Cart pulls horse

By David James.

Economics may not be a science, but it is an extreme example of scientism: the bane of what is laughably referred to as modern civilisation. Scientism, the religion that science should be applied far beyond what it is devised to do, has in economics been turned into a reversal of what causes what. Whether a cart is pulling a horse or a horse pulling a cart. Volition, that which impels human behaviour, is removed, producing at times comic results.

Economist pseudo-scientists alight, as all would-be scientists do, on what is measurable. Quantifiable. You know, those wonderfully reassuring numbers that preferably involve a % sign or two. This means that the focus is on transactions, because that is mainly what economic measures are (although occasionally we get something a bit more fuzzy like measures of “sentiment” which disturbingly hint that there might be some shadowy creatures, customers or investors, behind all those concrete numbers).

This results in putting transactions before what causes the transactions. That is, transactions come first, human being second. It produces some amusing contradictions. We saw an example of this in this comment about Pippa Malmgren, an economics pundit, who is opining that Australia has not actively diversified its industry base to deal with Dutch disease brought on by the mining boom. The comment was this:

(Malmgren) is an economic neo-liberal. Yet here she is asking why it is that we embraced the Dutch disease thrust upon us by global markets.

Why, in other words, would someone, a neo-liberal, who believes that markets should roam free – in other words that nations should be ruled by the price mechanism – be arguing that markets should have been shaped by human (even, perish the thought, government) action? That is, Australia should not have let itself be ruled by the price mechanism. One minute we let the cart pull us. Next minute, when the cart does not take us where we want to go, we complain that the horse hasn’t done enough. Time to blame the horse, I suppose, which is where the article went.

This is the ambivalence of scientism. On the one hand, anything that resembles an industry policy is demonised, especially by poorly educated economists in Canberra, as a distortion, an interference in the price mechanism. We must let those prices roam free, gorgeously intersecting the balance of supply and demand.

On the other hand, if we don’t like the results, we turn to our lack of volition in changing things to our advantage.

So here’s a couple of suggestions.

  1. First, introduce some basic philosophy into economics education. I know it’s too late for those who have already got their “training”, but maybe we can help a little for the future.
  2. Explain patiently that humans create artefacts, not the other way round. Money and the architecture of capital is a social artefact, they are the rules by which we live. Volition comes first.
  3. Gradually introduce ideas like actions and consequences, and, if you are feeling really brave, responsibility for those actions. Don’t want to scare the horses. Sorry, carts.

Scientism is enough of a problem with the genuine sciences. As the brilliant author GK Chesterton observed, the “rebuilding of this bridge between science and human nature is one of the greatest needs of mankind.” This is even more required in a pseudo-science, a social science, that is supposedly concerned with human behaviour. Yet all economics can come up with on human nature is tautologies about “rational choices”. Actually, that is a bit unfair. Paul Romer’s ideas about “endogenous” growth does at least hint that there may be some human beings involved in economic activity.

The mathematical physicist James Clerk Maxwell said that “one of the severest tests of a scientific mind is to discern the limits of the legitimate applications of the scientific method.” Quite. And human behaviour is largely outside those limits. As a discipline, economics is a road to nowhere. Worse, it is a dismal part of the hyper materialism and scientism that dominates the modern mind.

Chesterton, as ever, beautifully described the delusion that “men of science” fall into:

 “Men of science are beginning to be aesthetic, like the rest of the world, beginning to talk of the creeds they imagine themselves to have destroyed, they are beginning to be soft about their own hardness. That is, they are becoming conscious of their own strength – that is, they are growing weaker.”

Such posturing is replicated by many in economics. It looks even more ridiculous when it is considered that the underlying discipline is not a science at all.


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  1. Scientism is certainly a major part of the problem but of equal concern is a general tendency to over estimate our ability to manipulate the complex systems of human society ( let alone natural systems).

    Before everyone jumps up and plays ‘spot the free market, small govt extremist’ I am not saying we are mere sticks floating along the river of life pulled by currents we cannot resist or influence.

    Clearly there is a lot we can do.

    But understanding there are limits to what we can do is just as important.

    To bring some specificity to what I am talking about – the desire to ‘fix’ the problems of the GFC are understandable but there may be limits to what we can do or should try do. The cure may not be painless and trying to remove all pain may be a mistake.

    Reducing the risk of malaria by using vast quantities of insectide which kill off a multitude of other natural micro systems may be a reasonable example.

    ZIRP or close to it is an example which looks appealing but may simply be compounding existing problems or creating entirely new ones that are hard to predict ( i think easy!). Leaving usury to the side – interest rates are a key influence on personal decisions throughout the population.

    We should be sceptical about appeals to science but we should also be sceptical about our capacity to ‘mould’ the world to a state of perfection whether or not we appeal to claims of science or ‘other forms of ‘know how’.

  2. Economics is a ‘social science’ which allows economists to bore all those unfortunate enough to be within bragging range with comparisons of how their work is just as important and scientifically founded as other forms of scientific inquiry, such as Biology, Physics or Alchemy. Unfortunately, what they fail to mention is that by ‘science’ they actually mean ‘stolen from science’ and by ‘social’ they mean ‘not science’, so in reality economics is nothing more than ‘unscientific forgery dressed up to pass as science’.

    Economists put the ‘CON’ into economics.

    Checklist to see if you would like to become an economist

    * You like to think of yourself as a glorified bean counter.

    * You like to fool every layperson with complex mathematics.

    * You like to waste everyone’s time with long, obtuse and false explanations.

    * You like to be the only type of scientist still living in the 18th century, idealising maths and conceiving how the world works rather than observing it.

    * You like to have your scientific integrity compromised by being a scholar of a highly political science, and at the same time have The Man, a bank or a think tank as your employer.

    (From Encyclopedia Dramatica)

  3. Long after humanity is killed off, like the noxious planet virus that it is, the earth will live on.

  4. Economics is often called a study of choice. Stated another way, it is a study of human volition. Far from being removed, volition is the singular foundation of the entire discipline. It hate to appear snide, but to post a critique of this nature on a blog dealing primarily with economics really ought to demand just a modicum of understanding of what economics actually is.

        • Which is why I like to see a set of credentials, accreditation besides any piece presented on MB; and I guess is what you’re after as well….

          • Not quite right, Janet. My PhD is in English Literature (Shakespeare). My exposure to economics came from 27 years as a business/finance journalist. I have never ceased to be amazed at how intellectually flimsy it is, and I have interviewed a number of the well known players. The simple inability to define one’s terms is extraordinary.

          • You’ve got to give me a B+ for hunting out an economic David James, all be it the wrong one! And…your article is not alone, this weekend. ” I have very little appreciation and/or patience for the field of economics and its practitioners. Labelling it “the dismal science” does it far too much honour in my view, since it’s not a science at all. No more than psychology is, or anthropology, or beer brewing….”

    • The lady doth protest too much, methinks.

      Are you sure your indignation is not triggered by SoN taking a jack hammer to some of your deeply held beliefs?

      Surey you must understand that if you can get people to believe something, then you can influence their behavior. And certainly SoN is not the first to point out that the discipline of economics is more prescriptive than descriptive. Many would argue that the former is not science, but falls more under the rubric of religion or pseudo-science. Nonetheless, I’m sure that the early pioneers of the science of propaganda, PR and mass manipulation—-Mark Hanna, Edward Bernays, Walter Lippmann, Ivy Lee—–or their disciples like Joseph Goebbels, would disagree. They undoubtedly believed they were doing what any good technician does, which is to apply science to achieve a desired outcome.

      As the evolutionary biologist David Sloan Wilson notes in Darwin’s Cathedral: Evolution, Religion, and the Nature of Society, “Even massively ficticious beliefs can be adaptive, as long as they motivate behaviors that are adaptive in the real world.” But, in order for a belief system to have the power to motivate, it must be believed in. Furthermore, as Sloan Wilson goes on to point out, “natural selection involves many failures for each success.” Not all belief systems, therefore, motivate behaviors that are adaptive in the real world. Thus neoclassical economics finds itself in crisis for two reasons:

      1) With all the new discoveries being made in the world of neuroscience, psychology, biology, behavioral economics, etc., it is becoming increasingly difficult to be believed in, and

      2) It is not adaptive. It is a sick, disordered belief system that induces highly destructive behaviors.

  5. ‘human behaviour is largely outside the limits’ of science? I think you’ve neglected the discipline of psychology here of which the dominant parts has highly rigourous methods and has produced many robust, repeatable findings across cultures

  6. Excellent piece, “Revert”. So why do our politicians all genuflect to economists and allow them to control the economy’s levers? Surely, if politicians were to look at what’s best for the people/society as a whole as they did once, they wouldn’t make economists’ mistake of letting theory get in the way of common sense, or doling out privileges for the few? At the moment, as you say (if not in these words perhaps) scientism’s all arse-backwards.

    • What’s worse is that politicians won’t even listen to real scientists, who are pulling their hair out with frustration about the lack of action on carbon emissions.

  7. Economics suffers from lethal literalism… an outcome of the fundamentalism inherent in both desert-born Abrahamic faith and ‘scientific’ secular positivism.

    Here’s a meandering but fascinating article that looks at literalism more broadly:

    “Literalism was in the ascendant. Catholicism’s metaphors erased by Protestant literalism running its writ over the following centuries through the Industrial Revolution and Utilitarianism. The psyche, understood so well by artists and shamans, was reduced to a machine to the point where Descartes located the interaction of body and mind in the pineal gland.”

    • Thank you very much for this link, Michael. I found it an excellent, and re-inspiring article. In my view, the heart of what the author describes is the experience of self-lessness.

      I have come to a place in life where perhaps my only really strong “belief” – one that has only come about in recent years, as a consequence of observation and contemplation – continues to find evidence for its veracity amply demonstrated, both by others and more importantly, by my-self. That belief is this:

      PRIDE is the root of all evil.

      The so-called “Age of Reason” or “The Enlightenment” is something I have come to refer to as “The Endarkenment”. In my view, over the past few centuries we have become puffed up with pride arising from our acquisition of “knowledge”; and that pride in “knowledge” oftentimes quite irrespective of the true worth of the subject matter. For most of us, little if ever do we pause to consider that, as a matter of first principles, our personal storehouse of “knowledge” comprises information that is rarely obtained first hand, and indeed, may not be true. Invariably, we merely store up and re-parrot as stated or implied “fact” what we have merely heard or read others claim as “knowledge” or “fact”. In truth, we usually have little to zero first hand experience of many of the “facts” of life experience that we impart to others.

      The so-called “education” system supports this, by placing a higher emphasis on a child’s capacity to store, recall, and correctly repeat “facts”, and details of theories.

      In becoming puffed up with Pride in our “knowledge”, in our “reason” and “logic” and “scientific” approach to everything in life, we have increasingly lost our balance as human beings.

      Some may recall the old darkly joking line about helping someone to re-balance .. by putting a “lead pill” (bullet) in their left ear. Perhaps similarly, humanity has become weighed down on the left side of our brain by the deadly weight of too much “knowledge” activity, that is, in comparison to the weight of right brain “intuition” activity.

      We have come to trust almost exclusively in Reason over Intuition.

      In so doing, we have lost sight of something Known (but not necessarily known, small “k”) by the artist, the poet, the shaman.

      That the view is greatest from the cloud of unknowing.

      • Op8 You’d make a great Mankind Project man!!!

        In regard to the topic the main issue has always seemed to me to be the abandonment (total loss?)of common sense.

        • Hey Flawse .. I googled that; unsure whether you’re implying that I need help (which is true, of course), or could offer it! 😉

          Came across this video the other day, and immediately thought of you, and your campaign of enlightenment vis-a-vis the CAD. Enjoy.

      • The so-called “education” system supports this, by placing a higher emphasis on a child’s capacity to store, recall, and correctly repeat “facts”, and details of theories.

        I have to disagree on that one.

        The modern education system has been steadily placing less and less emphasis on this sort of thing for decades.

        To its detriment, IMHO. I can appreciate and strongly agree and education needs to teach people how to think, and most importantly the capability to critically analyse. However, our current education system is producing people who can’t spell, can’t write, can’t analyse, and can barely perform basic maths (eg: manipulate fractions or estimate answers), precisely because they are being taught that recalling facts and theories isn’t important (because you have the internet !), so long as you have a good try.

        • Touché. And thank you for pointing that out. How could I forget my own criticisms and annoyance at spotting ever-increasing incidents of spelling and punctuation errors in news captions, advertising, and the like (*shakes head in embarrassment*).

          I show myself here to be a good example of my own argument – stating or implying as “fact” something of which I do not have (current) first hand experience.

        • I actually agree with people who believe that the primary purpose of education is to foster creative, original and critical thinking. Unfortunately, without a solid grounding in basic skills and basic facts about the world students lack the essential tools to do this.

          Another excellent example of putting the cart before the horse.

  8. I love reading this kind of post. It reassures me to know there are people out there who have gone through an economics education at university and emerged with critical thinking ability still in tact.

    Social science is indeed a pseudo-science but that doesn’t make it entirely useless. Rigorous investigation of the social systems and phenomena that shape our lives is important. But it is equally important to know the limits of those investigations. Even more important is to understand that observable phenomena can be interpreted in a variety of ways depending on the world view of the researcher.

    Mainstream economics, better termed neo-liberal economics, is taught in universities as unchallengeable doctrine. There is occasionally an admission about the limits of a model (if only we had more data!) but generally it is presented as fact. But a plethora of alternative perspectives on economics exist. If they are taught at all they are taught as Political Economy, and are derided as a ‘waffly, Artsy’ kind of subject. Ranging from the classical economists (Adam Smith doesn’t actually say what you think he does), to Marxian analyses, to Keynes, and to institutional theories, political economy deals with the real world first, then looks for theories to explain it.

    Human behaviour is not reducible to mathematical formulae, and the most glaring problem to my mind with mainstream economics is that it entirely ignores the political nature of the economic system (who gets what and how, and what role the democratically elected government has in ameliorating undesirable market outcomes, or god-forbid, altering the operation of the system according to the will of the people eg the public provision of health and education so that it is universally available).

    *I just completed a Bachelor of Economics at the University of Sydney with First Class Honours in Work and Organisational Studies.

  9. 4. Make all economic students take some basic anthropology and history courses, so that they realize just how much diversity there is in human social organization and interaction.

    5. Repeatedly drill the principle of logic that it is possible reach a false conclusion by correct deduction from false premises, until students develop an appropriate suspicion of premises that are demonstrably false (such as “perfect information” or “perfectly rational agents”).

    6. Encourage students to test both assumptions and conclusions empirically, and to recognize (and make explicit) the bounds within which conclusions are valid, and (by implication) the domain for which the conclusions are not necessarily valid. Teach them to abandon the search for “universal truths”, instead settle for limited, practical observations and insights, and have the humility to acknowledge these limitations.

  10. 5. Declare your political affiliations/leanings/philosophies/ school/ background with all recommendations , papers and commentary.

    If nothing else, economics is a profession of tribes. The tribe colours everything.

    • GSM
      You don’t go far enough. Everything is a profession of tribes. And the cruxt of those tribes’ ideology and behavior lies in the individuals’ lived experience. We need to know about their key relationships – were their parents affectionate, cold and manipulative, abusive, demanding, dismissive, adventurous? Did they make friends easily as children ? Were they socially isolated? Resentful, easygoing? Flexible, open minded ? What was their first sexual experience, how well do they relate to the opposite sex? What do they believe to be the purpose of human existence ?

      Some summary biographical stuff like this with all recommendations, papers, speeches – then we’re cooking

    • spleen,

      Economics at it’s core is driven by Politics.

      Not being a science , economics has several “schools” each with it’s own teachings and versions of economic Utopia. Each school ; a tribe. Best to know the genesis of who is prescribing your future. But fankly, I dont care if they had a problem with their mother. Knowing their tribe helps me divine my future responses.

  11. Fichte’s and Nietzche’s will to knowledge has proved an absolute disaster.

    Kant had warned of such. What man can know, Kant cautioned, is only “an island, enclosed by nature itself within unalterable limits. It is the land of truth—-enchanting name!—-surrounded by a wide and stormy ocean, the native home of illusion, where many a fog bank and many a swiftly melting iceberg give the deceptive appearance of farther shores, deluding the adventurous seafarer ever anew with empty hopes, and engaging him in enterprises which he can never abandon and yet is unable to carry to completion.”

    Kant’s successors were not content to stay upon this tiny island, and set sail into the impenetrable night. Of these, the economists were certainly amongst the boldest and most reckless.

    Neoclassical economists deemed that no values are sacred, except those determined by a free market, and have labored long and hard to show that practically all behavior is driven by pleasure and self-interest. This is very explicit in the writing of third-generation Chicago school economists, such as Gary Becker and Richard Posner. The great novelty of their analysis is that the real influence—-the meaninful existence—-of any collective “values,” “religion,” “culture,” “fairness,” or “justice” that go beyond a maximization of individual benefits and costs does not exist anywhere.

    Robert E. Goodin points out that mainstream economists tend to presume that if we can compensate people we can do “anything” to them. After all, it is argued, they freely choose to accept the trade-off.

    In the neoclassical view, markets are an embodied rational will: the social world is governed by an “invisible hand” that miraculously produces a rational distribution of goods and services. In dissident views, like those of Minsky and Steve Keen for instance, markets are highly irrational and prone to large swings in sentiment, ranging from “conservative” to “euphoric” to “ponzi.” As Keen puts it, the “rational expectations” of the neoclassical economists means “never having to say you were drunk.”

    There has been a great deal of research done recently by neuroscientists, behavioral economists, biologists, pschchologists and those hailing from other disciplines, trying to determine what it is that motivates human behavior. What they’re finding is that we know almost nothing. There are a multitude of things that motivate human behavior of which we have precious little understanding, and rational expectations is probably not amongst the most important of them. As the psychologist Jonathan Haidt concludes: “Reasoning by its very nature is slow, playing out in seconds. Studies of everyday reasoning show that we usually use reason to search for evidence to support our initial judgment, which was made in milliseconds. But I do agree with Josh Greene that sometimes we can use controlled processes such as reasoning to override our initial intuitions. I just think this happens rarely.”

    So the entire neoclassical edifice is massively ficticious, having about as much basis in reality as the geocentric cosmos. This will not prevent most neoclassical economists from believing in it, however. I’m sure the majority of them will go to their graves believing they have discovered sure truth.

      • Certainly nothing against Montaigne, but you need to read Paul Boghossian’s Fear of Knowledge: Against Relativism and Constructivism.

        You embody Boghossian’s worst nightmare—-a conservative, self-serving ideologue wielding the weapon of constructivist and relativist thought:

        In the United States, constructivist views of knowledge are closely linked to such progressive movements as post-colonialism and multiculturalism because they supply the philosophical resources with which to protect oppressed cultures from the charge of holding false or unjustified views.

        Even on purely political grounds, however, it is difficult to understand how this could have come to seem a good application of constructivist thought: for if the powerful can’t criticize the oppressed, because the central epistemological categories are inexorably tied to particular perspectives, it also follows that the oppressed can’t criticize the powerful. The only remedy, so far as I can see, for what threatens to be a strongly conservative upshot, is to accept an overt double standard: allow a questionable idea to be criticized if it is held by those in a position of power—-Christian creationism, for example—-but not if it is held by those whom the powerful oppress—-Zuni creationism, for example.

        The intuitive view is that there is a way things are that is independent of human opinion, and that we are capable of arriving at belief about how things are that is objectively reasonable, binding on anyone capable of appreciating the rlevant evidence regardless of their social or cultural perspective. Difficult as these notions may be, it is a mistake to think that recent philosophy has uncovered powerful reasons for rejecting them.

  12. C’mon lets face it, economics is a failed science
    if sciences were students, economics would be the one that flunked and got held back.

    Not being able to answer in a definitive way a simple question like whether it is credit that drives house prices or house prices that drive credit is the equivalent of physics not being able to tell you if gravity pulls you up or down. Tragic.

    Take whatever nutty politician you want, and I’ll find you three university professors of economics who will support his views, no matter how nutty. Tragic.

    You read an econometric study, it breaks your b*** with charts and maths, and in the end it concludes with something that sounds like “Christmas is explained by a rise in the demand for gifts in December”. Tragic.

    Economics is an ambitious but young and slightly stupid kid

  13. As a preliminary observation, it would help clarify this discussion if the term “economics” were defined at the outset. Various contributors here deride neoclassical economics (well, that’s not hard to do) and contrast this with the work of Keen. I thought Keen was an economist as well, just not a neoclassical one.

    For the very little it is worth, I don’t think you would find any economist who would claim for economics the kind of certitude that chemists, physicists and biologists claim for their respective disciplines. So it seems to me that economics is being criticised for failing to be something no-one claims it to be. In this case, why bother? It is about as pertinent as faulting a cat for not being a pedigree dog.

    What this discussion does do is show how difficult it is to hypothesize about human behaviour. It is hard enough to understand the behaviour of a single individual, let alone the behaviours of masses of individuals and/or groups in all their many dimensions. But this does not mean it is invalid to try acquire understanding or to reflect on the limitataions of our past understandings. This is active social science too, taken most broadly.

    We need to appreciate that there are many kinds of understanding – many codes of learning or knowledge – and that while they are all accessible by the application of reason, they disclose many different sets of meanings.

    This does not describe limits to our ability to understand, rather it prompts us to consider what questions we are asking. If we are careful to state what it is we want to learn, then we can devise a method for discovering the answer or answers that we seek. This distinguishes the scientific method: deducing what questions to ask and what observations to make; learning to separate cause from effect and the relevant from the not relevant.

    This also reflects on the essentially creative and abstract character of social inquiry, which is, after all, what economics is.

    Sometimes it seems that economics is faulted for being unable specify the mundane – such as, for example, being unable to predict what the prices of milk and steel will be in Geelong in, say, four years time. But this is a trivial criticism. It is like faulting botany for not being able to predict the output of canola from a given acreage when the really important knowledge is understanding what is required to grow a healthy crop at all.

    That is to say, these are questions to which we need specific answers and there are some things that might be interesting, but which we just do not need to know every time. What is more valuable is knowing what kind of factors drive the consumption and production of milk and steel in Geelong – or the economy in general – ALL the time. If we know this, then we can develop our understanding of what milk-and-steel welfare consists of, and of how to optimise it in our population.

    This requires us to ask particular kinds of questions that require their own forms of inquiry, analysis and validation. This is common or garden economics. Tell me it’s not. Tell me it is “an extreme form of scientism”.

    • briefly said:

      What this discussion does do is show how difficult it is to hypothesize about human behaviour.

      That too, but it also goes to show how difficult it is to hypotesize about what is science. Surely there exists some middle ground between Hume and Fichte. That’s what Einstein did with his Kantian philosophy of science. Susan Neiman explains in “Subversive Einstein”:

      Though we know that Einstein first read the ‘Critique of Pure Reason’ at the age of thirteen, standard discussion of Einstein and Kant concentrates on space and time. At least as worthy of further scholarship would be Einstein‘s own remark in the Schilpp volume: “I did not grow up in the Kantian tradition, but came to understand the truly valuable which is to be found in his doctrine… quite late. It is contained in the sentence: the real is not given to us, but is put to us (by way of a riddle).“ To view reality as a riddle that is put to us is to question statements like Fritz Stern‘s, which I quoted in beginning, and with them the picture of Einstein as far from reality. Such statements assume that we know what reality is: what certain and what is not, what can be known and what can only be dreamt or intuited, what is given to us from objects outside us and what we contribute to their structure, what can be confirmed by experience and what calls experience into question. To view reality as a riddle that is put to us is to ask all these questions, and more. Kant‘s major reason for doing so was to call attention to the difference between the way the world is and the way the world should be. The first is the object of science, the second is a matter of ethics, and we confuse them at our peril. Those whose only reality is what we experience leave no room for experience to be changed by ideals of justice and progress that challenge the authority of experience itself. Yet those whose lives are guided by ideals without regard to experience are in danger of becoming merely utopian, or even totalitarian. Both in science and in ethics Einstein was aware of the risks of tradition-bound empiricism as well as of foolish idealism. More than anything else he was a Kantian idealist: with a commitment to maintaining ideals that are not derived from experience but that shape it. While maintaining a clear-eyed view of the way the world is, he never forgot the way it should be – and always acted according to the latter. Did this make him unrealistic? Telling someone to be more realistic is a way to say: decrease your expectations of the world. Einstein never did.

      Morally and ethically speaking, it would not be possible to get any further from the neoclassical economists than Einstein was, as Neiman goes on to explain:

      Yet his essay “Why Socialism“ – written in 1949, hardly an opportune time, goes so far as to say that “the economic anarchy of capitalist society as it exists today is the real source of evil“. Socialism, for him, is the reasonable response to a crisis of value: he thought the present sense a result of the lack of connections between individual and society. That break itself is furthered by the fact that the media are so thoroughly controlled by economic interests that individual citizens cannot use the political rights they have, while fear of unemployment makes them docile and tame… What‘s unusual in Einstein‘s arguments are first, his unequivocal rejection of Soviet-style communism: “No purpose is so high that unworthy methods in achieving it can be justified.“ Equally unStalinist was his claim that socialism can never be scientific. Einstein‘s socialism was a moral commitment, the only one he thought could give life meaning.

      Einstein’s socialist leanings probably go a long way in explaining why the MSM and the academe did a hit job on him, portraying him as a “Luftmensch,” a “bumbling professor with a German accent” (Time Magazine), an “eternal child” and a “sad fool” (Die Zeit), “childlike” and “wholly without sophistication” (J. Robert Oppenheimer), “innocent” (Isaiah Berlin), and “well-meant in the ususal sense, but lacking a certain closeness to reality” (Fritz Stern).

      • I think one could sum up Einstein’s positon on economics as follows:

        The entire purpose of economics, all the way from Adam Smith to Marx to the neoclassicals, is to take moral (or immoral) stances and turn them into science.

        In this, economists are little different from the alchemists of old, who labored endlessly to turn lead into gold.

        • They often seem like modern day palm readers to me, predicting the future by way of telling people what they want to hear.

      • I suspect not. It’s probable that what economics ‘is or isn’t’ is less important than what it it portrayed to be. In that regard I tend towards those who’ve compared it to,say, Christianity rather than Chemistry. But the discussion will rage, if for no other reason than – the Prize in Economic Sciences in Memory of Alfred Nobel, founder of the Nobel Prize.

        • Of course there’s a Prize in Economic Sciences in Memory of Alfred Nobel.

          It serves the same purpose as the papal bulla did during Medieval times. Do we have to be reminded how that movie ended?

          Since the eighteenth century, the authority of God as a source of absolute truths of the world—-the essence of the historic claim to authority of Jewish and Christian religion—-has been superceded in many areas of society by the rise of science.

          The success of economics in its religious function is to a significant extent independent of the degree of validity in the specific truth claims produced by economics as an analytical science, the religious function being powerfully served despite an analytic framework that was gravely flawed from the start.

        • QUOTE (by Hazel Henderson):
          The yawning gap between the real world and the discipline and profession of economics has never been wider.  The ever-increasing abstractions in finance and its models based on “efficient markets” and “rational actors”: capital asset pricing, Value-at-Risk, Black-Scholes Options Pricing, have been awarded most of the Bank of Sweden prizes since they were founded in the 1960s and foisted onto the Nobel Prize Committee.  Most of these abstract models, based on misuse of mathematics, contributed to the financial crises of 2007-2008.  Now, the family of Alfred Nobel, led by lawyer Peter Nobel, has disassociated itself from the Bank of Sweden Prize in Economics In Memory of Alfred Nobel.[1] They point out that Nobel never would have approved of a prize in economics since it is not a science – and would have disapproved even more that most of the prizes were given to Western, neoclassical economists using mathematized, abstract models – far from Nobel’s wider concerns.

          ANOTHER QUOTE (from Peter Nobel):
          “I can imagine Alfred Nobel’s sarcastic comments if he were able to hear about these prize winners. Above all else, he wanted his prizes to go to those who have been most beneficial to humankind, all of humankind!”

  14. Man observes event
    Man invents set of symbols to describe event
    Man notices event are well described by symbols
    Man concludes symbols must be “real”
    Man uses symbols to predict other events
    Man notices symbols can predict event
    Man concludes symbols must be cause of event

    Even the physicists are guilty of this one.

    As for science, it is a philosophy based on binary thinking (hypothesis vs null-hypothesis) and should be recognized as such. Even “real” sciences are limited by this.

    But the thrust of the article is excellent, do we serve technology (in this case economics) or does it serve us.

  15. Gosh what an interesting discussion, somewhat reminiscent of a lecture I attended some 30 years ago given by Australia’s then Minster for Science the Hon. Barry Jones. Now there was an Aussie with the courage to dream of a new world order in which Australians were makers of their own fate.

    Of course Barry’s universe was not the real world, it was at best the land of Oz. At its worst it was a perverse land incapable of meeting its own material needs, yet at the same time unwilling to integrate into a larger world system.

    Sometimes I wish I could take my pragmatic self back in time to challenge these idealists and force the free thinkers to construct an Aussie system that would integrate into a modern globalized world order. But then I realize that it really doesn’t matter because our problems mostly stem from the collective inability to contain our material desires, thereby forcing our economic and political decisions to be prisoners of the Current account deficit.

    • China-Bob said:

      Sometimes I wish I could…force the free thinkers to construct an Aussie system that would integrate into a modern globalized world order.

      Yep. You liberal internationalists have been at the “Great Game” (Rudyard Kipling) of world domination for a long time. Current events, however, and especially those in central Asia, the Middle East and South America, seem to have pushed your dream of global influence, power, hegemony and profits farther out of your reach than ever.

      China-Bob said:

      …our problems mostly stem from the collective inability to contain our material desires…

      This illustrates how the “science” of neoclassical economics is little more than a regurgitation of medieval theology, for China-Bob merely stakes out one side of the Poverty Dispute.

      The Poverty Dispute turned upon a decisive theological distinction. The Franciscan order believed that Christ had renounced his kingdom and worldly dominion and that they should imitate him by taking a vow of poverty. Moreover, they believed that this ascetism represented a moral position superior to that of the rest of the Church. Opposed to the Franciscans was Pope John XXII, who argued that Christ could not have renounced his worldly kingdom.

      The Franciscans argued for the supremacy of God’s potentia absoluta over his potentia ordinata and for theology over philosophy: a liberation of theology from the yoke of pagan philosophy. Faith alone teaches us that God (for neoclassical economists, free markets being God) is all-powerful. God’s omnipotence means that he does not create the world for man and is not influenced by anything that man does. He does not act according to human standards and cannot be comprehended by human reason. There is no immutable law or reason. Every order is simply the result of God’s (the free market’s) absolute will.

  16. “But then I realize that it really doesn’t matter because our problems mostly stem from the collective inability to contain our material desires, thereby forcing our economic and political decisions to be prisoners of the Current account deficit.”


    Be careful! You’ll be dismissed as a CAD obsessive.

    • “Be careful! You’ll be dismissed as a CAD obsessive.”

      Yea.. not much danger of me ever becoming a CAD obsessive because from the moment I don on my neoclassic hat I can prove that CAD like its close relative the budget deficit (and gov’t debt) is irrelevant. I think the argument goes something along the lines of a rational businessman’s decisions being the same with or without (CAD / deficit). Heck if this passes the neoclassic logic test, what worries could Greek Politicians or for that matter Greek citizens possibly have.

      Mind you having said this, we are entering “interesting times” where the Global Triffin paradox will force countries like Australia to run progressively larger CAD to satisfy the worlds liquidity requirements for our currency…. HUH what wait-up, the world needs $AUD for what exact purpose???… worrying inst it when this sort of drivel is so easily passed off as sound economic policy.

      Now here is a radical idea: What does the world look like if we (Aussies) intentionally run a CA surplus? Hmmmm

      • Oh Bob! Bob! I’m sorry. You are a sick man!

        Unfortunately you can don pretty much any sort of economic hat in order to have it proven that the CAD is irrelevant.
        ‘Common sense economics’ is the sole exception.

  17. SoN – I find Deirdre McCloskey has some keen perspectives. She also advises her students to include the study of engineering and literature. The Bourgeois Era (Pt 1 Virtues; Pt 2 Dignity) may challenge but is thought-provoking.

    ps Did (a) Ms Malmgren advise an alternative path; and if so (b) where does Ms Malmgren see this having positioned Australia at the end of 2012.


    • I must admit that McCloskey stands heads above most neoclassical economists. But in “a height contest among peanuts,” to invoke a saying coined by the Japanese, I’m not sure that means much.

      McCloskey published her apologia for neoclassical economics back in 2002, which is available on the internet:

      It’s called “The Secret Sins of Economics” and takes the form of a dialog between her and the critics of neoclassical economics.

      First come the “virtues mididentified as sins,” which she claims are not sins at all. She identifies these as being quantification, mathematics and libertarian politics.

      Next come the “venial sins, easily forgiven.” These derive from economics’ “monomaniacal focus on a Prudent model of humanity,” which she justifies with the neoclassical economists’ retort:

      “Thanks for the advice. But I make a good living specializing in
      P variables.” His sin is a selfish species of Ivory-Towerism. “Why do I need to concern myself with the
      entire argument? I do my specialty.”

      Following come the “numerous weighty sins requiring special grace to forgive but sins not peculiar to economics.” These include “institutional ignorance,” “historical ignorance,” “cultural barbarism,” “philosophical naïveté,” “a high-school version of the philosophy of science,” “a high-school version of ethical philosophy,” “arrognce in social engineering,” “candid selfishness,” and “personal arrognace.” These she dismisses by saying that everybody does them:

      But these sins are widespread, I repeat, among non-economists, too—-even that odd one, candid selfishness, which you can find Nature’s Economists articulating even when they aren’t trained in it.

      McCloskey concludes with “the two real sins, almost peculiar to economics.” These are “qualitative theorems” and “statistical significance.” So neoclassical economics is not absolute in its perfection, but it sure comes close.

    • And then there’s this from McCloskey:

      We should know why we believe, morally speaking, that bread should be allocated by a market but children should not.

      This cuts to the heart of the moral divide that separates neoclassical economics from some of the other schools of economics.

      Keynes, for instance, in his debunking of Say’s Law, argued that prices are not flexible – for example, workers may not take pay cuts if the result is starvation. The stakes for the neoclassicals, if Keynes should prevail in this argument, are high. The whole of neoclassical equilibrium analysis and its derivatives of optimization and efficiency in exchange live or die with Say’s Law.

      The neoclassical morality that “bread should be allocated by a market” is not a neoclassical invention. It can be traced back to classical morality and its Law of Population, described here by Robert L. Heilbroner:

      To Adam Smith, laborers, like any other commodity, could be produced according to the demand. If wages were high, the number of workpeople would multiply; if wages fell, the numbers of the working class would decrease. Smith put it bluntly: “…the demand for men, like that for any other commodity, necessarily regulates the production of men.”

      Nor is this quite so naive a conception as it appears at first blush. In Smith’s day infant mortality among the lower classes was shockingly high. “It is not uncommon,” says Smith, “…in the Highlands of Scotland for a mother who has borne twenty children not to have two alive.”… Malnutrition…took a horrendous toll among the poorer element. Hence, although higher wages might have affected the birth rate only slightly, they could be expected to have a considerable influence on the number of children who would grow to working age.
      ROBERT L. HEILBRONER, The Worldly Philosophers

      The only thing that stands in the way of achieving this free market Utopia, according to laissez-faire principles, are the rigidities created by government regulation, labor unions, and worker intransigence.

  18. Economics is essentially the study of people, multiple interactions across multiple levels and human created concepts (markets). It will never be a hard science because science is about having a hypothesis, testing said hypothesis, then making predictions based on the results. As human behaviour is rarely predictable, this presents a serious problem.

    It should be treated in a similar way to Pschology, although even that has a more solid base. A cross between pychology and sociology (which is utterly bogus) maybe.