- This is what an actual economics degree looks like.
Another bad consequence of the long reign of neoclassical economics is that so much intellectual energy (in the form of mathematics) has been wasted in challenging its key (and obviously ridiculous) assumptions. A fine example of this waste can be found in the pages of Doug Henwood's 1998 masterpiece Wall Street: How It Works and for Whom. Near the end of a chapter, "Market Models," in the middle of the book, Henwood describes how in the early '80s the economist Joseph Stiglitz challenged the efficient market hypothesis (the freer a market, the more accurately it processes information by way of prices) by explaining mathematically that high interest rates can discourage good borrowers and only attract bad ones, since all they want is just the money. The reason why Stiglitz pointed this out was to show that there will always be information problems/distortions even in the freest market you can ever imagine. The reason why it was important to make this point is that the leading economists of the day were aggressively pushing an idea that essentially demanded more and more financial deregulation to achieve its goal: the perfect market. Stiglitz and his collaborators showed no such perfection was possible because of the asymmetry of market information. Also, as Ole Bjerg makes clear in his recent book Making Money: The Philosophy of Crisis Capitalism, the market cannot even function without this imperfection:
If we imagine God coming down from heaven to put a definite price tag on all companies registered on the stock exchange, most of the trading in these stocks would cease.
But here is the thing: As related to the information problem with interest rates, Adam Smith already pointed it out over 300 years ago in his book The Wealth of Nations. This feature of business life was well understood by him and also by the economist who gave Marx his theory for labor, David Ricardo. Sadder yet, Stiglitz, one of the most famous and brilliant economists of our times, had no idea that the founder of his profession had already made the argument. Why was he clueless? Because they do not teach history in neoclassical economics. Only mathematics matters. Henwood:
To become a famous economist, you need not be familiar with the founding documents of your discipline. Smith... used words, words that anyone can understand. It’s much more serious to use math, which only a handful of people can decode; even professional economists report Stiglitz’ work hard going.All of that complicated math for what? Nothing. For explaining something that can be said easily with words. What a huge waste. Words, yes, have their limits. You can't land a fucking spacecraft on a comet with words. It will never happen. But you can adequately explain finance and economics without math.
I bring all of this up because I had a drink and an interesting chat yesterday with Alan Harvey, a local economist I admire (I highly recommend his book Demand Side Economics: Demand Side Minds). Harvey is the executive director of IDEAeconomics, an organization dedicated to the "reform of economics, using dynamic analysis and grounded in the realities of credit, money and debt..." Some big names are attached to this group—Steve Keen, Ann Pettifor, and James K. Galbraith. And its latest project, Harvey told me, is raising money for an illustrated book series, CRASH, BOOM, POP!, that shows in plain terms economics from a heterodox perspective—meaning, from the point of view of reality, history, and human experience. You will find little of that kind of realness in the orthodox economics they teach at institutions like the UW. But what one must always keep in mind is that this rejection of history and the rule of mathematics in economics is not natural; it's deeply political. It has created a barrier between the citizen and an important part of his/her life: the society's distribution of wealth. IDEAeconomics hopes to remove this politically imposed obstacle and redemocratize the dismal science.