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January 21, 2005

Anti-Economics: As Dangerous as the Guillotine?

Posted by William Coleman

Anti-Economic thought can be found represented in all the main ideologies. It is also rampant in the thinking of the environmentalist and anti-globalisation movements. Dr William Coleman - the author of Economics and its Enemies: Two Centuries of Anti-Economics - will be providing a regular analysis of anti-economics for the Social Affairs Unit.

On June 27 1794 Simon-Nicolas-Henri Linguet was tried by the Revolutionary Tribunal of France. His crime? A supposedly treasonable correspondence between himself and King Louis XVI. His sentence? To be guillotined, immediately. Thus the Terror annihilated a strange man of diverse and sometimes dangerous talents: poet, playwright, thief, theorist, renegade lawyer, rogue journalist, and escapee. But the chief remembrance to which Linguet is entitled is quite different. On account of his crazed pursuit of the French economic liberals during the 1760s and 1770s, Linguet may be described as the world's first anti-economist – or anti-économiste as he described himself.

Linguet provided a vivid archetype of the anti-economist that has been incessantly reproduced in the two centuries since.

But what is an anti-economist? The anti-economist is he who sees economics as a bane. Economics is harmful; it is "pernicious". No germ of good can be found within. No value can be salvaged from it. It contains no rudiment of insight; it is "dead", "bankrupt", "collapsed". The world would be better off without it. Therefore, its teachings should be discredited, its honours abolished, its representatives barred from public institutions, its institutional identity effaced, its centres of propagation encumbered or eliminated.

To further these ends the anti-economist is addicted to the searching examination of the doctrines and method of economics that, they believe, will destroy the credit of economics. Anti-economics has, therefore, proliferated critiques and "anti-texts": the critical examination of economics that supposedly proves its worthlessness. If anti-economics is hostility to economics, then what anti-economics does is produce critiques.

The critique of the anti-economist must be distinguished from criticism of economics. We all criticise economics, and should do so. Economics finds the world surprising, and is in need of criticism - good criticism. It has only grown because of criticism – good criticism. But the critique of the anti-economist does not want to "grow" economics, it wants to destroy it, and all their "criticism" is subservient to that end. As the author of Against Economics, Rajani Kanth, put it:

"the point … is not to criticise economics endlessly, but to dispense with it altogether".
The same sentiment is expressed by Hazel Henderson when she demands that economics must "simply be swept away".

However extreme these attitudes may appear, anti-economics is not the preserve of the solitary author or the obscure sectarian. Anti-economics has proved itself an excellent conductor of modern history's powerful ideological charges: socialism, liberalism, nationalism, conservatism, radicalism, humanitarianism, moralism. All these incongruent doctrines have proved capable of emitting phosphorescent anti-economics. Anti-economics is also well represented amongst the rival wisdoms of our times: environmentalism, managerialism, feminism, and, emphatically, the convulsion against globalisation. It – inevitably! – claims its own academic journal (The Post-Autistic Economics Review) which boasts 7,702 subscribers in approximately 150 countries, and which is thoughtfully supplied by its publishers to myself.

Anti-economics is now the western world's leading demonology of the intellect. It even overshadows anti-psychiatry, and the ritual denunciations of "positivism" amongst critics of science.

But does anti-economics matter? Is it ever likely to succeed in its ambitions? Might it be prudent policy to let these asses bray, while the rest of us carry on unperturbed.

I want to put the possibility - not the likelihood, but the genuine possibility - that anti-economics could succeed. I want to put the possibility that economics - real economics – might die. Why do I say this? Because real economics has died before.

Consider the society that in 1870 had:
• the largest population of any Western country;
• the largest and densest academic system of any country; and
• had over the preceding 40 years made distinguished contributions to economic theory (including marginal utility theory, marginal productivity theory, and the first supply and demand schedules ever drawn).

That country is Germany. But despite the strength of its heritage in economics, from the time of the formation of German Empire in 1870, economics (as it is ordinarily understood) died. It was replaced by the German Historical School of Economics (GHS), led by Gustav von Schmoller, who could claim after a period of time that the appointment of any "Smithian" in the German University system was impossible.

Repudiating all theory, the Historical School dedicated itself to eliminating "Smithianismus" and "Manchesterismus", and providing rationalisations for the cartelisation of industry and the establishment of protection. They were keen advocates of "social welfare" programmes to preserve cohesion of the new state. They also eagerly lent themselves to the collection of colonies in Africa and the Pacific, and the construction of a massive naval fleet. Giving something to everyone, German lecture theatres were flooded with students keen to absorb the economic wisdom of the Historical School of the day.

The hostility of the Historical School to theory amounted to a program of intellectual disarmament. Did Germany suffer? Not immediately. Between 1871 and 1910 real GDP per head grew a more than respectable 73 percent. (Protectionists should note that Germany did not grow as much as Sweden. With a distinctly less protectionist policy, Sweden experienced a real GDP growth per head of 117 percent over the same period.) But economics – like medicine or dentistry – proves its value best, not in the easy times, but the difficult ones. The GHS amounted to a piece of intellectual disarmament, and this had two catastrophic consequences after 1914. The German hyperinflation of 1922-23 is directly attributable to the precepts of Historical School that had "proved" the falsehood of what we call "monetarism". The ineffectiveness of German economists in dealing with the Great Depression is also attributable in part to the intellectual impoverishment of the Historical School. The most effective responses to the Depression, recall, came from the centre of mainstream economics, in Cambridge.

Germany paid for its anti-economics in material terms. And perhaps it paid in other terms. For the costs of damaging the credit of economics will never be purely material. Economics is built on premises that have a far wider remit than the simply material. These premises include; the oneness of human kind; the value of rationality, utility, freedom; the strong likelihood that each person is the best judge of their interest. Damage these premises, throw them away, or cover them with doubt and derision, and it is not just a lower GDP that is in prospect. Anti-economics may yet be as dangerous as the guillotine.

Yet anti-economics is usually shrugged off, often condoned, occasionally humoured, and sometimes even indulged, by both economists and non-economists alike. These responses bespeak of a complacency about the destructive potential of nonsense in the modern world; one that ill befits anyone with a knowledge of the modern world. Anti-economics is a pathology that deserves scrutiny. For the past decade a leading interest of mine has been the exploration of this pathology. Over the next 12 months I would like to report in this column some of what I have found.

Dr William Coleman is Senior Lecturer in Economics at the Australian National University and the author of Economics and its Enemies: Two Centuries of Anti-Economics, (Palgrave Macmillan, 2002).


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Why not start with clear and comprehensive definition of anti-economics?

Posted by: anti-blaberist at January 27, 2005 05:18 PM
•••

I have to disagree with the last comment. Prof. Coleman does clearly define anti-economics:
"The anti-economist is he who sees economics as a bane. Economics is harmful; it is "pernicious". No germ of good can be found within. No value can be salvaged from it. It contains no rudiment of insight; it is "dead", "bankrupt", "collapsed". The world would be better off without it. Therefore, its teachings should be discredited, its honours abolished, its representatives barred from public institutions, its institutional identity effaced, its centres of propagation encumbered or eliminated.

To further these ends the anti-economist is addicted to the searching examination of the doctrines and method of economics that, they believe, will destroy the credit of economics. Anti-economics has, therefore, proliferated critiques and "anti-texts": the critical examination of economics that supposedly proves its worthlessness. If anti-economics is hostility to economics, then what anti-economics does is produce critiques."

Posted by: Jane at January 27, 2005 06:04 PM
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I have to like the comment made by The Angry Economist at his site.
You may ignore Economics but Economics ain’t going to ignore you.
Looks like this series could be very interesting.

Posted by: Tim Worstall at January 28, 2005 11:30 AM
•••

The results of anti-economics of the German experiment changed
the world for all to see but when the US gets finished with
their anti-economics we'll all be dressed in burlap sacks
sporting wooden hoes in our little garden plots, trying to survive.

Money laundering laws will be some of the prime culprits.

Endless thievery in the form of taxes will top the list.

Posted by: jomama at January 29, 2005 03:03 PM
•••

Hogwash.

The German response to the great depression had little or nothing to do with the supposed dearth of economic theorists of a neoclassical variety in that country. With just a little reading you would know that there were many German marginalist economists working in Germany between 1900 and 1940--Dietzel, Conrad, Wagner, Eucken and Schumpeter come to mind (the latter holding a professorship at Bonn in the 1920s). So these are simply fairy tales retold ad nauseam by economists who wished they had some relevance for the world. F.A. Hayek was particularly keen to retell these stories. The fact remains that it was heterodox thinking (and in the case of the Nazis) willful and ruthless disregard of economic "fundamentals" (i.e., guns and butter) that ended the depression in Germany. As Keynes himself later observed, Germany was the first country to recover from the depression. The Brüning government which preceded the Nazis was committed to the very orthodox remedy of deflation between 1930-33, one that Hayek himself prescribed to his own great later embarrassment (he never forgave Keynes for getting this right). One of the last countries to pull out of the depression was France, then also pursuing a policy defending gold convertibility of the franc. Economics as it is currently taught is the naked emperor of the social sciences. Have a look at Roger Middleton’s “Charlatans of Saviours” or Steve Keen's “Debunking Economics” if you're not convinced. Neoclassical economics is in a deep intellectual funk, one that‘s terminal I’m afraid. There is an inverse relationship between higher education in economics and economic performance. Britain bwteeen 1890 and 1990 is a case in point. An endless retinue of highly-respected economists advised various British governments in these years (Edgeworth, Pigou, Marshall, Beveridge, Robins, Hicks etc.) and yet the British drove their economy into the ground. By comparison, Germany did rather better, perhaps because neoclassical and Keynesian economists were kept at arms length from the levers of power. Economics as a discipline is completely irrelevant to technological change, wealth creation and overall material prosperity.

The real mystery is how such smart people (economsits) can engage in something as intellectually sterile and irrelevant as neoclassical economics. A clue is provided by the economist
Bernard Guerrien:

"the problem is not with econometrics – or the “realism” of its statistical assumptions; it is with the “social structure” that Lucas and others suppose, in their models, as they reduce the whole economy to a “representative” agent’s choice – or to a “young” choice in an overlapping generations model. This obviously is nonsense, as it is also to discuss econometric tests about these models (even if you obtain R² = 0,99999). The same can be said about “Real Business Cycle” and “Computable General Equilibrium” models. The question is, again: how such intelligent people can propose – and endlessly study – such stupid models? I only see one reason for that: ideology (intuitive beliefs which render them blind). Here, the belief alluded to is that “market mechanisms” (whatever that may mean) produce “efficient” results – if you abstract from “frictions”, “failures”, etc." (Guerrien," Irrelevance and Ideology" see http://www.paecon.net/PAEReview/issue29/Guerrien29.htm

Posted by: Eckeman at November 20, 2005 12:40 PM
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I can somewhat see parallels between the development of physics and the development of economics. Neoclassical economics is the economics equivalent of Newtonian mechanics, and perhaps there are those seeking to replace it with a Quantum Mechanics. But perhaps classical economics is Newton and neoclassical is quantum...

Posted by: arkayz bible at November 23, 2005 12:56 AM
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