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Economics is Not a Science

By 05/31/2011 September 9th, 2014 DIT (Do-It-Together), Gilda's Posts, Green Economy, ParEcon

Sinking ShipAlbert Einstein once said that “We can’t solve problems by using the same kind of thinking we used when we created them.”

But at this moment, as we stare, overwhelmed,  at the perfect storm of economic and environmental degradation, we are doing just that.
We all seem to agree that our economy is in a big mess and there is a lot of consensus that Wall Street is to blame.  But when it comes down to doing something about it, we are pretty much resigned to moving the deck chairs around on the Titanic,  confining even those futile, if expensive, actions to the passengers in first-class.  We continue to feed the propagators, starve the victims, and kick people with good ideas to the curb  (like Elizabeth Warren).

This is bad, but not as bad as the fact that we don’t agree that the  global climate crisis even exists –– a state of affairs that is so maddening to Australian climate scientists that they were compelled to bust out a rap song (I’m a Climate Scientist) in their own defense.

What we really need now are tools that can help us re-discover and re-invent the purpose of the economy; to understand its necessary dependencies and responsibilities  to the planet; and to debunk, once and for all, the myth that economics is a neutral math-based science.

It is not. It is a human construct, grounded in human values and decisions that can either perpetuate the way things are or help us realize the way we want things to be.


Manfred Max-Neef To get us started, allow me to introduce two alternative and compelling models for a new economics.  In my mind, they both embrace the ecological and moral prerequisites of an economy that is worthy of the name.

The first is the environmental economics offered by Chilean economist Manfred Max-Neef’ in his book, Human Scale Development as well as in a more recent publication co-authored with experimental physicist, Philip Bartlett Smith, Economics Unmasked: From Power and Greed to Compassion and the Common Good.

Max-Neef and his colleagues set forth five basic postulates and one basic value principle as a framework for a humane new economics:

  • One, the economy is to serve the people and not the people to serve the economy.
  • Two, development is about people and not about objects.
  • Three, growth is not the same as development, and development does not necessarily require growth.
  • Four, no economy is possible in the absence of ecosystem services.
  • Five, the economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible.
  • And the fundamental value to sustain a new economy should be that no economic interest, under no circumstance, can be above the reverence of life.

Here is a video of Max-Neef discussing these ideas in more depth with Amy Goodman on Democracy Now:

Elements of DevelopmentThe second example is First Nation’s Development Institute‘s “Elements of Development”, as presented in Sherry Salway Black’s 1994 article “Redefining Success in Community Development.”

Black redefines “economic development” from the lens of Native American values and practices in order to create new and useful metrics and measures of what economic success might mean in a tribal context.

First Nation’s “Elements” are grounded in the symbiotic relationships between control of assets, kinship, personal efficacy and spirituality on the one hand, and the individual, the project, the tribe, and the nation on the other,  superimposed on an ecological plane.

Max-Neef’s model is predicated upon a basic understanding of a set of universal and finite human needs and their possible “satisfiers” which are numerous and various depending on one’s culture, locale, and historical moment.  Both books (Human Scale Development and Economics Unmasked) include the Needs/Satisfiers Matrix, which is at the root of his approach.

Do you have your own favorite economist? Please share what you know with Dr. Pop.

 

6 Comments

  • Sergio says:

    Buenismo Gilda! As an econ major, I’m always looking for new thoughts and ideas, especially those that are rarely mention in mainstream media. Gracias!

  • Gilda Haas says:

    so glad this was useful…hasta la próxima

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  • Jeff Tangel says:

    Well done Dr Pop–I think undoing the belief that economics is science is critical to finding a new way in the world. People resign themselves to “economic forces”, most of which they don’t understand (and its complexity yields great benefit to those who do), and therefore not only suffer, but don’t act to implement change. Here is a longish bit from my website, an introduction to, and video clip of Gerd Giderenzr, PhD, Dir of Max Plank Institute for Human Development giving a talk at the Institute for New Economic thinking in Berlin last year:

    What Can Economists Know? Rethinking foundations for economic understandings
    Gerd Gigerenzer, PhD
    INET Conference, Berlin April 12, 2012.
    A critically important talk given by psychologist Gerd Gigerenzer on the efficacy of economic decision-making that effectively demolishes the foundation of current economic thinking.

    “Almost all neoclassical, neuro-economics and behavioral economics makes decisions based on risk—that is, when all alternatives, all consequences and all probabilities are known.” Modeling works with risk, but not Uncertainty, argues Gigerenzer. And of course the world is filled with uncertainty, of which, the recent near-collapse of the financial system is just one example. And we would add, proof of the immeasurable hubris of Wall Street. But this hubris is not limited to Wall Street, it pervades our entire economics because it is built on economists’ ability to model reality. This modelling of reality, actually creates reality, a world of pleonexia, competition and collapse.

    Heuristics are better, Gigerenzer argues. “We must dare a science of heuristics…which are normative…and how most humans and animals make decisions most of the time.” Gigerenzer is arguing for a human understanding of the world. Recognizing both our limits and our strengths he favors simplicity, “complex problems don’t require complex solutions…and “very often less can be more.”
    http://www.youtube.com/watch?feature=player_embedded&v=DdEEwoKkfMA
    (22 min.)
    Best,
    EJ Tangel

  • Gilda Haas says:

    Thanks for the thoughtful comments and the video link — interesting. Not to mention that I learned a new word –– “pleonexia”. Perfect.

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