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 Neo classical economics debunked forever !

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PostSubject: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:08 am

Mainstream Neo classical economics debunked forever
Next time you meet a mainstream economist throw this at him.

This is extracted from the infoshop


What is wrong with economics?

In a nutshell, a lot. While economists like to portray their discipline as "scientific" and "value free", the reality is very different. It is, in fact, very far from a science and hardly "value free." Instead it is, to a large degree, deeply ideological and its conclusions almost always (by a strange co-incidence) what the wealthy, landlords, bosses and managers of capital want to hear. The words of Kropotkin still ring true today:

"Political Economy has always confined itself to stating facts occurring in society, and justifying them in the interest of the dominant class . . . Having found [something] profitable to capitalists, it has set it up as a principle." [The Conquest of Bread, p. 181]

This is at its best, of course. At its worse economics does not even bother with the facts and simply makes the most appropriate assumptions necessary to justify the particular beliefs of the economists and, usually, the interests of the ruling class. This is the key problem with economics: it is not a science. It is not independent of the class nature of society, either in the theoretical models it builds or in the questions it raises and tries to answer. This is due, in part, to the pressures of the market, in part due to the assumptions and methodology of the dominant forms of economics. It is a mishmash of ideology and genuine science, with the former (unfortunately) being the bulk of it.

The argument that economics, in the main, is not a science it not one restricted to anarchists or other critics of capitalism. Some economists are well aware of the limitations of their profession. For example, Steve Keen lists many of the flaws of mainstream (neoclassical) economics in his excellent book Debunking Economics, noting that (for example) it is based on a "dynamically irrelevant and factually incorrect instantaneous static snap-shot" of the real capitalist economy. [Debunking Economics, p. 197] The late Joan Robinson argued forcefully that the neoclassical economist "sets up a 'model' on arbitrarily constructed assumptions, and then applies 'results' from it to current affairs, without even trying to pretend that the assumptions conform to reality." [Collected Economic Papers, vol. 4, p. 25] More recently, economist Mark Blaug has summarised many of the problems he sees with the current state of economics:


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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:09 am

"Economics has increasing become an intellectual games played for its own sake and not for its practical consequences. Economists have gradually converted the subject into a sort of social mathematics in which analytical rigor as understood in math departments is everything and empirical relevance (as understood in physics departments) is nothing . . . general equilibrium theory . . . using economic terms like 'prices', 'quantities', 'factors of production,' and so on, but that nevertheless is clearly and even scandalously unrepresentative of any recognisable economic system. . .

"Perfect competition never did exist and never could exist because, even when firms are small, they do not just take the price but strive to make the price. All the current textbooks say as much, but then immediately go on to say that the 'cloud-cuckoo' fantasyland of perfect competition is the benchmark against which we may say something significant about real-world competition . . . But how can an idealised state of perfection be a benchmark when we are never told how to measure the gap between it and real-world competition? It is implied that all real-world competition is 'approximately' like perfect competition, but the degree of the approximation is never specified, even vaguely . . .

"Think of the following typical assumptions: perfectly infallible, utterly omniscient, infinitely long-lived identical consumers; zero transaction costs; complete markets for all time-stated claims for all conceivable events, no trading of any kind at disequilibrium prices; infinitely rapid velocities of prices and quantities; no radical, incalculable uncertainty in real time but only probabilistically calculable risk in logical time; only linearly homogeneous production functions; no technical progress requiring embodied capital investment, and so on, and so on -- all these are not just unrealistic but also unrobust assumptions. And yet they figure critically in leading economic theories." ["Disturbing Currents in Modern Economics", Challenge!, Vol. 41, No. 3, May-June, 1998]
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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:09 am

So neoclassical ideology is based upon special, virtually ad hoc, assumptions. Many of the assumptions are impossible, such as the popular assertion that individuals can accurately predict the future (as required by "rational expectations" and general equilibrium theory), that there are a infinite number of small firms in every market or that time is an unimportant concept which can be abstracted from. Even when we ignore those assumptions which are obviously nonsense, the remaining ones are hardly much better. Here we have a collection of apparently valid positions which, in fact, rarely have any basis in reality. As we discuss in section C.1.2, an essential one, without which neoclassical economics simply disintegrates, has very little basis in the real world (in fact, it was invented simply to ensure the theory worked as desired). Similarly, markets often adjust in terms of quantities rather than price, a fact overlooked in general equilibrium theory. Some of the assumptions are mutually exclusive. For example, the neo-classical theory of the supply curve is based on the assumption that some factor of production cannot be changed in the short run. This is essential to get the concept of diminishing marginal productivity which, in turn, generates a rising marginal cost and so a rising supply curve. This means that firms within an industry cannot change their capital equipment. However, the theory of perfect competition requires that in the short period there are no barriers to entry, i.e. that anyone outside the industry can create capital equipment and move into the market. These two positions are logically inconsistent.

In other words, although the symbols used in mainstream may have economic sounding names, the theory has no point of contact with empirical reality (or, at times, basic logic):

"Nothing in these abstract economic models actually works in the real world. It doesn't matter how many footnotes they put in, or how many ways they tinker around the edges. The whole enterprise is totally rotten at the core: it has no relation to reality." [Noam Chomsky, Understanding Power, pp. 254-5]
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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:10 am

As we will indicate, while its theoretical underpinnings are claimed to be universal, they are specific to capitalism and, ironically, they fail to even provide an accurate model of that system as it ignores most of the real features of an actual capitalist economy. So if an economist does not say that mainstream economics has no bearing to reality, you can be sure that what he or she tells you will be more likely ideology than anything else. "Economic reality" is not about facts; it's about faith in capitalism. Even worse, it is about blind faith in what the economic ideologues say about capitalism. The key to understanding economists is that they believe that if it is in an economic textbook, then it must be true -- particularly if it confirms any initial prejudices. The opposite is usually the case.

The obvious fact that the real world is not like that described by economic text books can have some funny results, particularly when events in the real world contradict the textbooks. For most economists, or those who consider themselves as such, the textbook is usually preferred. As such, much of capitalist apologetics is faith-driven. Reality has to be adjusted accordingly.

A classic example was the changing positions of pundits and "experts" on the East Asian economic miracle. As these economies grew spectacularly during the 1970s and 1980s, the experts universally applauded them as examples of the power of free markets. In 1995, for example, the right-wing Heritage Foundation's index of economic freedom had four Asian countries in its top seven countries. The Economist explained at the start of 1990s that Taiwan and South Korea had among the least price-distorting regimes in the world. Both the Word Bank and IMF agreed, downplaying the presence of industrial policy in the region. This was unsurprising. After all, their ideology said that free markets would produce high growth and stability and so, logically, the presence of both in East Asia must be driven by the free market. This meant that, for the true believers, these nations were paradigms of the free market, reality not withstanding. The markets agreed, putting billions into Asian equity markets while foreign banks loaned similar vast amounts.

In 1997, however, all this changed when all the Asian countries previously qualified as "free" saw their economies collapse. Overnight the same experts who had praised these economies as paradigms of the free market found the cause of the problem -- extensive state intervention. The free market paradise had become transformed into a state regulated hell! Why? Because of ideology -- the free market is stable and produces high growth and, consequently, it was impossible for any economy facing crisis to be a free market one! Hence the need to disown what was previously praised, without (of course) mentioning the very obvious contradiction.

In reality, these economies had always been far from the free market. The role of the state in these "free market" miracles was extensive and well documented. So while East Asia "had not only grown faster and done better at reducing poverty than any other region of the world . . . it had also been more stable," these countries "had been successful not only in spite of the fact that they had not followed most of the dictates of the Washington Consensus [i.e. neo-liberalism], but because they had not." The government had played "important roles . . . far from the minimalist [ones] beloved" of neo-liberalism. During the 1990s, things had changed as the IMF had urged a "excessively rapid financial and capital market liberalisation" for these countries as sound economic policies. This "was probably the single most important cause of the [1997] crisis" which saw these economies suffer meltdown, "the greatest economic crisis since the Great Depression" (a meltdown worsened by IMF aid and its underlying dogmas). Even worse for the believers in market fundamentalism, those nations (like Malaysia) that refused IMF suggestions and used state intervention has a "shorter and shallower" downturn than those who did not. [Joseph Stiglitz, Globalisation and its Discontents, p. 89, p. 90, p. 91 and p. 93] Even worse, the obvious conclusion from these events is more than just the ideological perspective of economists, it is that "the market" is not all-knowing as investors (like the experts) failed to see the statist policies so bemoaned by the ideologues of capitalism after 1997.

This is not to say that the models produced by neoclassical economists are not wonders of mathematics or logic. Few people would deny that a lot of very intelligent people have spent a lot of time producing some quite impressive mathematical models in economics. It is a shame that they are utterly irrelevant to reality. Ironically, for a theory claims to be so concerned about allocating scarce resources efficiently, economics has used a lot of time and energy refining the analyses of economies which have not, do not, and will not ever exist. In other words, scare resources have been inefficiently allocated to produce waste.

Why? Perhaps because there is a demand for such nonsense? Some economists are extremely keen to apply their methodology in all sorts of areas outside the economy. No matter how inappropriate, they seek to colonise every aspect of life. One area, however, seems immune to such analysis. This is the market for economic theory. If, as economists stress, every human activity can be analysed by economics then why not the demand and supply of economics itself? Perhaps because if that was done some uncomfortable truths would be discovered?

Basic supply and demand theory would indicate that those economic theories which have utility to others would be provided by economists. In a system with inequalities of wealth, effective demand is skewed in favour of the wealthy. Given these basic assumptions, we would predict that only these forms of economists which favour the requirements of the wealthy would gain dominance as these meet the (effective) demand. By a strange co-incidence, this is precisely what has happened. This did and does not stop economists complaining that dissidents and radicals were and are biased. As Edward Herman points out:

"Back in 1849, the British economist Nassau Senior chided those defending trade unions and minimum wage regulations for expounding an 'economics of the poor.' The idea that he and his establishment confreres were putting forth an 'economics of the rich' never occurred to him; he thought of himself as a scientist and spokesperson of true principles. This self-deception pervaded mainstream economics up to the time of the Keynesian Revolution of the 1930s. Keynesian economics, though quickly tamed into an instrument of service to the capitalist state, was disturbing in its stress on the inherent instability of capitalism, the tendency toward chronic unemployment, and the need for substantial government intervention to maintain viability. With the resurgent capitalism of the past 50 years, Keynesian ideas, and their implicit call for intervention, have been under incessant attack, and, in the intellectual counterrevolution led by the Chicago School, the traditional laissez-faire ('let-the-fur-fly') economics of the rich has been re-established as the core of mainstream economics." [The Economics of the Rich ]
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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:11 am

Herman goes on to ask "[w]hy do the economists serve the rich?" and argues that "[f]or one thing, the leading economists are among the rich, and others seek advancement to similar heights. Chicago School economist Gary Becker was on to something when he argued that economic motives explain a lot of actions frequently attributed to other forces. He of course never applied this idea to economics as a profession . . ." There are a great many well paying think tanks, research posts, consultancies and so on that create an "'effective demand' that should elicit an appropriate supply resource."

Elsewhere, Herman notes the "class links of these professionals to the business community were strong and the ideological element was realised in the neoclassical competitive model . . . Spin-off negative effects on the lower classes were part of the 'price of progress.' It was the elite orientation of these questions [asked by economics], premises, and the central paradigm [of economic theory] that caused matters like unemployment, mass poverty, and work hazards to escape the net of mainstream economist interest until well into the twentieth century." Moreover, "the economics profession in the years 1880-1930 was by and large strongly conservative, reflecting in its core paradigm its class links and sympathy with the dominant business community, fundamentally anti-union and suspicious of government, and tending to view competition as the true and durable state of nature." [Edward S. Herman, "The Selling of Market Economics," pp. 173-199, New Ways of Knowing, Marcus G. Raskin and Herbert J. Bernstein (eds.),p. 179-80 and p. 180]

Rather than scientific analysis, economics has always been driven by the demands of the wealthy ("How did [economics] get instituted? As a weapon of class warfare." [Chomsky, Op. Cit., p. 252]). This works on numerous levels. The most obvious is that most economists take the current class system and wealth/income distribution as granted and generate general "laws" of economics from a specific historical society. As we discuss in the next section, this inevitably skews the "science" into ideology and apologetics. The analysis is also (almost inevitably) based on individualistic assumptions, ignoring or downplaying the key issues of groups, organisations, class and the economic and social power they generate. Then there are the assumptions used and questions raised. As Herman argues, this has hardly been a neutral process:

"the theorists explicating these systems, such as Carl Menger, Leon Walras, and Alfred Marshall, were knowingly assuming away formulations that raised disturbing questions (income distribution, class and market power, instability, and unemployment) and creating theoretical models compatible with their own policy biases of status quo or modest reformism . . . Given the choice of 'problem,' ideology and other sources of bias may still enter economic analysis if the answer is predetermined by the structure of the theory or premises, or if the facts are selected or bent to prove the desired answer." [Op. Cit., p. 176]

Needless to say, economics is a "science" with deep ramifications within society. As a result, it comes under pressure from outside influences and vested interests far more than, say, anthropology or physics. This has meant that the wealthy have always taken a keen interest that the "science" teaches the appropriate lessons. This has resulted in a demand for a "science" which reflects the interests of the few, not the many. Is it really just a co-incidence that the lessons of economics are just what the bosses and the wealthy would like to hear? As non-neoclassical economist John Kenneth Galbraith noted in 1972:

"Economic instruction in the United States is about a hundred years old. In its first half century economists were subject to censorship by outsiders. Businessmen and their political and ideological acolytes kept watch on departments of economics and reacted promptly to heresy, the latter being anything that seemed to threaten the sanctity of property, profits, a proper tariff policy and a balanced budget, or that suggested sympathy for unions, public ownership, public regulation or, in any organised way, for the poor." [The Essential Galbraith, p. 135]

It is really surprising that having the wealthy fund (and so control) the development of a "science" has produced a body of theory which so benefits their interests? Or that they would be keen to educate the masses in the lessons of said "science", lessons which happen to conclude that the best thing workers should do is obey the dictates of the bosses, sorry, the market? It is really just a co-incidence that the repeated use of economics is to spread the message that strikes, unions, resistance and so forth are counter-productive and that the best thing worker can do is simply wait patiently for wealth to trickle down?
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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:11 am

This co-incidence has been a feature of the "science" from the start. The French Second Empire in the 1850s and 60s saw "numerous private individuals and organisation, municipalities, and the central government encouraged and founded institutions to instruct workers in economic principles." The aim was to "impress upon [workers] the salutary lessons of economics." Significantly, the "weightiest motive" for so doing "was fear that the influence of socialist ideas upon the working class threatened the social order." The revolution of 1848 "convinced many of the upper classes that the must prove to workers that attacks upon the economic order were both unjustified and futile." Another reason was the recognition of the right to strike in 1864 and so workers "had to be warned against abuse of the new weapon." The instruction "was always with the aim of refuting socialist doctrines and exposing popular misconceptions. As one economist stated, it was not the purpose of a certain course to initiate workers into the complexities of economic science, but to define principles useful for 'our conduct in the social order.'" The interest in such classes was related to the level of "worker discontent and agitation." The impact was less than desired: "The future Communard Lefrancais referred mockingly to the economists . . . and the 'banality' and 'platitudes' of the doctrine they taught. A newspaper account of the reception given to the economist Joseph Garnier states that Garnier was greeted with shouts of: 'He is an economist' . . . It took courage, said the article, to admit that one was an economist before a public meeting." [David I. Kulstein, "Economics Instruction for Workers during the Second Empire," pp. 225-234, French Historical Studies, vol. 1, no. 2, p. 225, p. 226, p. 227 and p. 233]

This process is still at work, with corporations and the wealthy funding university departments and posts as well as their own "think tanks" and paid PR economists. The control of funds for research and teaching plays it part in keeping economics the "economics of the rich." Analysing the situation in the 1970s, Herman notes that the "enlarged private demand for the services of economists by the business community . . . met a warm supply response." He stressed that "if the demand in the market is for specific policy conclusions and particular viewpoints that will serve such conclusions, the market will accommodate this demand." Hence "blatantly ideological models . . . are being spewed forth on a large scale, approved and often funded by large vested interests" which helps "shift the balance between ideology and science even more firmly toward the former." [Op. Cit., p. 184, p. 185 and p. 179] The idea that "experts" funded and approved by the wealthy would be objective scientists is hardly worth considering. Unfortunately, many people fail to exercise sufficient scepticism about economists and the economics they support. As with most experts, there are two obvious questions with which any analysis of economics should begin: "Who is funding it?" and "Who benefits from it?"

However, there are other factors as well, namely the hierarchical organisation of the university system. The heads of economics departments have the power to ensure the continuation of their ideological position due to the position as hirer and promoter of staff. As economics "has mixed its ideology into the subject so well that the ideologically unconventional usually appear to appointment committees to be scientifically incompetent." [Benjamin Ward, What's Wrong with Economics?, p. 250] Galbraith termed this "a new despotism," which consisted of "defining scientific excellence in economics not as what is true but as whatever is closest to belief and method to the scholarly tendency of the people who already have tenure in the subject. This is a pervasive test, not the less oppress for being, in the frequent case, both self-righteous and unconscious. It helps ensure, needless to say, the perpetuation of the neoclassical orthodoxy." [Op. Cit., p. 135] This plays a key role in keeping economics an ideology rather than a science:

"The power inherent in this system of quality control within the economics profession is obviously very great. The discipline's censors occupy leading posts in economics departments at the major institutions . . . Any economist with serious hopes of obtaining a tenured position in one of these departments will soon be made aware of the criteria by which he is to be judged . . . the entire academic program . . . consists of indoctrination in the ideas and techniques of the science." [Ward, Op. Cit., pp. 29-30]

All this has meant that the "science" of economics has hardly changed in its basics in over one hundred years. Even notions which have been debunked (and have been acknowledged as such) continue to be taught:

"The so-called mainline teaching of economic theory has a curious self-sealing capacity. Every breach that is made in it by criticism is somehow filled up by admitting the point but refusing to draw any consequence from it, so that the old doctrines can be repeated as before. Thus the Keynesian revolution was absorbed into the doctrine that, 'in the long run,' there is a natural tendency for a market economy to achieve full employment of available labour and full utilisation of equipment; that the rate of accumulation is determined by household saving; and that the rate of interest is identical with the rate of profit on capital. Similarly, Piero Sraffa's demolition of the neoclassical production function in labour and 'capital' was admitted to be unanswerable, but it has not been allowed to affect the propagation of the 'marginal productivity' theory of wages and profits.

"The most sophisticated practitioners of orthodoxy maintain that the whole structure is an exercise in pure logic which has no application to real life at all. All the same they give their pupils the impression that they are being provided with an instrument which is valuable, indeed necessary, for the analysis of actual problems." [Joan Robinson, Op. Cit., vol. 5, p. 222]
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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:13 am

The social role of economics explains this process, for "orthodox traditional economics . . . was a plan for explaining to the privileged class that their position was morally right and was necessary for the welfare of society. Even the poor were better off under the existing system that they would be under any other . . . the doctrine [argued] that increased wealth of the propertied class brings about an automatic increase of income to the poor, so that, if the rich were made poorer, the poor would necessarily become poorer too." [Robinson, Op. Cit., vol. 4, p. 242]

In such a situation, debunked theories would continue to be taught simply because what they say has a utility to certain sections of society:

"Few issues provide better examples of the negative impact of economic theory on society than the distribution of income. Economists are forever opposing 'market interventions' which might raise the wages of the poor, while defending astronomical salary levels for top executives on the basis that if the market is willing to pay them so much, they must be worth it. In fact, the inequality which is so much a characteristic of modern society reflects power rather than justice. This is one of the many instances where unsound economic theory makes economists the champions of policies which, is anything, undermine the economic foundations of modern society." [Keen, Op. Cit., p. 126]

This argument is based on the notion that wages equal the marginal productivity of labour. This is supposed to mean that as the output of workers increase, their wages rise. However, as we note in section C.1.5, this law of economics has been violated for the last thirty-odd years in the US. Has this resulted in a change in the theory? Of course not. Not that the theory is actually correct. As we discuss in section C.2.5, marginal productivity theory has been exposed as nonsense (and acknowledged as flawed by leading neo-classical economists) since the early 1960s. However, its utility in defending inequality is such that its continued use does not really come as a surprise.

This is not to suggest that mainstream economics is monolithic. Far from it. It is riddled with argument and competing policy recommendations. Some theories rise to prominence, simply to disappear again ("See, the 'science' happens to be a very flexible one: you can change it to do whatever you feel like, it's that kind of 'science.'" [Chomsky, Op. Cit., p. 253]). Given our analysis that economics is a commodity and subject to demand, this comes as no surprise. Given that the capitalist class is always in competition within itself and different sections have different needs at different times, we would expect a diversity of economics beliefs within the "science" which rise and fall depending on the needs and relative strengths of different sections of capital. While, overall, the "science" will support basic things (such as profits, interest and rent are not the result of exploitation) but the actual policy recommendations will vary. This is not to say that certain individuals or schools will not have their own particular dogmas or that individuals rise above such influences and act as real scientists, of course, just that (in general) supply is not independent of demand or class influence.

Nor should we dismiss the role of popular dissent in shaping the "science." The class struggle has resulted in a few changes to economics, if only in terms of the apologetics used to justify non-labour income. Popular struggles and organisation play their role as the success of, say, union organising to reduce the working day obviously refutes the claims made against such movements by economists. Similarly, the need for economics to justify reforms can become a pressing issue when the alternative (revolution) is a possibility. As Chomsky notes, during the 19th century (as today) popular struggle played as much of a role as the needs of the ruling class in the development of the "science":

"[Economics] changed for a number of reasons. For one thing, these guys had won, so they didn't need it so much as an ideological weapon anymore. For another, they recognised that they themselves needed a powerful interventionist state to defend industry form the hardships of competition in the open market -- as they had always had in fact. And beyond that, eliminating people's 'right to live' was starting to have some negative side-effects. First of all, it was causing riots all over the place . . . Then something even worse happened -- the population started to organise: you got the beginning of an organised labour movement . . . then a socialist movement developed. And at that point, the elites . . . recognised that the game had to be called off, else they really would be in trouble . . . it wasn't until recent years that laissez-faire ideology was revived again -- and again, it was a weapon of class warfare . . . And it doesn't have any more validity than it had in the early nineteenth century -- in fact it has even less. At least in the early nineteenth century . . . [the] assumptions had some relation to reality. Today those assumptions have not relation to reality." [Op. Cit., pp. 253-4]

Whether the "economics of the rich" or the "economics of the poor" win out in academia is driven far more by the state of the class war than by abstract debating about unreal models. Thus the rise of monetarism came about due to its utility to the dominant sections of the ruling class rather than it winning any intellectual battles (it was decisively refuted by leading Keynesians like Nicholas Kaldor who saw their predicted fears become true when it was applied -- see section C.Cool. Hopefully by analysing the myths of capitalist economics we will aid those fighting for a better world by giving them the means of counteracting those who claim the mantle of "science" to foster the "economics of the rich" onto society.
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PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 3:13 am

To conclude, neo-classical economics shows the viability of an unreal system and this is translated into assertions about the world that we live in. Rather than analyse reality, economics evades it and asserts that the economy works "as if" it matched the unreal assumptions of neoclassical economics. No other science would take such an approach seriously. In biology, for example, the notion that the world can be analysed "as if" God created it is called Creationism and rightly dismissed. In economics, such people are generally awarded professorships or even the (so-called) Nobel prize in economics (Keen critiques the "as if" methodology of economics in chapter 7 of his Debunking Economics ). Moreover, and even worse, policy decisions will be enacted based on a model which has no bearing in reality -- with disastrous results (for example, the rise and fall of Monetarism).

Its net effect to justify the current class system and diverts serious attention from critical questions facing working class people (for example, inequality and market power, what goes on in production, how authority relations impact on society and in the workplace). Rather than looking to how things are produced, the conflicts generated in the production process and the generation as well as division of products/surplus, economics takes what was produced as given, as well as the capitalist workplace, the division of labour and authority relations and so on. The individualistic neoclassical analysis by definition ignores such key issues as economic power, the possibility of a structural imbalance in the way economic growth is distributed, organisation structure, and so on.

Given its social role, it comes as no surprise that economics is not a genuine science. For most economists, the "scientific method (the inductive method of natural sciences) [is] utterly unknown to them." [Kropotkin, Anarchism, p. 179] The argument that most economics is not a science is not limited to just anarchists or other critics of capitalism. Many dissident economics recognise this fact as well, arguing that the profession needs to get its act together if it is to be taken seriously. Whether it could retain its position as defender of capitalism if this happens is a moot point as many of the theorems developed were done so explicitly as part of this role (particularly to defend non-labour income -- see section C.2). That economics can become much broader and more relevant is always a possibility, but to do so would mean to take into account an unpleasant reality marked by class, hierarchy and inequality rather than logic deductions derived from Robinson Crusoe. While the latter can produce mathematical models to reach the conclusions that the market is already doing a good job (or, at best, there are some imperfections which can be counterbalanced by the state), the former cannot.

Anarchists, unsurprisingly, take a different approach to economics. As Kropotkin put it, "we think that to become a science, Political Economy has to be built up in a different way. It must be treated as a natural science, and use the methods used in all exact, empirical sciences." [Evolution and Environment, p. 93] This means that we must start with the world as it is, not as economics would like it to be. It must be placed in historical context and key facts of capitalism, like wage labour, not taken for granted. It must not abstract from such key facts of life as economic and social power. In a word, economics must reject those features which turn it into a sophisticated defence of the status quo. Given its social role within capitalism (and the history and evolution of economic thought), it is doubtful it will ever become a real science simply because it if did it would hardly be used to defend that system.



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Neo classical economics debunked forever ! Empty
PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitimeFri May 16, 2008 2:44 pm

http://william-king.www.drexel.edu/top/prin/txt/marx/apxtoc.html

This is an excellent intro to marxian economics.

Just don't read the part about the transformation problem.
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Neo classical economics debunked forever ! Empty
PostSubject: Re: Neo classical economics debunked forever !   Neo classical economics debunked forever ! Icon_minitime

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