by From Andri Stahel and RWER current issue What does modern economics have in common with medieval theology? At a first glimpse, very little. After all, economics presents itself as a science, based on the same mathematical principles and ideals of objectivity and empiricism on which mechanical physics is grounded and which, as is known, replaced medieval theological description of reality. Moreover, they apply to different subjects: heavenly, spiritual matters for theology, earthly matters for economics. Notwithstanding, if we look at how modern economics is practised nowadays and its ideological role in supporting free markets and the hegemonic social and political practices, striking similarities emerge. In terms of method, since at least the end of the 19th century and early 20th
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from Andri Stahel and RWER current issue
What does modern economics have in common with medieval theology? At a first glimpse, very little. After all, economics presents itself as a science, based on the same mathematical principles and ideals of objectivity and empiricism on which mechanical physics is grounded and which, as is known, replaced medieval theological description of reality. Moreover, they apply to different subjects: heavenly, spiritual matters for theology, earthly matters for economics. Notwithstanding, if we look at how modern economics is practised nowadays and its ideological role in supporting free markets and the hegemonic social and political practices, striking similarities emerge.
In terms of method, since at least the end of the 19th century and early 20th century, the mathematical, model-based approach to economics has become hegemonic to the point of baring from its practice all dissenting or different methods. Unlike other social and historical sciences, modern economics was built around the idea that the economic reality can and indeed had to be approached in the same way natural scientists approach simple, repeatable phenomena like the movement of inertial bodies in physics or chemical reactions in chemistry.
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Thus, neoclassic economics has been modelled on the image of Newtonian physics, which it seeks to resemble, despite looking at a living, historical reality and not passive objects’ behaviour as physics did. Indeed, to do so, it had to take Newton’s standard assumptions like inertial movement assuming that objects move friction-free or the total elasticity of colliding bodies – thus, that no energy is lost at the collision – to a completely different level. Just like Newton’s laws of movement apply to frictionless inertial movement, the equations of the economist’s models require linear, predictable behaviour to be the norm. Thus, it had to assume not just the nonexistence of minor factors affecting the observed real-world behaviour of objects, but also the nonexistence of central aspects of the economic process like the inexistence of technological change, changing political, institutional and cultural factors, as well as the inherent plasticity and unpredictability of human behaviour. Just as Newton described celestial bodies’ behaviour, economists assumed that the economic process happens in an abstract, no-space and no-time historical void. Thanks to the ceteris paribus assumption, all qualitative change and non-mathematically depictable factors can be ignored.
By doing so, as I argued elsewhere (Stahel, 2020a), economics effectively placed itself out of any attempt of empirical refutation once any deviation of observed facts from the predicted outcomes in the model had to be necessarily attributed to the excluded, so-called exogenous variables of the model. But, unless physics, where the deviations observed due to the letting out of real-world frictions are usually minor and predictable, in economics, the variations are entirely different in nature and scale. Real-world frictions like political, technological, cultural, or environmental factors like the present Covid-19 epidemic or climate change affect real-world economic dynamics in complex and often unpredictable ways, with different feedback-loops phase-transitions and emergent properties happening all the time. And they are central to the process, unlike air friction which is just a relatively small and minor aspect affecting the fall of a billiard ball from the heights of the Pisa tower or the trajectory of a cannon-ball. Physicians would certainly not dare to predict the course of a falling feather on a windy day or that of a falling leaf in an autumn storm using Newton’s equations. Nevertheless, economists do not shy back from predicting the outcome, in numerical and precise terms, of Greece applying the IMF backed and imposed “structural adjustment plan” on its economy. Although no cultural, political, historical and environmental context has been taken into account by the models. read more