The Slow Death of Neoliberalism: Part 2

The Slow Death of Neoliberalism Part 1.

This post focuses on the failings of neoliberal economic theory. Neoliberalism arises out of positivist philosophy, defined in Part 1. Positivism is the theory that the only true knowledge comes from the scientific process.

There are five main principles behind Positivism:

1. The logic of inquiry is the same across all sciences (both social and natural).

2. The goal of inquiry is to explain and predict, and thereby to discover necessary and sufficient conditions for any phenomenon.

3. Research should be empirically observable with human senses, and should use inductive logic to develop statements that can be tested.

4. Science is not the same as common sense, and researchers must be careful not to let common sense bias their research.

5. Science should be judged by logic, and should be as value-free as possible. The ultimate goal of science is to produce knowledge, regardless of politics, morals, values, etc.

Economists created a group of sayings which they put in their introductory textbooks and teach as laws and principles to their students at all levels. For example, N. Gregory Mankiw, economics professor at Harvard, starts his introductory economics textbook Principles of Macroeconomics with a list of ten Principles he claims almost all economists agree are true. Any thoughtful person reading this list will see that these ten statements are either tautological (you can’t do two things at once) or are mere rules of thumb. The idea that you could build a positivist science on this foundation is absurd. But Mankiw disagrees, and so does everyone who took Econ 101 and stopped, and especially so do the elites from our top schools.

It’s not surprising, then, that this version of economics is failing. It cannot perform the basic goal of a scientific theory, making accurate predictions. Economic models have failed and will continue to fail to predict disasters; and there isn’t much hope that they will ever be able to predict anything of interest.

In Part 1 I pointed out that the positivist program can’t be easily adapted to the social sciences. David Andolfatto of the St. Louis Fed agrees, and tells us what we can expect from economics:

But seriously, the delivery of precise time-dated forecasts of events is a mug’s game. If this is your goal, then you probably can’t beat theory-free statistical forecasting techniques. But this is not what economics is about. The goal, instead, is to develop theories that can be used to organize our thinking about various aspects of the way an economy functions. Most of these theories are “partial” in nature, designed to address a specific set of phenomena (there is no “grand unifying theory” so many theories coexist). These theories can also be used to make conditional forecasts: IF a set of circumstances hold, THEN a number of events are likely to follow. The models based on these theories can be used as laboratories to test and measure the effect, and desirability, of alternative hypothetical policy interventions (something not possible with purely statistical forecasting models).

This obvious straw man at the beginning of this quote is typical of the arrogant economist described by Marion Fourcade. But let’s see how well the economist business does at the weak test of effectiveness offered by Andolfatto.

For decades economists taught the Kuznets Curve which they said shows that as industrialization proceeds, economic inequality first rises and then falls.
Thomas Piketty takes up this theory in Capital In The Twenty-First Century, and extends the data forwards and backwards from the early 1950s. Here’s a graph of top decile income share from 1910 to 2010 from Wikipedia.

Looking at that graph through the time Kuznets wrote, the early 50s, it might be read to support that hypothesis. The sudden rise, starting under Reagan and continuing ever since, completely contradicts the hypothesis. That didn’t stop people from teaching it.

The Phillips Curve asserts that there is a connection between inflation and unemployment: as the unemployment rate drops, inflation increases. It’s one of Mankiw’s 10 principles; and it’s deeply embedded in the models used by the Fed to decide interest rates. It’s mostly wrong. Here’s a recent debunking from the Philadelphia Fed, concluding that the Phillips Curve might help forecast inflation in a weak economy, but does not work in an expanding economy.

The Wikipedia Page for Phillips Curve says that:

The original Phillips curve literature was not based on the unaided application of economic theory. Instead, it was based on empirical generalizations. After that, economists tried to develop theories that fit the data.

A 2008 paper, The History of the Phillips Curve: Consensus and Bifurcation, Economica (2008), P. 10, lays out the history in detail. Roughly speaking, it begins with the observation by William Phillips that in the UK there was a stable relation between the rate of wage growth and inflation over a substantial period of time, and deviations could be explained reasonably. This paper was picked up by Paul Samuelson and Robert Solow and turned into the earliest mathematical formula in 1958. Since then there have been a number of occasions where the Phillips Curve failed, and each time economists just grab some more of their existing tools and try to fix it or explain the failure, in each case after policy-makers have gone on as if it were right and forced bad results on the economy and especially the wages of workers.

Here’s a third example. Economists say that the reason wages are stagnant is that productivity is flat, as if there were a relation between wages and productivity. Anyone who looks at this chart and reads this article from the Economic Policy Institute will have a huge question about that.

And that isn’t just the right-wing. Plenty of centrist Democrats make the same argument. And by the way, what does this say about the central theory of free market economics that supply and demand for labor set prices?

As I say here and here, neoliberal economists used their ideology of free markets to influence policy and to change the entire way we think about society without having the slightest idea of the consequences of their meddling because their models aren’t designed to deal with changes in societies or economies. As my examples show, they just keep on regardless of the success or failure of their predictions, and politicians and rich people ignore the failings and continue to follow their foolish advice.

Neoliberal economics obviously fails to measure up to the standards of positivism. It can’t predict anything useful, and it barely is able to explain itself coherently. That’s a problem with positivism too. People are slowly, slowly coming to grips with these failures and the damage they have done. It’s adherents are dying off, and their replacements are into it for the money and the power. Stupid ideas never die, but maybe they will lose their influence.

Updated to correct link to EPI article and chart.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

62 replies
  1. Desider says:

    I’m not quite sure where this series is leading, but it seems like a pile-on to provide some econ justification for shitting on anyone accused of being “neoliberal” politically.

    “Here’s a third example. Economists say that the reason wages are stagnant is that productivity is flat, as if there were a relation between wages and productivity.” – oh come on, I’m not an economist and I’ve known this is bullshit for ages.

    I even use this counterexample for people saying Clinton killed the manufacturing sector (whose demise started actually under Carter and had much more to do with China outsourcing in the maligned NAFTA): US manufacturing productivity has continued to skyrocket while employment in that sector has been decimated. We’re still #1 in the sector. They didn’t kill manufacturing – it’s doing actually quite fine, producing easier stuff to scale, and under Obama even some gains started to finally (after a decade+) show in an increase in manufacturing employment. It’s just we don’t make TVs anymore (and even Japan finally got out of this doomed sector just a few years after we did).

    Maybe I’m misunderstanding, but after a campaign year in which Modern Monetary Theory took front stage because it meant no longer balancing the books or reining in the shit that supposedly houses a pony [while anyone smeared as a “neoliberal” must be consigned to the dustbin of time] it’d be nice to approach these topics without more confirmation bias driving the discussion.

  2. lefty665 says:

    The arrogance of those flacking economics as a science has been apparent as far back as Samuelson and econ 101 for me.  It has always been the emperor’s new clothes.

    It is likely not a coincidence that the lines in your Figure A (disconnect graph) diverge at about the time the Dems abandoned the New Deal and the idea that workers should share in the fruits of their labor and embraced neo liberalism. It has been downhill for the workers of America since then.

    “And that isn’t just the right-wing. Plenty of centrist Democrats make the same argument.” You repeat yourself, right-wingers and centrist Dems are one and the same. New Dems aka centrist Dems are not actually Dems in a meaningful sense of the word. Calling them Democrats has been a DLC neolib fraud from the beginning.

    Neolib elitism finally caught up with the Dems last year when voters, fed up after close to 50 years of being abused, to use the desiders words, shit back on the neolibs and their candidates.  If the Dems are earnest about avoiding extinction, they must clean house of the neolib elites that have done so much to destroy middle America and the Dems as an effective political party while re-embracing workers and their work.

    I would not go as far as you have in discounting objectively based research and engineering. We live in an amazing world as a result of science and engineering. At the dawn of the 20th century radio was just a gleam in the eye of science, we were mostly transporting in horse drawn equipment, and lighting by burning oils or gas. We have positively come a long way since then.

    Thanks for an interesting series so far. Hope you pursue it.

     

    • orionATL says:

      lefty, the arrogance displayed here is yours and it is extraordinary.

      economics is a long acknowledged and respected science, respected enough to have nobel awards.

      as for your political viciousness, only a hack partisan of the grossest sort would write:

      “… right-wingers and centrist Dems are one and the same. New Dems aka centrist Dems are not actually Dems in a meaningful sense of the word. Calling them Democrats has been a DLC neolib fraud from the beginning…”

      do you realize that you are condemning tens of millions of democrats who simply do not agree with you? what kind of partisan fool would do that?

      and a very silly lefty writes:

      “… I would not go as far as you have in discounting objectively based research and engineering….”

      you just did, lefty, in dismissing economics as a science; economics is objectively based research.

      you seem from your comments a person grossly ignorant of economics in addition to being a grossly prejudicial individual. in fact, i think it would be hard to find an individual more ignorant and more prejudiced than you are.

      • lefty665 says:

        Perhaps if you read Ed’s posts “The slow death of neoliberalism parts 1 and 2” you could make an appropriate comment. And yes tens of millions of Dems can be wrong, and have been.

        • orionATL says:

          lefty,

          your comment displayed ignorance and prejudice. reading everything ed walker has written would not change the evident fact of your ignorant view of economics.

          nor would it change your breathtaking arrogance about what makes a “good” democrat.

    • orionATL says:

      today the nobel prize in economics was announced:

      https://www.nytimes.com/2017/10/09/business/nobel-economics-richard-thaler.html?

      nobel economics award began in 1969. the individuals used scientific and mathematical techniques to explore an amazing range of economic subjects:

      year name country** achievement

      1969Frisch, RagnarNorwaywork in econometricsTinbergen, JanThe Netherlandswork in econometrics
      1970Samuelson, PaulU.S.work in scientific analysis of economic theory
      1971Kuznets, SimonU.S.extensive research on the economic growth of nations
      1972Arrow, Kenneth J.U.S.contributions to general economic equilibrium theory and welfare theoryHicks, Sir John R.U.K.contributions to general economic equilibrium theory and welfare theory
      1973Leontief, WassilyU.S.input-output analysis
      1974Hayek, Friedrich vonU.K.pioneering analysis of the interdependence of economic, social
      .
      .
      .
      .
      2013Fama, Eugene F.U.S.empirical analysis of asset pricesHansen, Lars P.U.S.empirical analysis of asset pricesShiller, Robert J.U.S.empirical analysis of asset prices
      2014Tirole, JeanFranceanalysis of market power and regulation
      2015Deaton, Angus S.U.K.analysis of consumption, poverty, and welfare

      • lefty665 says:

        You obviously still have not read Ed’s posts “The slow death of neoliberalism parts 1 and 2”. It may be quaint, but it seems to me that reading the post would be a prerequisite to commenting.

        • orionATL says:

          what an obdurate blowhard you are lefty.

          you have no idea what i have read. but i can tell for sure from your ignorant comments about economics that i have read and studied a whole lot more economics than you have.

          as i said to earl, i’ll say to you:

          fortunately for mankind, your political biases, your prejudices, your righteous convictions carry no weight.

          the only other place i know in the american political spectrum where one can find americans as righteous and obdurate in their ignorance and folly as you two is in the republican teaparty gang.

          • lefty665 says:

            Orion, time to check in with your therapist, and perhaps get your meds adjusted.

            You might want to take this post and comments section along so your therapist can see the extent of your obsession with attacking me to the exclusion of actually reading the original post.  I do not pretend to know the extent of your education and readings, either on their own or in comparison to mine. However, I can tell from your attacks on me here that you have not read Ed’s post above or the links to other articles he thoughtfully included.

            Therapy and meds are good.

  3. earlofhuntingdon says:

    Neoliberalism is an avowedly political program.  Mainstream economists, especially members of the Chicago School, are its praetorian guard.  Theirs is a rigid, top-down hierarchy that entertains economic, political and social views that run the gamut from A to B.

    “Exploring” a field leaves out the essential element of to what end is one exploring and who is evaluating the merits of that exploration.  The recognized sciences of chemistry, physiology or medicine, and physics seem less controversial than literature or economics.  Even the former are controversial, given that their funding is subject to political choices.

    The award of a prize by a Nobel committee is ambiguous evidence.  Barack Obama’s premature and inappropriate “peace” prize comes to mind.

  4. orionATL says:

    e of h writes:

    “… The award of a prize by a Nobel committee is ambiguous evidence..”

    the award is not at all ambiguous; only an ideogue would conclude otherwise.

    my point though is that over ~150 years individuals far more knowledgeable than you or lefty about what does and does not deserve to be called science have deemed economics a science.

    furthermore, noble committees for the last 50 years have deemed a long list of very distinguished scholars worthy of individual recognition for their contribution to that science.

    fortunately for mankind, your political biases, your prejudices, your righteous convictions carry no weight.

    the only other place i know in the american political spectrum where one can find americans as righteous and obdurate in their ignorance and folly as you two is in the republican teaparty gang.

    • Norskie Flamethrower says:

      The hysteria with which you attack the commenters who support this critical analysis without addressing the analysis itself is most telling. One of the tenants of neoliberals and neoliberal economists is the masquerade that neoliberalism is “scientific”, intellectually demanding and intelligible to only those who have the education and intelligence to understand it. Neoliberalism is simply a politics designed to explain to and comfort those who find themselves suffering from the actions and policies of elected officials for whom they voted. The irony of your hysteria in this context is in the reading of your arguments.

      • orionATL says:

        norske you too are a notorious blowhard. just look at your pretentious screenname :)

        using inapproriate terms like “hysteria” is how commenters like you misuse and abuse words in an adolescent effort at dominance.

        my comments are straight forward and accurate – economics is a science without question and nobel economists are scientists.

        if you want to identify as another of the righteous progressives who are strongly akin to the intolerant followers of cromwell, be my guest.

    • earlofhuntingdon says:

      Aung San Suu Kyi might agree with you about the inerrancy of various Nobel committee choices.  Or perhaps Pope Pius IX.

      Getting straight A’s in school is a testament to one’s intellect, diligence and absorption of the material – and its accompanying cultural biases – being tested.  It is not an assessment of moral, political or social values.

      George Bush’s US Attorney picks, for example, were highly educated.  His appointee to the DC Circuit, jejune, arch-conservative Brett Kavanaugh, has degrees from Yale College and Yale Law School.  Kris Kobach graduated summa from Harvard College, has a law degree from Yale and a doctorate from Oxford.  I would not rate their legal, social or political choices highly.  The Nobel committees’ are equally fallible.

      • orionATL says:

        you know, e of h, declaring that economics is not a science or that rewarding economic scientists with a noble proves nothing is very similar to the anti-science attitude of climate deniers. what is operating here and with your climate-denying bretheren is ideologically grounded anger at some conclusions of some scientists. ideologically grounded anger can bring useful change in a discipline, e. g. with marx, but that is not a guarantee in every or most circumstances.

        • earlofhuntingdon says:

          Economics is a social science, with an affection for opaque mathematics.  It is fundamentally different from physics or chemistry.

          It is false to compare noting such an obvious circumstance with climate denial, which makes me wonder whether your anxious support for the Nobels has a noble purpose.

          • orionATL says:

            you really don’t know what you’re talking about.

            1. the mathematics is anything but opaque.

            2. keep in mind that economics is not built solely or even primarily on grand mathematical models. it is built on an enormous amount of data from the field that economists have collected and analyzed and made into useful understandings of human behavior.

            your viewpoint is harsh, ideologically based, and devoid of respect for the intellectual efforts of thousands of scientists over ~150 years.

            your disrespect and the arrogance that that entails is why i say you and your fellow “evaluators” are no more than the left wing equivalent of well-intentioned teaparty nuts. e. g., declaring economics not a science is nutty.

            • earlofhuntingdon says:

              Your ad hominem attacks are wearing thin.  You can have Friedman and Mankiw.  I’ll take Ha-Joon Chang, Steve Keen, and Mirowski.

              • greengiant says:

                Add Minsky.  Google nakedcapitalism.com Steve Keen.  Lots of articles. https://www.nakedcapitalism.com/2015/10/steve-keen-mainstream-economics-and-its-deadly-equilibrium-assumption.html  For my two cents, Clinton, the Dems, the GOP, and all the Nobel Prize winning economists are turds bought and paid for by the likes of GS and the oligarchs.  2008 debt bubble,  economists crickets.   30 percent of US wages spent on medical care with no prosecution on variable pricing,  economists crickets.  Per Minsky the US as a country, private and state, is an end stage Ponzi scheme  borrowing more than just to pay interest.  Not much said about how to allocate production when you only need 5 percent workforce.

                Happy dissonance bubbles to all.  Beyond my pay grade to mess with every ones’ realities.

              • orionATL says:

                e of h

                here is your initial response to my comments about economics being a science.

                e of h wrote:

                “…. Economics is a social science, with an affection for opaque mathematics.  It is fundamentally different from physics or chemistry.

                It is false to compare noting such an obvious circumstance with climate denial, which makes me wonder whether your anxious support for the Nobels has a noble purpose…. ”

                you do see the your hypocrisy, do you not, of your whining about ad hominem when you employed it in your first comment. (“makes me wonder”)? so clever, earl :)

                further, what might be your qualfication for declaring that economics has an affection for opaque mathematics? you mean like statistics, like calculus, like propositional logic? i would sincerely appreciate an answer to that one question.

                further, it is not false at all to make the comparison with climate -denial. both are ideologically based arguments against a branch of science. do you not see that?

                i am quite used to having folks whose behavior i have accurately described refer to my descriptions as ad hominem. ad hominem you know can be quite an accurate description of a human being’s behavior. if you are a republican teaparty ideologue and i call you a republican teaparty ideologue, that is ad hominem and an accurate description.

                tell me, earl, what of your repeated use in your comments throughout emptywheel of the pejoritive “neo-liberal”?

                is that notbad hominem, earl. do you get the whiff of your own hypocrisy in crying ad hominem about my description of your opinions about economics ?

                you, e of h, are a person whose views about economics i believe i have accurately described as

                “… your viewpoint is harsh, ideologically based, and devoid of respect for the intellectual efforts of thousands of scientists over ~150 years.

                your disrespect and the arrogance that that entails is why i say you and your fellow “evaluators” are no more than the left wing equivalent of well-intentioned teaparty nuts. e. g., declaring economics not a science is nutty…”

                i think your comments display a conviction devoid of respect for the field and that you really are not qualified to render the judgements on economics that you have rendered.

                just above you write:

                “… You can have Friedman and Mankiw.  I’ll take Ha-Joon Chang, Steve Keen, and Mirowski…”.

                good grief! you have no idea what i have been talking about do you? i am talking about your and lefty’s lack of a descent respect for an important area of human intellectual endevor – economics.

                i am not picking favorites. don’t you understand that?

                • earlofhuntingdon says:

                  I have a good idea what you’re talking about, despite your persistent ad hominem attacks.  I simply disagree wholeheartedly with your comments and characterizations of those of others.

  5. TarheelDem says:

    One of the interesting things I’ve discovered from recent reading is that the importance of positivism has been rethought even in the so-called hard sciences, most surprising of all, physics.

    For too long, economics has sailed along with non-falsifiable hypotheses as their primary assertions when the data in the time series for productivity and incomes should have caused a rethink.

    And the plain-and-simple fact that markets are systems that ration goods on the ability (and inclination) to pay should have cut off many market-based schemes for providing infrastructure decades ago. Indeed Theodore Vail only succeeded in privatizing telecommunications a hundred years ago by agreeing to very aggressive government regulation if it were fragmented it between the federal government and the states.

    • orionATL says:

      tarheeldem –

      thanks for the thoughtful comment.

      with respect to this sentence “… One of the interesting things I’ve discovered from recent reading is that the importance of positivism has been rethought even in the so-called hard sciences, most surprising of all, physics…”

      i believe it is the case that positivism has been being rethought for many decades. in addition to offering scientists useful insights, it became itself a kind of ideology; its leaders became philosopher-preachers. not surprisingly, non-loyalist began to challenge positivism and develop other useful approaches. much of the argument about positivism arouse from competing schools of thought in philosophy and sociology.

      the key point is that no one school dominates forever, but many schools contribute to knowledge and to scientific methodology in a long chain over time. for exsmple i personally would connect sir francis bacon’s emphasis on collecting and analyzing data (rather than a priori speculation) with positivism hundreds of years later. both contributed greatly to scientific advancement.

      i am not intetested in being loyal to any philisophical school touching science, whether positivism or other. i expect most practicing scientists feel the same.

      “… For too long, economics has sailed along with non-falsifiable hypotheses as their primary assertions when the data in the time series for productivity and incomes should have caused a rethink…”

      fine. a correction was needed. conclusions and theories were found lacking and new ways of approaching timegseries data developed.

      but that does not negate the value of prior time series work. self-evidently, without that work there would have been neither insights developed from time series data nor any impulse to correct flaws in methodology.

      my objection to comments posted near the beginning of this discussion above is the assertion that economics is not a science, which is both wrong and dangerously anti-intellectual.

      i am similarly unimpressed by assertions that a major award conferred on individual economists, such as a nobel, has little value in asessing an individual’s status in his science or whether he is a scientist at all.

      much of this ideogically based criticism of economics in comments here oo economics not being a science strikes me as commentary by scientifically ignorant and ideologically motivated partisans. this situation is a very different from one in which philosophers, methodologists, and scientists with training in and respect for a scientific field challenge a prevailing paradigm.

      or, as i noted elsewhere above, i see little the difference between climate denial of teaparty partisans and economics-is-a-science denial of righteous progressive partisans. both obviously have god and the right on their side. in due time, though, history will have cooled, if not school, the progressive ideologues just as the ideolgues labeled neo-liberal.

      respect for human intellectual achievement even that found deficient, must be a central value. figuratively burning libraries and books has cost our species enormously over the last 3 millenia.

  6. Norskie Flamethrower says:

    OrionATL: Thanks for making my point for me. Your obsession to read your own blathering doesn’t allow you to see what a fool you make of yourself, maybe try looking in the mirror will help…but then again just go back under the bridge with the rest of the trolls.

    • orionATL says:

      sterno can, a. k. a., norske

      it would be hard for anyone but a blowhard like you to come up with a comment as contrived and as inane as the one you posted @5:36. pure schoolyard babble.

      • Norskie Flamethrower says:

        ROFLMAO! I didn’t know they allowed pathetic trolls on this site…but then you have become a parody of yourself, must be comic relief. Stay out of traffic.

        • orionATL says:

          sterno can,

          you have along history of writing pompous nonsense beginning at the next hurrah.

          you keep writing more and more contrived comments that have no bearing at all on reality. your style is that of the adolescent troll with abundance of cutesy putdowns.

  7. lefty665 says:

    Economics has not been on the list of “sciences” that have been awarded prizes for most of the history of Nobel prizing. There was no Nobel prize for Economics until 1968 when the Swedish National Bank gave money to establish it. But, I’m sure bankers are the best judges of what endeavors are Nobel worthy, or maybe since that was the “Summer of Love” they were all stoned or off getting laid and left the funding memo to a junior accounts payable clerk.

    This year the award went to Richard Thayler who has combined two half sciences, economics and psychology to try to make a full science. Good luck with that. His Nobel winning idea is to “Nudge” people into making good decisions, I kid you not.  His quote is “My mantra is if you want to get people to do something, make it easy”. Boy that’s right up there above the double helix and nuclear fission, strip those Nobels and give them instead to a guy who has risen to the top by pontificating that people like to do things that are easy. What a marvelous grasp of the obvious, dunno why nobody ever thought of it before.

    The Chicago school has infested us with both Milton Friedman and Richard Thayler, WTF? It’s enough to make ‘ya wish that first nuclear reactor under the stands had gone critical back in ’42. But some real Nobels in physics  came out of that. Can you say Enrico Fermi? Nudge, nudge, wink, wink. See I made it easy for you. This Nobel stuff in econ is a piece of cake, but don’t eat too much.

    Here’s an example of “Dick” Thayler’s Nobel winning genius, pissing on imitation urinal flies. You can’t make this stuff up.

    https://www.washingtonpost.com/news/wonk/wp/2017/10/09/whats-a-urinal-fly-and-what-does-it-have-to-with-winning-a-nobel-prize/?utm_term=.51f565be88db

    https://www.washingtonpost.com/news/wonk/wp/2017/10/09/american-professor-wins-nobel-prize-in-economics-for-trying-to-understand-irrational-human-behavior/?hpid=hp_rhp-moretopstories2_nobel-620am%3Ahomepage%2Fstory&utm_term=.cc709386c267

    • orionATL says:

      thanks for taking the time to learn a bit about economics, lefty, but the info you breathlessly reveal is well known. more importantly, it does nothing to prove your argument. even a sly guy like you can’t twist history or reality to prove an invalid point.

      this is not a question of your thinking you can prove economics is not a science; it is a science. only political ideologues like you or your rightwing doppleganger would even try to construct the sort of silly, rickety, slapdash, ahistorical argument you have constructed here. i think you fit best with the leftwing equivalent of the psuedo-intellectual climate-deniers on the republican teaparty rightwing.

      the economists that iritate you so much have made their contribution to economics, too. that goes for milton friedman and monetary policy forcexample, whether an economic ignoramus like you accepts the fact or not.

      as some point in your ideogically driven war on economics you might want to pause and appreciate the thousands of scientists who have worked hard and shown imagination in trying to understand that part of human behavior we call economics.

      that a vicious little ideologue like youself (i’m recalling the hundreds of gratuitous, unkind comments you’ve posted here about hillary clinton) lacks any appreciation for that effort is not surprising, but it is revealing of your personality.

  8. bmaz says:

    You know, I really was not kidding earlier.

    Learn to state your own opinions and not carp at each other relentlessly.

    I HATE having to do this bunk. But I will. And there IS a bridge too far.  Do not keep this crap up.

    • orionATL says:

      bmaz –

      i have put an enormous amount of intellectual energy and physical time into responding to what i consider a misguided, ideologically based attack on a major field of human intellectual endevor – economics.

      you need to read what i have written – always in response commenters and always in response to arrant nonsense about economics not being a science. that was lefty’s original assertion, that economics is not a science. that entire argument is foolish beyond belief and profoundly anti-intellectual – from the left this time. that argument goes way beyond reasonable and thoughtful criticism of specific fields (neo-liberal) or methodologies of economics.

      again, you need to read what i took the time to write out.

      if you don’t appreciate the value of my responses above, than my view is screw you and the emptywheel website as a site that values comity – it’s refered to as “collegiality” in the academic world and is a frequent basis for tenure denial – above all else.

      from both sides, this has been an exceptionally valuable discussion that this site needed having.

      and i have more to say :))

      • lefty665 says:

        You still have not read Ed’s posts, “The slow death of neoliberalism parts 1 and 2”, or you have utterly failed to comprehend that he has driven a stake through the heart of the silly notion that economics is a science.

        • orionATL says:

          [email protected]:42p:

          “… You still have not read Ed’s posts, “The slow death of neoliberalism parts 1 and 2”,… he has driven a stake through the heart of the silly notion that economics is a science…”

          jesus, lefty. you can’t be that much of a idolatrous follower. ed walker would, i would guess, be the first person to tell you he does not have a lock on evaluating economics, and that there are many others who evaluate it differently.

          ed walker is just one person. he has just one brain and one vision; whatever he understands about economics (or any thing else) is from his perspective only.

          science is never about one person, no matter how intellectually competent in his/her field. science is a human group activity in which many different minds review a problem(s). and view it under rigorous standards of scrutiny from other trained minds. ed walker has ideas. ed walker educates himself. ed walker thinks about the matter that interests him and then expresses his ideas. the chances that ed walker is dead right are very slim. he may make a contribution that is large or one that is small, but it is the continuous review by the human social group under rigorous (we hope) standards of proof that validates any finding in economics or any other science.

          and for your benefit especially, i add that ideogy can be a fundamental motivator of intellectual activity, but in matters of science it quickly can become the enemy of clear insights into how things actually work. it can also make an ass of acolytes and worshippers. that is in fact part of the story ed has been telling :)

          finally, claiming economics is not a science is like claiming mormonism is not a religion. no matter what your views of the legitimacy of calling itca religion, it is socially accepted as a religion. you want to publicly make the opposite claim? go ahead. believe it. say it. believe it. act on your belief. the world will respond either “so what” or “get lost” .

          now if you want to consider economic science as something to value rather than a target for your boundless contempt, try publishing some criticisms of economics that you deem important and then argue for what you’ve published. you will get feedback. that’s how any science moves forward.

          • lefty665 says:

            So tell us orion, what flavor economist were you? Macro, micro, Chicago school? I pray you were not a follower of Milton Moron Friedman. Nudge nudge.

          • lefty665 says:

            You still haven’t read Ed’s post, “The death of neoliberalism” where you are angrily commenting over and over and over. Bizarre.

            • bmaz says:

              And…..here we are. I warned both to you. Leave it go.

              Orion seems to (so far) be able to, you should too.

              There is no reason in the world Ed’s thread should be cluttered with this nonsense. And it is not going to be. The next comment from either you or Orion that even looks like it is antagonistically pointed at each other will get bounced. I truly hope we do not go beyond that.

               

  9. wayoutwest says:

    I wonder if anyone knows what changed in the US economy that corresponds with the divergence between wages and productivity? This change is a large part of what drove the neoliberal realignment.
    The rapid acceleration in productivity gains since then is directly related to the increasing computing power available to business and industry. The slow wage growth displayed in the graph but not analyzed here or anywhere else I’ve seen hides important information. It makes a good talking point for some people’s use but really shows the divergence caused by the loss of skilled jobs and increase in low skilled lower wage jobs replacing them.

    Neoliberalism isn’t a theory it’s a reality, a process that has worked quite well for the class that imposed it and it isn’t going away because someone finds a flaw in a theory.

    • greengiant says:

      Globalization and destructive innovation.   If someone leaves money on a table,  someone else will take it no matter what the cost to others.

    • lefty665 says:

      I outlined part of what changed way up at the top. It is what so unhinged orion.

      In the early ’70’s the Dems abandoned their New Deal belief that workers deserved to share in the fruits of their labor. They embraced meritocracy aka neoliberalism. That was great for a few of us, but what it meant for workers was that if they did not thrive the problem was them, they lacked merit. It was no longer Dem fundamental belief that workers deserved equity largely ripped from capital. Lack of merit could be education, skills, location or more importantly the atrophying of organized labor muscle to compel the sharing of wealth because it was no longer a Dem bedrock principle. If workers had merit they’d get their share, if they did not, they lacked merit. Too bad chumps. What followed was the de-industrialization of America through neolib trade agreements like NAFTA and MFN status for China. The ‘merit’ workers then lacked was the gumption to relocate to maquiladoras in Mexico for wages of a dollar an hour or to China for a dollar a day.

      Historian Thomas Frank, author of “What Happened to Kansas”, details the Dems abandonment of their souls in “Listen Liberal”.  Ed does a better job above with neolib and why it is dying than I could ever do. Thanks Ed.

       

      • orionATL says:

        lefty,

        bulletin:

        lefty, the chief whiner about ad hominem, declares orion is “unhinged” :)

        don’t you wish.

        what you stated long ago at the top of comments to this post, lefty, was that economics was not a science. that is simply not the case. i have responded to that inaccurate assertion of yours.

        what you write here about conditions in the u. s. may explain why you are “angry at economics”, but it does not rebut my criticism of your position. nor does it justify your conclusion about economics.

        otherwise, i really don’t have any quarrel with what you have written here as political history. it is a tale sad but true. the loss of union organizing as a way of keeping your ordinary working guy and gal acting politically in their best interest has a lot to do with what happened. now guy and gal worker are on their own and some are being easily manipulated by republican/christian propaganda. your mix of economics and politics here though is ideklogical and thus factually questionable.

      • wayoutwest says:

        The great change I referred to was economic not political and the dems were just following their narrow interests in the new reality.

        The change was our transition from a producer nation into a consumer nation. We have moved from making and saving to buying and borrowing, that has accelerated since about l970. The countries we destroyed in WW2 and then helped rebuild started producing from new advanced modern factories that we couldn’t compete with and the first big unionized industry to fail was US Steel. China was opened up at this time and they have continued the trend by hoovering up much of our smaller but still unionized and good paying manufacturing. Unions lose their importance when the high wage union jobs are gone

        Neoliberalism is a cold and calculated response to this new economic reality maintaining and expanding the profits of the business class. The skilled union workers, those remaining, have shared in these profits while the growing service sector workers are left behind.

        • greengiant says:

          How automation and leading technology can provide the lowest cost of production is seen in the semiconductor industry.  In 1983, 1984 Japan was the world leader in buying semiconductor capital equipment.  With the most productive factories Japan took a large market share.  The same business plan was executed in turn by Korea, Taiwan and China.  According to the frontline documentary, US customs wanted to fine importers 400 million dollars in 1977 for dumping TVs.  Supposedly Robert Strauss in the US Treasury overruled customs.  In the same year the US Treasury threatened anti dumping charges against steel imports.

          “skilled union workers”,   do you live in another country?  The union movement in the US is quite dead and no longer bears mentioning except as a rallying cry to Trumpanistas or as a long ago memory of more equitable times.  The sobriquet “he was a union man” creates no more emotion today than talk of the Vietnam war does to anyone born after 1960.  The GOP suggests that an executive order can “suspend” all government unions.  Postings are made in a rich environment of motivations and do not stand by themselves.

    • Ed Walker says:

      There are several explanations for the divergence. One is the weakened bargaining position of workers as jobs were switched out of the country, labor unions were destroyed, and businesses began wider use of tactics against workers like contracting out work instead of employing people, shortened shifts, and others. Businesses also used their political power to weaken administrative protections for workers and their influence reached indirectly to the courts which began to rule against workers in case after case.

      In other words, this has a lot to do with the shift of social and political power to business, something completely ignored by economists in theories like the three I mention.

      • earlofhuntingdon says:

        Nice summary.  I would add weakened enforcement of existing protections against, say, age, sex and racial discrimination and straightforward but unenforced union and unionizing protections.  Then there is the persistent, well-funded business campaign to enact state-based right to fire rules across the country.

        No industrial country on earth has governments so in the pockets of big business and explicitly anti-labor as the United States.  Thatcher’s anti-union crusade came close, but state protections survived her.

        • Ed Walker says:

          Business drives government, and it has since forever. That’s one of the reasons I read and reported on Thorstein Veblen’s Principles of Business Economics, 1904. He makes that point repeatedly and with plenty of evidence from that time.

          • earlofhuntingdon says:

            California’s 19th century Big Four rail barons would heartily agree with you.  One of them moved to pre-Beltway DC as a permanent lobbyist and giver of cash gifts to congresscritters.  Plus ca change.

  10. earlofhuntingdon says:

    Few realize that the economics prize is not a true Nobel.  It was invented nearly 70 years after the fact, in 1968, by the central Bank of Sweden, “as a marketing ploy” to improve its reputation.

    According to Philip Mirowski, in essence, the Bank of Sweden in 1968 was attempting a twofer: 1) to avoid political accountability by becoming independent of its government; and 2) to promote “free market”, neoliberal policies.

    The Nobel family is among this prize’s most persistent and harshest critics.  Nor have scientists, “had much respect for the new economic Nobel prize.”  Q.E.D.

    • orionATL says:

      e of h writes:

      “… Few realize that the economics prize is not a true Nobel.  It was invented nearly 70 years after the fact, in 1968, by the central Bank of Sweden, “as a marketing ploy” to improve its reputation…”

      earl, anybody who knows anything about economics has known this since they first became interested in the subject. were you surprised to learn this. if so, i am not surprised :)

      your effort to impugn the prize (and p. mirowski’s) is both silly and disrespectful of extraordinary intellectual effort. the prize will continue to be given, it will continue to represent extraordinary intellectual effort, and it will continue to be a premier prize in the field.

      p. s. you and i need to have a conversation about your dislike of ad hominem comments and your repeated pejoritive use of the term “neo-liberal”.

      • earlofhuntingdon says:

        In rushing to condemn my supposed ignorance, you conflate the obvious, that the Bank of Sweden invented its “Nobel” for economics, with what is not obvious, its motivations for doing so.  The cited article suggests human, but not noble purposes, and that the controversy over it and whom it chooses to honor continues.

        Ed’s series have been about neoliberal economics, an entirely political program cloaked in economists’ garb, and one still in the ascendance – ask Puerto Rico, now facing draconian new laws as a disaster response, textbook neoliberalism – despite premature arguments about its demise.

        The balance of economics has much to say about the efficient use of limited resources by fallible humans, a proper pursuit of a social science.  (All of academia was competing with the classic “hard” science, physics, in the forties and fifties, a time when anyone wanting public funding renamed their pursuits as some variation on “science”.)  But neither the market nor economics generally offer full observations, let alone answers,  to human questions.

        • orionATL says:

          e of h –

          i understand what you are saying.

          my commentary was focused on rebuttal to the statements that economics was not a science and that the nobel prize in economics was an insubstantial award.

          i have laid out here a defense (as best a non-expert could) of economics as a science, of the nobel prize as a valued recognition of unusual intellectual achievement, and in general of respect for the scientific effort in any field.

          there is no area of human endevor that is not susceptible to fads and fraudsters or to availability of easy money. scientific activity certainly has been, but it has methods of public evaluation, public criticism, and self-correction that far surpass any other area of human activity. frankly, i fear book burning from movement members and true believers far more than i fear anything that hayek or van mises ever put on paper. given human history, there is good reason, to do so.

          yes there are the “bought” economic departments – at florida state and george mason and “bought” economists. and there is the genetically conservative institution of the univ of chicago. but chicago gave opportunity to behavioral economics and richard thaler. behavioral economics will fundamentally change economics over time in ways that match ed walker’s earlier criticism of the economics paradigm for individual decision making:

          http://www.chicagotribune.com/business/ct-nobel-prize-economics-richard-thaler-20171009-story.html

          as for your comments generally here at emptywheel website, you might not guess from my criticism above, but i regard your comments here highly and pay close attention to them. i do so because you seem to have a great depth of experience where matters of corporate behavior, finance, international business affairs, and politics are involved which make your comments richly informative. high utility comments have consistently been the case for the length of time you’ve commented here.

  11. orionATL says:

    before my digression to converse with earl of huntingdon, i came here intending to post a newspaper oped and to make a very important related point.

    to whit, if it makes anyone reading here who is dissatisfied about the social and economic distress developing in this country for the last 40 yrs anyone happy to point the finger of blame at an inanimate thing, namely economics in general or specific branches of economic theory in particular, go right ahead.

    it always astonishes me, though, that righteous progressives seem to prefer to blame something inanimate and insubstantiate like “economicsc or” neo-liberal” economic theory, rather than humans in positions of power, i. e., the policy guys. its the policy guys, stupid.

    well, here’s a reminder of just how important human policy makers, like a trump, a miller, a bannon, a mnuchin are:

    https://www.nytimes.com/2017/10/06/opinion/trump-federal-reserve.html

    this warning comes from paul krugman, a person some consider a traitor to the cause of caring about the plight of the common man. just be grateful for the heads up.

    the warning is that neo-liberal economics may be about to gain its greatest victory.

    read the paragraphs about one kevin warsh who clearly believes in the complete idiocy of controlling inflation when it is not a problem (does that sound like europe for the last 15 yrs?); he also warned against gov’t intervention when unemployment was 10 per cent.

    this is your real neo-liberal enemy, not economics or even neo-liberal economic theory. and don’t waste my time telling me he learned from hayek, von mises, friedman or your other individual bugaboos. he learned from monied people who made their preferance against gov’t spending known to him. monied people know this stuff in their bones. they don’t need economic theory.

    go chase after some policy makers and policy implementers if you want to kill neo-liberal political economics.

  12. Desider says:

    @OrionATL,
    you’re correct that there’s a scant headfake towards science with a much harder ideological component (a priori position determining pick-and-choose econ blather, ignoring progress, ambiguity, evolving theory and practice by economists, politicians and the public at large).
    I suggest editing down your responses a bit, however, and simply stop with the “obdurate” and other labels – the catfights don’t help the cause.

    • orionATL says:

      decider –

      thanks very much.

      i know you are right about the labels; they are stupid to apply. they detract from substance. they arouse anger and resentment that can last a long time.

      but sometimes…..

      there needs to be an accounting and a forcing to face up to unjust bias.

      anyway, i need to work on this. tx.

  13. Bay State Librul says:

     

    Ed has a tough job.

     

    The term “neoliberalism” is vapid. Maybe I’m stupid but I don’t understand it, the word has so many moving parts.

     

    Michael Lewis makes sense to me. Commenting on Richard Thaler, he says “People (even experts) and industries (even old ones) can make big, systematic mistakes. You don’t set out to find better ways to value professional baseball players if you believe that the market already knows everything there is to know about their value.”

    Human irrationality does matter, hence the study of behavioral economics

  14. Rapier says:

    The Clinton’s and Obama, still the nominal leaders of the Democratic Party are the living embodiment of Neoliberalism. The congressional leadership of the Party is all in on it.  Sanders bless his heart is off the neoliberal reservation but can only draw on an old outdated sort of socialism.  That does not suggest the death of neoliberalism.

    I suppose on some grand scale it is in decline but it will not die because of political action or choice.

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