Tuesday, August 11, 2009

More On Economic Reasoning

All ten of the letters in the 8-14 August issue of The Economist are responses to the critique of academic economics in the 18-24 July issue. My favorite is from Meghnad Desai:
"SIR - When I was a student we studied business cycles, but the topic disappeared with the rise of mathematical equilibrium theorising. The idea that capitalism is an equilibrium system is common among Keynesian and neoclassical economists; they only differ as to whether the equilibrium is at full employment or under employment. The grand synthesis being taught makes the equilibrium stochastic and dynamic, but that is all.

Capitalism is, however, a disequilibrium dynamic stochastic system as Marx, Wicksell, Schumpeter and Hayek have told us over the past two centuries. Richard Goodwin tried his best to present a mathematical theory of such a disequilibrium system. After the crisis we need to revive that tradition if we are not to be surprised by another crisis."
The on-line Lucas Roundtable at The Economist doesn't have any invited contributions from left-leaning non-mainstream economists.


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Eubulides said...

Iirc, Marx asserted that capitalism was a social system saturated with asymmetric relations of power resulting in exploitation of the majority of workers in the then industrialized world.

That a few aspects of capitalism are mathematizable via the stochastic calculus is trivially true in one sense, but we should not by any means indulge the fantasy that some economists, no matter how gifted, have captured the ding-an-sich of an irreducibly historical process and are thus epistemically entitled to have the final say in how to fix it.

Indeed the present mess shows that as long as the legal system is modified, or not given the commodification of law itself, it does not matter whether economists hit upon the one true model of the political economy --if there even be such a "thing"-- and thus can begin to explain the destabilizations brought forth by the current system of contract and property. What needs to be changed much more than the economists models is the system of property and contract which has led to so much utterly unnecessary suffering!

Robert Vienneau said...

Eubulides, I don't necessarily disagree. I do think it useful, in examining mainstream economics to have in hand some mathematical models set in historical time, in some sense.