The Economist Emperor has no clothes: Toxic Textbooks and Dissident Economics

The children’s fairytale ‘The Emperor’s New Clothes’ is useful (like Dr. Seuss’s The Lorax) for uncovering the ultimate psychological and cultural basis for how we think about economics, and economic practices and concepts such as money, credit, exchange, property, patents etc. Something becomes real with power and potency not because of its own qualities but because enough people imbue them with these qualities i.e. it becomes ‘real’ not because it exists but because enough people say it exists. Reciprocally, the economic imaginary creates and sustains its own subject – that is to say economics studies not the real economic world as it is, but bases its claims to knowledge on its study of an imaginary world – the economic imaginary. In large part this imaginary is made possible by the progressive disembedding of the economic from society (Polanyi, 1947). This imaginary world is peopled by perfectly rational, utility maximising individuals, firms existing in perfect competition and a market which clears at a price when supply meets demand.

According to Gilles Raveaud, one of the co-founders of the ‘post-autistic economics’ movement in France, one of the reasons for starting the movement was criticism of

"the construction of ‘imaginary worlds’ by economists. That is, worlds which do not have any link with any plausible mechanism in reality. Such worlds (the famous ‘models’) are just developed for their own sake, because of their tractability. We no longer want to be taught such fairy tales, the aim of which is not to explain ‘reality’, but just to show the ability of the writer to construct a ‘nice model’. It may be fun for the authors, but we do not want to be part of the game". (Raveaud, 2000)

Now ‘myths’, ‘fairy-tales’ and ‘imaginary worlds’ are not terms we usually associate with modern economics and the application of these terms – which I think is perfectly appropriate – seems to suggest a critique of economics that goes beyond its false denial of its normative assumptions and refusal to see itself as ethical, partial and biased, ideological and political. And that there is absolutely nothing wrong with this! So long as there is openness and honesty about value positions and normative judgements, neo-classical economists have as much right as anyone else (but a strictly equal right) to contribute and make arguments around how the economy ought to be organised. This is the appeal for pluralism within economics that is at the heart of the heterodox and post-autistic economics movement.

A good example of how frustration with the dominance o the neo-classical orthodoxy is being expressed is the ‘Toxic Textbooks’ campaign. This is a campaign started by students in the Sorbonne in Paris in 2005 for greater pluralism within university courses on economics – a demand for greater democracy and debate within the teaching of economics. The ‘Toxic Textbooks’ campaign is on one level simply another front in the battle against the neo-classical orthodoxy and in many respects that is correct. But it also reveals in a very public manner the fact that what is at stake here is an ideological battle for ‘hearts and minds’ and not simply an ‘epistemological’ paradigm shift in some Kuhnian sense. One of those who have championed the campaign is the heterodox economist Steve Keen who in a provocatively entitled article entitled ‘What a load of bollocks’, notes how despite the current economic crisis and the fact that neoclassical economists did not either predict it not after the crisis see any need to correct some of its basic assumptions, the orthodoxy intends to continue on as usual and regardless.

Two prominent economics textbook writers have recently written that the Global Financial Crisis (GFC) shows that the world needs more economics rather than less. Writing in the New York Times, Gregory Mankiw could see some need to modify economics courses a bit in response to the GFC, but overall he felt that: “Despite the enormity of recent events, the principles of economics are largely unchanged. Students still need to learn about the gains from trade, supply and demand, the efficiency properties of market outcomes, and so on. These topics will remain the bread-and-butter of introductory courses.” Writing on a blog The East Asia Forum, authors Doug McTaggart, Christopher Findlay and Michael Parkin wrote that: “The crisis has also brought calls for the heads of economists for failing to anticipate and avoid it. That idea, too, is wrong: much economic research pointed to the emerging problem. More economic research (and teaching), not less, is the best hope of both emerging from the current crisis and of avoiding future ones”. What a load of bollocks. The “principles of economics” that Mankiw champions, and the ”More economic research (and teaching)” that McTaggart et al are calling for, are the major reason why economists in general were oblivious to this crisis until well after it had broken out. (Keen, 2009a) http://www.debtdeflation.com/blogs/2009/05/25/what-a-load-of-bollocks/

The sheer dominance and power of the neo-classical orthodoxy, the profound lack of debate and criticism within the modern academic economics profession means that while of course the normal academic channels and modes of knowledge production should be used to develop and articulate critiques (such as academic journals, publications, research projects and conferences), there is also a need for direct action as it were. As against an authoritarian regime, dissidents would be foolish to advance their arguments against the regime solely by the established ‘rules of the game’. In the case of academic economics journals these are almost completely monopolised by the orthodoxy, with heterodox economists forced by the lack of pluralism and encouragement of dissident perspectives within mainstream academic economic journals, to create their own publications, journals and associations to support and promote their work. In this way the ‘Toxic Textbooks’ campaign can be seen as the ‘direct action’ complement to the ‘normal’ channels of intellectual protest. Like an authoritarian political regime, the neo-classical intellectual regime is largely immune and deaf to critiques through the ‘normal’ channels –hence the move to the streets by heterodox dissidents and their explicit casting of the issue in terms of a battle for hearts, minds and curriculum.

As Keen in another article noted:

The current economic meltdown is not the result of natural causes or human cnspiracy, but because society at all levels became infected with false beliefs rarding the nature of economic reality. And the primary sources of this infection are the “neoclassical” or “mainstream” textbooks long used in introductory economics courses in universities throughout the world…If economics were in any sense a science, this dramatic failure would lead to a period of soul searching and intellectual ferment from which would emerge a more empirically grounded vision. But with the essentially unscientific nature of economics, this development is unlikely unless enormous pressure is brought to bear on academic economics departments by their students, by business groups, unions, and community groups–in short by anyone whose welfare is affected by the economy…The most immediate source of pressure will be students of economics, who can and should actively protest against being taught neoclassical dogma as the global economy goes into meltdown around them. (Keen, 2009b)
http://www.rgemonitor.com/globalmacro-monitor/256781/economics_students_join_toxic_textbooks

It is not only the inertia of the established and therefore powerful orthodoxy that explains why one can understand this more ‘direct action’ approach being taken by the dissidents, but also because the stakes are so high. The economy and teaching about economics is far too important to be left to a self-selecting and self-reproducing ‘sect’. In short, because whoever controls the teaching of economics controls the policies that determine how the human economy operates, the stakes are enormous in terms of affecting well-being and survival of billions of people. The stakes are enormous also because the economy is human sphere which has the most direct, material and metabolic relationship with the non-human world which is the ultimate foundation for all life on the planet – human and non-human. If, as the dissidents believe (and I count myself amongst those dissidents) that the current economic orthodoxy is literally causing the liquidation of the life-supporting systems on the planet (and calling this ‘progress’), then their direct action, using whatever means necessary, is understandable and laudable. It is in defence of life and an earth-based economics supportive of life and well-being against the life-destroying or life-ignoring imperatives of the ‘orthodox economic regime of truth’ that the foundational motivation of the dissidents can be found. Ultimately, the ‘Toxic Textbooks’ campaign is about taking back control of economics from a powerful intellectual elite and their dominant paradigm which supports, justifies and give intellectual credence to an economic system that is literally killing life.