While the kids are fighting over who is king of the sandbox, the economy burns. And the games number-shufflers play to find new ways of pulling money out the air (and other places) are only part of the problem; the rest might very well lie with the field of economics itself. In a discussion on economics and the environmental crisis – how the former is not equipped to deal with the latter – Robert Nadeau writes in Scientific American (http://www.sciam.com/article) that neoclassical economics has its origins in highly dubious assumptions. In the 19th century, Nadeau points out, economists tried to put their field through a science-washing by adapting the equations of then-current physical theories: “The progenitors of neoclassical economics, all of whom were trained as engineers, developed their theories by substituting economic variables derived from classical economics for physical variables in the equations of a soon-to-be outmoded mid-19th century theory in physics.” That last bit is what takes it over the top: “soon-to-be outmoded.” These physical theories became obsolete!
It’s worth reading Nadeau’s piece in its entirety, but the gist of it is that the result of this “scientification” of economics is really bad assumptions that have led to even worse consequences. For example:
• “Market systems exist in a domain of reality separate and distinct from other domains.
• “Capital circulates in these systems in a closed circular flow between production and consumption with no inlets or outlets.
• “The lawful dynamics of closed-market systems legislate over the behavior of economic actors, and the actors obey fixed decision-making rules.
“There are no biological or physical limits to the growth and expansion of market systems.”
This goes a long way towards explaining the cultural attitude that “wealth” is most synonymous with having lots of money. The notion of a beautiful, healthy environment simply doesn’t factor in, especially when humanity is kept apart from nature and nature is treated as a mere commodity and resource. Yet, it’s the idea that there are no limits to market growth that really should raise a few red flags, along with the view that “actors obey fixed decision-making rules.” Not only do people make irrational decisions – don’t we see this all the time? – how does it make sense to believe that the economy can keep growing and growing? Grow where? Resources, as we’re painfully discovering with oil and water, are far from endless. I often hear the good news about the economy couched in terms of growth. But I have to ask: isn’t this growth model rather cancerous? Doesn’t continued market expansion seem a little metastatic?
The Republican-Democrat Two-Step
As the candidates strike fanciful, yet oddly nit-picky, poses on the economy, it’s telling that, as usual, no one is dealing with the fundamental issues underlying economic thought. To do so would be to admit that the problem is far worse than we think. Instead, we get the predictable routine: Democrats talk about the middle class, Republicans accuse Democrats of wanting higher taxes. It’s an old dance, one that shows that while Democrats may have their hearts in the right place, we have yet to see any tangible action that isn’t tantamount to selling out, and Republicans are big fat hypocrites concerned with stuffing the wallets of the “haves” and “have mores” while throwing everyone else under the bus. (At least, the notion that the Republican Party embodies any economic sense is laughable. The past 30 years have seen the Republican agenda of deregulation and free trade come to fruition – even under Bill Clinton. The result? Enron, home market collapse, banking scandals, foreign-owned debt – and still the government has to come to the rescue to keep the economy from falling to pieces. Go, GOP, go!)
If the big parties were interested in a serious discussion on economics, we would have to address fundamental assumptions, some of which are not so abstract. We would have to take a look at reigning in military spending although asking for fiscal prudence is seen as threat to national security. We would have to ask about making money from financial shenanigans like repackaged securitized mortgages – where has all the labour gone? We would have to ask about rebuilding America’s manufacturing base so that, instead of relying on China and other foreign countries, we could make our own products here. On a related note, we would have to ask about the value of self-sufficiency. We would have to talk about the local business, the small business. When even the notion of trade has been corrupted – it’s no longer about trading what we have in surplus for what another country has in surplus, but about relocating jobs and manufacturing to maximize profits – is it any wonder that globalization is such a weird thing? Instead of being able to take care of ourselves as much as possible, we are placed in an economic network in which we all become so highly dependent on one other that we play dominoes if any one of us falls. So much for independence and rugged – but socially-aware – individualism.
A related piece by Nadeau is titled “The Economist Has No Clothes” (http://www.sciam.com/article). That the economist apparently has no legs to stand on is also frightening, but maybe not as frightening as all the blather coming from Republicans and Democrats during this election season.
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