American Autumn

The New Spirit of Economics

Full of magic, mystery, and animal spirits once again.
The New Spirit of Economics

Rafiqur Rahman - Reuters

Audio version read by George Atherton – Right-click to download

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Economics wasn’t always the science it now claims to be. In fact, not so long ago what now is called big E economics was once magical, mysterious and altogether profound. John Maynard Keynes, the architect of America’s recovery from the Great Depression and champion of the welfare state, believed that at its core, economics is ruled by “animal spirits.” That is to say that the free, equal and rational mind of consumers in the Locke/Smith economic paradigm does not sufficiently explain human action in the market place; that economies operate more according to Freudian animal heritage, or esoteric and emotional impulses, than reason. Other thinkers from this formative economic era, like Joseph Schumpeter, sensed that a violent, warlike impulse of “creative destruction” lurked at the heart of capitalism. And Karl Marx, the great dreamer, proposed that economic theory, rather than empowering and rewarding the selfish gene, could instead create a better social realm in which every person gave according to his abilities and received according to his needs.

But around the 1950s, when the logical positivists were strutting their philosophy of strict rationality, applying scientific method to social phenomena, economists started distancing themselves from psychological and sociological considerations. They liked to think of themselves as real scientists, and over the next few generations they rationalized human behavior, sanitized their theories and models, and tried to transform economics into a mathematically driven exact discipline on the model of physics.

Today, as Gregory Mankiw’s widely used first year university economics textbook, Principles of Economics, shows, the “common weal” discipline has been reduced to a dry, boring, amoral and inhuman study full of pseudo formulas and cumbersome equations with little connection to ethical questions or social desirability. Graph upon graph on page after page of Principles of Economics reveal just how far economics has drifted from the poetry and prose of its roots – that often misread bible of global finance, Adam Smith’s The Wealth of Nations – to the purposely obtuse and elite math of today.

Along the way, a host of radical (though not really radical – just traditional) thinkers tried to warn the logic freaks of economics that their profession was heading into a dead end. Nobel Prize winner Wassily Leontief said: “Departments of economics are graduating a generation of idiot savants, brilliant at esoteric mathematics yet innocent of actual economic life.” Author of The Origin of Economic Ideas, Guy Routh wrote: “The standard economic texts are powerful instruments of disorientation; for confusing the mind and preparing it for the acceptance of myths of growing complexity and unreality.” And the great American economist and historian Robert Heilbroner, famously warned: “Before economics can progress it must abandon its suicidal formalism.”

But to no avail… for half a century, these warnings have fallen on deaf ears.

So here we are. Great Depression 2.0 and finally the mystery of economics is again awakening from its long logical slumber. In the panic of escalating financial and ecological meltdown, the old certitudes are crumbling and the logic freaks are everywhere in retreat. In 2008 Bush-era Federal Reserve Chairman Alan Greenspan, the man who oversaw much of America’s financial nose dive, told the public “those of us who have looked to the self-interest of lending institutions to protect share-holders’ equity, myself included, are in a state of shocked disbelief.” That’s putting it mildly. As the top economist in the nation for two decades, groomed in 50 years of rigorous positivism, such naïvety was as appalling as it was telling of the false science being sold to people. What Greenspan’s reflections show is that the Newtonian law of positivist economics – the self-interest principle, the "rational maximizer" at the heart of economics – is profoundly flawed. It should now go without saying that carrying on with business as usual in economics would be equivalent to physics without relativity or thermodynamics.

For a scientific experiment to cross the threshold from speculation to truth it must pass the repeatability test. For an outcome to be considered true, one must be able make it happen again. In their quest to be regarded as real scientists (lab coat and all) rather than ideologues, the positivist economic theorists so far have only been able to reproduce one major economic phenomenon – Depression. This is a sign that the only provable thesis in their pseudo inquiry is that unrestrained market liberalism leads to short term financial gain for the wealthiest members of society followed by periods of economic collapse.

As the global economic and ecological crises bear down upon us, positivists are being forced to admit that their understanding of nonlinear, real-world systems is frail at best and that their mathematical models have very limited value. Today every aspect of economics, right down to its fundamental tenets and axioms – growth, freedom, progress, happiness, self-interest – are now being rethought. The economic profession is entering an almost Nietzschean period of creative destruction.

This is the perfect moment to give the logic freaks one final push into the dustbin of history. We the heterodox economists, ecological economists and not-so-radical professors and students at universities around the world can kick over the old neoclassical paradigm and pave the way toward a new kind of economics – a psychonomics, a bionomics, a barefoot economics – a wide-ranging, multifaceted, human-scale discipline full of magic, mystery and animal spirits once again.

Kalle Lasn and Darren Fleet

98 comments on the article “The New Spirit of Economics”

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Anonymous

The "logic freaks" are - and always were - paid ideologues. Not all of them know or want to know they are paid, but there whole support system comes from moneyed interests.
This being so, they will be back. It is not ideas that will get rid of them.
Their purpose is to make economics inhuman.
The movement to escape them is as old as economics - and was strong at the beginning of the 20th century with Thorstein Veblen and follower.
But what happened. The Reaganites et al just paid to push them to the front again.

Anonymous

The "logic freaks" are - and always were - paid ideologues. Not all of them know or want to know they are paid, but there whole support system comes from moneyed interests.
This being so, they will be back. It is not ideas that will get rid of them.
Their purpose is to make economics inhuman.
The movement to escape them is as old as economics - and was strong at the beginning of the 20th century with Thorstein Veblen and follower.
But what happened. The Reaganites et al just paid to push them to the front again.

Anonymous

Today, the inequality in social status and the distribution of wealth is more widely spread than ever before in the history of mankind - thanks to the man-made cults like Capitalism, Communism and Socialism. While the West boasts having over 8,000 billionaire and close to one million millionaires – hundreds of millions of men, women and children live on less than a Euro a day. Hundreds of millions are denied access to drinkable water, healthcare, education, employment, and equal wages. Women and children are the greatest victims of these so-called “civilized West”, which uses them for sexual pleasures and labor for the greed.

America which has less 6% of world’s population – consumes more than 40% of world’s resources and produces 50% of world’s garbage.

Maurice Ulrich in his article titled Equality and Freedom expose the western hypocrisy:

“In developed countries, in France, how can anyone justify the fact that the CEO of a big corporate group earns three hundred times more than the employees of the same group? What is equality for the most humble employees, the unemployed, the youth going from one temporary job to another without any security, immigrants deprived of the right to vote, the undocumented, the homeless?

http://rehmat1.wordpress.com/2009/07/19/equality-freedom-and-the-west/

Anonymous

Today, the inequality in social status and the distribution of wealth is more widely spread than ever before in the history of mankind - thanks to the man-made cults like Capitalism, Communism and Socialism. While the West boasts having over 8,000 billionaire and close to one million millionaires – hundreds of millions of men, women and children live on less than a Euro a day. Hundreds of millions are denied access to drinkable water, healthcare, education, employment, and equal wages. Women and children are the greatest victims of these so-called “civilized West”, which uses them for sexual pleasures and labor for the greed.

America which has less 6% of world’s population – consumes more than 40% of world’s resources and produces 50% of world’s garbage.

Maurice Ulrich in his article titled Equality and Freedom expose the western hypocrisy:

“In developed countries, in France, how can anyone justify the fact that the CEO of a big corporate group earns three hundred times more than the employees of the same group? What is equality for the most humble employees, the unemployed, the youth going from one temporary job to another without any security, immigrants deprived of the right to vote, the undocumented, the homeless?

http://rehmat1.wordpress.com/2009/07/19/equality-freedom-and-the-west/

Look out LA

Tonight (29th) is apparently the night for Occupy LA to endure a police raid. 20 years ago the LA Riots were taking place and there is a connection.

There doesn't seem to be widespread awareness that silent martial law was declared with the Patriot act. This is why the US government, at the behest of the elites that control it, thinks it can deny transparency and press freedom and come in the dark and beat people. This is the same US government that for the longest time encouraged police to tell people lies in order to entrap them and then thought it was alright to torture and then thought that confessions brought out as a result of torture were binding. Starting with Bush II it thought it was alright to issue countless gag orders to cover crimes, and to disappear people into secret prisons and deny people due process and hold people indefinitely. It's the same government that roughed up NY city council members and a member of the NY Supreme Court because they were exercising their free expression rights in a peaceful protest.

What people don't see is that the real response to the LA riots took 10 year and it was the Patriot Act and the distraction that allowed such nonsense to be passed was 911, it was also the pretense to lying us into a war and was itself a fraud. We haven't prosecuted the people who brought about this wave of crime, the same people that brought on the newest pile of garbage with the fraud of austerity, because to point the finger at the right people could supposedly spark revolution. Right now it's Julian Assange facing extradition, soon it may be the Bush family.

After all, this is a government that thinks habeus corpus is controversial even though it prevents the police from kicking in the door to plant evidence- beat- disappear- gag order. This is the same government that is on the wrong side of climate change and supports dictators in the Middle East and has consolidated corporate media (that is to say useless propaganda) constantly blaring images from the Mid-East so the US people don't have to face what's going on at home. It's also the biggest supporter of murderous regimes in the Mid-East. Ironic that the best way to help the people in the Mid East would be to work on fixing what's wrong in the US. It seems that certain US elites have been the real terrorists. Austerity sounds like "Auschwitz" mated with "depravity," did they really think this crime the IMF foisted on the developing world would work on the rest of the world?

Look out LA

Tonight (29th) is apparently the night for Occupy LA to endure a police raid. 20 years ago the LA Riots were taking place and there is a connection.

There doesn't seem to be widespread awareness that silent martial law was declared with the Patriot act. This is why the US government, at the behest of the elites that control it, thinks it can deny transparency and press freedom and come in the dark and beat people. This is the same US government that for the longest time encouraged police to tell people lies in order to entrap them and then thought it was alright to torture and then thought that confessions brought out as a result of torture were binding. Starting with Bush II it thought it was alright to issue countless gag orders to cover crimes, and to disappear people into secret prisons and deny people due process and hold people indefinitely. It's the same government that roughed up NY city council members and a member of the NY Supreme Court because they were exercising their free expression rights in a peaceful protest.

What people don't see is that the real response to the LA riots took 10 year and it was the Patriot Act and the distraction that allowed such nonsense to be passed was 911, it was also the pretense to lying us into a war and was itself a fraud. We haven't prosecuted the people who brought about this wave of crime, the same people that brought on the newest pile of garbage with the fraud of austerity, because to point the finger at the right people could supposedly spark revolution. Right now it's Julian Assange facing extradition, soon it may be the Bush family.

After all, this is a government that thinks habeus corpus is controversial even though it prevents the police from kicking in the door to plant evidence- beat- disappear- gag order. This is the same government that is on the wrong side of climate change and supports dictators in the Middle East and has consolidated corporate media (that is to say useless propaganda) constantly blaring images from the Mid-East so the US people don't have to face what's going on at home. It's also the biggest supporter of murderous regimes in the Mid-East. Ironic that the best way to help the people in the Mid East would be to work on fixing what's wrong in the US. It seems that certain US elites have been the real terrorists. Austerity sounds like "Auschwitz" mated with "depravity," did they really think this crime the IMF foisted on the developing world would work on the rest of the world?

Anonymous

Well, Israel-born British author, musician and blogger, Gilad Atzmon, believes Israel is worse than Germany during WW II.

http://rehmat1.wordpress.com/2010/02/25/gilad-atzmon-proud-to-be-a-self-hating-jew/

Anonymous

Well, Israel-born British author, musician and blogger, Gilad Atzmon, believes Israel is worse than Germany during WW II.

http://rehmat1.wordpress.com/2010/02/25/gilad-atzmon-proud-to-be-a-self-hating-jew/

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