Understanding Sustainability Economics

QUESTION ONE

Neoclassical economics is not a science but an ideology, and only one of many in economics.  Its success has never been achieved in an open playing field in which all ideologies are taught and students select the most appropriate. Instead no alternatives are presented, or if so they are usually disparaged and delegitimized. Its success has been achieved and perpetuated by  monopoly status- by establishing and maintaining significant entry barriers that prevent democratic dialogue among competing visions. Dissidents using a different methodology or ideology, are ‘not one of us’ as Diane Coyle writes,

“We in the profession count [Paul] Krugman as a bona fide economist. By contrast many of us spurn Galbraith because he wasn’t a modeler . . . so we modelers can read The Affluent Society and even agree with it, without finding it persuasive. . . economics isn’t defined by its subject matter, but by its way of thinking” (Coyle 2007: 231-232).The message from Coyle (and many others) is palpable: Success in economics- teaching at top research universities and publishing in top journals — requires adopting the neoclassical ideology. But unfortunately, “Instead of regarding their theory as a tool in the pursuit of knowledge, neoclassical economists have made it the required viewpoint at all times and all places to look at all economic phenomena (Fullbrook 2004: 2).

Kenneth Boulding wrote that “the power of an ideology is made up of two factors, which [we] may call intensity and appeal” (quoted in Diesing 1971:116). Its ‘intensity’ is the power that the ideology has for its believers and its ‘appeal’ is the number of believers.

The intensity of neoclassical economics is due to its monopoly status- all other views are delegitimized. Although Soderbaum argues that many people “have internalized neoclassical economics because of its usefulness in understanding the economy” (2008, p. xi) I would argue the preponderant reason is instrumentalist- the means to a good job, tantamount to being a member of the Communist Party in the old USSR.

Isolation from other economic disciplines and other social sciences creates a religious fervor among many neoclassicals that their ideology is unique and far superior to all others, which in turn, enables the ideology to parry frequent and cogent criticisms. Joan Robinson, for example wrote  over thirty years ago,  “a great part of current teaching is conducted in terms of models that are evidently not intended to be taken seriously as hypotheses about reality but are used to inculcate an orthodox ideology” (1978: 4).  And Paul Diesing “Neoclassical economists believed their abstract postulates were concrete descriptions of empirical reality [and] modern day followers are still teaching it as empirical truth about the economy. In this respect they are using their implicit formal theory as a propaganda device to support the present capitalist socialist order” (1971: 121).

If such criticism were levied against my discipline, I would be humbled and turn inward for  self-reflection. I would seriously think about the accusations and if true, would work hard to rectify them. I would dialogue with the accuser to learn more. But not so with neoclassical economics, which resembles religious fundamentalism much more than a social science- deny the legitimacy of the detractors and idealize the past.

No better example of fundamentalist smugness, than Gregory Mankiw, writing in the New York Times during the depths of the Financial Crisis.

“People . . . often ask how the economic crisis is changing what’s offered in a freshman course. They’re usually disappointed with my first answer: not as much as you might think. Events have been changing so quickly that we teachers are having trouble keeping up. Syllabuses are often planned months in advance, and textbooks are revised only every few years. But there is another, more fundamental reason: Despite the enormity of recent events, the principles of economics are largely unchanged. Students still need to learn about the gains from trade, supply and demand, the efficiency properties of market outcomes, and so on. These topics will remain the bread-and-butter of introductory courses (Mankiw 2009)

The crisis should have precipitated a thorough reexamination of every aspect of economics; instead neoclassical economics is emerging unrepentant and more aggressive than before.

Every now and then I’ll ask neoclassical economics why they teach their subject. The usual response is an incredulous stare, but I also get snippets suggesting that teaching neoclassical economics is easy- you teach deductive reasoning and need not worry about actual investigation. Its pedagogy is also amenable to lecturing rather than active learning. You can teach the same thing without updating your syllabus.

I am interested in learning more about why neoclassical economists continue to teach their subject.  Do other Conference participants have any insights? Is this an issue that we could survey existing economists to learn more? It would be nice to have some supporting evidence.

Edward Fullbrook noted, somewhat tongue–in–cheek that “we live in a time when bad economics probably kills more people and causes more suffering than armaments” (2004: 5).    While some actual statistics would be illuminating, Fullbrook’s point is that another source of the neoclassical appeal is its failure to account for damages; it has failed to internalize its myriad negative externalities. Such an appeal is difficult to dislodge, but not impossible, as will be discussed in the next section. This is also an important topic to discuss in Berlin given the increased momentum to ethical accountability.

To summarize, its strength is artificial: it is based on sustained monopoly privilege and failure to fully incorporate its externalities.

QUESTION TWO

Neoclassical economics has become ossified in its dogma and immune from criticism. This makes our work more difficult, but certainly not impossible. I view our challenge as analogous to surmounting slavery during the 19^th century. The metaphor is apt —  we are enslaved to an ideology that emphasizes economic growth; we are enslaved  to consumerism and its belief that more is better and we can always have more with limited environmental disruption; and we are enslaved to believing that any environmental disruption is fixable by tinkering within the system- a tax here, a subsidy there.

William Lloyd Garrison, an outspoken American abolitionist and founding editor of The Liberator wrote in his inaugural issue,

“On this subject, I do not wish to think, or speak, or write, with moderation. No! no! I am in earnest — I will not equivocate — I will not excuse — I will not retreat a single inch — AND I WILL BE HEARD. The apathy of the people is enough to make every statue leap from its pedestal, and to hasten the resurrection of the dead” (Garrison 1831)

We must borrow his passion and dedication and not rest until economics is once again useful in solving the world’s problems.

Our most daunting challenge is that neoclassical economics is fundamentalist, immunizing itself from change by any appeal to reason. It stubbornly clings to its utopian past, while parrying all challenges and refusing to dialogue with other disciplines.

We can remake economics and we can defeat[1] the fundamentalist neoclassical economics by using economics education to make economics more pluralist. How to do so, I will discuss in the next question. The remainder of this essay will address how economics can realize sustainability.

It has long been know that neoclassical economics has never been sustainable, as McNeil writes,

“If Judeo-Christina monotheism took nature out of religion, Anglo-American economists (after about 1880) took nature out of economics. The growth fetish, while on balance quite useful in a world with empty land, shoals of undisturbed fish, vast forests, and a robust ozone shield, helped create a more crowed and stressed one.  . . economic thought did  not adjust to the changed conditions it helped to create; thereby it continued to legitimate, and indeed indirectly to cause, massive and rapid ecological change” (2000: 336).

Why hasn’t neoclassical economics adapted? Why does it remain stubbornly faithful to its original precepts? Why did neoclassical economics assume that any environmental disruption is an external, and hence an externality rather than internal to the system? Why has environmental economics, the ideological offspring of neoclassical economics blithely assumed that environmental problems can be elucidated with the application of standard microeconomic tools?

One answer is the obdurate refusal of neoclassical economics to embrace the concept of radical uncertainty, central to any study of the environment and also central to most other social sciences.

Radical uncertainty fundamentally differs from ordinary risk and ordinary uncertainty, each  incorporated in neoclassical economics. In situations of ordinary risk, all outcomes are specified, along with their probabilities; and in ordinary uncertainty, although outcomes are known, their probabilities are not. As such, both situations are amenable to the standard neoclassical problem of maximizing either individual utility or expected utility within a boundary of known constraints. With radical uncertainty however, all outcomes are not known, so “calculating probabilities has no meaning” (Vant 2005: 246).

But uncertainty and radical uncertainty are fundamentally characteristic of our ecosystems; thus neoclassical environmental economics which applies the standard tools of microeconomics and identifies solutions by ascertaining market prices is both misapplied and irrelevant.

Perhaps neoclassical economics has avoided incorporating fundamental uncertainty since it profoundly changes how science is conducted. Under normal science, we rely on the

“experts’ ability to determine, with high certainty, the relations between the different variables of a system. It is based on the assumption that ignorance can be reduced at least to risk. . . but radical uncertainty [blurs the distinction] between facts and values. ..  . in a way fundamentally different from when dealing with certainty and risk. The cognitive becomes in a way normative.  . . What chances we are prepared to take is an issue for the citizen, not the expert. And it is not least for these reasons that deliberative institutions have become increasingly popular (Vant 2005: 360-361).

But how can one deliberate without knowledge of alternatives? How can one deliberate if one has been proselytized to arrogantly defend one’s faith while disparaging and delegitimizing all other alternatives?

Other disciplines within economics recognize radical uncertainty and have made it a central tenet. It is important not just to develop alternatives to neoclassical ideology, which most of us are doing, but to incorporate radical uncertainty within neoclassical economics, despite the  radical makeover that will occur. That is radical change must come from with. Perhaps this can be achieved by jettisoning supply/demand analysis, based on the 19^th century Newtonian physics, in favor of tools based on quantum mechanics. I have outlined the necessary first steps (Reardon 2010) and along with Soderbaum’s analysis (2008: 69-75) would like to pursue this further in Berlin.

If all variables are known, along with their outcomes and probabilities, the system is closed and is amenable to only one epistemology since the general laws governing behavior can be deduced. But ecological systems as well as economies are not closed: all variables are not known, and neither are outcomes or probabilities, so the system is open, justifying the embrace of radical uncertainty. An open system means that there is more than one correct way of knowing about the reality, which suggests the importance of pluralism as a modus operandi. How to achieve it will be discussed in the next section.

QUESTION THREE

Why aren’t existing institutions adequate? Why does poverty persist? Why is existing theory inadequate to explain reality? These are important questions to ask, which most social sciences encourage, as do most disciplines within economics. Doubt is central to social inquiry since,

“All social inquiry originates with doubt. . .Inquiry is undertaken to explain phenomena to remove doubt, to restore confidence in expectations, to reintegrate, reconstitute, rehabilitee or reorder that which has been questioned, has become problematic, has become of urgent concern” (Tool 2001: 24).

Not so with neoclassical economics. It does not encourage doubt; rather just like fundamentalism, it encourages conformity to a distant past and by encouraging all economists to think alike. Doubt is purged. No dissent is tolerated.  Most neoclassical economists strive not to teach students about how the world operates- to do so requires and openness to engage with other disciplines- but to think like economists. Not only does this assume that all economists think alike but it sends a clarion call to students that if you want to succeed you must get on the neoclassical bandwagon.

It is much easier to teach conformity than to teach how to question. And once doubt and questioning is taught and centralized as a pedagogical component, the genie is let out of the bottle, so to speak. Neoclassical economics despite its hegemonic arrogance has always suffered insecurity- afraid to test its mettle vis-à-vis other approaches and ideologies; hence the preferred response to bully and delegitimize.

The art of dialogue, including respect for differing ideologies, has always been missing from neoclassical economics but if economics is to move forward, neoclassical economics must become pluralist. It is not enough for us to develop alternatives, neoclassical economics itself must change.

Rehabilitating current teachers of neoclassical economics is too difficult — not impossible, just difficult. These vested interests either see nothing wrong with continuing to teach neoclassical economics; or understand what is wrong and choose not to change, so as to not disrupt their own career trajectory.

My main suggestion to make neoclassical economics more pluralist is to focus on economics education. Needless to say, this is a catch-22 situation. We simply cannot begin teaching pluralist economics, since neoclassical educators will not incorporate pluralist agenda into the syllabi. Nor can we appeal directly to students, although attempts to do so are valiant (Hill and Myatt 2010).

Reforming economics will take time- at least a generation which forces us to ask if we can wait that long. This increases the urgency of our task, requiring a redoubling of our efforts.

My recent book on economics pluralism (Reardon 2009) offered specific strategies for incorporating pluralism directly into the classroom. I also founded a new global journal in economics education – The International Journal of Pluralism and Economics Education, to offer a venue for pluralists to dialogue about specific strategies to implement pluralism. But this isn’t enough – we must also work among non-practitioners, and non-academics to identify appropriate entry points and put pressure on existing practitioners to change. I discussed how to do this in an earlier article (2004) and would like to further discuss appropriate strategies in Berlin. Here I just mention a few.

Economists have traditionally responded to incentives of demand and supply and thus identification of entry barriers can be successful in devising efficacious incentives. Government officials should require all analysis to be pluralistic in scope and method, while rejecting monist advice and dialogue; just like access to public airwaves requires competing views. In addition, we should offer workshops around the globe on pluralism. By appealing directly to administrators and alumni on the importance of the workshops, it will increase pressure on the existing and (future) practitioners of neoclassical economics to attend.

Back to sustainability: Soderbaum notes that sustainability is a contested and multi-faceted concept: business as usual; social and ecological modernization; and radical interpretation (2008, pp. 1-3 and 13-15).  Neoclassical economics is most compatible with the first, but  incompatible with the third, despite that the third is necessary for survival. Thus the importance of restructuring neoclassical economics.

If neoclassical incorporates doubt, radical uncertainty, respect for differing ideologies, and the art of dialogue into its core, there is hope for reformation. But if so, will it still be neoclassical economics? No, but isn’t this our objective?

QUESTION FOUR

Alfred Marshall wrote that “economic conditions are constantly changing, and each generation looks at its own problems in its own way” (Marshall 1946: v). A central problem for our generation is neoclassical economics and economics education which compartmentalizes our problems by disparaging other ideologies. It is easy to recognize that “economics has been at the heart of development dialogue for so long that the dominance of neoclassical economics is essentially part of the problems faced” (Soderbaum 2008: 95).

It is not enough to develop other alternatives- this is necessary but not sufficient; it is also necessary to reconceptualize the current paradigm of neoclassical economics; if not it will continue to be taught to our students and will continue to influence policy and policy makers.

It isn’t enough to criticize neoclassical economics, and to offer alternative paradigms, we have been rather successful in doing so- and the criticism of the neoclassical paradigm has developed into a somewhat successful industry. But we must also change the paradigm from within, by changing the incentives, and value judgments  of the participants and practitioners. This is difficult because neoclassical economics education has never developed or encouraged the necessary institutions to recognize other alternatives and to engage in dialogue; thus we must start from scratch.  The “emphasis on democracy, governance and capacity building” (Soderbaum 2008: 19) must also occur within the paradigm of neoclassical economics.

The challenge is to reconceptualize the paradigm from within, in addition to replacing it from without, which can only be accomplished with an economic education that dialogues with other economic disciplines and teaches that alternative ways of understanding and knowledge exist.

Our task is three-fold: Identify all obstacles to reconceptualizing economics; second, identify a multi-entry point of attack, including government officials, the public and university administrators; and third implementing a more pluralist economics education.

References

Coyle, Diane. The Soulful Science: What Economists Really Do and Why It Matters. Princeton, New Jersey: Princeton University Press, 2007.

Diesing, Paul. Patterns of Discovery in the Social Sciences.  Hawthorne, New York, 1971

Fullbrook, Edward, (ed.) A Guide to What’s Wrong With Economics. London: Anthem, 2004.

Hill, Rod and Tony Myatt. The Economics Anti-Textbook- A Critical Thinker’s Guide to Microeconomics. London: Zed Books, 2010.

Garrison, William Lloyd. “To the Public” The Liberator, January 1, 1831. http://www.pbs.org/wgbh/aia/part4/4h2928t.html

Mankiw, N. Gregory. “That Freshman Course Won’t Be Quite the Same” New York Times, May 23, 2009. http://www.nytimes.com/2009/05/24/business/economy/24view.html

Marshall, Alfred. Principles of Economics, 8^th edition. London: MacMillan, 1946

McNeill,  J.R. Something New Under the Sun- An Environmental History of the Twentieth Century World. New York: Norton, 2000.

Jack Reardon “Suggestions to Effectuate a Multi-paradigmatic Approach to the Teaching of Principles of Economics.” Journal of Economic Issues 38 (September 2004): 839-841.

—– Handbook of Pluralist Economics Education. London: Routledge, 2009.

—– “What are the Questions We Should Be Asking in Microeconomics.” Presented at the Third  Seminary of Heterodox Microeconomics, Universidad Nacional Autonoma de Mexico (UNAM) Mexico City, Mexico, October 2010.

Tool, Marc. The Discretionary Economy- A Normative Theory of Political Economy. New Brunswick, New Jersey, 2001. r

Robinson, Joan. What are the Questions and other Essays?  Armonk  NY: M.E. Sharpe, 1980.

Vant, Arild. Institutions and the Environment. Cheltenham, UK: Edward Elgar, 2005.