Why I Am Down on Economists


Thomas Edsall, a topnotch journalist, wrote a recent column in the NYTimes about why people are poor. My hook can be found in the first sentence.

Let’s imagine for a moment that there are no political pressures distorting our discussion of poverty and that we can look at it as a technical problem, not a moral one.

This is followed by a series of discussions of recent research done by a variety of economists, coming from the poles of political ideology. The specifics are irrelevant and not worth the lineage in the paper. He shows that economic studies reflect the political bent of the researchers. Duh. If you add the results of both sides, the picture that emerges is, at least, more comprehensive.

Despite the conflicting nature of these left and right analyses, there is a strong case to be made that they are, in fact, complementary and that they reinforce each other. What if we put it together this way? Automation, foreign competition and outsourcing lead to a decline in well-paying manufacturing jobs, which, in turn, leads to higher levels of unemployment and diminished upward mobility, which then leads to fewer marriages, a rise in the proportion of nonmarital births, increased withdrawal from the labor force, impermanent cohabitation and a consequent increase in dependence on government support.

Edsall suggests that if left and right could get together, we might make a little progress on the poverty front. I agree that this would be better, but there is still something missing. Economists are perhaps the most ideological social scientists toward their discipline. The models all use are more or less the same, except for the going-in assumptions, which tend to reflect their political leanings. Politicians don’t have to be ideological, but have become highly polarized about what works and what doesn’t. Neither has a stronghold on the right answers. The problem with applying ideological solutions to complex problems arises from what Alfred North Whitehead called the “fallacy of misplaced concreteness.” Ideologies are rigid rules about right and wrong, whether it is about the physical or the social world. When these rules are being invoked, they inevitably miss the concreteness of the real world. It is not quite like the abstracted world the rules are presumed to represent. Every moment is different from the last instant. People do things that do not fit the economist’s or sociologist’s models.

The Greeks knew this, and separated the kind of knowledge, phronesis or prudence, necessary for governing from the kind of knowledge about the physical world, epistemē and technē. They would not, of course, have read Whitehead, but still knew it takes something more like wisdom than technical or theoretical knowledge to run the world. Before Socrates, they even had a sense of complexity, that is, lack of concreteness in the way the world works in practice. Heraclitus is believed to be the source of this famous aphorism, “Everything changes and nothing remains still … and … you cannot step twice into the same stream.” If the world is never the same from minute to minute, then no set of formulas or fixed ideas is going to fit precisely, but that is just what ideologues think. I consider scientists as a special kind of ideologues who think they can know everything about the world.

Edsall repeats the standard mantra of both economists and the politician they counsel.

Scientific and technological progress are likely to drive us toward a solution to the problem of poverty only if they take the form of innovations that have a deep impact on economic growth and employment opportunities. To really change things, this impact would have to be comparable to developments spurred by the Industrial Revolution or, more recently, the information revolution. Progress, if it comes, will inevitably bring its own distributive dilemmas.

He might change his tune if he would listen to the only economists I know that make sense. I call them the existential economists because they deal with actual human beings instead of the abstractions found in standard economics. One of these is well known, even winning a Nobel Prize. Amartya Sen argues that the basic function of an economy is to provide people with the capabilities to flourish (my word, not his). The key is the idea of capabilities, an existential variation of the formulaic utility function. He writes:

I have also made the constructive claim that this gap [in utilitarian equality] can be narrowed by the idea of basic capability equality, and more generally by the use of basic [existential] capability as a morally relevant dimension taking us beyond utility and primary goods.

The second is a lesser known Chilean economist, Manfred Max Neef who uses different words to express the same underlying idea. It is not poverty defined as some level of income that separates those who can enjoy some minimum standard of living from those who can’t. Still no human beings here because standard of living is just another number. Max Neef writes of poverties, plural, as the issue. Poverties are akin to the capabilities or, better, the lack thereof that Sen discusses. A third is Fritz Schumacher, who titled his famous book, Small Is Beautiful: A Study of Economics as if People Mattered.

Small is indeed beautiful; it enables people to see other people as individuals, not as statistics. Employment figures fail to indicate the human aspects of work. We have been growing for a few years again, but jobs are less and less available to those who can’t do math or run a computer. Technology is likely to make life even more chancy for them. Instead of putting a cap on political contributions, perhaps we should think about putting a cap on the wealth of those who run for national office. I expect that people who have had to struggle to obtain the capabilities Sen proposes would be much less interested in numbers and abstractions than the wealthy who now occupy most of the seats in Congress. Max Neef was addressing the problems of developing countries, arguing that pouring money into an economy was not the answer. His writing is uncomfortably relevant to the US right now as we too have a poverties problem. Big time.