Re: Depoliticisisng economics

[Julio Huato <juliohuato@xxxxxxxxx>]

soula avramidis quoted Reinert (2005):

> Achieving a higher degree of abstraction was made at the cost of
> reducing complexity and excluding variables. In economics this is
> a process which moves back and forth over time almost as *fashions*.
> It is possible to see the history of economic thought as consisting
> of long and almost monotonous sequences of the same economic factors
> entering the theory, later to be thrown out, later to be included again:

On the surface, it is a back-and-forth movement.  But underneath,
there is a current that is not nearly as arbitrary or cyclical as
Reinert suggests here.  Krugman's paper, "The Fall and Rise of
Development Economics" (googable), gives us a clue about this more
regular underlying trend.  A much broader perspective on the same was
provided in the first chapter ("Science: A Brief Evolutionary
Analysis") of the now-forgotten N Georgescu-Rogen's _Analytical
Economics: Issues and Problems_.

What's so new about the idea that -- say -- the assumptions of game
theory or general equilibrium are highly restrictive or simplifying? 
Wasn't that obvious in the 1950s and 1960s?  Why is Stiglitz's
questioning of the premise of perfect information sticking while
similarly valid warnings by many others were ignored?  Why did the
notion of increasing returns and other externality-like stories in the
"new trade" models or in the "endogenous growth" models get all the
recognition?  If we trace it seriously, the notion of knowledge as an
externality may go back to -- not Allyn Young (as claimed by Hicks and
Kaldor) -- but Socrates.

Why did Simon's challenge to the assumption of rationality and
standard organizational decisionmaking get the attention while
previous challenges were discarded?  Why are behavioral economists
making recent headway, while similarly egregious discrepancies between
psychological intuition and "rational choice" models were dismissed
before?  Why are economic history, the new political economy, the new
institutional economics, etc. eliciting renewed attention as we speak?
 Why are Acemoglou and others attempting to "unbundle institutions,"
the interaction between markets and politics?  Didn't Kalecki had
great ideas about it, some of them decently formalized?  Why Bowles'
and Gintis' evolutionary stories (which, frankly, don't propose much
people didn't "know" before) are not so easily rejected by the
mainstream?

The vested interests, the needs of "the system," academic powerplay,
Anglocentrism or Anglo-Americanocentrismo, ideological inertia, and
chance all play a role.  But the factor we usually downplay may not be
that negligible: *analytical clarity*.  What the winners have in
common isn't their questioning an existing theory or their dreaming up
a new one.  It is instead their showing how from alternative, more
"realistic" sets of assumptions, just as clear conclusions can be
drawn.  Moral of the story: It's not enough to point to the gap
between reality and the assumptions of a theory.  We have to beat the
old model at its own game and -- on top of that -- narrow the gap. 
And the standards of analytical clarity are continuously shifting
towards more rigor and generality.

All theories are abstractions.  What is needed is the ability to
replace the old assumptions with new ones and derive from them just as
clear and testable conclusions as those that flow from the old
assumptions *and* -- on top of that -- get a better fit.  Friedman was
wrong: the "realism" of the assumptions is crucial for the "realism"
of the conclusions.  But besides being "realistic," the assumptions
have to be analytically manageable.  (The good news is that what used
to be analytically unmanageable becomes manageable.  And I mean
"analytical" in the broader sense, to include numerical methods,
computational "brute force," increasingly acceptable alternatives to
strict analytical solutions.)

Ultimately, we measure success by our ability to expose the status
quo, provide a reasonable roadmap to build a robust alternative, and
win people to class unity and struggle, .  We need to win the "battle
of ideas," not once but many times over.  Crossing all the t's and
dotting all the i's is not going to be a guarantee of success, but
it'll improve our chances.

Isn't that, still, a risky strategy?  Aren't we inviting a deadly
crash against the cliffs and rocks of Scopuli under the spell of the
capitalist sirens?  How could we not always be at risk?  Like in the
legend, there are two extreme approaches (and infinite possibilities
in between).  Like Odysseus, we can make a pledge to rule out a
possible future "dynamic inconsistency": plug our ears with beeswax,
tie ourselves to the mast of our political vows, and ask our comrades
to keep us tied until we clear the perils, that is, forever (i.e.,
ideological monolithism).  Or, like Jason, we can pull the lyre and
try and sing better songs to drown the chants of the capitalist sirens
(i.e., treating socialism like a science).

Julio