|
July 30, 2010
In The Great Mortification: Economists’ Responses to the Crisis of 2007–(and counting) in The Hedgehog Review Philip Mirowski draws attention to an obvious point since the global financial crisis that those neo-classical economists with their “vision of capitalism as a perfect or nearly perfect system” got things badly wrong. They'd been caught with their pants down.
Mirowski says:
Economists have not comported themselves with much dignity of late. Normally so quick off the mark to ferret out and expose irrationality in others, currently they have been distinctly loathe to recognize a pandemic within their own ranks. I refer here to the outpourings spewn forth by the economists themselves, provoked by the numerous embarrassments that have been visited upon them consequent to the onset of the world economic crisis...General interest magazines, from Business Week to The Economist to The New York Times—previously cheerleaders for the economics profession—turned openly hostile in 2008, hectoring whole schools of thought for their failures, grasping randomly for “new paradigms,” rooting around for sixth-round draft picks and telegenic wicked rebels to replace their prior stable of catallactic pundits.
Mirowski quotes from James K. Galbraith was about the only high-profile economist to echo an attitude that had become commonplace in the blogs. In "Who Are These Economists, Anyway?” in Thought and Action (Fall 2009) Galbraith says:
Leading active members of today’s economics profession…have formed themselves into a kind of Politburo for correct economic thinking. As a general rule—as one might generally expect from a gentleman’s club—this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen.… They oppose the most basic, decent and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not reexamine their ideas. They do not consider the possibility of a flaw in logic or theory. Rather, they simply change the subject. No one loses face, in this club, for having been wrong.
Mirowski makes several points. The first is that this is a profession has banished philosophy and history from the graduate economics curriculum, and then chased it out of the undergraduate curriculum as well. Mathematics ruled.
Mirowski's second point is that the economics profession was caught unawares by the meltdown in 2008 when the entire financial system seemed poised on the brink of utter failure. The professional economists had played a large role in producing the conditions leading to systemic breakdown, from theorizing the financial innovations and staffing the financial institutions to justifying the deconstruction of regulatory structures held over from the last Great Depression. The economists were convinced their Great Moderation and neoliberal triumph would last forever.
It came to an end with a bang and the economics profession had great difficulty in coming to terms with the current crisis. They continued to assert their neo-liberal beliefs that the market can recover from a credit if left alone when reality showed the opposite. The banks had to be bailed out by the state. The discrepancy between belief and actuality is stark.The inference is that capitalism is not a perfect or nearly-perfect system.
Unsurprisingly, as Galbraith points out, recent work into the nature and caus-es of financial collapse has been marginalized, shunted to the sidelines within academic economics:
Articles that discuss these problems are relegated to secondary journals, even to newsletters and blog posts. The scholars who betray their skepticism by taking an interest in them are discouraged from academic life—or if they remain, they are sent out into the vast diaspora of lesser state universities and lib- eral arts colleges. There, they can be safely ignored.
The dissident voices are those who argue that crisis is the normal in capitalism. However, the main Marxist current has little to say on financial crises, since for them or them finance is largely a veil over deeper forces in the real economy.
|
