Economics as Ideology

One of the more interesting developments to emerge out of the current crisis is the growing recognition among prominent economists that the discipline has either failed to address the pressing issues of the day (by either not anticipating the crisis or failing to offer appropriate solutions) or been caught in an ideological milieu that has prevented one faction of the discipline (called freshwater economists by Krugman) from breaking away from its commitment to free market fundamentalism. The other faction, the saltwater economists of which Krugman is a member (indeed, he coined the terms freshwater and saltwater economists), have at least pierced the veil and developed models that do a better job of mimicking the economy; providing them with the ability to offer better policy prescriptions. Yet, despite the evidence supporting saltwater over freshwater prescriptions, it has become frustratingly obvious that the political system gravitates to solutions that are more compatible with freshwater views.

Why is it that very serious people (to use Krugman’s apt phrase) generally dismiss Keynesian solutions while accepting as self-evident the need for austerity? Worse yet, how could saltwater economists continue working with models that clearly clash with the evidence?

Mark Thoma has argued that part of the reason for this frustrating state of affairs is that there has been a great disconnect between the discipline and public discourse; and at the core of this disconnect has been the growing mathematical formalism of the discipline. The abstract nature of formal economics, such as the DSGE or RBC models, have made it difficult to translate these ideas into understandable every day terms. But, in addition, this trend has been aided by the discipline’s desire to be scientific, the timidity of economists to comment on normative issues due to their commitment to positive economics, a disciplinary sociology that rewards theorists over data grubbers, and a difference in focus between academic economists and policy wonks. As a result of this constellation of forces, a vacuum has been created that has allowed charlatans and cranks, instead of thoughtful (saltwater) economists, to fill the void in public debate. The way out of this dilemma is through greater public engagement; the more that economists engage in public debate (as is already occurring through the growing presence of economics blogs), the greater the likelihood that charlatans will recede into the background, allowing more thoughtful economists to dominate public discourse.

While I agree that public discourse would improve if there were greater participation by economists of the non-charlatan variety, the problem is that such participation would require a different type of political structure, one that’s not beholding to corporate interests, and a correspondingly different type of media, one that’s not owned by corporate interests. What’s more, the conversation would have to provide a greater voice to not only saltwater types but Heterodox Economists (Post Keynesians, Radical Political Economists, Feminist Economist and Institutionalist – of the original sort) who have been making far more pointed critiques of the discipline and capitalism for a much longer period of time, but have been dismissed by mainstream economists and ignored in public discourse. More importantly, I don’t think saltwater economists appreciate the extent to which the discipline is indeed engaged in public discourse, and that rather than being disconnected from public debate is instead the biggest contributor of beliefs that structure political dialogue in capitalist societies.

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About Mayo Toruño

Professor of Economics, Emeritus California State University San Bernardino
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