Dickie Dear, I think you don\’t understand

Richard Murphy in his comments section.

"If economics is a science it is a very poor one. Let’s look at some of the assumptions it requires to ensure it works as one:

1) Perfect knowledge of the future

2) Certain knowledge of current preferences which will never change

3) Mindless pursuit of self interest in the face of conflicting goals

4) No externalities i.e. everything of value can be priced, with certainty

That’s not science: that’s mumbo jumbo. "

I agree that what you\’ve laid out there is mumbo jumbo. But that\’s because what you\’ve laid out is not "economics". It\’s a desperate misunderstanding of a certain sect.

1) I can\’t think that there\’s any economist at all who claims that the subject rests upon perfect knowledge of the future. Good grief, there are few enough who argue that it rests upon perfect knowledge of the present. For example, Akerloff got the Nobel for studying asymmetrical information…if one group has more knowledge than another (which is what that phrase means) we\’re pretty clearly not talking about everyone having perfect information, are we?

2) Certain knowledge of preferences? Well, yes, most economists do argue that both individuals know what their own preferences are better than others do for them and that preferences are consistent. That if you prefer A to B and B to C then you prefer A to C. But no one at all insists that these are unchanging over time. Appetites for (the same as a preference) for risk for example are known to change: it\’s one of the ideas that underpins a certain set of business cycle theories. Savings and consumption preferences are known to change over time: Modigliani\’s lifetime savings hypothesis for instance.

3) Mindless pursuit of self interest? Umm, no, not even Adam Smith said that. Pursuit of enlightened self interest, yes, but if you actually bother to read him he talked a great deal about sympathy for one\’s fellow man, just as an example. The current phrase used is that we all attempt to maximise our utility. And yes, the warm glow that comes from doing the morally right thing is indeed included in the definition of utility (as is of course the warm glow from doing things that aren\’t morally OK, say, adultery).

4) No externalities. Umm, Richard, have you even bothered to crack open an economics text book in recent decades? Externalities are taught at A level economics these days. Absolutely every single damn economist looking even vaguely at climate change is arguing not about whether they exist but how do we deal with them? The cap and trade systems have been designed by economists, the proposals for carbon taxes (one creates a market in what was formerly an externality, the other brings it into the current market pricing structure)….good grief, the entirety of environmental economics is based on Garrett Hardin\’s analysis of the Tragedy of the Commons, simply another name for a certain type of externality.

I\’m afraid that you\’ve betrayed the fact that you really do not understand economics at all. Something I have to admit I\’ve suspected for some time now but at least now I know.

"Ecnomics" is, like "science" itself, best understood as a toolbox to be used in attempting to make sense of the world around us.

7 comments on “Dickie Dear, I think you don\’t understand

  1. Tim
    I agree with your criticism of the version of economics presented by Richard Murphy. He is talking highly-biased nonsense.

    However, as a classical Smithian (if I may use such a phrase) I have to say (for balance) that most modern, especially neoclassical, growth theories are about how their models of growth work and not about how economies grow.

  2. I’m with the Queen on this one” How come none of you economists saw the Credit Crunch coming?”
    Also “We have these recessions from time to time.None of my governments ever knows what to do about them”
    Says it all. Can’t be much of a predictive science if it does n’t see something this big hurtling through space at us. The Henry Georgites predicted it coming but their man was an ex-seaman / drifter with a Mississippi river boat gambler beard,who wrote a best-seller which all trained economists avoid like the plague as instant professional suicide.

  3. The lack of self awareness is interesting. After all, a lack of perfect knowledge about the future is perfectly reasonable for a Free Market economist. He can, in the spirit of optimism and trust, leave it up to other people. Richard (if I can use his first name and given the frequency with which he graces us with his opinions I feel like an old friend) on the other hand wants to replace the individual decisions made by individual people by Planning. Or something that looks a lot like it. If that is not informed by Perfect Knowledge of the Future, or something close to it, how is it going to work then? We are all going to be forced into some scheme that is no better than a lottery?

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