I read an article in the Financial Times earlier this week (September 23, 2023) -…
One of the stark facts about the academic economics discipline is its insularity and capacity to deliver influential prognoses on issues that affect the well-being of millions with scant regard to the actual consequences of their opinions and with little attention to what other social scientists have to say. The mainstream economists continually get things wrong but take no responsibility for the damage they cause to the well-being of the people. A 2015 paper – The Superiority of Economists – published in the Journal of Economic Perspectives (Vol 29, No. 1) by Marion Fourcade, Etienne Ollion and Yann Algan is scathing in its assessment of the economics discipline. They say that mainstream economists largely ignore contributions by other social scientists and consider them inferior in technological sophistication, have a “predilection for methodological and theoretical precision over real-world accuracy”, largely ignore”the basic premise of much of the human sciences, namely that social processes shape individual preferences”, and parade an arrogance and superiority that masks the sterility of their analysis. In this context, I thought the 2015 Report from the Joseph Rowntree Foundation – Sociological perspectives poverty – was a breath of fresh air in its approach to understanding poverty. The empirical base it presents refutes most of the major assumptions and conclusions of economists who work in the field of poverty. A mainstream professor who was supervising my economics graduate program once said to me: “Bill you are a bright boy but you should be doing sociology”, which was an example of the negative control mechanism designed to weed out dissidents (like me). It didn’t work. But I always considered the disciplines of sociology and anthropology (not to mention psychology, political science, social welfare etc) to be important in my journey to become ‘well read’. Most economists, however, do not think that. Perhaps that is why I was able to be part of the development of Modern Monetary Theory (MMT).
The insularity of economics
First, the problem of economics.
One “eminent professor” of economics, interviewed by the researchers for “The Superiority of Economists” article, told them that:
You are only supposed to follow certain rules. If you don’t follow certain rules, you are not an economist. So that means you should derive the way people behave from strict maximization theory … The opposite [to being axiomatic] would be arguing by example. You’re not allowed to do that … There is a word for it. People say ‘that’s anecdotal.’ That’s the end of you if people have said you’re anecdotal … [T]he modern thing [people say] is: ‘it’s not identified.’ God, when your causality is not identified, that’s the end of you.
In fact, what mainstream economics has come down to, at the graduate level, is a cute game, which former IMF chief economist Olivier Blanchard summarised in his August 2008 article – The State of Macro as being an exercise in following:
… strict, haiku-like, rules … [the economics papers] … look very similar to each other in structure, and very different from the way they did thirty years ago …
Graduate students are trained to follow these ‘haiku-like’ rules, that govern an economics paper’s chance of publication success.
So if an article submission does not conform to this haiku-like structure it has a significantly diminished chance of publication.
So we get a formulaic approach to publications in macroeconomics that goes something like this:
- Assert without foundation – so-called micro-foundations – rationality, maximisation, RATEX.
- Cannot deal with real world people so deal with one infinitely-lived agent!
- Assert efficient, competitive markets as optimality benchmark.
- Write some trivial mathematical equations and solve.
- Policy shock ‘solution’ to ‘prove’, for example, that fiscal policy ineffective (Ricardian equivalence) and austerity is good. Perhaps allow some short-run stimulus effect.
- Get some data – realise poor fit – add some ad hoc lags (price stickiness etc) to improve ‘fit’ but end up with identical long-term results.
- Maintain pretense that micro-foundations are intact – after all it is the only claim to intellectual authority.
- Publish articles that reinforce starting assumptions.
- Knowledge quotient – ZERO – GIGO.
This is why the publication bias problem in mainstream macroeconomics is so significant.
Economists are notorious for their lack of regard for other disciplines, particularly those that study human behaviour.
Economics is the “least outward-looking social science” (see the 2017 study – Inside Job or Deep Impact? Using Extramural Citations to Assess Economic Scholarship).
It operates as an:
… insular professional culture that discounts contributions by other social scientists, imposes dogmatic standards in teaching and training, and uses tightly controlled hiring practices to enforce conformity with the norms and goals of a guild-like professional elite.
In 2002, the work of Rik Pieters and Hans Baumgartner concluded that:
… no area of economics appears to build substantially on insights from its sister disciplines.
(Reference: Pieters, R. and Baumgartner, H. (2002) ‘Who Talks to Whom? Intra- and Interdisciplinary Communication of Economics Journals’, Journal of Economic Literature, 40(2), 483-509).
“The Superiority of Economists” article found that:
1. “Examining the structure of interdisciplinary citations in detail reveals sharp differences across disciplines.”
2. “sharply asymmetric flows between economics and the other social sciences” in cross-citations.
3. “articles in the American Political Science Review cite the top 25 economics journals more than five times as often as the articles in the American Economic Review cite the top 25 political science journals. The asymmetry is even starker with regard to the American Sociological Review. While only 2.3 percent of the sociologists’ citations go to their economic colleagues (often in a critical fashion, arguably), just 0.3 percent of economists’ citations go to sociologists …”
4. “French sociologist Pierre Bourdieu, the top-cited name in US sociology today, received a single mention in the AER during the 2000s”.
5. “economists have in general less regard for interdisciplinarity than their social scientific and even business school brethren”.
6. The majority of economists either “disagree or strongly disagree with the proposition that ‘in general, interdisciplinary knowledge is better than knowledge obtained from a single discipline.'” We are the only discipline that holds that view.
7. There is a strict hierarchy enforced in economics – with economists looking “both inwards and towards the top if its internal hierarchy” – “there is more control”. This is the Groupthink element.
8. The control extends to the design of PhD programs, who gets a job, who gets published, who gets research grants, who gets to give keynote speeches, who gets access to the media, and on.
Economics and poverty
This insularity then affects how economists analyse real world problems.
While economists often claim poverty is a topic that they are interested in, they adopt such sterile approaches, biased towards promoting individual choice to the top of causes, that the analyses fall short of providing an understanding.
As the 2015 JRF Report – Economic theories of poverty note:
Classical economic traditions contend that individuals are ultimately responsible for poverty, thereby providing a foundation for laissez-faire policies … Both classical and neoclassical approaches overemphasise monetary aspects, the individual as opposed to the group, and a limited role for government …
Classical traditions view individuals as largely responsible for their own destiny, choosing in effect to become poor (e.g. by forming lone-parent families). The concept of ‘sub-cultures of poverty’ implies that deficiencies may continue over time, owing for example to lack of appropriate role models, and that state aid should be limited to changing individual capabilities and attitudes (i.e. the laissez-faire tradition).
When I was an economics student we were taught that unemployment, which in the real world is a major cause of poverty, was, in fact, a choice made by individuals who preferred ‘leisure’ to ‘work’ because the real wage they could access was not large enough to offset the utility they would gain from enjoying the leisure that arose from not working.
There were elaborate technical analyses presented as I went through the years of study to show that if the government dared to introduce an income support payment for unemployment it would further distort the choice for leisure – the so-called ‘corner solution’ of the work-leisure model.
We were also told that the real wage they faced was low because they had chosen not to invest in themselves to enhance their productivity through human capital accumulation (education and training).
And the more insidious claims were that a class of impoverished people deliberately positioned themselves in this way (as a ‘utility maximising’ choice) because of categorical biases in the welfare systems.
More recently, we have been told that indolent teenage girls keep having kids so they can enjoy the child support payments and avoid working.
The mind-numbing effects of this sort of ‘education’, read, indoctrination, take their toll on many economics students as they progress through their studies.
While there is a lot of self-selection involved (that is, prior beliefs are attracted to economics), economics programs at university level also nurture sociopathological tendencies in the students.
I have written about this before – see for example these blog posts:
1. The brainwashing of economics graduate students (February 12, 2019).
2. Economics curriculum is needed to work against selfishness and for altruism (September 19, 2018).
3. Humans are intrinsically anti neo-liberal (May 22, 2017).
One of the obvious points is that this sort of framing is no accident.
Even during the Great Depression, the idea that the government would provide income support to the unemployed was strongly resisted by business leaders, who wanted cheap labour.
In Howard Zinn’s – A People’s History Of The United States: 1492-Present – published by Harper Perennial (p.378), we read that:
Henry Ford, in March 1931, said the crisis was here because “the average man won’t really do a day’s work unless he is caught and cannot get out of it. There is plenty of work to do if people would do it.” A few weeks later he laid off 75,000 workers.
The data from that period shows that every time a job vacancy was advertised hundreds applied seeking work.
There have been many articles written by key mainstream economists (such as Milton Friedman) that argue that economic cycles (and hence unemployment dynamics) are driven by labour supply shifts.
An essential conclusion that you would draw from the supply shift stories is that quits (workers leaving jobs on their own volition to pursue leisuer) should behave in a countercyclical manner.
All the empirical evidence on quit behaviour from every country runs contrary to that construction.
US institutional economist Lester Thurow wrote in his 1983 book – Dangerous Currents:
… why do quits rise in booms and fall in recessions? If recessions are due to informational mistakes, quits should rise in recessions and fall in booms, just the reverse of what happens in the real world.
I also recall reading a lovely account of how the mainstream economists explained the rapid rise in unemployment during the Great Depression – that within the elapse of a year or so, around 25 per cent of the workforce suddenly acquired a new found taste for leisure and decided to quit their work – a sudden outbreak of laziness struck the world during the 1930s!
If mass unemployment becomes an optimal choice between work and leisure and leisure wins out then government should not try to stimulate spending to provide more jobs nor provide unemployment benefits to further subsidise leisure.
The demand side – spending etc has no part to play in creating employment and hence reducing unemployment.
This agenda was, of course, anti-government intervention, unless it was feeding procurement contracts in the military-industrial complex or bailing out capitalists and bankers in times of crisis.
The target was to reduce assistance to the poor and redistribute national income to the rich – the defining characteristic of the neoliberal era.
The ‘individuals are to blame’ narrative that comes from mainstream economics teaching extends into a number of areas and a nomenclature emerged to support this strategy.
In various nations the terms were different – but they all were designed to vilify the unemployed and other income support recipients – ‘bludgers’, ‘drifters’, ‘lazy’, ‘scheming’, ‘living off the rest of us’, and more.
Them and us.
That sort of strategy meant that nations could endure significant recessions without the majority (who kept their jobs) questioning the basis of the recessions (a lack of overall spending) and the role that governments could play in eliminating them.
Some literature actually eulogised the recession experience as a sort of ‘cleansing’ episode where capitalism maintained efficiency – by shedding high cost technologies and less profitable entrepreneurial ventures.
The on-going redistribution of national income away from workers and the rising income inequality was carefully swept where it would not be noticed.
Enter the sociologists
The Joseph Rowntree Foundation (JRF) Report – Sociological perspectives poverty – (published in June 2015), offers a stark point of departure for social scientists who are interested in engaging with real world problems such as poverty.
The Report (authored by Tracy Shildrick and Jessica Rucell):
… describes and critically analyses sociological theories on the causes of poverty and discusses contested concepts that relate to how we might understand poverty from a sociological/social theory perspective …
In contrast to economists, who focus on individual causation (the ‘unemployed are to blame’ narrative), sociologists tend to adopt structural explanations and understandings and then see how “the structure and organisation of society … relates to social problems and individual lives”.
This is a much more attractive and fruitful path to take and is consistent with the break that Keynes and others made from the mainstream in the 1930s, when they rejected the standard ‘optimising’ explanation for mass unemployment in favour of a focus on the systemic failure of the economy to generate enough jobs as a consequence of insufficient aggregate spending.
They also showed how aggregate level constraints (say, a lack of jobs) rendered individual choice powerless. When there are not enough jobs, an unemployed individual can do very little to become employed.
The JRF Report tries “to balance up the relative importance of social structures (that is, the ways in which society is organised) and the role of individual agency (people’s independent choices and actions)” as a basis for understanding poverty.
In terms of the balance between structure and agency, economists are located at the extreme end of agency.
Sociologists seek to engage with real world evidence to challenge the ‘individualistic’ construction of poverty.
The JRF study concluded that:
1. “poverty can be better understood as a result of the ways in which resources and opportunities are unequally distributed across society” – that is, a structural outcome of unequal power and access to national income.
2. “social class and processes of class reproduction remain important, particularly for the continuity of poverty over time and across generations”.
3. “people’s social class positions still influence the opportunities open to them. Starting out life in poverty means a greater risk of poverty in later life.”
During the Great Depression and all major cyclical events that have followed, the mass unemployment that arose was clearly accompanied by rising layoff rates and falling quit rates.
When job vacancies were offered, huge numbers of people queued up in the application queue.
The JRF Report reviews the research evidence in this field and concludes:
Empirical evidence does not support the idea that people positively embrace living on welfare benefits or that people prefer living on benefits to working. There is little evidence that all but a very small number of claimants prefer not to work or that claimants do not actively engage in job searching … Throughout more than twelve years of research in deprived neighbourhoods in Teesside, Shildrick and colleagues also found a strong commitment to work amongst people who are often described as having rejected the work ethic … even when repeatedly faced with ‘junk jobs’ … characterised by ‘gruelling, monotonous, tightly controlled and poorly rewarded’ working conditions … and sometimes being made substantially poorer in taking work. The work ethic of research participants remained stubbornly – and perhaps surprisingly steadfast …
Think about the vast body of research that they are reporting on here.
Economists sneer at it – as being anecdotal or qualitative.
Real social scientists consider it to be valuable insights into real world human behaviour.
And then juxtapose that with the views pushed by progressives who support the introduction of a universal basic income to overcome poverty.
The research evidence is clear – people want to work, even if the jobs are not particularly flash.
There is no evidence that a large number of unemployed would prefer to be passively supported by income guarantees.
The researchers further noted that:
The fact that a work commitment remains strong even where jobs are scarce can be explained, at least in part, by long-standing class cultural expectations about the importance of employment within the working class. Work has moral and emotional dimensions, as well as economic ones, and it offers dignity and respect … The idea that the workless inhabit cultures of worklessness or that they pass on such attitudes and values to young people has also been found wanting …
Again, recognising that an attachment to work is more than just a desire to earn income.
We gain our place in society through work.
There is no culture of preference for passive income support where the state abandons its responsibilities to generate enough jobs, and, instead treats the people it makes unemployment because of its faulty macroeconomic policy positions, as passive consumption units.
Further, in this neoliberal era, having a job is not guarantee of an escape from poverty.
The JRF Report notes that:
In the current context, working conditions for many have worsened, public sector jobs have rapidly declined, unemployment and underemployment have been increasing, and low-paid and part-time work have proliferated … It is a particular problem for those countries which have followed an economy based on aggressive free-market principles. As a result, in-work poverty is an increasingly important explanation for contemporary poverty.
This is the problem of the ‘working poor’.
Please see these blog posts (among others):
1. Welcome to the ‘homeless’ working poor – a new neoliberal KPI (February 22, 2018).
2. The neo-liberal class warfare on the poor and the rest of us (March 10, 2016).
3. Rising working poor proportions indicates a failed state (June 20, 2012).
4. The war on the poor (December 29, 2004).
So a Job Guarantee program has to not only ensure everyone can work when they want a job but also that the wages and conditions guarantee a socially-inclusive existence.
Introducing a Job Guarantee is not a panacea to everything.
But it is a giant first step to a better society.
But don’t expect to many economists to agree. But then they have made themselves irrelevant in the main through their Groupthink and insularity.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.