Category Archives: Economics

Evidence Based Economics

When one has worked one’s entire career within the framework of a powerful paradigm, it is almost impossible to look at that paradigm as anything but the proper, if not the only possible, perspective one can have on (in this case) biology. Yet despite its great accomplishments, molecular biology is far from the “perfect paradigm” most biologists take it to be. This child of reductionist materialism has nearly driven the biology out of biology. Molecular biology’s reductionism is fundamentalist, unwavering, and procrustean. It strips the organism from its environment, shears it of its history (evolution), and shreds it into parts. A sense of the whole, of the whole cell, of the whole multicellular organism, of the biosphere, of the emergent quality of biological organization, all have been lost or sidelined.

(Woese, Carl R. (2005, 101) Evolving Biological Organization. In Microbial Phylogeny and Evolution: Concepts and Controversies (Jan Sapp, ed.). Oxford: Oxford University Press.)

“Whether you can observe a thing or not depends on the theory which you use. It is theory which decides what can be observed” (Albert Einstein speaking to Werner Heisenberg during his 1926 Berlin lecture, quoted in Salam 1990).

Edward Fullbrook (2016, 3) Narrative Fixation in Economics

It is essential to recognise here that the alternative to an explicit philosophy of science is not an absence of philosophy. Rather, it is an implicit and often bad philosophy. And, whatever may be the theoretical or substantive orientations of contemporary economists (whether econometricians, axiomatic-deductive theorists, hermeneuticists, and so on) their practices are all underpinned or informed by (competing) science-oriented philosophies of some sort. Of course, much of this is often tacit or unacknowledged, and it may be in contradiction with other beliefs. But it is precisely because of this that philosophical analysis can go to work. There is always the possibility that explicit methodological investigation of scientific practice, or other social forms, can make a contribution by rendering explicit some knowledge that is already implicit but unrecognised, and perhaps, in the reporting of economists (or whoever), openly contradicted. As Kant argued it is a function of philosophy to analyse concepts which are already given but confused.

(Lawson 2005, 44, Economics and Reality)

Michael Joffe uses a complementary, comparative approach, examining theory development in the natural sciences from a historical perspective to generate insight into how other fields of science use diverse types of evidence combined with causal hypotheses to generate empirically based causal theories. Using the history of natural science (i.e., germ theory, plate tectonics, money and banking, growth of the state, etc.) the goal is to learn useful methodologies for theory development. (Joffe 2017, 1, Abstract)

The history of natural sciences provides exemplars of how to develop causal theories based upon multiple sources of evidence and can be useful as a guide in reforming economics. One element of good scientific practice is cross-disciplinary, comparative perspective using a bottom-up focus on the actual practice of scientists. (Joffe 2017, 2-3, Introduction)

Empirically informed causal theories are developed over time, incrementally, and have an ontic rather than an epistemic focus. They place an emphasis on the role of evidence of multiple interlocking kinds (qualitative and quantitative, experimental and observational) in a dynamic iterative process in which diverse types of evidence are considered in light of hypotheses and theory production utilizing a full range of styles of reasoning. Where contextually appropriate, they use empirical research including experimental, observational, and historical analysis. For example,

The way that the correct description of the money-generating mechanism was achieved was by the patient documenting of what actually happens in the financial system, describing how banks really behave (Joffe 2017, 8).

Another example of theory development based on systematic empirical work is a two-volume study of the growth of the modern state (Lindert, 2004). This describes the growth of the state qualitatively and quantitatively in each of the major countries that developed rapidly after the industrial revolution, together with an analysis of the causal factors in that country. It then provides an over-view of the forces behind state growth, while acknowledging the between-country heterogeneity. Thus, it encompasses description, generalisation and explanation, as well as the limits to generalisation imposed by factors specific to each country. This use of comparative economic history is a good model for developing theory, not least because it ensures that any explanation or suggested causal mechanism corresponds to the spatial and temporal patterns that actually occurred, as well as paying attention to specific factors that may have been present in certain countries. (Joffe 2017, 8, emphasis added)

Theory can become a barrier to causal understanding when it becomes myopic; instead of seeing the world as it is, the scope of what can be examined and seen is determined by the dominant theoretical perspective—its starting point is epistemic (axiomatic) not ontic (Joffe 2017, 9). In such situations what can be studied and observed become restricted by philosophical and/or methodological presuppositions. “Economics analysis should be data-first not theory-first (Juselius, 2011).” When substantive (obvious) knowledge is ignored and not incorporated into theory development to maintain either theory or model “purity” of the axiomatic deductive methodology this is frequently done to maintain an implied universality of stories/models of human behavior even in the face of obvious evidence that shows fundamental dissimilarities between different types of economic systems. The purity of the theory must be maintained so it can be explained in terms of universal human attributes or other postulated attributes of human behavior regardless of how unrealistic such postulates are in the real world. An example of such theory induced blindness can be seen in certain economists search for micro foundations akin to physics (Joffe 2017, 9):

Thus, there is a danger that bad theory can be protected by the co-existence of substantive knowledge by “theory” that does not incorporate it. An important instance is the idea that any macro concept, such as that of economic growth, requires “micro-foundations.” (….)  The insistence on the need for micro-foundations is held by many economists, but the “news” that growth has had a specific spatial/temporal distribution is not news to them—and therefore it would not be accepted as evidence against the theory. (Joffe 2017, 10)

Addelson similarly notes:

The language of economic theory, like any language provides a framework for thought: but at the same time it constrains thought to remain within that framework. It focuses our attention; determines the way we conceive of things; and even determines what sort of things can be said…. A language, or conceptual framework is, therefore, at one and the same time both an opportunity and a threat. Its positive side is that (one hopes) it facilitates thought within the language or framework. But its negative side arises from the fact that thought must be within the framework. (Coddington 1972: 14-15) (Addelson, Mark. Equilibrium Versus Understanding [Towards the Restoration of Economics as Social Theory]. London: Routledge; 1995; p. 12)

The “conventional starting point” for neoliberal and even some heterodox economics is a top-down axiomatic deductive methodology. Joffe (2017) proposes an evidence-based bottom-up approach in which theories are generated from evidence rather than based on a story or parable about universal human behavior and/or upon hypothetical stylized behavior (i.e., axiomatic deductive methodology). Neither just-so story telling and/or axioms of universal human behavior start with observations of actual occurring processes of observed human behavior. Such abstractions are derived from axioms not observed human behavior and therefore have limited scope and applicability since they don’t take into account actual historical context of time and place.

A different approach is to study human behaviour as it is, e.g. truth-telling (Abeler, Nosenzo, & Raymond, 2016) and cooperation and altruism (Rand, Brescoll, Everett, Capraro, & Barcelo, 2016). This has the potential for developing a theory of economic behaviour that is based on the heuristics people actually use, and to link this with an evolutionary account of the causal processes that led to their existence in our brains (Gigerenzer, Hertwig, & Pachur, 2011; Gigerenzer, Todd, & ABC Research Group, 2000). (Joffe 2017, 12)

Realistic theory can be derived from observations. Evidence, whether experimental or observational, is used in generating new theory. (Joffe 2017, 12) Lines of evidence can be combined. Evidence is diverse, qualitative and quantitative, historical and experimental, and strands of evidence can be combined and/or generate new insights with broad explanatory hypotheses in support of empirically informed theory.

This would be a natural way of developing conceptual categories that correspond to natural categories (“carving nature at its joints”) with strong ontic emphasis and focus on causation. A theory in this sense can also be said to be true or false—or perhaps better, that it is able to possess some degree of truth. (Joffe 2017, 12)

~ ~ ~

Joffe aspires for a value neutral practice of science that elevates evidence over bias, presuppositions, and prior beliefs. It requires discipline and sincerity to put these prejudices and biases aside and let the evidence lead one wherever it is heading. Just as evidence is the basis of fairness in any judicial context, evidence is also the basis of hypotheses generation in any scientist’s mind when endeavoring to generate theoretical understanding.

Bad Samaritans

After he had come to power in a military coup in 1961, General Park turned ‘civilian’ and won three successive elections. His electoral victories were propelled by his success in launching the country’s economic ‘miracle’ through his Five Year Plans for Economic Development. But the victories were also ensured by election rigging and political dirty tricks. His third and supposedly final term as president was due to end in 1974, but Park just could not let go.Halfway through his third term, he staged what Latin Americans call an x`‘auto-coup’. This involved dissolving the parliament and establishing a rigged electoral system to guarantee him the presidency for life. His excuse was that the country could ill afford the chaos of democracy. It had to defend itself against North Korean communism, the people were told, and accelerate its economic development. His proclaimed goal of raising the country’s per capita income to 1, 000 US dollars by 1981 was considered overly ambitious, bordering on delusional. (Chang, Ha-Joon. Bad Samaritans (p. 6). Bloomsbury Publishing. Kindle Edition.)

President Park launched the ambitious Heavy and Chemical Industrialization (HCI) programme in 1973. The first steel mill and the first modern shipyard went into production, and the first locally designed cars (made mostly from imported parts) rolled off the production lines. New firms were set up in electronics, machinery, chemicals and other advanced industries. During this period, the country’s per capita income grew phenomenally by more than five times, in US dollar terms, between 1972 and 1979. Park’s apparently delusional goal of $1,000 per capita income by 1981 was actually achieved four years ahead of schedule. Exports grew even faster, increasing nine times, in US dollar terms, between 1972 and 1979.4 (Chang, Ha-Joon. Bad Samaritans (p. 7). Bloomsbury Publishing. Kindle Edition.)

The country’s obsession with economic development was fully reflected in our education. We learned that it was our patriotic duty to report anyone seen smoking foreign cigarettes. The country needed to use every bit of the foreign exchange earned from its exports in order to import machines and other inputs to develop better industries. Valuable foreign currencies were really the blood and sweat of our ‘industrial soldiers’ fighting the export war in the country’s factories. Those squandering them on frivolous things, like illegal foreign cigarettes, were ‘traitors’. I don’t believe any of my friends actually went as far as reporting such ‘acts of treason’. But it did feed the gossip mill when kids saw foreign cigarettes in a friend’s house. The friend’s father – it was almost invariably men who smoked – would be darkly commented on as an unpatriotic and therefore immoral, if not exactly criminal, individual. (Chang, Ha-Joon. Bad Samaritans (pp. 7-8). Bloomsbury Publishing. Kindle Edition.)

Spending foreign exchange on anything not essential for industrial development was prohibited or strongly discouraged through import bans, high tariffs and excise taxes (which were called luxury consumption taxes). ‘Luxury’ items included even relatively simple things, like small cars, whisky or cookies. I remember the minor national euphoria when a consignment of Danish cookies was imported under special government permission in the late 1970s. For the same reason, foreign travel was banned unless you had explicit government permission to do business or study abroad. As a result, despite having quite a few relatives living in the US, I had never been outside Korea until I travelled to Cambridge at the age of 23 to start as a graduate student there in 1986. (Chang, Ha-Joon. Bad Samaritans (p. 8). Bloomsbury Publishing. Kindle Edition.)

(….) Korea’s economic ‘miracle’ was not, of course, without its dark sides. Many girls from poor families in the countryside were forced to find a job as soon as they left primary school at the age of 12 – to ‘get rid of an extra mouth’ and to earn money so that at least one brother could receive higher education. Many ended up as housemaids in urban middle-class families, working for room and board and, if they were lucky, a tiny amount of pocket money. The other girls, and the less fortunate boys, were exploited in factories where conditions were reminiscent of 19th-century ‘dark satanic mills’ or today’s sweatshops in China. In the textile and garment industries, which were the main export industries, workers often worked 12 hours or more in very hazardous and unhealthy conditions for low pay. Some factories refused to serve soup in the canteen, lest the workers should require an extra toilet break that might wipe out their wafer-thin profit margins. Conditions were better in the newly emerging heavy industries – cars, steel, chemicals, machinery and so on – but, overall, Korean workers, with their average 53–4 hour working week, put in longer hours than just about anyone else in the world at the time. (Chang, Ha-Joon. Bad Samaritans (pp. 9-10). Bloomsbury Publishing. Kindle Edition.)

Urban slums emerged. Because they were usually up in the low mountains that comprise a great deal of the Korean landscape, they were nicknamed ‘Moon Neighbourhoods’, after a popular TV sitcom series of the 1970s. Families of five or six would be squashed into a tiny room and hundreds of people would share one toilet and a single standpipe for running water. Many of these slums would ultimately be cleared forcefully by the police and the residents dumped in far-flung neighbourhoods, with even worse sanitation and poorer road access, to make way for new apartment blocks for the ever-growing middle class. If the poor could not get out of the new slums fast enough (though getting out of the slums was at least possible, given the rapid growth of the economy and the creation of new jobs), the urban sprawl would catch up with them and see them rounded up once again and dumped in an even more remote place. Some people ended up scavenging in the city’s main rubbish dump, Nanji Island. Few people outside Korea were aware that the beautiful public parks surrounding the impressive Seoul Football Stadium they saw during the 2002 World Cup were built literally on top of the old rubbish dump on the island (which nowadays has an ultra-modern eco-friendly methane-burning power station, which taps into the organic material dumped there). (Chang, Ha-Joon. Bad Samaritans (p. 10). Bloomsbury Publishing. Kindle Edition.)

Mathematics as Ornament

One of the founders of neoclassical economics, William Stanley Jevons, thought that economics should be a mathematical science, and this is why, even today, most neoclassical economists use a large amount of mathematics in their work. The father of rational expectations theory, Robert Lucas, claimed, in a lecture at Trinity University in 2001, that: “Economic theory is mathematical analysis. Everything else is just talk and pictures”. Motivated, among other things, by these positions, British philosopher of science Donald Gillies wrote an interesting article on the comparison of the use of mathematics in physics and in neoclassical economics. (Sylos Labini, Francesco. Science and the Economic Crisis (Kindle Locations 1788-1793). Springer International Publishing. Kindle Edition.)

Gillies first recalled that physicists have learned to critically consider each theory within the precise limits that are dictated by the assumptions used and by the experiments available. From the times of Galileo and Newton, physicists have, therefore, learned not to confuse what is happening in the model with what instead is happening in reality. Physical models are compared with observations to prove if they are able to provide precise explanations: an example of this type is represented by the procession of the perihelion of Mercury, which we discussed in the previous chapter. Otherwise, theoretical models can provide successful predictions. For example in 1887, Hertz generated the electromagnetic waves postulated by Maxwell in 1873. The question is therefore: can one argue that the use of mathematics in neoclassical economics serves similar purposes? Otherwise, this usage is reduced to a mere rhetorical exercise, which employs the flaunted use of a relatively refined tool to precisely calculate irrelevant quantities. Gillies’s conclusion is that, while in physics mathematics was used to obtain precise explanations and successful predictions, one cannot draw the same conclusion about the use of mathematics in neoclassical economics in the last half century. This analysis reinforces the conclusion about the pseudo-scientific nature of neoclassical economics we reached previously given the systematic failure of the predictions of neoclassical economists. (Sylos Labini, Francesco. Science and the Economic Crisis (Kindle Locations 1794-1804). Springer International Publishing. Kindle Edition.)

To show this, Gillies has examined the best-known works by a selection of the most famous neoclassical economists (Paul A. Samuelson, Kenneth J. Arrow, Gerard Debreu and Edward C. Prescott) in the period from 1945 to the present. The most famous work of Samuelson is one of the classics of mathematical economics, “Foundations of Economic Analysis”. Gillies notes that Samuelson, in his book of over 400 pages full of mathematical formulas, does not derive a single result that can be compared with the observed data. There is even no mention of any empirical data in the book Samuelson! (Sylos Labini, Francesco. Science and the Economic Crisis (Kindle Locations 1804-1808). Springer International Publishing. Kindle Edition.)

As for the seminal work of Kenneth Arrow and Gerard Debreu, published in 1954 and previously discussed, Gillies highlights that the general equilibrium models considered by the authors are based on such simplistic assumptions of reality that they cannot be compared with the observed data. In fact, as Samuelson, they do not derive any result that can be compared with the empirical data, which are indeed absent in their work. (Sylos Labini, Francesco. Science and the Economic Crisis (Kindle Locations 1809-1812). Springer International Publishing. Kindle Edition.)

Finally, Gillies takes into account the article by Edward C. Prescott called “The Equity Premium. A Puzzle”, written in collaboration with Rajinish Mehra. In this article, the authors try to compare the general equilibrium model of Arrow-Debreu with theoretical data obtained from a real economy, namely the US economy in the period 1889– 1978. In this case, there is no agreement between the theoretical results and empirical data. In conclusion, neoclassical economics, unlike physics, has not achieved either precise explanations or successful predictions through the use of mathematics. Thus, this is the main difference between neoclassical economics and physics. (Sylos Labini, Francesco. Science and the Economic Crisis (Kindle Locations 1812-1817). Springer International Publishing. Kindle Edition.)

Change is Coming

For more than a decade now, dissatisfaction with the state of economics as a discipline has been growing within its ranks. Much of it has been driven by students and young people who are increasingly aware of the many limitations of what they are being taught at universities across the world, and much more willing to challenge existing dogmas and power structures.

This book is the outcome of a collective effort by such young people, to identify more precisely the source of their unhappiness with the current state of economics and, even more importantly, to highlight how this state of affairs can be changed.

It highlights a wide range of problems within the profession including a lack of diversity and inclusion; harmful hierarchies between countries; a dominant paradigm that fails to address structural inequalities, whitewashes histories of oppression, and undermines democracy and development; and incentive structures that punish economists who seek to venture beyond this paradigm. By presenting these concerns in clear-eyed and courageous ways, it also provides much hope for the future of economics.

We know that much of this dominant paradigm in economics is simply wrong and is being continuously exposed as being wrong: from being over-optimistic about how financial markets work and whether they are or can be ‘efficient’ without regulation, to misplaced arguments in favour of fiscal austerity or the deregulation of labour markets and wages. Critical relationships between humans and nature that form the basis of most material production are dismissed as ‘externalities’. These are only some of the ways in which mainstream economic thinking is either irrelevant or downright misleading in understanding contemporary economic processes and useless or counterproductive in addressing humanity’s most important challenges.

One reason is that much of the mainstream discipline has been in the service of power, effectively the power of the wealthy, at national and international levels. By ‘assuming away’ critical concerns, theoretical results and problematic empirical analyses effectively reinforce existing power structures and imbalances.

Deeper systemic issues like the exploitation of labour by capital and the unsustainable exploitation of nature by forms of economic activity, of labour market segmentation by social categories that allows for differential exploitation of different types of workers, of the appropriation of value, of the abuse of market power and rent-seeking behaviour by large capital, of the use of political power to push economic interests including of cronies, of the distributive impact of fiscal and monetary policies – all these are swept aside, covered up and rarely brought out as the focus of analysis.

This is associated with strict power hierarchies within the discipline as well, which suppress the emergence and spread of alternative theories, explanations and analysis. Economic models that do not challenge existing power structures are promoted and valorised by gatekeepers in the senior ranks of the profession. Alternative theories and analyses are ignored, marginalised, rarely published in the ‘top’ journals, and obliterated from textbooks and other teaching materials. (Ambler, Lucy; Earle, Joe; Scott, Nicola. Reclaiming economics for future generations (Manchester Capitalism) (pp. 16-17). Manchester University Press. Kindle Edition.)

The disincentives for young economists to stray from the straight and narrow path are huge: academic jobs and other placements as economists are dependent on publications, which are ‘ranked’ according to the supposed quality of the journal they are in, in a system that demotes articles from alternative perspectives; promotions and further success in the profession depend on these markers. (Ambler, Lucy; Earle, Joe; Scott, Nicola. Reclaiming economics for future generations (Manchester Capitalism) (pp. 17-18). Manchester University Press. Kindle Edition.)

This combines with the other pervasive forms of social discrimination by gender, racialised identity and location. A macho ethos permeates the mainstream discipline, with women routinely facing the consequences. Along with widespread patriarchy, the adverse impact of relational power affects other socially marginalised categories, according to class, racial and ethnic identities, and language. The impact of location is enormous, with the mainstream discipline completely dominated by the North Atlantic in terms of prestige, influence, and the ability to determine the content and direction of what is globally accepted. The enormous knowledge, insights and contributions to economic analysis made by economists located in the Global South in Asia, the Middle East, Africa, Latin America and the Caribbean are largely ignored. (Ambler, Lucy; Earle, Joe; Scott, Nicola. Reclaiming economics for future generations (Manchester Capitalism) (p. 18). Manchester University Press. Kindle Edition.)

Then there is disciplinary arrogance, expressed in insufficient attention to history and a reluctance to engage seriously with other social sciences and humanities, which has greatly impoverished economics. Arrogance is also evident in the tendency of economists to play God, to engage in social engineering, couched in technocratic terms which are incomprehensible to the majority of people who are told that particular economic strategies are the only possible choice, in an attitude that collapses into the unethical. (Ambler, Lucy; Earle, Joe; Scott, Nicola. Reclaiming economics for future generations (Manchester Capitalism) (p. 18). Manchester University Press. Kindle Edition.)

Fortunately, there is growing pushback against these tendencies, globally and within the current bastions of economics in the North Atlantic. This book is very much part of that response: challenging the rigidities and power structures within the mainstream discipline, and calling for a more varied, sophisticated, nuanced and relevant understanding of economies. This is, of course, greatly welcome; it is also hugely necessary and urgent, if economics is to reclaim its position as a relevant social science that had origins in both moral philosophy and statecraft. (Ambler, Lucy; Earle, Joe; Scott, Nicola. Reclaiming economics for future generations (Manchester Capitalism) (pp. 18-19). Manchester University Press. Kindle Edition.)

Jayati Ghosh
Professor of Economics,
University of Massachusetts Amherst, USA;
formerly Professor of Economics,
Jawaharlal Nehru University, New Delhi, India

Bismark on Rice

Late-Victorian economic doctrine answered the need for an intellectual response to the workers’ challenge, to trade unions, to socialism, to the land reform movement, and to Social Democracy. Liberal economists upheld the existing property order and its inequalities. In Western Europe, North America and Australasia, Social Democracy eventually prevailed over fascism and communism, established welfare states, safeguarded the structures of capitalism, and dominated policy during the first three post-war decades. It sustained economic growth and distributed it more equally. To do this, it had to challenge the assumptions of neoclassical economics, and sometimes to reject them. (Offer, Avner; Söderberg, Gabriel. The Nobel Factor (p. 6). Princeton University Press. Kindle Edition. https://a.co/foDEAma)

In contrast to the competitive free-for-all of orthodox economics, Social Democratic parties in post-war Europe (and in the English-speaking countries) defined a cluster of collective aspirations:

•  Collective insurance against life-cycle periods of dependency, regulated and administered by government and paid for through progressive taxation.
•  Good-quality affordable housing, by means of rent control, new construction, mortgage subsidies, and public or collective ownership.
•  Secondary and higher education, land use planning, scientific research, culture, sports, roads and railways.
•  A mixed economy with extensive public services, some nationalized firms, but leaving private ownership to manage production and distribution.
•  A special concern for disadvantaged groups.13

The United States also went along with a good deal of this programme, and if it failed to provide universal healthcare entitlement, it did provide one for the old and the indigent.

Offer, Avner; Söderberg, Gabriel. The Nobel Factor (pp. 6-7). Princeton University Press. Kindle Edition. https://a.co/cobZtMt

Japan: Bismark on Rice

DURING A DEBATE AMONG THE PRESIDENTIAL CANDIDATES in the spring of 2008, former New York mayor Rudy Giuliani offered a picture of health care in foreign countries: “These countries that say they provide universal coverage—they pay a price for it, you know,” Giuliani explained. “They do it by rationing care, by long waiting lines, and by limiting, or I should say by eliminating, a patient’s choice.” Judging from that, it seems safe to say that Rudy Giuliani has never visited Dr. Nakamichi Noriaki at the Orthopedic Surgery Department of Keio Daigaku Hospital in Tokyo. (Reid, T. R.. The Healing of America (p. 82). Penguin Publishing Group. Kindle Edition.)

In a society that is acutely conscious of hierarchy and rank, Dr. Nakamichi is generally recognized as one of the top orthopedic surgeons in all Japan; his clinic at Keio is perhaps the most respected place in the country for the repair of stiff, aching shoulders like mine. I was first told about him one Thursday morning in Tokyo when I was complaining, as usual, about my shoulder. I called his office to schedule an appointment—and was told to come in that same afternoon. After the familiar poking, patting, massage, and manipulation, Dr. Nakamichi suggested an assortment of different treatments that might work for me; in fact, it was the widest variety of care any doctor had proposed. The treatment available in Japan ranges from acupuncture to injections to manipulation to the total shoulder arthroplasty that my doctor back home had recommended. All the options, he told me, are covered by Japanese health insurance. When I asked how long I would have to wait if I chose the full-scale shoulder-replacement surgery, the doctor checked his computer. “Tomorrow would be a little difficult,” he said. “But next week would probably work.” (Reid, T. R.. The Healing of America (pp. 82-83). Penguin Publishing Group. Kindle Edition.)

In other words: no waiting, no gatekeeper, no rationing, and a broad array of patient choice. Prices are low; as we’ll see, the Japanese system has a rigid cost-control mechanism that favors the patient, at the expense of doctors and hospitals. My out-of-pocket cost for an office visit with the prestigious Dr. Nakamichi in his prestigious clinic came to ¥2,060, or $19 (the doctor charged $64, and insurance pays 70 percent of the bill in Japan). (Reid, T. R.. The Healing of America (p. 83). Penguin Publishing Group. Kindle Edition.)

(….) It’s worth noting that this happens in a largely private-sector system; Japan relies on private doctors and hospitals, with the bills paid by insurance plans. In fact, Japanese doctors are the most capitalist, and most competitive, that I’ve seen anywhere in the world. (Reid, T. R.. The Healing of America (p. 83). Penguin Publishing Group. Kindle Edition.)

(….) Since medical care is so readily available, so easy to get, and so cheap, you might think that the Japanese use an awful lot of medical care. And you’d be right. The Japanese are the world’s most prodigious consumers of health care.1 The average Japanese visits a doctor about 14.5 times per year—three times as often as the U.S. average, and twice as often as any nation in Europe. If you can’t get to the doctor, no problem: Nearly all general practitioners in Japan make house calls, either daily or weekly. (Reid, T. R.. The Healing of America (p. 84). Penguin Publishing Group. Kindle Edition.)

(….) “Japan’s macro health indices, such as healthy life expectancy and infant mortality, are the best, or among the best, in the world,” says Professor Ikegami Naoki, the country’s best-known health care economist. “Now, that’s not all the result of health care. Japan has lower rates of violent crime than most countries, less illicit drug use, fewer traffic accidents, lower rates of HIV infection, less obesity. In terms of keeping people alive and healthy, those factors obviously help. But you also have to give some credit to the health care system for providing universal coverage and egalitarian access without long waiting lists, and we need to credit the doctors and the medical schools for providing a high quality of treatment.” (Reid, T. R.. The Healing of America (p. 85). Penguin Publishing Group. Kindle Edition.)

The Japanese system, in short, provides care to every resident of Japan, for minimal fees, with no waiting lists—and excellent results. This is a good deal for the people of Japan, and they take advantage of it, flocking to clinics and hospitals. To an American, it seems natural that this formula—heavy demand by an aging population, with almost no rationing of care—would add up to a huge national medical bill. But when it comes to costs, Japan has turned the predictable formula upside down. Despite universal coverage and prodigious consumption, Japan spends a lot less for health care than most of the developed nations; with costs running at about 8 percent of GDP, it spends about half as much as the United States. (Reid, T. R.. The Healing of America (p. 85). Penguin Publishing Group. Kindle Edition.)

(….) As we’ll see shortly, not everybody in Japan is happy with the system and its strict cost controls, because the system squeezes cost by sharply limiting the income of medical providers—doctors, nurses, hospitals, labs, drug makers. But if your goal is to provide quality care for everybody at a reasonable cost (which is not a bad goal for any health system), then the Japanese model could be a good one to follow. (Reid, T. R.. The Healing of America (p. 86). Penguin Publishing Group. Kindle Edition.)

Dr Pangloss’s Economism

For a little over a century, a mere blink of the eye in human history, western and westernized leaders, politicians, policymaker, and the public have operated on the belief that there can be a scientific discipline of economics, a field of study separate from moral philosophy and the natural sciences. Never mind that economics coevolved with a political discourse driven by power. Economics seemingly explains how society should be organized and people should live. The modern economic world arose around ideas generated by economists, and this world has been supported by corresponding public economistic beliefs that I refer to as “economism”.

Fullbrook, Edward ; Morgan, Jamie. Post-Neoliberal Economics (p. 97). World Economics Association Books. Kindle Edition.

It is proved that things cannot be other than they are, for since everything was made for a purpose, it follows that everything is made for the best purpose.

—Pangloss, in Voltaire’s Candide, 1759

THE KEY TO ALL THINGS

This invocation of basic economics lessons to explain all social phenomena is economism.* It rests on the premise that people, companies, and markets behave according to the abstract, two-dimensional illustrations of an Economics 101 textbook, even though the assumptions behind those diagrams virtually never hold true in the real world. Economism is an interpretive lens through which people make sense of reality. Like any such framework, it also implies a certain set of value judgments and policy choices. For example, if a simple supply-and-demand model shows that taxes reduce employment, then it follows that high tax rates are bad and should be lowered. Because it claims the authority of “economics,” economism can be a powerful rhetorical tool. And while superficial economic arguments can serve multiple purposes, in today’s world they most often justify the existing social order—and the inequality that it generates—while explaining the futility of any attempt to change it. (Kwak, James. Economism (pp. 6-7). Knopf Doubleday Publishing Group. Kindle Edition.)

For every well-intentioned proposal to help ordinary working people, economism provides an answer. Raise the minimum wage so the working poor take home more money? That’s a nice idea, but that’s not how the world works. According to Jude Wanniski, one of the pillars of The Wall Street Journal’s editorial page in the 1970s, “Every increase in the minimum wage induces a decline in real output and a decline in employment.” Wanniski was an adviser to Ronald Reagan, who echoed, “The minimum wage has caused more misery and unemployment than anything since the Great Depression.” Raise taxes on the rich to pay for services for everyone else? Good try, but, Gregory Mankiw (author of one of the world’s most popular economics textbooks) explains, “as [high-income taxpayers] face higher tax rates, their services will be in shorter supply.” Or, in the words of the 2012 vice presidential candidate Paul Ryan, “if you want faster economic growth, more upward mobility, and faster job creation, lower tax rates across the board is the key.”16 The examples go on and on. The problems of financial markets, health care, education, and many other fields can all be reduced to economic first principles that dictate simple solutions. (Kwak, James. Economism (pp. 7-8). Knopf Doubleday Publishing Group. Kindle Edition.)

These claims are made so often in the media and by politicians that they appear to be a natural feature of the landscape. But they all come from somewhere. They are based on a lesson that economics students learn in their first semester: the model of a competitive market driven by supply and demand. In this model, the supply and demand for any product determine its price; prices create incentives for individuals and businesses; and those incentives ensure that consumers get what they want, companies are as efficient as possible, and resources are allocated optimally across the economy. As the pathbreaking economist Paul Samuelson wrote in 1948, this basic lesson is “all that some of our leading citizens remember, 30 years later, of their college course in economics.”17 (Samuelson was well aware of the power of introductory courses: “I don’t care who writes a nation’s laws—or crafts its advanced treatises,” he once said, “if I can write its economics textbooks.”18) (Kwak, James. Economism (p. 8). Knopf Doubleday Publishing Group. Kindle Edition.)

This elegant model, however, rests on a set of highly unrealistic assumptions. The definition of a competitive market requires that all suppliers offer the same product—there are no differences in features, quality, or anything else—and that each company is so small that its behavior has no effect on overall supply. If this assumption does not hold—such as in the market for cell phone service, or air travel, or automobiles, or books, or almost anything—then supply and demand do not necessarily produce the optimal price, and the allocation of resources may be distorted.19 The argument that a minimum wage increases unemployment assumes that employees are currently being paid the entire value of their work; otherwise, employers would be willing to pay slightly higher wages in order to keep them. Again, this premise is unlikely to be true in the real world of fast-food restaurants or hotels, where workers have little bargaining power and companies are therefore able to claim most of the value that their employees create. (Kwak, James. Economism (pp. 8-9). Knopf Doubleday Publishing Group. Kindle Edition.)

Economism ignores these uncooperative facts and assumes the necessary assumptions, reducing all real-world questions to simple models and answering them in the same terms. In this sense, economism is like an ideology. Communism explained industrial society as the product of class struggle, with the inevitable outcome of proletarian revolution. Nationalism, the other great European ideology of the nineteenth century, saw rivalry between groups of people with a common background as the motor of history. Its lesson was that each nation should achieve political unity to promote its interests in the world. (Kwak, James. Economism (p. 9). Knopf Doubleday Publishing Group. Kindle Edition.)

“Economism” is a somewhat obscure academic term, generally used to criticize someone for overvaluing economics—by overestimating the importance of material conditions, focusing exclusively on economic metrics, applying economic methodologies when they are inappropriate, or accepting economic theory too readily.14 In this book, I use “economism” in a more specific sense, as the belief that a few isolated Economics 101 lessons accurately describe the real world. The economist Noah Smith calls this phenomenon “101ism.”15 (Kwak, James. Economism (p. 17). Knopf Doubleday Publishing Group. Kindle Edition.)

Commanders of Corruption

[C]apitalism is not a monolithic form of economic organization but rather that it takes many forms, which differ substantially in terms of their implications for economic growth and elimination of poverty. The implicit assumption underlying the idea of a homogenous capitalism, the notion that all capitalist economies are fundamentally the same, reflects something of the mentality common during the cold war when two superpowers, representing two great ideologies, were struggling for the hearts and minds of peoples of the world. On the one side were countries like the United States, whose economies rested on the foundation of the private ownership of property, and on the other were communist or socialist societies, whose economies essentially did not. This distinction seemed to divide the two economic systems, and not much thought was given to the possibility that there is much more to capitalism. (Baumol et. al. 2007, vii)

Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity

Fighting corruption is not just good governance. It is self-defense. It is patriotism, and it’s essential to the preservation of our democracy and our future.

—President Joseph R. Biden, Jr., June 3, 2021

Across the world, leaders of authoritarian governments, and their cronies, are robbing their people. These leaders are kleptocrats and they are pocketing staggering sums of cash, which they move through the world’s financial systems into investments in the wealthiest Western nations. These crimes perpetrated by the kleptocrats governing Russia, China, Iran, Egypt, Hungary, Nigeria, and many more nations not only impoverish their own citizens, but all of us. More gallingly, we are assisting them in their greed and their grand corruption. Even more worrying, we are complicit in their quest for ever greater power. (Vogl, Frank; Vogl, Frank. The Enablers (p. 12). Rowman & Littlefield Publishers. Kindle Edition.)

Central to Western complicity with kleptocrats and their associates across the globe are the armies of financial and legal advisors, real estate and luxury yacht brokers, art dealers and auction house managers, diamond and gold traders, auditors, and consulting firms, based in London and in New York and in other important global business centers, who aid and abet the kleptocrats in return for handsome fees—these are the enablers. They are motivated not only by the substantial incomes they obtain but also by the widespread failures of law enforcement across the Western democracies to impose punishments that are sufficient to serve as meaningful disincentives. At the major banks, for example, who have been prosecuted at times for multi-billion-dollar laundering of dirty cash, not a single chairman or chief executive officer has personally faced criminal charges for such activities, while the fines that are agreed to settle legal actions appear, quite simply, to be viewed by bankers as just the costs of doing business. (Vogl, Frank; Vogl, Frank. The Enablers (pp. 12-13). Rowman & Littlefield Publishers. Kindle Edition.)

The short-term maximization of profits is at the core of the corporate cultures at many of the world’s largest banks and multinational corporations. They are giant enterprises and some of these banks have assets under management that dwarf the GDPs of many national economies. The drive for ever bigger and quicker profits, which translate into mounting bonuses for senior executives, push issues of integrity and accountability to the sidelines. Concerns for serving the public interest, which ought to be at the center of the cultures driving vast companies, have increased in recent times as public demands and leading groups of investors have called upon these companies to pay far greater attention to how their business practices impact climate change. Gradually, arguably too slowly, these pressures are generating positive developments. But when it comes to international corruption and the roles that major banks and other giant multinational firms play, then public pressures for reform are few, investor concerns are barely visible, and corporate boards of directors charged with risk management oversight are silent. (Vogl, Frank; Vogl, Frank. The Enablers (pp. 13-14). Rowman & Littlefield Publishers. Kindle Edition.)

Some of the activities of the enablers are illegal. Many of their actions in service to their kleptocrat clients are legal, but they do not serve the public interests of citizens in democratic nations, and indeed well beyond. By supporting the power of the kleptocrats and their associates, the enablers contribute to risks to international security, to Western democracy, and to the stability of the international financial system. The threats are now so formidable that countering the kleptocrats and their money-laundering operations has to become a leading priority for the Biden administration, the US Congress, the British government, the Commission of the twenty-seven-country European Union (EU), and other public authorities, such as those in Canada, Australia, Singapore, and the United Arab Emirates (UAE). These authorities are now doing more to counter illicit finance than ever before, but their combined impact is modest when seen against the full magnitude of international grand corruption and money laundering today. The necessary actions need to embrace fully the roles played by the enablers who reside in our midst, who are subject to our domestic laws and regulations, and whose operations do us so much harm. (Vogl, Frank; Vogl, Frank. The Enablers (p. 14). Rowman & Littlefield Publishers. Kindle Edition.)

Curbing the activities of the enablers will make it far more difficult for kleptocrats and their associates to launder their stolen loot and invest it safely and profitably. It will make it far harder for authoritarian governments to access the global capital markets and secure formidable sums of cash through new bond issues. Diminishing the activities of the enablers for their corrupt clients will make the financing of terrorist organizations more difficult. It will stymie the rising efforts of some regimes, notably Russian and Chinese, to channel funds to foreign governments and organizations in their quests to disrupt democracies and diminish Western geopolitical and commercial influence. (Vogl, Frank; Vogl, Frank. The Enablers (pp. 14-15). Rowman & Littlefield Publishers. Kindle Edition.)

The vested interests are well-entrenched, and securing reforms to counter corrupt practices in finance and commerce more generally will be intensely difficult. The starting point is increasing broad public understanding of the activities of the enablers and why these are so damaging. Too many politicians, journalists, and concerned citizens are poorly informed about how the kleptocrats operate, how the enablers serve their clients, how inadequate are current laws and the application of relevant financial regulations, and just how much cash we are now talking about. (Vogl, Frank; Vogl, Frank. The Enablers (p. 15). Rowman & Littlefield Publishers. Kindle Edition.)

Illusionary Progress

We live in an age of great technological success, in an atmosphere of materialistic philosophy tempered with misgivings and regrets, in a turmoil of social change and of conflicting political ideologies. We are uneasy with forebodings, for civilization may well die in the next war if it comes. We are little consoled by the prospect of dying amid new luxuries. Brilliant progress in the technological application of science stands in sharpest contrast with the social chaos of our generation. Will the critical historian of 3000 A.D. remember us chiefly for our success in one area or for our failure in the other? Can the echelons of science be diverted in part from the sector where they have won us an overwhelming victory to that where the battle turns against us? When and how? In the present article I shall suggest for the physical sciences a diversion of much effort from gadgetry to an extensive study of man himself, and for the biological sciences a keener, more integrative appraisal of evolutionary history as the basis for extrapolating from the past the course of man’s inevitable social destiny? (Williams 1948, 116)

It is scarcely necessary to belabor the point that within the past two centuries man has made unprecedented progress in the natural sciences. Basing action on this newly acquired knowledge he has harnessed steam, electricity, chemical reaction, and, presently, atomic fission to do his bidding. He has tapped field, forest, and subterranean depths for fuel, food, and materials of construction. He has erected towering cities, spanned the continents with rail and roadway, and girdled the globe with wires, radio beams, and swift flights of air armadas. Mechanical power and assembly lines have multiplied a hundred or a thousand fold the yield of goods from his hand and brain and eye. An economy of abundance is at length possible, but:— (Williams 1948, 116)

As ever increasing fraction of the fruits of human toil and ingenuity goes to feed the holocaust of war. The greatest drain on the exchequer of every government is the cost of present and past wars. The waste of ruined cities and scarred countrysides spreads over three continents where rose the most ancient of historic civilizations. More utter devastation looms on the horizon through the latest and most momentous of man’s scientific discoveries. Social progress since Roman times seems almost negligible. If legalized slavery has been well nigh abolished, chivalry has also waned. Conflicting political concepts of earliest history still persist in unresolved modern controversies. Democracy has just disarmed three major tyrannies at great cost but faces still another. The remaining one [i.e., Russian revolution] professes a prophetic vision for all mankind when its aegis shall have spread around the globe. (Williams 1948, 116)

The Russian people do not want war. Most probably the Russian government does not want it. Certainly neither the people nor the government of the United States desire World War III. Yet some inexorable force seems to impel both governments (and peoples) in that direction. Neither the leaders whom the Russians have chosen or accepted nor the leaders whom Americans follow are able to lead in the direction which everbody wants to go. Why? Because Russian thought and American thought are as far apart as the poles with reference to the basic political means which will achieve the universally desired end. There are no universally accepted political principles. Nothing indisputable has been learned in 5000 years of racial history. There is no scientific knowledge about politics. (Williams 1948, 116-117)

In economics the condition is essentially the same. There are almost as many schools of thought as there are thinkers. None will deny the tremendous impact of scientific technology upon our present economy, but beyond that few economic principles are universally accepted. The most elemental matters are in dispute: private property versus communal ownership; personal rights versus governmental sovereignty; economic versus political boundaries. Free trade versus protective tariff is, for example, still merely a matter of opinion. Our social systems are extremely diverse, and class strife of various sorts has rarely been more conspicuous. At best society is static; at worst, and more prevailingly, society moves off in all directions at one and gets nowhere. Fundamentally this is because social science is not science; its foundations are utterly insecure. It has no basis for proceeding from the known to the unknown, for virtually no principles are established beyond dispute. (Williams 1948, 117)

Scientists, however, have no occasion to be supercilious or sacrosanct. The failure of political, social, and economic theory to make progress is an old story. We are doing no worse than in Roman times, merely no better. The prime reason for the contrast lies in this, that for the most part in natural sciences we enjoy the benefits of the experimental method. We guess what should happen by a priori reasoning and then design a careful experiment whereby we verify or confound our prior reasoning. In social science the practice is to reason a priori and then assert the conclusion to be true. The experimental method is not practically available in social matters [except via historical perspective]. We may enact a measure, say the Smoot-Hawley act, but long before the experiment is complete a war, a new technology, a change of administration, or some other country’s countermeasure intervenes to invalidate any conclusion. All our so-called social experiments in domestic economy are fraught with similar hazards. (Williams 1948, 117)

One of the difficulties of the social sciences is that their problems are always problems of immediate concern to large numbers of people. Vox populi raises a distraction to disturb any objective contemplation. Public opinion focuses its attention about some controversial problem, and those who become the political leaders are those whose views are acceptable to the majority. All other contenders are disqualified for the moment though a decade later they may have proved themselves wiser than their opponents. The successful political leader is one who correctly senses the trend of public opinion. As Disraeli once quizzically remarked, “I must follow the people. Am I not their leader?” (Williams 1948, 117-118)

(….) In social problems there is no appeal to natural science, and natural science as such seeks no opportunity to be heard. Yet I beg to submit that human affairs are by no means unrelated to the kind of universe in which we dwell and with which science is so much concerned. The difficulty is that science is prevailingly either preoccupied with isolated phenomena in Nature or with the gadgetry of technology. The direction of human affairs is by common consent relegated to a position outside the field of scientific enquiry. We have already referred to the sad fact that the experimental method is inapplicable to social science. Otherwise we might be more sure footed in our social progress. (Williams 1948, 118)

Physics and chemistry are supreme examples of experimental science. Together with mathematics they account for most of the technical progress man has made. However, there is a large field of true science which is essentially observational rather than experimental. Astronomy and geology furnish us with many significant examples. We cannot turn the stars in their courses to ascertain experimentally the result, so it is necessary to infer indirectly much of what has been learned about their motions, masses, and composition, as well as their past history and future destiny. Similarly, in geology we cannot experimentally raise mountains, divert the course of great streams, or reproduce the conditions of ancient lakes. Yet few would deny that astronomy and geology are true sciences or that their conclusions are broadly trustworthy. (Williams 1948, 118)

Biology as a field lies between those of purely experimental and purely observational science. Many of its problems can be and have been attacked experimentally and successfully. Some of the great problems of biology are set on a time scale so vast that short-lived man cannot deal with them experimentally. Otherwise we might perhaps prove the descent of man from lower creatures by producing him on the sport for evidential purposes. However, the evolutionary process can be observed in the laboratory by the use of short-lived lower organisms and it can be turned to immediate practical account in breeding plants and animals of specifically desired characteristics. In spite of its many debatable regions, biology ranks as a sound science. (Williams 1948, 119-119)

According to my view each of these types of method has a potential application in human affairs. (….) In a thousand ways each person differs form his fellows. What we call personality is an integration of ten thousand traits each determined in part by heredity, in part by training and in part by current habits and ways of life [e.g., culture]. Some of these traits doubtless have a physiological basis if it could be traced. Some are psychological yet have an underlying physical basis, and many fall in the class of spiritual qualities. (Williams 1948, 119)

Personality is a fact of vital importance in our human relations. Yet one could assemble a very imposing array of physiologists, biochemists, psychologists, and physicians only discover that the whole battery of talent could not account for [the nature of personality]. These personality factors are of tremendous importance in many of our social problems. (Williams 1948, 119)

(….) So much for the potential of experimental natural sciences which would be much more significant for future human welfare at this stage than a new plastic, a more efficient freezing unit, a faster airplane, or a flossier automobile. We could get along with what technology already offers in those lines, but we keenly need means of preventing frustrated, futile lives and of raising the whole level of human happiness. These things must be recognized as within the potential field of science. We must get out of our ruts of thinking in terms of a single discipline and in terms of the physical things used for food, shelter, raiment, transportation, or amusement. We ourselves are more important than our environment. (Williams 1948, 120)

There is, however, a whole category of human problems of which the crux lines in the massing of humanity, rather than in the individual. A large group of humans bond together by some real or fancied community of need or circumstances acts differently at times than each of them the component individuals would be disposed to do if acting independently. People divide into groups by race, by language, by flags, by economic level, form of employment, or special intellectual interest or aptitude. Once so divided we are prone to forget our common humanity and place all emphasis upon our national or class interest. It is by the operation of this form of mass psychology that the problems of international antagonisms, political animosities, class and racial hatreds arise. In the present era, war, industrial strife between employer and employee, and racial hatred appear as the most outstanding destructive forces. There are, however, numerous lesser rivalries exemplified, for example, by pressure groups of farmers, manufacturers, dairymen, or what not. The study of individuals will not meet these problems. (Williams 1948, 120)

The most significant contribution which science might make to this category of problems is an emphasis on our common human heritage and the oneness of human life with all the life which preceded it in the evolutionary process. That is the route by which we came to be human and that is the road by which man may grow to greater stature. Biological evolution arrays hundreds of millions of years before us. May not science discern its trends and consider their validity for man today? (Williams 1948, 120)

(….) However, our social trends need to be undergirded by some broad philosophy which, endeavors to estimate results at least a generation hence. No social course which veers abruptly first in one direction then in another can possibly lead us happily forward. Yet that is precisely what we do in civic, political, and national life. (….) We proceed by impulse, not according to a reasoned course which becomes ingrained in the fiber of the people. Imagine a business enterprise succeeding with such a fluctuating policy. (Williams 1948, 121)

A popular philosophy cannot become second nature to a people within a few weeks or months or years. Its culture must pervade our educational processes for decades before the philosophy can ripen and bear fruit. It is, however, high time that such a social philosophy be born and that it have the endorsement of a large element of our most thoughtful people. How better can it be born than out of the womb of science and how will it gather more commanding support than if it comes from scientists. Science today enjoys an unprecedented popular respect, and no voice speaks with as much authority as does the scientist who is backed by the general opinion of his fellows. (Williams 1948, 121)

We had such a philosophy at the time of the birth of our republic, and, in spite of some dissent, we believed in it as a people. In the words of the Declaration of Independence “We hold these truths to be self evident: That all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness. That to secure these rights governments are instituted among men, deriving their just powers from the consent of the governed;—” There are other philosophies abroad today. Not long since Hitler thundered “The state is everything, the individual nothing.” Today Russia’s Politburo justifies the dictatorship of a minority by defending its beneficent intentions. (Williams 1948, 121)

The divergent philosophies cannot all be true yet they were or are supported by the mass of scientists, as well as other people, resident in each of the respective countries. This could not possibly be true if science had generally recognized that humanity is a part of Nature and an outgrowth of her works. (Williams 1948, 121)

Some will object that evolution has had no consistent trends; that it has changed direction with climatic alterations as in the successive periods of glaciation. Its fundamental trends and causative factors have, however, in my opinion, maintained a high degree of constancy. The continuity of the evolutionary process has received amazing and unexpected support in the field of biochemistry during the past decade or two. The enzymes and other chemical mechanisms that operate in our tissues are present and operative also in the tissues of lower animals and even in plants and microorganisms for more primitive and far more ancient in their evolutionary origin. If life development has been so continuous that the oxidative mechanisms, for example, of its earliest forms of organisms are still operative in its latest and higher forms, it is scarcely reasonable to think its past trends are not still meaningful for man’s future. (Williams 1948, 121-122)

Machine Dreams

If the emergentist-materialist ontology underlying biology (and, as a matter of fact, all the factual sciences) is correct, the bios constitutes a distinct ontic level the entities in which are characterized by emergent properties. The properties of biotic systems are then not (ontologically) reducible to the properties of their components, although we may be able to partially explain and predict them from the properties of their components… The belief that one has reduced a system by exhibiting [for instance] its components, which is indeed nothing but physical and chemical, is insufficient: physics and chemistry do not account for the structure, in particular the organization, of biosystems and their emergent properties (Mahner and Bunge 1997: 197). (Robert 2004: 132)

Sarkar (1998; Gilbert and Sarkar 2000) makes a helpful distinction between two kinds of reductionism — genetic reductionism and physical reductionism. Physical reductionism sees physics as the most basic of the sciences and holds that all scientific explanations may (and should) eventually be recast in the terms of physics; genetic reductionism holds that ‘genes can explain all phenotypic features of an organism’ (Sarkar 1998: 174). These types of reductionism are not coextensive, though both champions and critics of reductionism tend to conflate these two varieties; but whereas physical reductionism is a thesis about relations between the sciences, genetic reductionism is a thesis about the role of genes in organismal development. Both varieties of reductionism may be problematic, though for different reasons. (Robert 2004, 136)

Robert, Jason Scott (2004) Embryology, Epigenesis, and Evolution: Taking Development Seriously. Cambridge Studies in Philosophy and Biology.

If one starts from the axiom-premise organisms are complex machines (which within certain limits I have no problem with) and the economy is merely a network of automata functioning like an “revealed preference” calculating machines one can rather easily develop mathematically tractable models. But these models hide the real world political and social dimensions of business and economics. Economies are more like organisms than machines. And more importantly one organism in particular, the human organism, including our ability to create other machines, systems, institutions, political and social structures, norms, and practices which allow us to modify physical, social, and even intellectual reality. Through our intelligent use of our minds and bodies we create other mechanisms, physical and social (living) relationships. These have their own levels of appropriate analysis. Social science, like biology, cannot be reduced to chemistry and physics. Neither can it be reduced to genetic algorithms or computational rules. Social science cannot be reduced to a natural science via some yet-to-be-discovered social mathematics. Human beings are not just more complex social insects. These are machine dreams or more to the point machine delusions rooted in a form of scientism.

THE GENE MYTH is not just a myth about genes. It is a story about the nature of the organism and the character of biological explanation. Inspired by our experience with machines, the story (in one of its versions) is narrated in a language of causal analysis, where some things make other things happen, and our investigation of a collection of parts, one by one, enables us to piece together a knowledge of the integrated whole. The continual elucidation of explanatory “mechanisms” has seemed to vindicate the story, supported further by promises of a better life for humans and a steady stream of stunning technical achievements in data gathering and manipulation of organisms. It is no wonder that the Human Genome Project aroused such high expectations.

But this story has now come to the end of its useful life. The loss of the gene at the head of a chain of causal mechanisms explaining the organism represents more than the loss of the master link in the chain. It exemplifies the failure of every link considered as machinelike. The seeming chaos of causal arrows now being documented under the heading of “gene regulation” repeats itself in every aspect of the cell. Researchers dutifully trying to follow arrows of causation end up chasing hares running in all directions. Is there any subdiscipline of molecular biology today where research has been reducing cellular processes to a more clearly defined set of causal relations instead of rendering them more ambiguous, more plastic and context dependent, and less mechanical? Consider a few examples. (Talbot 2013, 51) [And here the interesting part begins …]

Stephen L. Talbott (2013) The Myth of the Machine-Organism: From Genetic Mechanisms to Living Beings. In Genetic Explanations: Sense and Nonsense.

Epigenetic Algorithms

Mechanical metaphors have appealed to many philosophers who sought materialist explanations of life. The definitive work on this subject is T. S. Hall’s Ideas of Life and Matter (1969). Descartes, though a dualist, thought of animal bodies as automata that obeyed mechanical rules. Julien de la Mettrie applied stricter mechanistic principles to humans in L’Homme machine (1748). Clockwork and heat engine models were popular during the Industrial Revolution. Lamarck proposed hydraulic processes as causes of variation. In the late nineteenth century, the embryologists Wilhelm His and Wilhelm Roux theorized about developmental mechanics. However, as biochemical and then molecular biological information expanded, popular machine models were refuted, but it is not surprising that computers should have filled the gap. Algorithms that systematically provide instructions for a progressive sequence of events seem to be suitable analogues for epigenetic procedures. (Reid 2007: 263)

A common error in applying this analogy is the belief that the genetic code, or at least the total complement of an organism’s DNA contains the program for its own differential expression. In the computer age it is easy to fall into that metaphysical trap. However, in the computer age we should also know that algorithms are the creations of programmers. As Charles Babbage (1838) and Robert Chambers (1844) tried to tell us, the analogy is more relevant to creationism than evolutionism. At the risk of offending the sophisticates who have indulged me so far, I want to state the problems in the most simple terms. To me, that is a major goal of theoretical biology, rather than the conversion of life to mathematics. (Reid 2007: 263)

Reid, Robert G.B. (2007) Biological Emergences: Evolution by Natural Experiment. Vienna Series in Theoretical Biology.

More attention to the history of Science is needed, as much by scientists as by historians, and especially by biologists, and this means a deliberate attempt to understand the thoughts of the great masters of the past, to see in what circumstances or intellectual milieu their ideas were formed, where they took the wrong turning or stopped short on the right track. (R. A. Fisher, 1959)

Wilkins, Adam S. (2002) The Evolution of Developmental Pathways

Because the great controversies of the past often reach into modern science, many current arguments cannot be fully understood unless one understands their history. ERNST MAYR 1982, 1

McCloskey, Deirdre Nansen; Ziliak, Steve. The Cult of Statistical Significance (Economics, Cognition, And Society) (Kindle Locations 2036-2038). University of Michigan Press.

As the relations between development and evolution were explored in the last decades of the twentieth century, mutations in those genes that regulate development also assumed great significance. Regulatory (homeobox) genes were reported that affected whole sets of genes, and some paleontologists [and developmental geneticists, etc.] have emphasized that mutations in such regulatory genes result in large discontinuous evolutionary changes (a reshuffling of parts) and may be a macromechanism of evolution. But symbiosis–the inheritance of acquired genomes, wholes or parts–was trivialized or ignored by paleontologists. Gould himself regarded the symbiotic origin of mitochondria and chloroplasts as “entering the quirky and incidental side” of evolution. (Sapp 2003: 250-251)

Most of the great controversies and conceptual oppositions of the nineteenth century are still present at the beginning of the twenty-first century: religion and vitalism versus evolution and materialism, structuralism versus functionalism, reductionism versus holism, gradualism versus saltationism, selectionism versus nonadaptationism, the inheritance of acquired characteristics, and nurture versus nature. What has changed is not so much the nature of the ideas but the evidence supporting them and the intensity of the debates. (Sapp 2003: 267)

Jan Sapp (2003) Genesis: The Evolution of Biology

Conceptualizing Cells

We should all take seriously an assessment of biology made by the physicist David Bohm over 30 years ago (and universally ignored):

“It does seem odd … that just when physics is … moving away from mechanism, biology and psychology are moving closer to it. If the trend continues … scientists will be regarding living and intelligent beings as mechanical, while they suppose that inanimate matter is to complex and subtle to fit into the limited categories of mechanism.” [D. Bohm, “Some Remarks on the Notion of Order,” in C. H. Waddington, ed., Towards a Theoretical Biology: 2 Sketches. (Edinburgh: Edinburgh Press 1969), p. 18-40.]

The organism is not a machine! Machines are not made of parts that continually turn over and renew; the cell is. A machine is stable because its parts are strongly built and function reliably. The cell is stable for an entirely different reason: It is homeostatic. Perturbed, the cell automatically seeks to reconstitute its inherent pattern. Homeostasis and homeorhesis are basic to all living things, but not machines.

If not a machine, then what is the cell?

— Carl R. Woese (2005, 100) on Evolving Biological Organization

DECONSTRUCTING MARGINALIST MICROECONOMICS

What is the essence of homo economicus? Homo economicus is a man in search of pleasure. He is man who knows what he wants and how to get it. There are fixed limits on what homo economicus can obtain, but he is a master of getting the best that he can from within those limits. The term was first coined as a criticism. It would seem that when certain people in the nineteenth century read the famous economist and philosopher John Stuart Mill, they did not like what they found. They accused Mill of reducing the human being to nothing but a calculator of his immediate pleasures. They said that Mill had removed anything properly human from Man and replaced him instead with some sort of amoral robot [e.g., automaton]; this robot they called homo economicus (Persky 1995). (Pilkington 2016, 71)

Mill himself was quite explicit about what he was doing. He claimed that economics—which was then called ‘political economy’—was concerned only with certain specific facets of Man’s existence. It did not poach on the preserves of other moral disciplines but rather abstracted from them and reasoned as if they did not exist. Mill wrote:

[Political economy] does not treat of the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means for obtaining that end. It predicts only such phenomena of the social state as take place in consequence of the pursuit of wealth. It makes entire abstraction of every other human passion or motive; except those which may be regarded as perpetually antagonizing principles to the desire of wealth, namely, aversion to labor, and desire of the present enjoyment of costly indulgences … Political economy considers mankind as occupied solely in acquiring and consuming wealth; and aims at showing what is the course of action into which mankind, living in a state of society, would be impelled, if that motive, except in the degree in which it is checked by the two perpetual counter-motives above adverted to, were absolute ruler of all their actions. (Mill 1844) (Pilkington 2016, 71-72)

What concerned those who criticised Mill’s homo economicus was that it highlighted some of what they considered to be the less seemly aspects of Man’s existence. This was the age of high morality, and Mill’s construction seemed to many to be against the morality of the day. This was also an age of mass wealth accumulation, and Mill’s construction probably showed up a certain truth that some were less than pleased to deal with as it ran contrary to what they considered good behavior. (Pilkington 2016, 72)

By the mid- to late twentieth century, mass consumption had become a way of life and contemporary morality was more accommodative to the homo economicus. Indeed, today he seems like a rather natural construction in an age where people constitute their lives through accumulation and consumption. He has also been given more precision. Today, following on from the work of the early marginalists, he is modelled using indifference curves and differential calculus. To a critic of the theory, it is less the morality that stands out as it is the image of Man that is put forward. Man is seen as a sort of automaton with fixed, ordered preferences [or “if-then” rules as envisioned by genetic algorithms], a vast capacity for information that would be the envy of even the most powerful of computers. Whereas yesteryear homo economicus seemed offensively amoral, today he seems offensively unrealistic. (Pilkington 2016, 72, bold added)

The fact of this matter cannot be overstated enough If we turn, for example, to the main macroeconomic model used by the European Central Bank at the time of writing, we find it populated with a plethora of homo economicus. In their key forecasting model which is supposed to represent the Eurozone economy, they write:

Each household h maximises its lifetime utility in a given period t by choosing purchases of the consumption good, Ch,t, purchases of the investment good, Ih,t. (Christoffel et. al. 2008, p. 11)

Thus they turn every household into a homo economicus and then lump these homo economicus together and spell out their exact behaviour in a series of equations. If the assumption that each household acts like a homo economicus can be shown to be nonsense, then the findings of the model will also be nonsense. This cannot be stressed enough: this assumption is at the absolute core of many ‘very serious’ theories; without it they literally cannot function. Yet if the construction can be shown to be false, and by that I mean if it can be shown not to be a reasonable approximation of the real object of study (economic agents), then the theories themselves must also be false and central banks can be shown to be wasting an awful lot of time and resources employing people to build such theories. (Pilkington 2016, 73)

Useful Idiots qua Economists

I think we all agree that solving ethical issues or deciding on values cannot be left to economists. I don’t think many economists would fancy the role. But I’m not sure how it can not be left to politicians. Democracy, as Schumpeter remarked, is rule by politicians. I am struck by how often posts on this blog imply that economists rule the world. They are nowhere near doing so, of course — and that’s a very good thing! But I still can’t see an alternative to politics, unsatisfactory though it often is.

— An Econometician’s Argument, RWER, 5/8/2020

Implicit in the red herring argument that ‘economists don’t rule the world’ is the claim they have no relationship, influence, or role in politics and that there is a nice neat divide between the role of economists in society and the theories they create separate and apart from politics and politicians. History doesn’t bear this claim out on many levels. It assumes economics and economists are innocent of playing any role, for better or worse, through economic theories and their influence upon upon society and politicians. The world is not black and white; economists have had and do now play a role in socio-political outcomes.

~ ~ ~

The length to which those in the profession go to push their simplistic narrative [on free trade] are nothing short of exasperating. When reading some of the pronouncements and arguments put forward by proponents, you would be hard pushed not to think that you were looking at the words of cult members or conspirators. Consider the words uttered by Paul Krugman—often supposed to be a liberal or left-of-centre economist. Krugman is determined to tell his audience that those who argue that Ricardo’s argument is not relevant to the real world simply do not understand it. He then equates rejection of Ricardo’s theory with rejection of evolutionary theory and equates both with some sort of aversion to mathematics. He writes:

At the deepest level, opposition to comparative advantage—like opposition to the theory of evolution—reflects the aversion of many intellectuals to an essentially mathematical way of understanding the world. Both comparative advantage and natural selection are ideas grounded, at base, in mathematical models—simple models that can be stated without actually writing down any equations, but mathematical models all the same. The hostility that both evolutionary theorists and economists encounter from humanists arises from the fact that both fields lie on the front line of the war between C.P. Snow’s two cultures: territory that humanists feel is rightfully theirs, but which has been invaded by aliens armed with equations and computers. (Krugman 1996)

The patronising tone [2] is manifest here in that Krugman is implicitly invoking what we earlier called the ‘limiting principle’. The naive dupes who reject the economist’s advice on free trade are the cultural theorists and the postmodernists. They are intellectuals that spend more time reading books than they do undertaking the hard work of writing down equations and looking at statistics. Krugman’s speech is dog whistle politics all the way—and we should stress that it is politics because free trade is a highly politicised issue that only economists think can be sanitised in such a crude fashion. (Pilkington 2016, 330-331)

These economists become what Vladimir Lenin in the context of a rather different ideology called ‘useful idiots’. That is, propagandists that are being used by others for motivations that they do not understand. In the 1990s, they were useful idiots for large corporations that wanted to scrap factories in the West and move them overseas. At the time of writing, they are useful idiots for corporations who want to protect intellectual property rights in the face of new technologies under the guise of the free trade ideology. Rather, hilariously dogmatic free traders today have also become the useful idiots of monopolistic forces who use public sector subsidies and technologies to produce products that they then sell to the public at exorbitantly high prices. When this price-gouging activity is threatened by overseas companies making generic knock-offs at a fraction of the cost, the corporations call in the free trade army to defend their so-called ‘property rights’. (Pilkington 2016, 331)

The forces at work behind dogmatic free trade arguments at any given moment in time will never be self-identical. In order to understand the agenda behind any trade policy at a given moment in time, you must examine it in critical detail. What the free trade dogma does is it tricks economists fooled by their own simplistic narratives into becoming propagandists for whatever the powers-that-be want to impose on various countries at any given moment in time. This is not an exaggeration either. In his talk, Krugman closes by laying out a series of propaganda tactics to preach the generally unpopular argument for dogmatic free trade to the general public and, most especially, the soppy ‘cultural’ intellectuals. He says:

I cannot offer any grand strategy for dealing with the aversion of intellectuals to Ricardo’s difficult idea. No matter what economists do, we can be sure that ten years from now the talk shows and the op-ed pages will still be full of men and women who regard themselves as experts on the global economy, but do not know or want to know about comparative advantage. Still, the diagnosis I have offered here provides some tactical hints. (Ibid.)

In this book, I have tried to steer away from direct considerations of policy. But I have laid out a brief discussion about free trade not because I am advocating protectionism but because it is a prime case where we see what function abstract economic theory can play in politics and society. That much economic theory is based on ridiculously narrow assumptions and unrealistic a priori premises should, at this stage, be obvious. But it is worth being clear how the types of people that espouse this sort of thing can be used by political forces that they do not understand and cannot comprehend. (Pilkington 2016, 331-332)

I have always been averse to the idea that economics as it is currently taught is some sort of organic outgrowth of the ideology of the ruling class. I do not find the Marxist story convincing that economics as it is currently taught is a mere reflection of the interests of the ruling class. Rather, I think that the explanation is much simpler: economists have cast such darkness over their own discipline that they can make themselves believe in basically anything that suits them at any given moment in time. All one has to do is feed them a very simple argument that seems internally consistent, and they will mistake this consistency for some Absolute Truth about the real world. Such people are very useful to the powers-that-be. They are the same people who were promoted to positions of power in the Medieval Church. It was not that what they were saying was so much a reflection of the interests of the elite so much as it was that what they were saying was a brilliant distraction from what was really going on. Contemporary mainstream [and some heterodox] economics is less the ideology of the ruling class than it is the opiate for establishment intellectuals who find that their little models and their ridiculously simplistic arguments get them invited to all the rifht places. (Pilkington 2016, 332)

2 It should be noted that Krugman is playing to his audience’s elitism in his rhetoric by calling Ricardo’s idea ‘difficult’ as he does throughout his lecture (entitled ‘Ricardo’s Difficult Idea’). In fact, it is not a remotely difficult idea. Most teenagers understand it perfectly well when laid out in high school economics class. The more reflective ones, however, do not swallow it hook, line and sinker.