Monday, July 2, 2018

David F. Ruccio — “They aren’t laws of nature”

Nicola Headlam is, I think, right with respect to “how the rules of the economy are set”:

“Somehow, someone, somewhere made these rules up. They aren’t laws of nature.” And they determine “who’s got what and where and why”.
The question is, how do we teach economics so that that message gets through?
What to do? Start calling BS for starters.
This is yet another example of economics as philosophy, which is rationally based, rather being than science, which is empirically based. This is a foundational mistake that biases the entire structure. As soon as one encounters the term "natural, that's a tell to check the empirical warrant.
And, for the most part, that means pushing students through the chapters of a traditional textbook of economics, and therefore teaching them a narrow version of economics, consisting almost entirely of neoclassical and Keynesian theories, approaches, and policies.
That way of teaching economics has the effect of naturalizing a capitalist economy. First, it reduces the universe of relevant economic thought to contemporary mainstream economics. No other economic theories, now or in the past, need apply. (Nor, for that matter, should knowledges about the economy beyond mainstream economics, from either disciplines or from outside the academy.) Second, the methods and models are taught in a “common sense” manner. As I discussed back in May, markets have a magical, quasi-mystical status within mainstream economics. They are the original starting-point of neoclassical theory—presented as being “just there,” with the requisite price and quantity axes and supply and demand schedules, as the origin and focus of economic analysis. As for macroeconomics, which I discussed this past April, the premise and promise of both Keynesian and neoclassical macroeconomics is that, with the appropriate institutions and policies, capitalism can be characterized by and should be celebrated for achieving full employment and price stability. In both cases, at the micro and macro levels, the rules governing the economy are considered to be natural laws, which are correctly captured within the models of mainstream economics—and then, of course, meant to be respected and obeyed....
Occasional Links & Commentary
“They aren’t laws of nature”
David F. Ruccio | Professor of Economics, University of Notre Dame

1 comment:

Konrad said...

There was a time when the “divine right of kings” was considered a law of nature, like gravity or the conservation of energy.

Today the masses falsely think that man-made the rules of the macro-economy are laws of nature. (This includes MMT people who falsely imagine that their “taxes drive money” mantra is a law of nature.) This false illusion is sustained by lies and by the use of mathematical symbols. (“Mathematics proves that the U.S. government has a debt crisis.”)

False beliefs are why the masses are impoverished and enslaved.

That said, some things are facts, whether or not we call them “laws of nature.” For example, the sovereign government’s deficit is the economy’s surplus, and the sovereign government’s surplus is the economy’s deficit. It is a fact that the U.S. government creates money out of thin air, just as we create and destroy points on a scoreboard by changing the numbers. It is a fact that money is not physical or limited, but is instead a strictly mental concept. It is a fact that monetarily sovereign governments do not need loans or tax revenue in their own currency.

Today, economics textbooks discuss everything but the facts.