On Tuesday 16th of March 2017 Robert Skidelsky and I launched my book The Reformation in Economics in the Clement Attlee room in the House of Lords. It has taken some time to upload these videos of Robert’s and my comments. Most of the speeches were captured but I have included my own text below (I did not end up sticking to the written comments verbatim).
On a separate note, Brian Romanchuk has written a short review of the book here.
Thanks very much for coming. I’m pleased to see that you’ve shown some interest in the book.
I won’t beat around the bush. I’ll get right to it.
What is the key question that the book seeks to address? It is this.
To what extent is economic theory an ideology and to what extent can it be thought of as a neutral tool which can be used to explore and possibly improve reality?
What I mean by ‘ideology’ is not a political ideology – I’m not concerned with whether you lean Tory or Labour. Nor do I mean a worldview or Weltanschauung – such as Marxism, libertarianism or communitarianism.
What I mean by ‘ideology’ is a mode of thinking that does not seek to attain Truth – but rather seeks to attain Power. A mode of thinking that seeks to justify a certain social or economic order.
The argument that I make in the book is that a good deal of contemporary mainstream or ‘marginalist’ economics is in fact ideology in this sense.
BUT – and I hope you will have some sympathy for this claim – I also argue that there are aspects of economics that are not ideology. That is, there are aspects of economics that do in fact aim at revealing truth – rather than imposing power.
These are the aspects of economics that seek to explain the facts of the world as we see them – and, in the best instances, give us structural explanations why these facts line up in the way that they do.
If we are going to be serious, however, I think that we need to ask firmly: which is which? Which aspects of economics seek Truth and which seek Power? And in order to do this we must inevitably start with some robust epistemological questioning of economic theory.
Until now I think that economists have been somewhat cagey about discussing epistemological issues. To be frank I think that this reluctance is due to the fact that the epistemological foundations of modern economics are a little embarrassing. The “assumptions don’t matter” approach of the marginalists tends to crop up in conversation like an uninvited dinner guest or a weird uncle.
On the other hand, those that have criticised economics for being “too unrealistic” or based on flimsy assertions often seem to find it difficult to lay down clear criteria of evaluation.
This is where I hope that my book fits in. In it I have attempted to do a bit of everything at once. First, I have held what seem to me to be the major tenets of contemporary marginalist economics up to epistemological criticism. I have then – drawing on an old Prussian named Kant – laid out clear methodological and epistemological criteria to judge suitable theoretical replacements. And finally, I have constructed the skeleton of what I think could develop into a suitable alternative.
All that sounds rather grand – perhaps even tipping into the grandiose. But the book is in no way a creation ex nihilo. I have drawn on decades of excellent work by economists that have unfortunately been shunned by the marginalists.
Nor is the book an attempt at a Grand Unified Theory of everything. This is not a Book of Scripture. We have enough of those.
In fact one of the driving forces of the book is the feeling, wisdom, knowledge – call it what you will – that we can’t know everything.
We cannot, in fact, produce large-scale models of economy like the physicists do. It simply doesn’t work. Economies are too complex. They are not written in the elegant, concise prose of the Book of Nature.
If the DSGE modellers are attempting to draw up a detailed map of the economy I am merely trying to provide some directions. I call this method – following Mr Kant – the construction of ‘schema’. These schema work to try to orient us in the world of economic events and provide a firm footing.
I’ll run through the specifics of the book quickly.
Apart from this new approach to economic method the book deals with theories of money and banking; it deals with theories of profits, prices and income distribution; and it deals with theories of finance and investment – that last one I believe makes up the core of economic theory properly understood.
I hear that there is already a myth floating around out there that this is a highly abstract theoretical book with no bearing on the real world. Overuse of words like ‘epistemology’ in what I’ve just said aside, I want to dispel this myth.
Many of the aspects of theory that I discuss in the book are directly tied to key contemporary policy debates that we hear today. This is not a coincidence. I wrote it that way. I tried to avoid the more irrelevant aspects of economic theory and stick to the good stuff.
To run through a few practical examples, the chapter on money and banking has direct bearing on the quantitative easing programs that have been run by the worlds’ central banks recently – and may help to understand why these did or didn’t work as they were supposed to.
There is also a chapter on free trade that takes what seems to me a more realistic approach to the economics of trade.
I’ll briefly conclude by asking: what would economics look like after a reformation? To my mind it would be a lot more pluralistic. There would be an awful lot more debate – and by ‘debate’ I mean debate over deeply held general principles and not over whether the bell looks nicer than the whistle.
I think it would be a lot less dogmatic and people would be more willing to ask challenging questions. I think that economists would be a lot more humble with regards to what they could say with confidence. Basically I think it would look a lot more like the economics of 70 or 80 years ago.
And for that it would be a lot more exciting, a lot more engaging, and a lot more interesting. I also think that economists would develop a healthy allergic reaction to doctrinal method, gatekeepers and taboos.
I’ll leave it there.
Please enjoy drinks and conversation. If anyone has any questions about the book I’d be more than happy to answer them. Thank you for coming and have a good time.