[PEN-L:30092] Re: Re: Post-Autism in the Micro

[Ben Day <day@xxxxxxxxxxxxxx>]

At 09:40 AM 9/5/2002 -0700, Eugene Coyle wrote:
>    The current Galbraith piece is appealing, but professors need a more 
> concrete road
> map at this point --  his level of abstraction sets the stage, but what to 
> actually do?

I dunno about this - even as an abstract map, I don't find Galbraith's 
manifesto very compelling from a left perspective (I'll paste the essay 
below, for those who want to read it), for a few reasons. For one, I think 
his critique suffers from the same gross empiricism that JD finds 
unsettling in McCloskey's article - a belief that economics needs to become 
closer to "real science" and discard "unobservables" (one senses a 
Friedmanesque measure of economic theory based on predictive power lurking 
here). Two of his primary grievances are the failure to teach accounting, 
and limited range of data gathering (not bad grievances, but if you only 
had 10, would these make your list?). Secondly, Galbraith doesn't seem to 
significantly break with the mainstream assumption that the goal of 
(macro)economics is to study aggregates.  What one foregoes with this 
assumption is analysis of how economic institutions allow some groups in 
society to control other groups, monopolize (or dominate) access to 
resources, and shape historical change. This seems to me to be one of the 
basic differences between (most) Marxian economics and (most) 
neoclassical/Keynesian economics, although I think many academic Marxists 
tend to get caught up in trying to show how class, for example, is 
important for understanding aggregate outcomes. But while I appreciate 
efforts of this sort, and they are important for demonstrating how class 
matters for issues of efficiency, total output, distribution, etc., I think 
we need to be careful of abandoning class critical economics - that is, 
economics that is not concerned merely with the utilitarian "well-being" of 
economic agents (and this focus would include issues like income 
inequality) - but also who is holding the wheel, so to speak, and how 
people are oppressed/dehumanized not merely qua consumers (via the unequal 
distribution of consumption rights), but qua social animals entitled to 
participate in society and lead fulfilling lives. Galbraith, of course, 
falls short of calling for any role for class analysis, but even within the 
more limited range of heterodox theory he does advocate, I think he 
subjects these as well to the goal of aggregate analysis (institutional 
economics, for example, needn't necessarily be so subjected).

I also don't quite see how his article involves "moving on" from the 
microeconomics debate. Is such a debate not important precisely for 
constructing a "new" economics? He weighs in on the debate summarily in his 
first point, but without any defense of his position or recognition of the 
strands in the debate opposing that position.

(The essay is pasted in below).

------Ben

Can we please move on?  A note on the Guerrien debate
James K. Galbraith   (University of Texas at Austin, USA)

Gentlemen, ladies, comrades...  Your contributions to the Guerrien debate 
have been
reflective, even wise occasionally.  But even where points were most deftly 
made, as they
were (to my taste) by Peter Dorman and by Steve Keen, something about the 
discussion
troubles me.  There is here the flavor of a certain type of social 
activist, earnest and dedicated,
honorable in every way, yet so caught up in the problems of the poor that 
one comes finally to
understand they would be quite lost if poverty were ever made to disappear.

In other words, aren't we wasting our time? Isn't there more important work 
to do?  In the
immortal words of Thorstein Veblen:

"If we are getting restless under the taxonomy of a monocotyledonous wage 
doctrine
and a cryptogamic theory of interest, with involute, loculicidal, tomentous 
and
moniliform variants, what is the cytoplasm,  centrosome, or karyokinetic 
process to
which we may turn, and, in which we may find surcease from the metaphysics of
normality and controlling principle?"

Critics of the neoclassical doctrines have penned, over more than a 
century, millions of words --
though few as good as those just cited.  But how many have devoted 
themselves to new and
alternative theory, to an economics that was not merely a variant or a 
gloss on neoclassical
doctrine?  Keynes. Robinson.  Schumpeter.  Ayres. Simon. 
Leontief.  Galbraith père.
Georgescu-Roegen. Sraffa.  Minsky. Davidson. Nelson and Winter, too 
tentatively.  Pasinetti.
Peter Albin.  And since then? Yes I know there are others, including some 
readers of these very
words.  But aren't you tired of embedding your originalities in critical 
restatements, however
elegant, of what is already clear to thousands of bright undergraduates on 
the second day of
class?

It is time to get on with it. We need a replacement for neoclassical 
economics. A new
curriculum.  Let's build it.  Let me suggest a few key characteristics of 
what should follow.

        1. The micro/macro distinction should be abolished. It exists in 
principle to separate
irreconcilable doctrines.  The new classicals have recognized this, and 
have abolished macro.
(As Evelyn Waugh said of Randolph Churchill's surgeons, it was a miracle, 
they found the
only part that was not malignant, and removed it.) We should take the 
opposite tack: toward
a theory of human behavior based on principles of social interaction.

        2. Empirical work should be privileged.  Real science does not 
protect bad theory by
concentrating on unobservables.  It is, rather, a process of interaction 
between conjecture
and evidence.  In the history of science, new technologies for measurement 
have often
preceded new ideas.  Believe it or not, this could happen in economics too.

        3.  Mathematics should mainly clarify the complex implications of 
simple constructs,
not  obscure simple ideas behind complex formulae.  Dynamical systems (as 
Steve Keen
rightly insists), fractal geometries, cellular automata all help us to 
understand the principles
underlying evolutionary social dynamics.  They are also fascinating. They 
help students
learn to think.  Mathematics should lie, in other words, at the essential 
core of a new
curriculum;  it should not be deployed defensively, as the protective belt.

        4.  Our economics should teach the great thinkers, notably Smith, 
Marx, Keynes,
Veblen and Schumpeter (to restrict myself tactfully to a few of the honored 
dead).  We
need not reinvent the field; nor should we abandon it. Economics over the 
sweep of history
is not mainly about scarcity (which technology overcomes) nor about choice 
(which is
generally neither free nor the defining characteristic of freedom). Rather, 
economics is
about value, distribution, growth,  stabilization, evolution. The great 
ideas  in these areas,
and the history in which they were embedded, are fundamental.  They should 
be taught,
and not as dogma but rather as a sequence of explorations.(1)

        5.  Pop constructs derived from neoclassical abstractions (social 
capital, natural
capital....) are not part of our canon.  While they are noteworthy as 
efforts to reconcile
neoclassical ideas and policy commitments to real social problems, these 
constructs also
extend, rather than attempt to overcome, the logical defects of the 
neoclassical system.
From the standpoint of post-autism, therefore, they represent a dead end.

        6.  Nor should we accept the reconstruction of  economics as an 
amalgam of interest-
group politics. This approach -- popular these days at the American 
Economic Association --
has become a way of isolating certain dissenters who cannot conveniently be 
suppressed.
But the fact that race, gender, and the environment are important social 
constructs does not
mean that economics requires a separate branch for the economics of race, 
another for the
economics of gender, and another for "sustainable development."  It should 
instead mean that
the core of what we teach should handle these questions (which relate to 
power, discrimination,
entropy, and so forth) in a way that is central to the discipline we espouse.

        7.   An economics of modern capitalism should study the actual, 
existing features and
behavior of our system.  Households, business enterprises of all the types 
(including some
characterized by diminishing and others by increasing returns, some with 
monopoly power
and others without), money and credit systems, governments and their 
budgets, and the
international system are all parts of a nested, hierarchical structure of 
rule- and convention-
setting institutions, of interacting and sometimes conflicting sources of 
power. Their behavior
is characteristically unstable and sometimes violent.  To have reduced the 
subject to shapeless
households, firms and markets, all linked by a uniform conceptual structure 
of supply and
demand curves (labor market, capital market, goods markets...) - and in 
equilibrium! - that
was the original neoclassical mistake, already analyzed by Keynes in the 
first pages of the
General Theory.

        8.  Accounting matters.  We should work with and teach from the 
full spectrum of
information sources, not merely sample surveys (with their obsessive focus 
on personal
characteristics such as years of schooling) and the national accounts, but 
also credit,
trade, industrial and financial data.  Not to mention linking economic 
measurements to
other information: political events, the environment, quality of life, 
demography,  health.

        9.  A focus on social structures and the data that record them 
requires new empirical
methods.  The study of dispersions, of inequalities, is intrinsic to the 
study of power.
Neoclassical economics with its bias in favor of the sample survey, the 
gini coefficient,
and the assumption of normality in the distribution of errors has neglected 
the mathematics
and statistics of dispersion measures.  There are large gains to be had 
here, for small
investments of effort. Likewise the study of social structures cannot be 
done properly with
parametric techniques held hostage to the dogma of hypothesis and test. 
There is no single
formula for empirical learning.  Numerical taxonomy, discriminant analysis, 
multidimensional
scaling, and many other techniques are available for studying the phenomena 
of real economic
systems, and we should learn, use, and teach them.(2)

        10.  Finally, our economics is about problems that need to be 
solved. There remain
before us the pursuit of  full employment, balanced growth, price 
stability, development, a
sustainable standard of life.  That is why students once were attracted to 
our field.  That is
why they abandon it now.  That is also why, if we develop a coherent 
research program,
and a teaching curriculum derived from it, that broadly respect the 
principles outlined above,
we will prevail in the long run.

Notes
1. I thank Pedro Conceição for his characteristic insightfulness on this point.
2. In my view, the study of inequalities and social formations provides the 
linkage between Keynesian macro
principles and the behavior of smaller social formations -  but I will not 
try to persuade you of that right now.

________________________
On Sept. 1, James K. Galbraith became the Lloyd M. Bentsen, jr. Chair in 
Government/Business Relations at  the University of Texas at Austin, where 
he directs the University of Texas Inequality Project ( 
http://utip.gov.utexas.edu )  He is also a Senior Scholar of the Levy 
Economics Institute, and his most recent book, co-edited with Maureen 
Berner, is Inequality and Industrial Change: A Global View  (Cambridge, 2001).