“Toward the Next Paradigm in Economics?” was the banner for a local meeting I recently had to talk about two seminal books: Kate Raworth’s “Doughnut Economics” and David Orrell’s “Quantum Economics”.
Four people attended. One had turned up because she knows Kate Raworth as a parent. Their children go to the same school (“Only in Oxford?”). Another was the partner of an economist who had visited my blog and told her that it must be written by a science hating dilettante. That piqued her interest.
No one had read either of the books but we had a lively discussion about how unjust, un-green and generally unreasonable the status quo is. We did touch on money and the economy in that we shared a puzzled surprise at how yesterday’s champions of austerity were currently announcing spending plans far in excess of the “tax and spend” “Marxist” Labour party’s ?
For the next meeting I will try and interest [postgrad] students from the relevant university departments. (#goodluckwiththat)
As to criticisms of the equilibrium mainstream coming from science haters, dilettantes and ignorant non-economists?
The good news is that the Silo effect does not turn everyone into a defensive – aggressive Pavlovian dog. Paradigms are institutionalized social constructs inhabited by individuals who can be more or less identified with its defining narrative. There are many nominally mainstream economists who go through the DSGE motions (which pay for their supper) without necessarily believing a word, or rather a number.
The bad news is that the FT’s Wolfgang Munchau is putting it mildly when he concludes that the [ideologically commmitted] mainstream, having “invested a life’s work in developing DSGE models … will not let go easily” and “a successful challenge will come from outside the dicipline”. (1) Sociologists and historians are likely to be less polite and suggest that paradigms have to die out. Literally. (2)
For the not yet fully initiated or committed I am preparing a short history of the mainstream critiquing itself. But no need to wait for that, just read the relevant bits in those two books. (3)(4)
As a psychologist I have noticed that economists you meet at Oxford parties are conspicuously welcoming these days, saying things like: “We need more psychology!”
The trouble with embracing the ex “pseudo science” of Kahneman type behavioural economics is the missing self reflexive application of these ancient bits of wisdom to oneselves, starting with confirmation bias, perhaps?
To a psychologist the recent discovery of “behavioural biases” it is all a bit of a joke. Varieties of cognitive dissonance have been taught along with visual illusions in 101 psychology for more than half a century. Not to mention oldish business studies texts like Eric Clarke’s “The Want Makers”.
Nb On Silo Effect in social science see, e.g. Geoffrey Ingham (5)
(1) “The transition in thinking required today in economics , while not technically difficult, seems as much a challenge to orthodoxy as the one a century earlier when classical physics collided with quantum reality . Perhaps I am biased , but Wolfgang Munchau may have been right when he wrote in the Financial Times in 2015 that ‘ The mainstream invested a life’s work in developing their DSGE models . They will not let go easily , but continue to tinker with their models … the successful challenge will come from outside the discipline .’ ” D. Orrell, Quantum Economics, 2019, p259
(2) Thomas Kuhn quotes Max Planck, according to whom “a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.” Mind you, this wasn’t meant to apply to social science which is so “soft” all its diverse paradigms tend to survive as parallel schools, or silos.
(3) D. Orrell, Quantum Economics, 2019, p238, The penny drops: “While many mainstream economists have continued to make excuses for their epic forecasting miss, not all have been so sanguine …” Read more
(4) K Raworth, Doughnut Economics, 2017, “Overcoming our inheritance” p 134 on neo-classical critique of the new Keynsean synthesis : “(G)eneral equilibrium theories dominated macroeconomic analysis through the second half of the twentieth century , and all the way up to the 2008 financial crash . The ‘ New Classical ’ variants of equilibrium theory – which assume that markets adjust instantly to shocks – jostled for attention with so – called ‘ New Keynesian ’ variants that assume there will be adjustment delays due to ‘ sticky ’ wages and prices . Both variants failed to see the crash coming because – being built on the presumption of equilibrium , while simultaneously overlooking the role of the financial sector …” Read more
(5) G Ingham “The Nature of Money” Preface : “This book is the result of my long – standing impatience with the disciplinary boundaries of the social sciences in modern academia . Not only have they become sharper , but there is also greater specialization and fragmentation into ‘ sub – fields ’ and esoteric niches . Since the division of intellectual labour in the early twentieth century , I believe that there has been a loss of understanding of how the world works . This belief is based on direct experience over a period of almost forty years in the University of Cambridge .”