a flickering candle

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By ELEUTÉRIO FS PRADO*

Commentary on the theses of the group “Economics for inclusive prosperity”

From the outset, it is necessary to welcome (with some irony, it is confessed) the fact that another dissonant voice has emerged within the North American academy formed by economists, which is in fact dominated by an overwhelming unitarism. It is, however, a faltering candle in an immense darkness. Here it will be shown what it consists of without abdicating the right to severe criticism.

And it begins with the title: it is clarified that the prefixes “pós” and “pre” do not indicate historical positions there, but positions in the field of contemporary economics which, in one way or another, still insists on calling itself Economics – thus abjuring the term Political Economy favored by classical economists. Reference is thus made to a group of center-left economists who are currently meeting under a banner that they themselves call Economics for inclusive prosperity (that is, Economics for Inclusive Prosperity – or EfIP). As this initiative considers itself post-neoliberal and as, moreover, it claims to be in a morally superior position to that more common in the tradition in which they are inserted, it will be designated here as EPI.

One can court a demand for inclusive prosperity in the face of actually existing prosperity, which has been recognized as cruelly discriminatory. However, this assessment says nothing about the theories that support such alternative economic policies. For what matters is whether such theories are true or false. For example, marginal utility theory can support a proposal to improve income sharing. Even if this improvement is very desirable, it is not admissible to support this theory any longer, since, as has been known since Walras, the proposition that real people maximize utility is false. Neoclassical theory, moreover, as is also known, is logically inconsistent: it defines prices by equilibrium, but the dynamics of tatonnement does not guarantee that equilibrium can be achieved.

Neoclassical theory is kept intact in the field of Economics not by ideology, at least in the sense of a belief that favors certain interests. In fact, it opens up some space for the expression of diverse interests. But because of a subconscious or even unconscious horror of the truths about capitalism that the labor theory of value created by classical economists had already revealed to their time. Both with regard to the misery and exploitation of workers, but also with regard to anarchy and propensity for crises, both inherent in this economic system. One prefers to see only, for example, the progress and prosperity that he was able to produce at least until recently.

And the progressive character of capitalism was also accentuated by Karl Marx in the mid-nineteenth century. But he didn't stop showing his contradictions and his perverse tendencies. Under this system, wealth grew like never before, but its evolution also left a trail of violence, sacrifices and poverty under the cover of a de facto anti-humanism.

A manifesto of this association was published, in 2020, in the magazine nota 10 with distinction and praise of American Economic Association [1], totally dominated by neoclassicism. It says that the EPI initiative aims to “provide a complete vision of economic policy, which presents itself as a genuine alternative to market fundamentalism”. The latter, he alerts, tends to be identified frequently – but wrongly, as he says – with contemporary economic knowledge as a whole; behold, according to her, there are more things between earth and heaven in the field of economics. Thus, it is worth noting right from the start that the participants in this new current continue to embrace the technocratic knowledge that is sheltered under the label of Economics.

The motivation of the authors of this manifesto is clear: “we live today in an era of astonishing inequality, sustained by an oligarchic policy”. In addition, according to them, there remain “inefficiencies in key sectors such as education, finance, health, social media, as well as a spectacular climate crisis”. Now, they believe that all these are solvable problems within the current “market economy”, just by changing the institutions within which it survives. Such inefficiencies, it should be noted, are pointed out and calculated based on an ideal market economy – idealized, platonic – that the neoclassical theory itself supposedly provides.

The common pragmatic orientation of this initiative must also be clear; they don't want to revolutionize economic theory like John M. Keynes did in the 1930s. They don't want to create a more general and deeper theory; in the case of this author, he wanted to theoretically recover what everyone has always known, that is, that capitalism endogenously generates involuntary unemployment.

The goal maintained by them seems to be much more modest: there is, as they say, “a consensus on the need for a genuine alternative – a set of policies that are both effective and inclusive, that respond to legitimate grievances without sowing divisions in society”. ”. And here something important transpires. The state of dissatisfaction of a large part of American workers, the great recent political demonstrations in the United States, seem to be the underlying causes, pre-conscious and even unconscious, of this initiative. Perhaps they fear the outbreak of a spontaneous revolution in the heart of liberal-democratic society, which, as we know, is very liberal but not very democratic in fact.

In any case, they recognize that the economy is going through a crisis of legitimacy; since Milton Friedman and Friedrich Hayek, it has undoubtedly adopted a reactionary agenda, even fueling the policies of totalitarian dictators. Or allying with proto-fascist politicians. On the face of it, they wish to walk a different path. They also believe that it is necessary to contain the deterioration of the economic system itself, which is increasingly iniquitous.

But this crisis is not, according to them, of economic theory as such. Here is what they say: “many of the politically dominant ideas of the last few decades do not even find support in good theory (sound economics) nor on good empirical evidence (good evidence). “Neoliberalism – or market fundamentalism, market fetishism, etc. – is not consistent with the application of modern economics, but with its simplistic and primitive perversion”. If so, then it suffices to articulate a more complex and more modern version of the received theory without contesting its fundamentals. It will be? Just introducing more and more empirical tests? Or not?

Well, they recognize that the economists' discourse is forged on the foundations of mathematics and not of economic reality as such. In this sphere, only discourse that is qualified by form – and not by content, and not by veracity – is seen as scientific. Such modern scholastics consequently despise qualitative analyzes and arguments presented in ordinary language. On the ground floor, economics students who make an effort to learn this techno-normative knowledge dismiss “the economy of blah blah blah” like bewildered ants. However, the promoters of this new initiative – or startup academic – also intend to “unmask the anti-economic stereotypes found on the left”.

Furthermore, they recognize what Joseph Schumpeter called “Ricardian vice”, that is, the practice of using simplified models to draw conclusions – and make economic policy recommendations – supposedly valid for a much more complex world. “Economists” – they say – “are often enamored with models that focus on a restricted set of variables (…) at the expense of potential complications and adverse implications”.

However, without fear of falling into a patent mystification, especially for those who are not economists, they claim that “economic science” is a knowledge that is uncompromised with the continuity and functioning of capitalism: “despite the bad habits, the contemporary economy is not a mere pawn of markets and selfish interests”. Here, in short, is that it is also concerned – according to them – with “market failures”. Well, that's because they want to adjust the supposedly imperfect real world to the perfection of an ideal market that only exists in the minds of economists themselves. And even when economists are concerned with income sharing and unemployment, they do so in the name of preserving capitalism, that is, the system that inexorably and endlessly creates poor income distribution and unemployment.

The fragility of these “innovators” arguments is really impressive; behold, they do not hesitate to fall into fragrant performative contradictions. However, the heart of the problem with this proposal and with its “novelty” lies in the way of understanding scientificity in general. They begin by asserting peremptorily that the “science of economics never produces predetermined political conclusions. In fact, all of its predictions and conclusions are contingent.” It will be? Now, this last statement is not true: the technonormative knowledge that is called Economics consists precisely in building “castles in the clouds” – mathematically, of course – precisely because they issue to regulate the real world exactly the “edicts” that they want to issue. , that is, economic policies that favor the development of capitalism – eventually under the more pleasant name of “inclusive prosperity”.

A test? Do readers of this note want proof? It is precisely they themselves who provide this demonstration. Here is what they quote, by the way, with enthusiastic approval (sic!), from another economist of the same technocratic species to which they belong: “nowadays, any brilliant graduate student, choosing his assumptions (…), carefully of course, can produce a consistent model that generates whatever policy recommendations it favors”. How, is that right?! Now, what they reply is not merit, but, on the contrary, consists precisely in the problem.

This kind of pragmatic “scientificity”, by the way, can only dominate in a world governed by money. There is some doubt that economic policy recommendations themselves are often sold for money – and even when this does not happen directly – there is an entire system of incentives that largely corrupts scientific scholarship in economics. Are you bothered by this situation? There are, but they are exceptions and they live in academic ghettos within departments or are expelled from them as soon as possible. Most economists prefer the comfortable shelter of capitalist institutions.

In a real science, practitioners cannot choose their assumptions so and following the best practices; they have to justify them with reality, thus maintaining a strict commitment to the truth even if it is difficult to find, subjecting themselves to the best human values. Scientific conjectures cannot have the character of “heroic” idealizations, as occurs in the current world of economists, a true pull from the modern kingdom of Hades – god of wealth who governs the world in silence, but with the greatest cruelty whenever necessary from his point of view.

It cannot be said, however, that they do not know this. Having understood “scientificity” in economics as instrumental, as a product of instrumental reason and the manipulation of the world and therefore uncompromised by realistic assumptions, they preserve themselves by saying that “research in economics has become significantly more empirical and applied since the 1990s”. nineteen ninety". Only now! Only when large databases became available! Can empiricism save the constructive idealizations that best suit the practical-utilitarian purposes of economists?

Well, according to them, “this is important because the systematic search for empirical evidence is a device that runs counter to ideological political prescriptions”. Well, that is not true either. And this they also know since they put in a footnote that empirical evidence is never decisive. Well, what is really decisive is a fearless critical spirit that does not give in to any sacrifice to tell the truth and that despises the power of money and its train of advantages and rewards.

In the EPI manifesto reviewed here, there is not a single reference to social classes and the so-called functional distribution of income. There are only references to the poor distribution of income received by individuals and families and to unemployment, which, however, do not repeat what is found, for example, in John Stuart Mill and John Maynard Keynes – because they do not have the same frankness and their same strength.

As is known, in the preface of the Principles of Political Economy and Taxation, David Ricardo wrote: “at different stages of society… the proportions of the total product… allotted to each of these classes, under the names of rent, profit, and wages, will be essentially different… to determine the laws which regulate this distribution is the main question of Political Economy”. Well, that's exactly where the title of this note came from: post-neoliberals, but pre-Ricardians. But perhaps it is precisely this kind of approach, which was adopted even by right-wing political economists in classical times, that they see the origin of the “anti-economic stereotypes found on the left”!

* Eleutério FS Prado is a full and senior professor at the Department of Economics at USP. Author, among other books, of Complexity and praxis (Pleiade).

 

Note


Naidu, Suresh, Rodrik, Dani; and Zucman, Gabriel – Economics after neoliberalism: introducing the EfIP Project”. “Papers and Proceedings”, American Economic Association, 2020, p. 366-371.

 

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