The Big Issues: Economics for flourishing Part 1

Update: I originally published these three articles as a single, unreadably long post - To show more respect for my readers, and to try enforce some self-discipline, I have now broken it into separate, and I hope more digestible parts...

I've been struggling for a while to find the right angle to express my Sustainable Human Flourishing-related concerns about Chicago school neoclassical economics - (Note: If those words mean nothing to you, then you should look into it a bit, because this is the school of macroeconomic thought that pretty much runs the world today.)

Noah Smith has saved me from an important part of that struggle with this brilliant post, in which he expresses some very valid concerns on the widely debated topic of whether modern economics is a science (there are some stellar follow-up comments too). I've recently started following Noah because he seems to be a rather clever economics (almost) grad who eloquently expresses many of the same concerns I've heard in various forms from other younger generation economists. Some great quotes from Noah's post include:

Now, far be it from me to argue with the Oxford English Dictionary. But I contend that the real question here is substantive, not semantic. Whether or not an object is an "airplane," the important question is whether it flies. And whether or not economics is a "science," the important question is whether or not it discards its bad ideas.

and...

What bothers me is that the economics profession, as a culture, does not always insist that the testable models be tested and discarded. When enough economists ignore the facts and keep believing in models that can and should be discarded, then even though economics is procedurally a science, culturally it is not behaving like one. 

I can't agree with Noah more - If we look at this by example then the contrast between real science and economics could not be more stark. First, an example from classical science:

Exhibit A) Just last week, we heard from scientists at CERN who, with the OPERA experiment, seem to have disproved one of the most deeply cherished tenets of modern physics - after a multi-year, multi-billion dollar experiment involving hundreds of the top scientists on the planet, they might just have succeeded, quite unexpectedly, in breaking the speed of light!

What do real scientists do when faced with such "success"? They literally beg other scientists to help them prove that they are wrong!


Now, on the other hand, we have an example from the "science" of economics. This example is just as significant but probably a lot more real to most readers:

Exhibit B) The extended global economic crisis of 2008 that we all continue to live through... This crisis is the result of systemic failures in the "scientific" models developed by neoclassical economists.

So, what do we hear from the "scientists" responsible for those models? Krugman puts it very nicely

"When I look at a lot of what prominent economists have been writing in response to the ongoing economic crisis, I see no sign of intellectual discomfort, no sense that a disaster their models made no allowance for is troubling them; I see only blithe invention of stories to rationalize the disaster in a way that supports their side of the partisan divide."

Let me try to use an analogy here that I hope will become more apposite when I revisit it below - thousands of people around the world are making it their life's work to try prove that creationism is fact. This does not make creationism a science. It makes it mass wishful thinking. Creationism would become a science if thousands of people made it their life's work to disprove it, and all failed to do so.

Is there any wonder that there are so many comparisons made between neoclassical economic ideology and religious ideologies? With their dogged wishful thinking that their models are ok, despite the evidence, too many economists are behaving like creationists, not like scientists.

In the next part of this post, I'll explore an even more important concern about the current global economic system, and start what I hope will be an extended exploration of an alternative system...