Nick Rowe, Fool Or Knave?

I take the following as given:

• Contemporary heterodox economists are continuing communities that have been around for generations in leading universities. And they are and have been publishing in scholarly peer reviewed journals.
• Many in these communities accept theories of endogenous money, that a central monetary authority cannot control the quantity of money in use in the economy.
• Many in these communities reject the loanable funds theory of interest in all runs. Interest rates cannot be explained by the interaction of supply and demand, savings and investment.
• These perspectives are not taught in mainstream textbooks (which are almost all a matter of shedding darkness).

Nick Rowe demonstrates the truth of the last proposition while pretending the opposite. To appreciate Rowe's refusal to honestly state that he and the mainstream textbooks do not teach the existence of the heterodox perspectives on money I list above, one must read the comments to the linked post. For example, Nick Rowe states, "The idea that banks just act as intermediaries between savers/lenders and spenders/borrowers is about long run equilibrium." Nowhere does he state that this idea is controversial.

One sees a lot of other ignorance and stupidity on display in the comments:

• One W. Peden pretends that a "majority" of heterodox critiques of economics are, like climate change denialism, "by outsiders to the discipline".
• Ian Lippert pretends "there is [an] unified methodology to ... microeconomics", even though commentators earlier in the thread demonstrated that heterodox economists severely criticize microeconomics, just as well as macroeconomics.
• DavidN also pretends that "micro and the various subfields" do not get critiques from the heterodox.
• Stephen Gordon, after being told more than once of specific political programs associated with Modern Monetary Theory (MMT), such as a program for an Employer of Last Resort (ELR), continues to pretend MMT has "No policy implications/recommendation". (For his gross stupidity and illiteracy, he owes the commentator DeusDJ an apology.)

I realize that I should not get angry about those who refuse to engage a large number of their fellow economists and who rudely tell lies, maybe first to themselves, about what economists teach. For there will always be many vulgar fools and knaves.

Amartya Sen And The Second Phase Of The Classical Revival

Adam Smith and David Ricardo exemplify classical economics. Economists lost and forgot many good ideas in classical economics with the advent of marginalism.

The first phase of the classical revival clarified the classical theory of value and distribution. Scholars achieved this clarification by building on Piero Sraffa's work. Amartya Sen, a student of Maurice Dobb, Piero Sraffa, and Joan Robinson, has commented (e.g., Sen 1974, Sen 2003) a couple of times on Sraffa. He's even had something appreciative to say of the labor theory of value.

Ricardo and Smith have different writing styles, with Ricardo more formal and Smith treating a wider range of material. Furthermore, the theory of value and distribution is only a component, albeit an essential one, of classical economics. In Smith, individuals are not exclusively self-interested utility-maximizers. They exhibit a variety of types of motivations, including sympathy and a regard to social conventions. Furthermore, Smith's statements cannot be partitioned into statements of facts and statements of values. Smith's judgements on what is desirable are multidimensional, not based solely on increasing, for example, income per head.

I have been reading Sen's Development as Freedom and related literature. Like Smith, Sen treats a wider ranges of ideas than are dealt with in the classical theory of value. Sen argues that economic development must be considered along many dimensions, not just income per head. Some of the goals he considers, such as the empowerment of women, are good in themselves. But his consideration of the interconnected instrumental roles of many of these goods provides a rich empirical research program. As examples, I cite the role of decreased income inequality in raising life expectancy, the role of democracy of preventing famine even when crops fail, and the role of increased female literacy in decreasing infant mortality for girls.

Vivian Walsh, while drawing on Hilary Putnam, points out that facts, values, and conventions are, as in Smith, impossible to separate in Sen's work. He looks to Sen as exemplifying the "second phase" of a revival of classical economics. This second phase is less formal than the first, and it treats a wider range of issues.

Perhaps a historian of ideas would find it of interest to research Wittgenstein's role in all of this. Putnam drew on the later Wittgenstein in developing his pragmatic anti-dualism. And, of course, Wittgenstein acknowledges Sraffa's influence. Perhaps a study along these lines would strengthen claims of the complementary nature of Sraffa's and Sen's economics.

(I want to recall that I have commented before on a limited amount of Sen's early work on choice. I also want to recall Daniel Little's post on the second phase of the classical revival.)

(It seems to me that Sen's work already answers the concerns raised in some recent discussions of propertarian confusions about freedom.)

References

• Nuno Martins (2011). "The Revival of Political Economy and the Cambridge Tradition: From Scarcity Theory to Surplus Theory" Review of Political Economy, V. 23, N. 1 (January): pp. 111-131
• Hilary Putnam (2004). The Collapse of the Fact/Value Dichotomy and Other Essays, Harvard University Press. [To read.]
• Hilary Putnam and Vivian Walsh (2009). "Entanglement through Economic Science: The End of a Separate Welfare Economics", Review of Political Economy, V. 21, N. 2 (April): pp. 291-297.
• Hilary Putnam and Vivian Walsh (editors) (2011). The End of Value-Free Economics, Routledge. [To read; a collection that includes some of my other references.]
• Amartya Sen (1974). "On Some Debates in Capital Theory", Economica, V. 41, Iss. 163 (August): pp. 328-335.
• Amartya Sen (1997a). "Maximization and the Act of Choice", Econometrica, V. 65, N. 4 (July): pp. 745-779.
• Amartya Sen (1997.) "Dobb, Maurice Herbert", in The New Palgrave: A Dictionary of Economics (ed. by J. Eatwell, M. Milgate, and P. Newman), Macmillan Press.
• Amartya Sen (1999). Development as Freedom, Alfred A. Knopf.
• Amartya Sen (2003). "Sraffa, Wittgenstein, and Gramsci", Journal of Economic Literature, V. 41 (December): pp. 1240-1255.
• Amartya Sen (2005). "Walsh on Sen after Putnam", Review of Political Economy, V. 17, N. 1 (January): pp. 107-113
• Amartya Sen (2010). "Adam Smith and the Contemporary World", Erasmus Journal for Philosophy and Economics, V. 3, Iss. 1 (Spring): pp. 50-67.
• Vivian Walsh (2000). "Smith After Sen", Review of Political Economy, V. 12, No. 1.
• Vivian Walsh (2003). "Sen After Putnam", Review of Political Economy, V. 15, No. 3 (July).
• Vivian Walsh (2008). "Freedom, Values and Sen: Towards a Morally Enriched Classical Economic Theory", Review of Political Economy, V. 20, N. 2 (April): pp. 199-232.

Vocabulary For Marxism

I am unsympathetic with this view:

"[Marxists] seem to talk in a dense jargon that (presumably) requires years of Marxist study to comprehend. Not weird, just obscurantist." -- Noah Smith

Mainstream economists have their own technical terms. I see nothing odd about expecting people interested in Marx to, at least, recognize the following vocabulary:

• absolute rent
• absolute surplus value
• base
• bourgeois
• circulating capital
• class for itself
• class in itself
• classical political economy
• commodity fetishism
• constant capital
• department I
• department II
• dialectics
• differential rent
• expanded reproduction
• exchange value
• fixed capital
• historical materialism
• industrial reserve army
• labor power
• labor value
• law of value
• laws of motion (of capitalism)
• market price
• means of consumption
• means of production
• mode of production
• negation of the negation
• object
• organic composition of capital
• overdetermination
• praxis
• prices of production
• primitive accumulation
• proletariat
• rate of exploitation
• rate of surplus value
• reification
• relations of production
• relative surplus value
• realization problem
• scientific socialism
• simple commodity production
• simple reproduction
• Socially Necessary Abstract Labor Time (SNALT)
• subject
• superstructure
• surplus value
• transformation problem
• use value
• utopian socialism
• value
• variable capital
• vulgar political economy

Steve Keen Aims At A Stationary Target

"Unlearning Economics" has been posting on Steve Keen's Debunking Economics: The Naked Emperor Dethroned? The second edition was published in 2011 and the first edition in 2001. As far as I can see, the major substantive changes in the second edition consist of:

• More on macroeconomics, especially so-called Dynamic Stochastic General Equilibrium (DSGE) models.
• More on Keen's own dynamic systems approach, building on Minsky, to macroeconomic modeling.
• Connecting up the intellectual bankruptcy of mainstream economics to the current global macroeconomic disaster

But I want to concentrate here on microeconomics.

A common mainstream response to Keen is to say that the cutting edge of mainstream researchers have transcended the issues Keen raises. At best, he is only attacking undergraduate teaching.

In the course of a decade, one might expect introductory teaching to have changed to incorporate some of this advanced research, at least if economics resembled many other academic disciplines. My sense, though, is that Keen had no need to update the sections on microeconomics, except to attempt other tactics in exposition, if he so chose. Am I correct?

Are mainstream economists more willing to teach General Equilibrium theory to undergraduates, including the proofs of the "near emptiness" of the theory? Do they teach that downward-sloping demand curves cannot be justified on the basis of individual utility maximization? Do they argue for downward-sloping demand curves on some other basis - perhaps because differences in characteristics among consumers balance out non-substitution effects in the aggregate (as in Werner Hildenband's research)? Has the absence of a chapter on game theory in Keen's book become more glaring, as it would be if David Kreps' textbook were more popular? Is the teaching of the theory of the perfectly competitive firm still vulnerable to Piero Sraffa's 1925 and 1926 papers? Is Robert Aumann's approach with a continuum of agents taught to undergraduates? Or, perhaps, teaching could become more focused on the empirical facts of behavioral economics, increasing returns to scale, markup pricing, and the structure of inter-industry flows and less focused on mistaken a priori neoclassical theory.

Mainstream economists are trained to be ignorant, including of the history of subject. This willful ignorance on history, as far as I know, has only become worse in the period between Keen's editions. Thus, if mainstream economics can ignore a criticism for about a decade, they can then relegate it to the (unstudied) history of thought. As I understand it, most of the arguments in Debunking Economics are decades old.

Will mainstream teaching in economics ever be worth taking seriously?