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The first part of this essay’s title is from a Chubby Checker’s mega-hit single from 1961. I have chosen it because twisting is in my mind partly the explanation for the second part of the heading. I will give some examples that support my statement. But first.

Prof. Söderbaum describes ideology as a subjective mental construct of what could be seen as good means to reach a desirable end. Maybe the same model could be used to answer the question raised in the invitation – what shall we do to have pluralism, at least in academia. Pluralism is our end. By using historical sociology as a research model, perhaps the past can teach us partly what the means could be.

The most influential circles in society have always implemented a suitable economic doctrine. In Medieval times the church was in command and the scholastic presented models for good economy that were in accordance with what was said in the Holy Script. Later on when the royal rulers were the leading political figure they built their economic strategy on theories of mercantilism that had ideas how to make the State richer. At the time when wealth of nations heavily depended on “small business” for development, political economy was the name of the game and Smith draw the conclusion that self-interest was a strong driving force.

After the industrial revolution the Market and Parliament evolved as the most powerful economic actors and they are more than happy with the theories of neoclassical economics. Why is that? From a perspective of structural functionalism I think it is fair to say that the neoclassical “structure” is functional to both parties – it is mutual beneficial. They are both looking for an economic theory that legitimizes their ambitions – economic growth. Neoclassical economic theory run parallel with the successful saga of economic growth and was seen as the cause. They got influence because they were seen as the ones who had the answer how to deliver higher living standards.

Wealth is best created by an unregulated market neoclassical theory says. Wealth is measured as money. Elected politicians are in charge and they live in symbiosis with the Business because it is from the later the former get there means from a hopefully pecuniary-functioning market. They get their resources for political reforms from taxes. Income and profit is the primarily base for taxation. The base will increase with economic growth. More taxes mean more reforms. More reforms mean that chances for re-election increases. For this, society needs successful companies, who want profit (because that is how success is measured). And a free market has been seen to deliver. At least till we understood that there were also externalities. But the powerful “business-as usual”-group is still lobbying the mantra that the free market is also most suitable to handle the problems – if they at all exist.

The above has been the main path for economic thinking but the importance of power can also be shown from the part of the world where we have had communists in charge. There the orthodox, overriding economic ideal was the Marxistic. When they lost their influence the free market ideology became the principal economic model.

So in my opinion one answer to the heading, is that neo-classical theory suites the interests of 20th century political and economic power. Neo-classical economic theory tries to convince us all, how a free market is the best guarantee for economic growth and thereby high standard of living.

But it is not only economic theory that depends on the good will of the influential. From the natural-science I have this example. The greek astronomer Aristachos (310 – 230 BC) is known to have presented the first heliocentric model. But it was Ptolemy (AD 90 – 168) with his geocentric presentation who won the ears of the Church because it was much more attractive to the idea that God created the planet Earth and humans. Today there are groups that try to convince us about the environmental problems. They get some space in newspaper but the solutions are still market-oriented although most environmentalists see this free-market ideology as the cause. Another small example. Where is the logic behind the EU-commissions ambition to forbid all smoke-free tobaccos but continue to allow the ones you have to inhale via smoke? The later is unhealthier and creates passive smoking. Could it be the power from lobby groups??

Another aspect of this to be far away from the scientific paradigm centre is that it could be quite costly for one’s career. And also to have more difficulties to get research funded. So from a personal view-point it is better to stick to the ideology of the establishment. But we must also admit that Materialistic welfare is addictive. And to be a little bit sarcastic one can say that modern politicians can be seen as “drug-dealers”.

There is also a socio-psychological dimension of this. Why do we prefer branded clothes? The market has made us believe that we will more easily be accepted. And that makes life easier. Why do immigrants have more difficulties to get jobs? Why are men over-represented at manager positions? Because the foreigners and women are different and harder to understand its what the influential men think. That’s why white man prefers to hire white man. Neoclassic economists recruit like-minded. If you think in the same way life is easier.

This was about the importance of being a magnet for the actors with influence. But I would like to point at two other components off attractiveness.

  1. Neoclassical are very good in creating mathematic equations that at a first glance look very scientific and thereby very convincing. But in reality they are like H.C. Andersen’s saga The emperor’s new clothes – naked. The equations cannot be dressed with any empirical based numbers. See Hill, R. & Myatt, H. for an elaboration.
  2. Neoclassical are very good in giving their followers story-lines that for them are very supportive. The believer wants to hear arguments that are in line with his faith.

Twisting

Neoclassical economists are very good in select (for their theory) useful parts of, or “twisting” information in, scientific papers and from there create stories which seem convincing and thereby attractive to followers or in stronger words support their admirers with “propaganda”-arguments and thereby not letting them down, which is very attractive..

Due to the limited space I have elaborated around two cases. But if one scrutinize other very well-known environmental debates or reports like Limits to growth, Ozone depletions and Our Common future (for the last one see Bratt 2009), one will find the same twisted conclusions presented by the establishment. A very good reminder is also what Adam Smith really wrote about banks and enterprise owners.

Inventive neoclassical economists have created what they call the Coase theorem which says that two producers where one inflicts on the others, they can find an optimal production volume that benefits both parties. What they have done is to use the free market ideas presented in the first part of Coase’s article The Problem of Social Cost. But they twist the empiric by excluding the facts in the later part, or as Coase conclude himself;

The argument has proceeded up to this point on the assumption that there were no costs involved in carrying out market transactions. This is, of course, a very unrealistic assumption. In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on. These operations are often extremely costly, sufficiently costly at any rate to prevent many transactions that would be carried out in a world in which the pricing system worked without cost.[1]

North has in his book calculated that the transaction cost in US could be up to 45% of the price. Additional disinformation is that the theorem, when presented by neoclassicals, talks about two actors, not two producers. What they want us to believe is that the free market also means that the theorem works if one part is a consumer. In that case the logic is that the consumer must pay the producer to reduce the stress. But that is never said.

So Coase himself realize that there is more to a transaction that just the production costs. But he also concludes that benefits have more dimensions than just pecuniary values. At the end of the article he says;

In this article, the analysis has been confined, as is usual in this part of economics, to comparisons of the value of production, as measured by the market. But it is, of course, desirable that the choice between different social arrangements for the solution of economic problems should be carried out in broader terms than this and that the total effect of these arrangements in all spheres of life should be taken into account. As Frank H. Knight has so often emphasized, problems of welfare economics must ultimately dissolve into a study of aesthetics and morals.[2]

Quite far away from the price theory created in a cost-quantity graph based on a free market assumption.

Environmental Kuznets Curve

The Word Bank’s annual Development report from 1992 has the subtitle Development and the Environment. Here they present their view on the status of the human environment – both the natural surroundings and the living standard. Their findings are mainly based on the OECD report The State of the Environment from 1991. The empiric presented were used by some economists as an inspiration to explain that GDP at a high level was beneficial not only to better living condition but more important to the natural environment in general. As one pro-argument for ‘Business-as-usual’ to be sufficient, to explain how economic growth is not only compatible to a ‘green’ future and but even could be instrumental to an improvement of the ecosphere, that they are mutual reinforcing, stakeholders for this group presented a theory that were baptized to the Environmental Kuznets Curve.

Two other pioneers Grossman and Krueger [3] commented in their article quite unconditionally that;

…we found no evidence that economic growth does unavoidable harm to the natural habitat. Instead we found that while increases in GDP may be associated with worsening environmental conditions in very poor countries, air and water quality appear to benefit from economic growth once some critical level of income has been reached. The turning points in these inverted U-shaped relationships vary for different pollutants, but in almost every case they occur at an income of less than $8000 (1985 dollars). For a country with an income of $10,000, the hypothesis that further growth will be associated with deterioration of environmental conditions can be rejected at the 5 percent level of significance for many of our pollution measures.

But one of the most cynical comments is the one from Nobel laureate Beckerman who in a very arrogant way put forward a recommendation for the ones who are suffering from environmental stress and less development;

… if you want a better environment in general and, in particular, reasonable access to clean drinking water, adequate sanitation and an acceptable urban air quality, you have to become rich.”[4]

But the World Bank who is the theoretical father of the concept writes.

In some cases environmental quality improves as income rises. /…/ Some problems are observed to get worse as the income rise. But this is because no incentives yet exist to change behavior. /…/ When societies have decided to enforce a change – trough regulations, charges, or other means – environmental quality has improved. /…/ Past patterns of environmental degradation are not inevitable. Individual countries can choose policies that lead to much better (or worse) environmental conditions than those in other countries at similar income level. /…/ Rising incomes and technological advances make sustainable development possible, but they do not guarantee it./…/ Effective environmental policies and institutions are essential.[5]

So the presenter of the ‘facts’, the World Bank, conclude that it is politics not the GDP that make the difference. The conclusion of the World Bank is supported by the background material from OECD, which is worthwhile quote at length as it shows how business-as-usual economist rely selected one-sided the information in the report. It is quite obvious that also the OECD means that there is political action behind the improvements.

Over the last two decades, control strategies and technologies have been developed in OECD countries for reducing the emissions and concentrations of traditional air pollutants. /…/ Such control strategies and technical progress have been combined to substantially reduce air pollutant emissions in many countries, against a backdrop of growth (my italics) and structural change in economies and energy demands. /…/ In spite of the above successes, urban pollution continues to be a problem because: /…/The air quality in some cities and densely populated regions, especially in the south of Europe, is still deteriorating. The main reasons are that pollution control regulations are not strong enough, or not vigorously enough enforced, and that energy and transport policies do not emphasize energy savings and substitutions capable of offsetting the effects of economic growth (my italics). Lastly, newly emerging problems also add to the challenges of providing for cleaner air: More and more toxic pollutants are being released into the atmosphere. [6]

So by discriminatory reading innovative economists creates the Environmental Kuznets Curve with GDP as the x-axis and uses the World Bank and OECD reports as their sources.

Another perhaps not so well known but influential is the Yale University report EPI (Environmental Performance index). There index from 2005 (then called ESI Environ. Sustainable Index) had a correlation between there index and GDP that were 0.22 (not that good). They changed the name to EPI 2008. But also the parameters included and suddenly the correlation was 0.73 (very good). Maybe it should be added that the index is developed in cooperation with the World Economic Forum.

Change

But there is also hope. History also proves that change is inevitable. When one structure is shown dysfunctional we tend to look for alternatives. But they must convince the influential that they solve problems and will leave us better off. In the early days of capitalism it was seen as inappropriate to compete. Today it is glorifying to make money as long as the means are within legal limits. Self interest as an ideology is ok. In ancient time slavery was seen as natural. In the 19th century most of it was gone and it is unthinkable today to be a legal form of production. Hopefully we will get to a point where we do not use the Nature as our slave without value, but instead seriously understand that our survival depends on a fair treatment. With that insight, change in what is economically will arise.

With a historical sociology as a theoretical framework one could look into why or how economical thinking is changing. My interpretation is that is has mainly to do with shift in influence or power.

As Prof. Söderbaum points out there has been and still are alternative ideas about what makes economic behaviour optimal. But very few listen to them as they are marginalized groups. An example from the past is the economic theory of physiocracy supported by the larger landowners in France in a try to increase their significance. The French revolution changed the arena. The institutionalists in USA couldn’t persuade the market forces in the long run. And that even in the mirror of the great depression.

Today we have heterodox economic perspectives like feministic, rent-free, institutional and ecological, just to mention a few. But the only one (in my opinion) that has some influence is neo-institutional besides the dominant neo-classical perspective.

One guru in the field of public relation or “how to change attitudes” was Bernays who understood that it was much more efficient to base the arguments on emotions than facts. He changed the attitude towards female smoking in USA from being a symbol of prostitution to being a modern liberated woman. And the tobacco industry (who paid for the campaign) could double their market. Today we have L’Oreal that uses the slogan ’because you worth it’. Advertising based more on personal evaluation than facts. Probably the neoclassical message, higher living standard if we can have economic growth, is more attractive than the green economists who predict a doomsday if don´t change life-style.

Solutions

So in our case I think we have to identify the influential persons or groups within the academia if we want our desired change. But we must also make the politicians understand that neoclassical theories do not “deliver” any longer. The time is gone when policies could be built on perpetual economic growth. As I see it is necessary to have this two part oriented strategy as most students will not attend courses if it is not beneficial for their chances for jobs and principals will not give courses if it is not beneficial for their economy.

References

Beckerman, W. (1995) Small is Stupid: Blowing the Whistle on the Greens. London: Duckworth.

Bratt, L. (2009) The Brundtland link between poverty and environmental degradation, and other questionable opinions’, Int. J. Innovation and Sustainable Development, Vol. 4, No. 1, pp.74–92.

Coase, R. (1960) The problem of social costs. Journal of Law and Economics 3(1) 1-44

Grossman, G. Krueger, A. (1995): Economic Growth and the Environment, Quarterly Journal of Economics, vol. 110, pp. 353-377

Hill, R. & Myatt, H. (2010) The economics anti-textbook. Zed Books, London.

OECD (1991) The state of the environment. Paris

World Bank (1992) World Development Report: Development and the Environment

 


[1] Coase, R. (1960) p. 13

[2] Coase, R. (1960) p. 42

[3] Grossman and Krueger 1995 p

[4] Beckerman 1995 pp 25-6

[5] World Bank 1992 pp 39- 43

[6] OECD 1991 p.49

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