Wednesday, January 20, 2010

Skimming Moshe Adler

A few weeks ago, in a bookstore a couple of hundred miles away from here, I skimmed Moshe Adler's Economics for the Rest of Us: Debunking the Science that Makes Life Dismal. I did not purchase it because I am already too far behind in my reading. It is targeted for those outside the economics profession.

It is a short and approachable book that, as I recall, falls into two main parts.

The first part is about the mainstream economist's concept of (Pareto) efficiency. I hopped over this section fairly quickly, since I see no need to be strongly guided by this criterion in making policy decisions. I gather Adler agrees.

The second part is about income distribution, the theory of marginal productivity, and wages. Adler compares and contrasts neoclassical theory and the more empirically applicable classical theory. If I read this book in more depth, I would probably have some caveats about Adler's interpretation of the classical economists and his assignment to them of one (non-Malthusian) theory of wages. Adler recognizes that in a theory in which wages are determined by well-behaved supply and demand functions for labor, the imposition of higher wages results in less employment. Less security and less employment is a bad thing for many members of that vast majority in capitalist societies who depend on income from labor to live. On the other hand, when wages are the result of class struggle, as in Adam Smith, for example, the theory does not predict that unions, minimum wages, less "flexible" labor markets will result in less employment. And, despite the poppycock mainstream economists teach, that is the world we live in.

I agree with the author. Economics took a mostly wrong turning more than a century ago. I don't think that this book will convince many mainstream economists. If Adler wanted to convince mainstream economists, he would have had to written a more impenetrable book. I think Adler does address some of the questions raised by the current global economic crisis.

(I realize I am behind in responding to comments on previous posts.)


Anonymous said...

"Economics took a mostly wrong turning more than a century ago."

I would agree -- the question is, surely, why? Why move to such an unrealistic analysis technique? Perhaps because it allowed a more vigorous defence of capitalism?

Interestingly, various Marxists have suggested, but have never proven, that neo-classical economics was a response to Marx. This not only ignores the earlier socialists who utilised classical economics to attack capitalism, it also ignores the awkward fact that Léon Walras, one of the founders of that economic theology, wrote a book attacking Proudhon in 1860.

An Anarchist FAQ

Regina Chris said...


I wasn't sure where to forward this, but I thought that both you and and your readers may find the upcoming event of interest:

This is the URPE component of the EEA "at the Loews Philadelphia Hotel, February 26 - 28. The hotel is located at 1200 Market Street."
Forgive my laziness in not writing out the acronyms in full. The URPE event has a session on Sraffa and a lot of nifty heterodox stuff.

Chris Pepin
Regina, SK, Canada

Robert Vienneau said...

Iain, I did not know that about Walras. I think Walras was enamored of making economics like physics. He had his own version of socialism to advocate. I think part of the story of the marginal revolution has to be about more than the motives of the founders. Why were they able to find a receptive audience for their ideas for a while? That might have something do with Marx.

Regina, thanks for the announcement.

Jim Farmelant said...

Just to complicate things a little bit further, there have been people who were both Marxists and neoclassical economists at the same time. I think that the most notable example, being the Polish economist Oskar Lange.

Back in 1935, in his essay, "Marxian economics and Modern Economic Theory," The Review of Economic Studies, June 1935, he wrote:

“If people want to anticipate the development of Capitalism over a long period, a knowledge of Marx is a much more effective starting point than a knowledge of Wieser, Bohm-Bawerk, Pareto or even Marshall (although the last-named is in this respect much superior). But Marxian eco¬nom¬ics would be a poor basis for running a central bank or anticipating the effects of a change in the rate of dis¬count.”


“[I]n providing a scientific basis for the current administration of the capitalist economy‘bourgeois’ economics has developed a theory of equilibrium which can also serve as a basis for the current administration of a socialist economy. It is obvious that Marshallian economics offers more for the current administration of the economic system of Soviet Russia than Marxian economics does, though the latter is surely the more effective basis for anticipating the future of capitalism.”