by From Gregory Danake and RWER issue 93 The nexus of mainstream (or neoclassical) economic theory is “homo-economicus” (or economic person). It is a super being who dwells in a fairy tale land with complete information and is obligated to act hedonistically (maximizing their individual utility at the margin). Neoclassic economists merely stamp out this little cookie person, and then chuck out all the inconvenient dough, including: altruism, reciprocation, and “moral sentiments” (as Adam Smith suggested in his virtually unknown first volume), not to mention behavioral proclivities and a modicum of concern for the natural environment. Their poor little cookie person has been bludgeoned to crumbs on empirical as well as philosophical grounds for decades (see, Fleming, 2017), and yet its
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from Gregory Danake and RWER issue 93
The nexus of mainstream (or neoclassical) economic theory is “homo-economicus” (or economic person). It is a super being who dwells in a fairy tale land with complete information and is obligated to act hedonistically (maximizing their individual utility at the margin). Neoclassic economists merely stamp out this little cookie person, and then chuck out all the inconvenient dough, including: altruism, reciprocation, and “moral sentiments” (as Adam Smith suggested in his virtually unknown first volume), not to mention behavioral proclivities and a modicum of concern for the natural environment. Their poor little cookie person has been bludgeoned to crumbs on empirical as well as philosophical grounds for decades (see, Fleming, 2017), and yet its specter lives on. Many ideas and actions of the mainstream have been widely condemned and disconfirmed, yet they persist, suggesting an inordinate level of scientific lassitude.
Some of the more potentially troubling aspects mainstream economics could receive a renewed lease on life, via selective applications of Artificial Intelligence. This is particularly relevant if it is merely used to shore up faulty theories regarding the dog-eat-dog nature of our society. MACHINA-EONOMICUS could be even more impenetrable and strengthen the illusion that the prevailing ideology is unassailable logic. Just when it began to look like the beleaguered cookie person was finally going to yield to the often befuddled (yet authentic) sense of our common humanity, s/he is being refurbished with even more mechanical workings. As AI further penetrates the raison d’état of the clandestine political economy, neoliberalism might be a reinvigorated.
What was to become a patch work of contradictory notions we now call “mainstream” or “orthodox” economics began during the industrial revolution with the highly selective extraction of a few classical ideas (e.g. the “invisible hand”, “comparative advantage”, “the barter myth”, the efficacy of inequality, and the sanctity of accumulation). It did not acquire its mathematical veneer until the Victorian Era (1830s to the early 1900s), via the work of William Stanley Jevons, Leon Walras, and Carl Menger and their Marginal Revolution (e.g. individual utility, diminishing returns, general equilibrium, etc.). What famed American non-orthodox (institutional & evolutionary) economist, Thorstein Veblen, would label “Neoclassical”, adopted the Newtonian mechanical worldview. Prominent economic historian, Phillip Mirowski (1989) describes how neoclassical formulas were simply lifted, whole cloth, from outdated physics textbooks, and hence lacked an awareness of thermodynamics (e.g. entropy), or any dynamics for that matter. Their notions of a static equilibrium left them stranded on a cold, dead planet, yet their insistence on perpetual growth and increased consumption, magically endowed it with infinite resources (or technical substitutes). In another prescient book, Mirowski (2002) contends that mainstream economics has also been hell-bent on becoming a “cyborg science” well before the advent of AI. In the process Mirowski chronicles how elements of economics have remained close to the machinations of the Military Industrial Complex (e.g. the Rand Corporation) since the days when operation researchers worked alongside the code breakers and other progenitors of AI, during WWII. As the cold war proceeded, much the prevailing ideology of mainstream economics was also honed, beginning with a small group that met in a Swiss village in 1947.
What is so intriguing about the influence of the Mont Pelerin Society (or Pelerins for short), is that their hidden political pronouncements (now known as neoliberalism) became so easily interwoven with neoclassical methods, which specifically excluded political concerns. Some conflate the radical libertarianism and “market fundamentalism” of neoliberalism with neoclassical theory in economics, but they are not same. The complete capture of economics by a cult of ideologies did not emerge with a vengeance until the 1970s, after a few decades of lavish corporate funding of dedicated think tanks, foundations, and entire university departments, as well as law and business schools. The fake Nobel prizes (actually the Riksbank Prize) that economists award themselves at the same time as the authentic science and peace prizes did not begin until 1969, with a significant number going to Pelerin purists in perpetuity. With the elections of Ronald Reagan in the US and Margaret Thatcher in the UK, neoliberalism arrived at the pinnacles of power, and has maintained its hold, irrespective of political party. The durability of its power is also found in the lifetime appointment of neoliberal judges (Baby Borks), particularly to the US Supreme Court.
Neoliberalism was surreptitiously welded into neoclassicism in order to sustain certain policy prerogatives, and pass them off as scientific truths. read more