The relationship between scientific research and economics is not a new topic, and many authors from Steve Keen to many others, have discussed these ideas in depth: physics envy, realistic models, and limiting scope of inquiry(economists often feel the need to weigh in on all sorts of scientific and technological issues outside their domain whether climate change or future technologies).
Today I just want to describe a little bit what the consensus in modern economics looks like, and why it exists. Many heterodox people, whether progressive or regressive austrian, work outside of this consensus to develop and discuss foundational ideas to the discipline.
Firstly, let's discuss how scientific domains develop consensus and what that looks like. The comparison I would make is to that of a sport or game or skill. Consider skateboarding. While skateboards can look very different, generally you have a board with four wheels that the rider stands on without attachments. While three points of contact with a surface are sufficient for stability, skateboards often have "trucks", which allow the rider to steer by leaning to one side of the board or the other. Thus four wheels are needed so that you can lean to steer and still maintain stability traveling in one direction or the other.
Skateboarding has developed its own language for tricks. I would like to include a citation, but given it is not a typical academic discipline, it may take a while before I get to revising this. There is a clip I recall seeing of Rodney Mullen discussing this idea, that skateboarders have an international language for what they do, and that it can be used to describe tricks that haven't even been performed before.
So this is the fundamental way that consensus develops in these disciplines. You have many people practicing a skill or art, and as they develop demonstrable expertise, they begin to recognize some common principles. To continue with the skateboard example, there are basically 4 ways to stand on a skateboard and ride it: regular, switch, nollie, and fakie.
These 4 terms may sound unusual to someone not familiar with skateboarding, but the language actually tells us a lot about the history and culture of skateboarding.
First, let's discuss the term "fakie". This term is actually shared in different "action sports", such as bmx. It basically means just to ride backwards. In skateboarding as the rider typically assumes a sideways stance, riding fakie doesn't necessarily look backwards, but in the process of learning it, you have to learn how to balance on your board differently.
Becase these four board stances dramatically change the technique you use to balance and control the skateboard, many tricks can be prefixed or suffixed with one of these, to indicate which stance was used when the trick was performed. "Nollie" in particular, comes from the phrase "nose ollie", indicating that this stance wasn't cemented as a formal idea until after the ollie was developed.
To someone who doesn't skateboard, it might be suprising that each of these four stances are dramatically different, and you can be proficient in one stance, but look like a drunk kangaroo if you try to ride in another stance. (kangaroos would be certainly impressive if they learned to skateboard, given how powerful their legs are and if they used their tail as a counter balance, but it is hard to imagine a kangaroo being naturally very coordinated with their gigantic feet and tiny arms, thus the analogy).
So only by doing a skill or art, does one learn the nuances of how it works.
Many of the early economists were people involved in or interested in politics or business. And that is why it gets so sticky. Politics and business are two of the most subjective and social activities we engage in, so being both methodological and rigorous while being proficient is difficult: you are dealing with other people acting according to their subjective experiences and interests.
Thus, in order to form the modern consensus, economists had to limit what ideas and principles they talked about, and which ones they wouldn't.
Economics was modernized from the 1970's onward. Banking and finance were modernized earlier from the late 19th century to middle 20th century or 1950's.
Much of banking as it was being modernized, was focused on the agriculture practice of farming, as farming is perhaps the quintessential economic activity involving capital investment: land tools, seed, machinery, and labor. If there was a textbook model of the capital process, farming would be it. So as farming become modernized, so did finance and banking.
Why did economics lag behind?
I would attribute this to the fact that economics integrates both business and politics. And the political system of the "modern" world, whatever that means, didn't get a real chance to stabilize until after world war 2. After we figured out how to build planes and tanks, and boats and atom bombs, then the issue of politics became dramatically different.
Before this point politics was the art of dealing with foreigners, after modern warfare, politics became the art of dealing with your citizens in global world.
All the inventions leading to this point, would affect what politics and economics are today.
One of the problems with the scientificization of economics, is you can't really do it in a laboratory. So it is like skateboarders stuck learning about their art by playing video games such as Tony Hawk's Pro Skater.
In the rush to have consensus, the economics profession just sort of took a selection of existing ideas, and made them official cannon.
The only problem is, many of these "traditional" ideas, were based on bad descriptions or outright fabrications. We still tend to think of money as gold or silver, in media such as video games. We think banks store money in their vault, instead of the vault being just a buffer or relay between where the money gets printed, and where it gets used.
It was probably a good idea that economics attempted to set certain topics as "out of bounds", so that focus and research could look elsewhere. But in this case, the boundary is basically a swimming pool deck covered in broken glass, and rough unfinished concrete that bakes in the sun to burn your feet. It's time to clean up around the edges, and work on these questions that are "out of bounds", because they are political in nature.
## Is our "Capitalism Obsessed" Politics Just Anti-Marxism?
Many associate Karl Marx with Communism and Socialism. But it is often pointed out that Marx's most significant work was Das Kapital. Marx put most of his effort into describing what capitalism is. He did this as an attempt to hyperbolize and villify a system which concentrates all economic power in the hands of a few wealthy and powerful individuals.
Many Americans today think of capitalism as a patriotic idea and essential to what America is as a country. They would perhaps be surprised to learn that the word comes from french, and it wasn't used in the modern sense until the 1850s, almost 100 years after the formative period for the United States.
The idea of Capitalism developed in historical parallel to the abolishment of slavery and the United State Civil War, not its founding.
If you notice, earlier in this essay I was careful to specificy "the capital process", rather than use the term capitalism. I would define the capital process as the activities of investment, record keeping, allocating and allocating profits, so specifically the activities itself, and not the associated political ideas and system.
The capital process can be utilized under a broad range of societal norms and political structures. And separating the politics of it, from the specifics of the operation of it, is important to discuss both sides clearly.
When Marx wrote Das Kapital he was describing a phenomenon that was not yet fully developed. He described a political system that was so obssessed with the capital process that it became the entire organizing force of a society. Rather than calling this hyperbolic and unrealistic, modern "conservatism" has embraced marxism, or rather they have decided to aspire to the society that Marx described as a distopian fairy tale.
Ask a modern conservative capitalist, and they would like to claim that they are 100% free from and Marxian influence. But I think that is completely wrong. They have embraced marx's distopia, the same way someone might enjoy the aesthetic of the Hunger Games movies and then decide to have that be a template for our actual society.
I would consider Marx's version of capitalism to be a fantasy/sci-fi novel. I'm sure both rabid pro-capitalism types and the unoriginal Marx disciples will hate me for this.
But the point is, we don't have embrace a society where the capital process is the totality of our political and social organization just to "own Marx".
Anyway, this point has little to do with modern economics, except to highlight why having a boundary is so important. It is good thing that modern economics tries to delineate between these issues, I simply think that we still need to pay attention to thing on teh boundary and not simply dismiss them.
This boundary is money creation and social regulations.
Because of the modern obsession with Marx's boogeyman, it is hard to talk about, in a reasonable way, what markets actually do. I think the best way is to simply imagine a swap meet.
A swap meet is an organized event where people come together to buy and sell a bunch of stuff. It's not intend to be a total organizing force for all of society and every political and legal question. That would be absurd.
Swap meets are not an every day event. And that is entirely the point. They are a special unique day or event so that people can do this activity all at once, and therefore as efficiently and quickly as possible. In this sense, it is much like any other convention around a special interest.
So whereas some people think markets should be the organizing force for all of economic life, I see it like a job fair or swap meet, or a draft in a sports season. Yes, having freedom to choose teams and trade wares is important, but most of our time is spent either on a particular team or using our wares, not trading them.
In particular, capital markets are even more of a special event that even fewer people participate in. And in my opinion, that's why they need political checks and balances. Because everyone's life is effected by the decisions made in captial markets, yet so few people directly are involved, they need to be regulated and operate within public laws.
The thing perhaps that annoys me the most about the modern economics consensus, is not necessarily even their conclusions: free international trade, public austerity, and regulation in the interests of preserving capital markets. No, the thing that annoys me the most is the language and scope they use for discussing these ideas.
Modern economics talks about convexity of preferences with little emphasis on the more general problem of mathematical search and optimization. Convexity is a useful property in mathematical search and optimization because it allows you to draw boundaries where a possible solution might be, not that we should always assume that it applies to particular variables.
Modern economics talks about price curves even when sellers and buyers do not have different criteria for setting price, such as is the case with speculative trading. Sellers prefer higher prices and buyers prefer lower prices, but when you are trading assets based on speculation, everyone is just basing their price on what they think the future price will be. In this case, there is no reason to use a different model for the demand side or the supply side, just because buyers and sellers both prefer a price in their favor, does not mean they are using different information or criteria for setting those prices.
Modern economics treats class issues as purely a specialization issue. Some people are computer programmers, and some people wash windows on cars. This outcome represents some optimal allocation and not a division of power, according to modern economic consensus. They describe any misallocation as "elite overproduction", not working class undercompensation. This is obviously a ridiculuous joke because abstract jobs like programmer or accountant are only useful as long as someone is doing physical work, and they primarily serve to help us better organize that physical work, they cannot replace it.
So the issues of labor allocation and compensation are distorted by the generous returns to capital.
I could go on and on. But the bias in economics is not just from wrong conclusions, in most cases, the conclusions are valid given the limited framing. It is from a limited scope of acceptable discourse, and everything outside that scope is treated as tradition without acknowledgement.