Economics - science or religious cult?

[tama]

Economics as a Secular Religion

Importantly , the Enlightenment’s search for rational principles as a secular
alternative to traditional religious authority and beliefs to justify our moral
decisions is itself a religious search, serving the same dogmatic and legitimating
functions of what Bergson calls static religion. Economics claims to provide
that secular justification for many contemporary policy choices. As a result,
economics threatens to become the dominant rationalist and fundamentalist
religion of contemporary capitalist society and of the emerging global civilisation.
This threat is aided by its attempt to appropriate the prestige associated with
the natural sciences. Importantly , it is easy to slip between the uses of
individualism as an analytical tool to a promotion of individualism as a normative
ideal. This religion is of particular appeal to business and political elites because
it tends to legitimise greed, love of money and power. It is leading to the
commercialisation of all human activity , while aiding the atomisation and
privatisation of competing values and groups. It has elevated money beyond a
convenience to the means of salvation and the source of meaning, values and
security, turning it, and the mechanism for acquiring it, into idols.

Economists—the prophets and priests of this new religion—preach a bout and
have a major impact on public policy and our institutional arrangements.
Economics therefore provides an alternative faith tradition, complete with values,
ideas of welfare and of progress—usually defined in terms of quantitative
economic indicators, w hich dominate public discourse and which seek to reshape
our institutions and organisations. With their influence on g overnment,
economists are the new theocracy , the contemporary manifestation of Plato’s
guardians. In particular , the economic theologian’s rhetoric resembles
contemporary process theology . In this school, although God will possess the
classic attributes of omnipotence (all power), omniscience (all knowledge) and
omnipresence (present everywhere), He does not yet possess them in full. Such
a theology offers considera ble comfort to the economic theologian, explaining
the dislocation, pain and disorientation that are the results of transitions from
economic heterodoxy to free markets. THE MARKET is becoming more like
Yahweh of the Old Testament: not just one superior deity contending with
others, but the Supreme Deity, the only true God, whose reign must now be
accepted universally and who allows no rivals. There is no conceivable limit to
THE MARKET’s inexorable ability to convert creation into commodities. In the
church of THE MARKET, everything—no matter how sacred—eventually
becomes a commodity. This radical de-sacralising dramatically alters the human
relationship to land, water, air and space. Indeed, human beings themselves
start to become commodities as well. This comprehensive wisdom of THE
MARKET is something that, in the past, only the gods knew. In ancient times,
seers entered a trance and informed anxious seekers of the mood of the gods and
whether the time was auspicious for particular enterprises. Today, the financial
media are the diviners and seers of THE MARKET’s moods, the high priests of
its mysteries. THE MARKET has become the most formidable rival to traditional
religions, not least because it is rarely recognised as a religion. The contradictions
between the world-views of traditional religion and the world-view of THE
MARKET religion are so basic that no compromise seems possible.

http://epress.anu.edu.au/cotm/pdf/whole_book.pdf

[bemildred]

1. Ideological cult, uness you consider the worship of money a religion.

We certainly do worship money, our version of a religious epiphany is winning the lottery or some reality show.

[Fuddnik]

2. The Economist has no clothes

http://www.scientificamerican.com/article.cfm?id=the-economist-has-no-clothes


The Economist Has No Clothes

Unscientific assumptions in economic theory are undermining efforts to solve environmental problems

By Robert Nadeau

The 19th-century creators of neoclassical economics—the theory that now serves as the basis for coordinating activities in the global market system—are credited with transforming their field into a scientific discipline. But what is not widely known is that these now legendary economists—William Stanley Jevons, Léon Walras, Maria Edgeworth and Vilfredo Pareto—developed their theories by adapting equations from 19th-century physics that eventually became obsolete. Unfortunately, it is clear that neoclassical economics has also become outdated. The theory is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.

The physical theory that the creators of neoclassical economics used as a template was conceived in response to the inability of Newtonian physics to account for the phenomena of heat, light and electricity. In 1847 German physicist Hermann von Helmholtz formulated the conservation of energy principle and postulated the existence of a field of conserved energy that fills all space and unifies these phenomena. Later in the century James Maxwell, Ludwig Boltzmann and other physicists devised better explanations for electromagnetism and thermodynamics, but in the meantime, the economists had borrowed and altered Helmholtz’s equations.

The strategy the economists used was as simple as it was absurd—they substituted economic variables for physical ones. Utility (a measure of economic well-being) took the place of energy; the sum of utility and expenditure replaced potential and kinetic energy. A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathematical scientific discipline.

Strangely enough, the origins of neoclassical economics in mid-19th century physics were forgotten. Subsequent generations of mainstream economists accepted the claim that this theory is scientific. These curious developments explain why the mathematical theories used by mainstream economists are predicated on the following unscientific assumptions.

(snip)

[tama]

3. Thanks

Who believes that:

- The market system is a closed circular flow between production and consumption, with no inlets or outlets.
- Natural resources exist in a domain that is separate and distinct from a closed market system, and the economic value of these resources can be determined only by the dynamics that operate within this system.
- The costs of damage to the external natural environment by economic activities must be treated as costs that lie outside the closed market system or as costs that cannot be included in the pricing mechanisms that operate within the system.
- The external resources of nature are largely inexhaustible, and those that are not can be replaced by other resources or by technologies that minimize the use of the exhaustible resources or that rely on other resources.
- There are no biophysical limits to the growth of market systems.

?

[mother earth]

4. Money can be the difference btwn life and death on more than one level...oh yeah, we worship money.

And we are ever so silent when those predictors of economic trends and policy speak...

[Mattias]

5. As a modern "priest"

I am an economist of the PhD class so guess what I say could be interpreted by some as truth. What differs economics from prophetical truism is that it is a scinence in its core. Some economists use it as a belief system but thoose who do, grasp a fundamental vein that basically nullify the science they pretent to belong to.

Economics is a science and will continue to be so aslong as economists question common belief and search for new answers to old questions. Which I can guarantee we do now more than ever. I admit the market solution was a paradigm many economists including myself belived in. I am what in US would be a progressive economist and in Europe a social democrat and have always been. My belief was that education, social welfare and such should be financed by the public sector. Reaching maximum efficincy the market could be used to minimize waste and maximize utility.

This was a wrong assumption based on the theory we had. But today economics is going through what can be called a paradigm shift, old truisms are discarded and new truisms are explored and enhanced. Behavioral economics for example did not exist when I studied for my master, now its a requisite to get a master.

With the crisis of 2009 did not only come a bad wind around the world but also the seed to question old truths and find new solutions in economics. We have learned that monetary policy works find to smooth out "normal" events but it is insufficient to tackle big problems. We have learned that there is no "homo economicus", there are no representative consumer, utility maximation is not going to happen in anything else than textbooks and macroeconomis is not based on aggregating microeconomics.

Europe is pursuing an austerity policy that is directly countereffective in solwing problems, USA assuming it does not solve the fiscal cliff is going the same way. China is the only country pursuing a fiscal expansion of the big economies and it is fairling a good deal better.

My science likely created the theory that made the reasoning that crated this crisis possible. And holding on to old truths as austerity likely is currently worsening it.

But economics is not dogmatic, we learn as we move along. Unfortunately economics is somewhat a vulture science, we learn the most in crisis. Another example is unemployment reaserch, it was a part of economics that untill about 1980 did not recieve alot of attention. Reason behind this was that untill then it was not percived as a problem and also since full employment was the normal situation untill 1973, it was hard for an economist to find data. Employment reaserch had to focus on times of high unemployment and that took the reaserch back to the 1930s. At that time the labour market was much more heterogenus than now, so thus came the reasoning to lower barriers of entry by monetary means. Collecting data takes about 20 years, formulate models and theories a few more years. We now find that the labour market is alot more complex than assumed, one can even question if there exist a labor market, likely at minimum there exists a labour market for uneducated, educated and highly. Propably that is not enough, likely there exists hundreds of labor markets. But how to know this before data is collected?

It is hard as an economist to see so many people having to suffer from wrong theories. It's even harder to know that my scinence advance the most when people suffer the most.

But we learn and we adapt, the scientists that is, the politically motivatet ones will stick to there guns no matter what.
What we know from 2009 and will bring to the future of our science is;
Economics is a social science not a natural science
Markets have a place in the economy togheter with goverment policy. The two function optimally in co-operating
Sociology and Phsycology are as important as math and statistics
Fiscal Policy are relevant
Education is first order and taxation second order to reducing emplyment
Keynes is alive and well
Micro theory cannot be aggregated to macro
Financial markets are not real markets and can be regulated down to the bone without affecting the real economy. Banks could have there own taxation of 99 % of profit and the real economy would not suffer.

What we learned in the oil crisis
Fiscal expansion is not always good, it increased inflation aswell as unemployment. A monetary approach combined with austerity would likely have made it a smoother transition.

And a very important lesson for the future. When financial crisis happen, as in 1872, 1905, 1929 and 2008 fiscal stimulus is the medication for the illness. When real side crisis happen as in 1956, 1973, 1980, 1991 and 2000 monetary policy is the best medication. In political rethoric it often seems as one is always and everywhere better than the other, which is not true, sometimes austerity is a good path, sometimes fiscal expansion. One has to identify if its demand collapsing (as now, which mean fiscal expansion is the cure) or if it is a supply side problem (as 1973 when wages skyrocketed and thus created an enviroment for restrictie monetary policy) Unfortunately this crisis is from the repbublicans suggested to be cured by the antidote to a completely diffrent illnes.

All in all economics is not a static science. We learn as we go along unfortunately economic crisis are the fast track to new theories. But also remember that had we not had the 1930-s to learn from we wouldlikely be in a global depression now. Our grandparentes payed a high price, to high, for this knowledge. As I know my proffesion it is shifting, the biggest problem is really the ones who implement our science. Very few economists if asked today would say a lower taxation will solve anything, those who do will likely have a political stamp in their forehead saying "GOP".

From surveys around the globe by IMF/WB taxes on business is on 14th place for big companies and not even present on small companies. Education is number one in all OECD, G20, G7, G8, BRIC countries. For an entrepreneur to become an entrepreneur she/he first need an education. Bill Gates/Steven Jobs denied education would likely have created fewer jobs than 0 % corporate tax. And to be populist, if Joe the Plumbers parents had to pay his whole schooling, its likely Joe the Plumber had become Joe the Puscher.

[GMR Transcription]

6. Economy -science or religious cult?

Hi,
As we all are well aware of the facts about economy.Economics is nothing but science. And this post is quite interesting and informative for the readers of this blog as this is a very good and innovative point to be noted and discussed. And also to let others know inform about it. Here's a point is being mentioned that *Economists—the prophets and priests of this new religion—preach a bout and
have a major impact on public policy and our institutional arrangements* which is really informative enough.