Well, I read every word of Paul Krugman's article about the failure of Economics as a discipline and of economists as a group, and I don't disagree with any of it, but he is missing out on some big issues that also need to be discussed and understood before we actually know what is going on in our world.
- English majors understand human nature better than economists do. If, as Krugman said, "homo economicus" is perfectly rational, where did the folks who came up with this simplistic idea go to college, and didn't they read, say, Shakespeare, Locke, Rousseau, Hobbes, Dickens, Trollope, Proust, Zola, or even Freud? To suppose at this late date that people are rational in anything, but especially in consideration of their own self-interest, is to be painfully, gaspingly ignorant. The works of all of these writers are full of characters who act irrationally -- who are greedy and cruel and selfish and angry when it would be far more pleasant and healthy to be a "rational actor." Emile Zola, in particular, anatomized our current era of irrational economic misery between 1871 and 1893, in his Rougon-Maquart series. In "The Kill" and "The Belly of Paris," he wrote about wretched excess. In "The Ladies' Paradise," he wrote about Amazon.com driving independent booksellers out of business. In "Money," he wrote about financial speculation. In "The Debacle," he wrote about the stupid wars we get ourselves into. Go read one -- you will be amazed that plus ca change, plus c'est le meme chose, no matter how economists feel that they are reinventing the world.
- Is human nature basically good or evil? No economist can embark upon his profession without considering this question, and yet they all seem to. And they all seem to think human nature is basically good, or they wouldn't be surprised by the effects of deregulation. Have none of these guys been to Naples or Moscow? Or even seen a James Cagney movie? There can never be such a thing as a free market, because it is human nature to cheat, monopolize, and buy off others so as to corner the market. This is what leads people like me to feel that economists can hardly be so simple-minded as they appear -- they must be spouting this junk just to suck up to tyrants. If there is an unregulated free market, then everything must be for sale, including lives, children, bodily organs, endangered species, the air we breathe, and the planet earth. The key thought here is that the free market puts all of these things up for sale, and quite often what the free market values little (the ozone layer, child sex workers), humans value very much. If an economist is on the side of the free market in this instance, then he is a fool or a monster. Or at least an ignoramus.
- Krugman's piece focuses almost entirely on finance. Keynes is his model. But there is something more going on with economics than finance, and it is production. If you want to know what's happened to production in the US in the last generation, I suggest you read Marx. My last reading of Marx took place in Mrs. Ticknor's Social Studies class in 1962, when I did my report on "The Communist Manifesto" and kept misspelling the word "bourgeois," but I never forgot one piece of analysis, and that is that as the workers earn more money for their labor, the owners export the factories to the periphery of the industrial world in order to keep wages down. This perennial cycle means that the workers can never afford what they produce, and so the market for their goods is always somewhere else. Welcome to the race to the bottom. Do any of these economists care about actual goods, or is gambling their only idea of economic activity? If the workings of finance is the only thing they think about then of course they are seduced by mathematical formulas. So are guys who read the Daily Racing Form. That can be a life work, too. And more elegant, if you ask me.
- Speaking of goods, economists who have deigned to think about manufacturing have always resisted calculating the costs of raw materials by calling them "externals." For example, if I come to your country with my enormously expensive army and I steal, or attempt to steal, your oil, in order to make it into gasoline and blow ever more pollution of all kinds into the air, then the cost of the war (in lives, money, social, and environmental damage), the moral cost of the theft of someone else's resource, and the ultimate cost to the planet and its living beings of global warming will not, according to economics, be factored into the cost of the oil, because those things are "externals" and are considered to be free. Well, they are free, to the shareholders of Exxon, but they are not free to the planet. You would think that economists, as human beings, would look around once in a while and say, "Gosh, something 'external' is going on." But they don't seem to.
- Who's paying these guys? One of the profound effects of economics in our day is that the people with the money and the power have embraced the guilt-free, external-less, everything-will-turn-out-okay-in-the-end philosophy of economics in order to justify their own evil works. And the economists, for the most part, have sucked up to that money. Aspen Institute? Let me in. Hoover Institution? That's not located in Kiev, is it? Oh, right -- Palo Alto. The reciprocal back patting, mutual admiration, and pocket lining of these economists and their friends in high places is never-ending and destructive. It is called "corruption." Naomi Klein wrote about some egregious examples in The Shock Doctrine. But don't tell Greenspan that he's an item of corrupt vermin skittering around the old boy's club -- he thinks of himself as an intellectual. Unless and until these economists look within (do they have a "within"?) and understand the destruction they have caused, they will continue to tell an eager audience (the ruling class) that everything is fine, or soon will be, or ought to be, or...whatever. What has created our mess is arrogant no-nothingism at the highest levels, and as long as that obtains, there is no hope for the rest of us.