Economics is Dead
Economics is Dead
The Neoliberal Agenda is a Fool's Errand
Last week I interviewed The Cowboy Economist, a Professor of Economics at Texas Christian University, Forbes columnist, and author of Contending Perspectives in Economics: A Guide to Contemporary Schools of Thought. We had a far ranging discussion about the origins of capitalism, alternatives to capitalism, Keynes and post-Keynesian and neoclassical economics, with John plotting out how neoclassical economics became the dominant school of economics.
“Economics is dead,” John stated towards the end of the episode. He claims that if we want to change the world it’s going to have to be through policy, and part of the strategy must entail getting between the policy-makers and the neoliberal economists advising them.
John explains how the Neoclassical school of thought pulled ahead of the herd of economic theories to become the mainstream economic thought, leading to the ferocious age of late-stage capitalism we’re living through today. He revealed how McCarthyism drove the Neoclassical push as, during the Cold War, the United States was trying to purge its country of communism and anything affiliated with Russia. As capitalism had come to represent American identity, the with hunt for communists had an inverse, shadow effect of promoting capitalism and the free market—the American ideal. Neoclassical economics explained and celebrated American ideology during a time the American identity was under threat (no doubt exacerbated by losing the Vietnam war).
This led to the rise and mutation of neoclassical economists into a neoliberal agenda which drives political leaders, recursively investing in and doubling down on the economic paradigm we live in today despite increasing wealth gaps, food poverty, fuel poverty, housing crises, inflation, unemployment, and climate catastrophes all around the world.
Who’s in charge?
Power is very often discussed on Planet: Critical. Who wields it? What’s their agenda? How do we grab it? These topics are nuanced and complicated because people, even those in charge, even those colluding with fellow elites to thieve and exploit, are typically products of their environment and very often either believe what they are doing is correct, or that they have a right to it. So how do we parse the paradigms that people live in, believe in, replicate, and the deliberate and cynical deeds done to maintain power?
We may call both effects of the “political agenda”. However, it is critical to remember that political agendas are the result of systems, in much the same way late-stage, neoliberal madness capitalism is the result of a neoclassical ideology which was swept up by political, cultural and social systems. The political agendas we decry today could only arise on the shoulders of the past, like anything else.
This may seem obvious to some, but let’s continue to break it down: The concept of the free market began with Adam Smith to combat strict government regulation and prevent elite monopolisation which were doing little to provide for the average Joe. This was taken up by Friedrich Hayek and Milton Friedman, whose theories advised Thatcher and Reagan. Combining this political power with the nationalist narratives sweeping the United States during the Cold War period is a recipe for ideological hegemony.
Where did it go wrong?
Ideological hegemony describes the economics of our world today. Neoliberalism quite literally ignores evidence to maintain itself; governments submit citizens to party values. Where did it all go wrong?
We live as part of an ecosystem of components interacting with one another, people included. Arguably, then, political agendas and late-stage madness are not plans, but byproducts of those systems. Ideologies are byproducts of systems. Nobody is in charge.
A system is created over time through the evolution of multiple components interacting and transforming due to those interactions. To state that a system could be created by an ideology ignores what it takes to really make a system. Whereas, we have many examples of ideology as byproduct of system.
Take The Old Testament (or any religious text): passage upon passage of rules and doctrine about what to eat, what not to eat, who to marry, who you can’t marry, where to live, what to claim, how to serve. We know from behavioural science that repetition is the best way to create habits and change beliefs: Is it the repeating of acts, rituals and traditions that internalises a way of life which then creates the ideology?
Following on, the ideology, the byproduct of the system, becomes a thing in and of itself, and that point the system must start to break down because it is no longer functioning in the real world but in an ideological construct of the world. Of course, there isn’t just one system and one paradigm, but it explains why fervent believers despite mountains of evidence appear genuinely mad to others.
It also explains why neoliberal economists maintain that neoliberal economics will save us from the conditions created by neoclassical economics.
Why systems break down
Schools of thought like neoclassical economics, which respond to the problems of their day, evolve over time into a systemic approach which then births an ideology. That ideology then mandates the continuation of that system in order to maintain its own existence.
But ideologies are fixed, they are by their vary nature rigid, non-responsive. They do not tend to evolve. So the mandate becomes that the system has to act within conditions that don't actually exist. This is why systems break down. It’s also why agents of power double down on their ideology and deliver KamiKwasi mini-budgets to the horror of citizens and markets alike.
The old gospels cannot respond to the world today because they don’t exist in the world today. We need to devote our creative powers to envisioning the new, and construct that new with the knowledge one day it will be out-dated. We need permission to abandon the past to create the future.
"if we want to change the world it’s going to have to be through policy"
I guess John doesn't really agree with his own assertion that Economics is Dead, since it is a very Ecnomics-y proposition to assert that policy is the only way to change the world.
Policy is "economics-speak" for laws, and government and compulsion of behavior to change social norms, rather than to enforce them. Despite decades of proof this doesn't work, here we are again.
Specifically, John is acting from within the third of the three primary premises of the very Neoliberalism is seems to be declaring dead.
These are:
1. The Invisible Hand;
2. The Growth Imperative
3. Government v Markets Duality.
He is speaking from the Third Premise: when Markets fail, we need to default to Government, i.e. Policy, i.e. the Force of Law. There is no other choice. Also, until Markets actually do fail, Governments have to stay out of it. Completely.
But first, The Invisible Hand.
This is the proposition that all choices made by society are actually made by us, as individuals, each deciding for ourselves in our own self-interest, according to what we each believe is in our own best self-interest. Not selfishness, really. Self-determination. FREEDOM! in MAGA-speak.
The unspoken corollary of this is that institutions don't matter. Which contradicts the third principle: that there are only two institutions, and they matter very much. It is overwritten by the second principle: The Growth Imperative.
We are free to choose how we think the economy is going to grow, but we MUST CHOOSE GROWTH. All else Ist Verboten!
Also, people as individuals don't actually vote in the Markets for Money, which is the only Market that really matters in Neoliberalism. Money does. Or rather people vote with money. The more money you have, the more your vote counts. If you have more money than anybody else, your vote is the only vote that counts.
This is not freedom. It is tyranny by money. Which is Neoliberalism.
And which individuals have the most money with which to vote in the Markets for Money?
Those who control the institutions that own the most money.
What are those institutions, that own the most money in the Markets for Money today?
Pensions. And also, endowments. The tens of trillions collectively, worldwide, of society's shared savings aggregated into social superfunds for future income security in retirement (pensions) and for future income security for civil society (endowments).
These institutions own the most money in the Markets, and so they matter the most to society, when it comes to shaping our economy.
But those Institutions are not built for Growth. They are built to be there, now and later, both equally, forever, delivering the dignity of life that comes with security of income for this generation, and the next, both equally, forever: every month, forever.
So that is the tangle of lies that make up Neoliberalism. And the great failing of our economy today.
Because Asset Managers, who are experts at Growth, have monopolized these institutions of Fiduciary Money, and directed them not towards sufficiency to their fiduciary purpose, but to growth in transaction volumes measured in money prices in the Markets for maintaining transaction volumes and prices.
In consequence, Fiduciary Money is failing, the Markets are failing, the Economy is failing, our future is failing ("we are eating our seed corn") and our society is collapsing through a cascading cavalcade of interrelated social failings that emanate from the failthlessness of Fiduciary Money investing in Growth instead of in Sufficiency, including:
short-termism
economic elitism
corporate gigantism
financing system instability
retirement system unreliability
social and environmental unsustainability
corporate capture of politics and public discourse
political divisiveness degenerating towards violence
our institutional inability to take action on climate and other challenges in our changing times that require us all, as Humans - Earthlings, really - to take action at the scale of climate
The answer is not policy.
It is common sense.
Your sense, and mine, taken together to form one shared common sense, of what is fiduciary/non-fiduciary in the deployment of fiduciary money as fiduciary-grade financing for fiduciary-grade enterprise to shape a fiduciary economy of dignity and security, for all, forever.
Let's talk about that!
Your think piece is a lot better than the original interview! Thanks for making sense of it. And I agree with Tim. 'Economics is dead' is an empty slogan.