We have squandered 80 years on a wrong conception of how our economy works. There is much to fix…
Contrary to the proclamations of neoclassical economists (like Robert Solow), the world cannot get along without natural resources. That this fact needs stating is a testament to the shallowness of economic theory.
How the fruits of wealth creation should be divided between capital, land and labour has been subject of considerable debate throughout history. In 1817, the economist David Ricardo described this as “the principal problem in political economy”.
This is what a group of powerful people look like when they lose touch with reality. As we have already seen the techno-innovations that are supposed to mitigate climate change are largely granfalloons. The elite fantasy of growth combined with R&D and techno-innovation to resolve the climate crisis can do a lot of damage by diverting us from the reality of the catastrophe that humanity faces.
Key to the conceptual confidence trick are assumptions about what people in general are like. It is all based on an implicit modelling of human beings. Certain types of behaviour (the type that allows economists to model people and markets) are called “rational”.
The ideas of the economists are important because they frame the way we understand the world, sometimes distracting us from understanding and living in the world in other ways. The economists claim that they describe the world as it is, rather than describing it as it should be, but there is an entire value system implicit in economics.
Economists tell us how consumers on the market, “voting” with their purchasing power got what they wanted and wealthy landowners got the economic theory that they wanted.
Henry George and Karl Marx developed alternative radical theories out of the ideas of Adam Smith and David Ricardo.
But let us retrace our steps to consider what a lot of people are unaware of – economics was originally considered to be a branch of moral philosophy.
A core principle of neoliberalism is that citizens are to be defined first and foremost as consumers.
To orientate to the world properly we need to have a proper feel for the huge amount of what we don’t know…
The power to create wealth gave Midas an unsustainable life as a complete solipsist. Oil’s power to create wealth has had a similar effect on Neoclassical economics.