their paradigm has led to a hardening of their commitment to the mainstream story, and a continuing search for ad hoc rationalisations to justify that continuing commitment.

The Newtonian metaphor at the heart of neoclassical economics has a particularly destructive consequence for economic fundamentalism, which is usually overlooked. It commits the theorist to viewing the person as reactive to and dependent on inputs from the environment. It stands in direct contradiction to the views of the libertarian philosophers, who stress the individual’s autonomy.[17] There is, therefore, a fundamental conceptual inconsistency at the very heart of the economic fundamentalist project.

Furthermore, in its physical form, the Newtonian metaphor presupposed the existence of a prior harmony established by God, and its import into economics via Smith and Walras involved the assumption of a continuation of some pre-established balance. The mechanical model cannot explain the emergence of a spontaneous order, but presupposes it.[18]