The Reformation in Economics: Philip Pilkington answers your questions
On Thursday 2nd February Philip Pilkington, author of The Reformation in Economics, took to the floor to answer questions that our followers submitted on Twitter. Find out what he has to say about the current state and the future of economics…
What does an anti/non-free market economics look like to you?
What's funny about mainstream economics is that they don't actually describe markets. At least, not real markets, not as they actually work. I'm not anti-market - I work for a living in markets and, while there are some elements that could be curbed, in some ways they are quite effective. I'm anti-policies that are derived and rationalised based on a totally fictional view of how markets work in the real world. In the real world markets interact with all sorts of other societal institutions - from government to local cultures to societal norms and beyond. In truth they could not operate any other way. Markets cannot exist outside of these institutions and this needs to be understood and taken into account when doing economics.
What are we, if not homo economicus?
We are what philosophers have, until very recently, assumed us to be: moral beings. Our behaviours and our motivations are structured in and through moral norms. If we had no moral norms - I'm a pessimistic Freudian here - we would act like animals; just as we see men act in wartime when the other side has been dehumanised. I see Man as a hopelessly flawed animal who is only held in check by societal constraints and norms. This is, by the way, an inherently conservative view of Man - one that stretches back to Burke. The supposedly conservative free-marketeers, the champions of the homo economicus are the ones who want to unleash the most base of our instincts with no consideration of human conscience and morality - not to mention their making judgements based on the so-called "optimal, Pareto optimality" or "efficiency" rather than on some overarching moral vision of what society should be. At least, that's what reading their utilitarian theories would suggest.
Is economics really broken, if so, who is responsible for breaking it?
The moral flaws with the theory, the dehumanising element in it, go right back to the satirist (!) Bernard Mandeville's "Fable of the Bees" in the 18th century. They were channelled through the English philosopher Jeremy Bentham's utility theory and entered the world in their current form through there. That's where the ghastly, amoral, utilitarian stuff comes from. The mathematical obscurantist impulse is more recent. I think that almost all of that can be traced back to Paul Samuelson in the mid-20th century. Specifically his text "The Foundations of Economics Analysis" published in 1947.
Do you think our current economic situation is analogous to any other, if so which one?
Not really. In 2008 we had a 1929-style event, but we didn't have a serious Depression. This was mainly because we'd built up solid institutions since the 1930s - everything from a large government that could plug the spending shortfall to a central bank that could support the ailing banking system. The irony is that these were the sorts of institutions that the neoclassical economic theory actively attacked - or, at least, it attacked these institutions when the theory was followed honestly. So we're in a weird limbo where we have a sort of "contained depression" where the government is keeping a thoroughly rotten system - decayed from years of so-called "globalisation", "free market policies" and "inflation targeting" by the central banks - to continue to tick over. I think that's why we're seeing a huge populist backlash, to be honest. And who knows where that goes?
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Philip Pilkington is a research analyst working in investment management and focusing on macroeconomic research. Prior to working in investment management, Philip ran the popular Fixing the Economists blog and published regularly in various international publications on economic issues. He holds a masters degree in Economics from Kingston University, UK.