The Guardian has an excellent long read today. By John Rapley, it explains how economics became a religion. It is well worth reading. I think the core paragraph is this one; others might disagree:
The irony is that, in its determination to make itself a science that can reach hard and fast conclusions, economics has had to dispense with scientific method at times. For starters, it rests on a set of premises about the world not as it is, but as economists would like it to be. Just as any religious service includes a profession of faith, membership in the priesthood of economics entails certain core convictions about human nature. Among other things, most economists believe that we humans are self-interested, rational, essentially individualistic, and prefer more money to less. These articles of faith are taken as self-evident. Back in the 1930s, the great economist Lionel Robbins described his profession in a way that has stood ever since as a cardinal rule for millions of economists. The field's basic premises came from “deduction from simple assumptions reflecting very elementary facts of general experience” and as such were “as universal as the laws of mathematics or mechanics, and as little capable of ‘suspension'”.
Rapley's response to this universal law is:
The Irish have been known to describe their notionally Catholic land as one where a thin Christian veneer was painted over an ancient paganism. The same might be said of our own adherence to today's neoliberal orthodoxy, which stresses individual liberty, limited government and the free market. Despite outward observance of a well-entrenched doctrine, we haven't fully transformed into the economic animals we are meant to be. Like the Christian who attends church but doesn't always keep the commandments, we behave as economic theory predicts only when it suits us. Contrary to the tenets of orthodox economists, contemporary research suggests that, rather than seeking always to maximise our personal gain, humans still remain reasonably altruistic and selfless. Nor is it clear that the endless accumulation of wealth always makes us happier. And when we do make decisions, especially those to do with matters of principle, we seem not to engage in the sort of rational “utility-maximizing” calculus that orthodox economic models take as a given. The truth is, in much of our daily life we don't fit the model all that well.
I think that particularly well put.
So too is the rest of his case. I have long felt that economics is a religion, and one surrounded by myths that make the likes of Christianity look decidedly mundane in the demands that it makes of its adherents. It survives because of our need for narrative.
There is a better story to tell. But the world is still not hearing it.
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[…] rather good. Flip Chart Fairy Tales, written by Flip Chart Rick is one of them. In the context of John Rapley’s argument on how economics became a religion the following extract from a post there in the potential demise […]
In trying to explain fiat money, see
http://www.progressivepulse.org/economics/basic-econimics/what-is-fiat-money/
I use the language of belief and high priests. The analogy with religion is useful but still I think there is more to economics that just belief. In economics we can measure stuff like healthcare spend as percent of GDP, inequality, etc. Just because there are many things we cannot measure does not mean that a scientific approach is a waste of time. In physics, we cannot even measure the speed and position of an atom at the same time and now we think that most of the universe is made of dark energy and dark matter but no one has any idea what it is. Still few suggest that physics is not scientific!
Yes there is a lot wrong with neoclassical economics, and I tend to be very critical but still there is also a lot that we can learn from many economists including some of the neoclassicals.
I don’t dispute that there is much to learn – and agree it would be absurd to think otherwise
I do question many of the mathematical techniques used over the last forty years or so. By seeking to eliminate the unknowns much of the supposed rigour this suggests exists eliminates the questions that makes economics essential
Agreed.
The “simplifying assumptions” (that make the mathematical approach convenient and possible tend to simplify reality right out of the equation. ‘Econometrics’, which is really just inferential stats, loses the plot completely when applied to macroeconomics.
Some of the dubious mathematical methods came in during the neoclassical era with Alfred marshall etc. but the greatest offenders by far were Rand Corporation in the 1950’s. The Cold War ‘science’ craze led to ironically faith based attempts at trying to reduce the social science of economics to an exercise in quantitative methods.
It should also be noted that some of the worst offenders were nominal ‘Keynesians’ like Solow and Samuelson.
At any rate this book and this author (Mirowski)tell the story much better than I do:
https://monoskop.org/images/7/76/Mirowski_Philip_Machine_Dreams_Economics_Becomes_a_Cyborg_Science.pdf
“The “simplifying assumptions” (that make the mathematical approach convenient and possible tend to simplify reality right out of the equation. ”
Agreed, and my main concern.
Econometrics has a real role to play in life and I support it. But force fitting it to provide answers it cannot give does not.
Geoff Davies: “SACK THE ECONOMISTS and disband their departments” A little harsh perhaps? In a guest post on Steve Keen’s blog he wrote, in 2013: ” I can only describe neoÂclasÂsiÂcal ecoÂnomÂics as pseudo-sciÂence, or even as pre-sciÂenÂtific – myths unconÂstrained by any conÂtact with realÂity.”
I also think economic arguments are often used as the justification for moral and political judgements, a bit like scripture is used as a basis for theology.
Fowler’s stages of faith concept ( he describes six levels ) has a level where people tend to constantly quote texts without doing much thinking. He argues there is a higher stage where people see the different denominations and even different religions as tributaries all draining into the same river. It is about how we relate to ourselves and each other.
In our world we are pushed into following ‘economic imperatives’ but what we know of how the economy works should be used for higher purposes -as you argue in the “Courageous State”.
“Man does not live by bread alone” very neatly sums it up.
I was quite surprised to see you comparing religion and economics in this way, Richard, but I agree with you entirely.
In this link it would be easy to substitute the word “Bullshit” for “Economics” and I doubt that many would notice!
http://callingbullshit.org/syllabus.html#Big
Organised religion always has the capacity to inculcate thinking that has little to do with spiritual faith
i think its easy to jump to conclusions that economics is now a religion but i wouldn’t go that far to be honest. i’m currently doing my masters in economics. Yes the theoretical branch is full of silly assumptions about human behaviour. I took the behavioural module and even in that found myself thinking ‘so what’ – the randomized control trials which are now all the rage are far too small in scope to be of any use or meaning, though its had some success in micro development. i would say that the ‘utility maximising’ individual is roughly true – but only if the definition of utility was greatly expanded.
but the fact is in many of my modules we did deal with empirical work, the models Are tested, and econometrics does its best to try and iron out flaws in the data. I’ve had to read tons of papers so far (2 months and a dissertation to go) and none of them have ever expressed anything with absolute certainty, in the way a religious text does.
i also think simply dismissing the subject as a religion is too simplistic of a position, and for me, Jeffrey Sachs in his 3 lectures at the LSE back in January hit the nail on the head. The issue is a lack of values missing at the core of the subject. What is its purpose? Is it supposed to improve the lives of people? What metrics should we be measuring, or do we regress everything against GDP growth? (no!) Sachs terms it as ‘Pro social outcomes’, which is a broad term but is the direction that economics should be going.
i think economics for too long has shied away from making objective value judgements. Yes, objective, i think you can say with some high degree of certainty that having an education, for instance, gives a human being a better life experience – instead of going “does the cost of education justify the return”, as the entire literature on returns to education approaches it – and then working out the most efficient way to deliver that education to that human.
rambling thoughts but i just keep hearing this ‘economics is a religion’ tagline from many of the progressive economists i follow and I just think it’s a nice soundbite with not much substance to it, given the real empirical work that goes on in the field. I think the more underlying and pertinent questions to ask are the meaning and purpose of the field.
I have to disagree with you: I do not doubt that econometrics can be useful but too often the maths is chosen to fit a theory that has far too little relationship with reality. Then I seriously question the merit
Always read the theory is my warning
I tend to agree with some of Schum’s points. At best economics is an observational science – trying to make sense of how humans interact given a complex set of cultural rules that very few people understand. Yes, those rules are a belief system but the outcomes based on those beliefs can be measured to some extent (note that all measurement is imperfect anyway). I only find economics interesting in the way that I believe the scientific method has something to offer. Psychology, sociology, anthropology are interesting in a similar way, religion is similarly interesting to science as an aspect of anthropology.
The scientific method is not necessarily moral, and the quest to understand is not always predicated on the idea of making things better. Scientists and economists need to look elsewhere for moral guidance, perhaps to philosophy and literature, or just climbing a mountain and searching within yourself, some might call that religion 🙂
When people say that economics has ‘become a religion’ I think they are referring to the human behaviour around a set of economic ideas. I agree with Charles Adams but would say more prosaically that to me economics is about the study of human behaviour around money.
Religion seems to be based on a set of ideas and narratives that people choose to believe in or not. Is this how people view say neo-liberal economics or even Marxist theories? Maybe not.
The stories in the Bible or the Quoran (and other holy books) are much more positive sounding, more humanistic than any neo-lib mantra I have ever explored. These mantra reduce people to nothing but calculators. And we know that some people are actually like this – but not all- and they seem to be in the minority (probably working in the City!).
I also tend to think that religiosity in economics often finds itself rooted in the more affluent end of society and the apparatus that there is to maintain the status quo (economics faculties in Universities and think tanks). Money has a great way of co-opting moral ideas into its retinue and using them to self justify. I know local clergy who think that the C of E is too dominated by money – it the biggest land owner in the country I believe.
The message in Jesus apparently kicking over the money lenders’ tables in the Temple has no significance these days and is overlooked.
In Adam Curtis’ film ‘All Watched Over By Machines of Loving Grace’ he recounts that Ayn Rand’s ‘And Atlas Shrugged’ and her other works is the second most popular book in America after the Bible. My sister in law used to work for Goldman’s and one of her American colleagues proudly gave her a beautiful hard back edition of Rand’s ‘The Fountainhead’. Inculcated or what?
The long march to Reagan began at least 30 years before he got into office with corporate backed gramophone records that spoke of free markets, private medicine and the evils of state intervention etc., with Reagan as the poster boy.
In other words the neo-lib project had a long lead in time in time and the only way to break it with another narrative ((one more we know to be more in tune with how complex and sharing that human beings really are) is to do exactly the same things neo-liberalism did to become ‘legitimate’.
I think the orthodoxy of ‘ the market knows best ‘ was always and everywhere a cover for state sanctioned corporatism regardless of the sector the business , or quasi-business was in and the slimming down of bureaucracy in the ostensible public sector has been matched by a build-up of bureaucracy in the ostensible private sector. In terms of efficiency and costs well any gains in efficiency can probably be put down to the greater use of computers, but costs have increased many times by the payment of massively increased salaries and bonuses paid to ‘ CEOs’ in ‘ businesses ‘ created from the privatisation of public assets. Back in the day the head of one of the old water authorities was a sort of middle ranking civil servant paid a decent salary commensurate with his experience and responsibility . Now as the CEO of one of the privatised water company he is paid a seven figure salary plus bonus with several tiers of ‘ senior managers ‘ on equally high salaries . None of these people have taken any risk to profit in this way, but they are equated in the financial press with entrepreneurs and real risk takers and bit by bit the public have been conned into believing this nonsense and paying through the nose for services that were created by the state, but privatised for the benefit of the few to the cost of the many.
I think Rapley is wrong. He says most economists believe in ‘homo economicus’, a profit-maximising person, self-interested, rational, wants to keep more of his or her own money.
That concept has been abandoned long ago by economists, and replaced by the concept of ‘utility’ which incorporates economic advantage with social participation, the feeling of concern for your fellow man, and leisure time.
This has testable outcomes such as the funding model of Wikipedia which is free for users versus the funding model for Encarta. Or the 2-2.5% of national income towards foreign aid paid by British residents ( of which 0.7% is compelled by government ).
Religion doesn’t abandon ideas and try new ones, but economics does.
I think you are fundamentally wrong ion that point
Read Steve Keen, Debunking Economics
Richard,
do you follow the rest of Steve Keen’s work, his Minsky model and his emphasis on private debt being the driver of recessions? What’s your take on it? I’m a fan of Keen and his work, I wonder how other professional economists like yourself perceive it?
(regarding my earlier comment and your response on econometrics – it depends on the study. Yes econometrics itself isn’t some perfect magic bullet solution to data quality, but its the most scientific method we have for interpreting data, so far. As for how the econometric equations are fitted to the theoretical model – that is absolutely true as you say – but that doesn’t apply to all studies in economics. For instance, i’m doing the development economics stream in my Msc, and I’ve mostly had to deal with empirical work. Indeed, my dissertation is on tax revenue mobilisation and its determinants, and i’m shaping my conceptual framework around the lit review and existing empirical studies, then extending it – not around some theoretical model from which the econometric model is then derived. I’ve seen that a lot in the growth theory literature (Romer etc.) and that’s where you’re absolutely correct – but it doesn’t apply carte blanche to all areas of economics)
I am a fan of much of Steve’s work
Much of the profession has no time for him
Or Minsky, come to that
[…] almost back to the theme of economics as religion, and in a very real sense it is. Fiat money has value because we believe in […]