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Neoclassical economics, he says, is a “just-world theory,” one that posits that not only do good people get what they deserve but those who suffer deserve to suffer. He says this model is “a warrant for inflicting pain.” If we continue down a path of mounting scarcities, along with economic stagnation or decline, this neoclassical model is ominous. It could be used to justify repression in an effort to sustain a vision that does not correspond to the real world.
“The free market norm assumes a frictionless exchange which maximizes everyone’s well-being,” he said. “The existence of ... coercive instruments, such as the prisons and the enormous military, makes you think that the theory is not all it is purported to be. There is a gap between what it pretends to be and what it is.”
Offer argued that “a silent revolution” took place in economics in the 1970s. “Economists,” he said of the 1970s, “discovered opportunism—a polite term for cheating. Before that, economics had been a just-world defense of the status quo. But when the status quo became the welfare state, suddenly economics became all about cheating. Game theory was about cheating. Public-choice theory was about cheating. Asymmetric information was about cheating. The invisible-hand doctrine tells us there is only one outcome, and that outcome is the best. But once you enter a world of cheating there is no longer one outcome. It is what economists call multiple equilibria, which means there is not a deterministic outcome. The outcome depends on how successful the cheating is. And one of the consequences of this is that economists are not in a strong position to tell society what to do.”
In policy, if the model is bad, then reality has to be forcibly aligned with it by means of coercion. How much coercion is actually used provides a rough measure of a model’s validity. That the Soviet Union had to use so much coercion undermined the credibility of communism as a model of reality. It is perhaps symptomatic that the USA, a society that elevates freedom to the highest position among its values, is also the one that has one of the very largest penal systems in the world relative to its population. It also inflicts violence all over the world. It tolerates a great deal of gun violence, and a health service that excludes large numbers of people.”
“Major ways of thinking about the world constitute just-world theories,” he said. “The Catholic Church is a just-world theory. If the Inquisition burned heretics, they only got what they deserved. Bolshevism was a just-world theory. If Kulaks were starved and exiled, they got what they deserved. Fascism was a just-world theory. If Jews died in the concentration camps, they got what they deserved. The point is not that the good people get the good things, but the bad people get the bad things. Neoclassical economics, our principal source of policy norms, is a just-world theory.”
Does he state in his article what he thinks the solution should be? One thing is outlining the problem, and another thing is offering solutions. S+Fed by the way.
Those academics who deviate from the central core doctrines, including in economics, are finding themselves defunded. Oversight committees impose quotas on academics and insist that the work conform to what they call disciplinary norms.
“The idea of the autonomous scholar is disappearing,” he said. “I am not sure many people even remember it.”
If we continue down a path of mounting scarcities, along with economic stagnation or decline, this neoclassical model is ominous. It could be used to justify repression in an effort to sustain a vision that does not correspond to the real world.
Offer, who has studied the rationing systems set up in countries that took part in World War I, suggests we examine how past societies coped successfully with scarcity.
Clinging to the old neoclassical model could, he argues, erode and perhaps destroy social cohesion and require the state to engage in greater forms of coercion.
When used to derive policy, an economic model not only describes the world but also aspires to change it. In policy, if the model is bad, then reality has to be forcibly aligned with it by means of coercion
“There are two core doctrines in economics,” Offer said. “One is individual self-interest. The other is the invisible hand, the idea that the pursuit of individual self-interest aggregates or builds up for the good of society as a whole. This is a logical proposition that has never been proven.