Never Let A Serious Crisis Go to Waste. Philip Mirowski
commodities, information as a public good, and conventional definitions of risk to motivate his version of “real-world” economics. At another juncture, he admits that a relevant macroeconomics “is not simply a matter of modifying the way we model individual behavior,” but as he repeatedly conjures “behavioral economics” as the font of deliverance, he has nothing else on offer. In chapter 5 we suggest that behavioral economics has been a sink of despair. Quiggin frequently wishes for a “newer Keynesianism,” but has to concede that the neoclassical synthesis was “not particularly satisfactory at a theoretical level, but it had the huge practical merit that it worked.”28 Time and again he signals that he is aware that neoclassical economics frustrates and confounds intellectual deliverance from the morass of zombie ideas; but nevertheless, he cannot seriously countenance the possibility that the solution to logical incoherence involves its repudiation. The result is that Quiggin repeatedly contradicts himself, and perforce treats it as a virtue. This is itself a pungent symptom of zombie thought, and is widely found across the board of the “legitimate left” of the economics profession, from Paul Krugman to Joseph Stiglitz to Adair Turner to Amartya Sen to Simon Johnson. Paul Krugman, feeling secure in his status, has conveniently confessed to the derangement:
The brand of economics I use in my daily work—the brand that I still consider by far the most reasonable approach out there—was largely established by Paul Samuelson back in 1948, when he published the first edition of his classic textbook. It’s an approach that combines the grand tradition of microeconomics, with its emphasis on how the invisible hand leads to generally desirable outcomes, with Keynesian macroeconomics, which emphasizes the way the economy can develop magneto trouble, requiring policy intervention. In the Samuelsonian synthesis, one must count on the government to ensure more or less full employment; only once that can be taken as given do the usual virtues of free markets come to the fore.
It’s a deeply reasonable approach—but it’s also intellectually unstable. For it requires some strategic inconsistency in how you think about the economy. When you’re doing micro, you assume rational individuals and rapidly clearing markets; when you’re doing macro, frictions and ad hoc behavioral assumptions are essential. So what? Inconsistency in the pursuit of useful guidance is no vice.29
I do not wish to suggest one should never, ever simultaneously entertain A and Not-A. There is a grain of truth to this: quantum mechanics has been deemed inconsistent with classical mechanics and macro-scale theories such as relativity at various points in its history; it is possible for a science like physics to operate for a while with conceptual schizophrenia. Indeed, sometimes it may be a necessary prerequisite to come to understand the full nature and character of the submerged contradiction. However, the historical divergence comes with neoclassical economics in that most other sciences do not then banish their members who point out the inconsistencies and worry over their meaning. Nor do they simply expel the proponents of one side of the theory in order to maintain doctrinal purity, as happened with the rational-expectations movement and its epigones.
During the Cold War, the economics profession was growing more exclusive, but was not completely intransigently intolerant of rival doctrines, for reasons of ideological appearances. For instance, evidence from the Paul Samuelson archives suggests he really did nominate Joan Robinson for the Bank of Sweden economics “Nobel.”30 Things really ratcheted upward in terms of imposed conformity only after the Fall of the Wall, for equally obvious political reasons. However, the apogee of denial of divergent thought occurred during the Great Bubble. A very strange literature sprang up in the early 2000s, asserting that there was no such thing as neoclassical economics anymore, in the sense that the legitimate orthodox economics profession had explored every possible analytical divergence from the rigid Walrasian general equilibrium model of days past, and someone, somewhere, sometime had built formal models addressing the previously heterodox concerns.31 Rationality? Who needs it? Equilibrium? We can do without it! Maximization? We can get around it! Individual greed? Just read Amartya Sen! Supply and demand? That just gets fed to people insufficiently mathematical to grasp the latest interpretation of the Sonnenschein-Mantel-Debreu theorems! Bubbles? We got ’em, hot, foamy, and rational. Complexity? How much can you handle? And so on and so on. Point to anything you may not find salubrious, and we’ve got a “not-so-new” model (and maybe a bridge) to sell ya. And yet, all this putative open-minded tolerance and catholic heedfulness was accompanied by bald attack on and excommunication of any last vestige of heterodox economics in top-ranked universities throughout the world, and the redoubled exclusivity of top-ranked economics journals. History of doctrines was banished, and scattered ghettos of heterodox thought were unceremoniously leveled. Even European holdouts were vigorously routed in their national contexts. For those on the front lines, it was wrenching to witness this contradiction up close.
I believe it was no accident that all manner of otherwise tolerant eclectic people started claiming that heterodoxy in economics was finally a thing of the past precisely during the Bubble run-up to 2007; perhaps we can now appreciate it as the twin offspring of the neoliberal herald of the “end of history,” akin to the “Great Moderation,” only now in the precincts of intellectual endeavor. The profession had been rendered starkly more homogeneous in outlook and training, not least through graduate recruitment of tyros with no undergraduate degree in economics, which had significant consequences for the bumbling responses of economists when the crisis hit. Training and backgrounds had grown so narrow that the newer generation had no idea there had ever been anything alien to their tradition, and hence their impressions of intellectual freedom were simple artifacts of their ignorance. Things had gotten so bad that some heterodox holdouts felt they had fallen victim to an elaborate fraud themselves: “There is nothing more frustrating for critics of neoclassical economics than the argument that neoclassical economics is a figment of their imagination.”32 No purge is more insidious than that which comes cladded with plausible deniability.
There are many different ways to understand how Big Brother managed to accrue a reputation for political neutrality and an open mind; and this book is an attempt to look at that phenomenon from a number of different perspectives. It is a bit more of a stretch to see how that reputation has been maintained (albeit under persistent duress) throughout the drubbing that the economics profession has suffered in the aftermath to the crisis; that also is the concern of this volume. It seems clear that the faux-tolerance of the “End of Neoclassical Economics” movement in the new millennium actually has made the response to the crisis by economists even more addled than it might have been otherwise.
However, there is one concise explanation of this history that no PhD economist would deign to entertain, although we shall insist it be kept on the table for the duration of this book. It is the proposition that Quiggin turned out to be half-right: it is not just that a few component models found in economics are zombiefied; rather, it is the neoclassical tradition as a whole that is approximating the walking undead, and has been lurching around that way for a while. Patently, this begins to get at why no amount of heterodox brickbats (or incisive reasoning) can halt its inexorable march. Before my audience dismisses this notion out of hand as too draconian, consider the following.
Let us provisionally take the proponents of the dissolution of the neoclassical program at face value. First off, it seems we have arrived at the historical epoch where academic neoclassical economics no longer strives to explain “the economy,” because for sophisticated economists, there is no such thing. Critics who prattle on about “real-world economics” merely flaunt their naïveté to the quiet disdain of the gatekeepers of expertise. Rather, card-carrying neoclassical economists come convinced they possess a Theory of Everything at the End of History, and apply their so-called economic approach to everything great and small under the sun: life and death, sex, neurons, nations, language, knowledge, science itself, personal identity, evolution, aesthetics, global environmental disruption, even human virtues such as dignity.33 Through prestidigitation, a theory of trade has morphed into a “theory of choice”; and choice is everywhere. After all, isn’t that the central message of Freakonomics, the best-selling book of the Great Moderation: that wicked rebel (yet safely orthodox) economists can explain sumo wrestlers, teen homeboys, girls’ first names, and crime statistics? Yet explanatory hubris brings its own special tragedy: it is a philosophical commonplace that a doctrine that nominally explains “everything”