Tuesday, June 16, 2015

Economics is a Fraud Redux

As the United States deindustrialized in the late 1970’s through the 1980’s and one factory after another shuttered its doors, the economics profession cheered on this development. They took to the pages of op-ed columns and appeared on TV stations and assured us that we would now be living in something called the “service economy” where manufacturing jobs would be replaced by retail jobs selling the products now made in Asia, along with other various assorted “services.” This was an unstoppable and perfectly natural development, they told us, and nothing to worry about.

Today, in the 2000’s whenever workers in these service industries point out that they cannot earn enough to live on and agitate for higher wages, we are told that these service workers are not worth anything more. We are told by these same economists that this is their “marginal product” and they do not deserve to paid any more than they are. That this is what the "natural" wages of retail workers should be, and to pay them more would cause unemployment. Somehow, they neglected to mention that when they cheered on deindustrialization thirty years prior. If a service economy leads to a poorer population overall, then why was deindustrialization so good for us back in the 1980's? Economists are silent.

Similarly, we are constantly told by economists that “the economy is not a zero sum game.” That it’s about cooperation for mutual benefit. That there are no winners and losers when it comes to capitalist economics - everybody wins.

Yet at the same time, we are told that we must remain “competitive” with other countries, usually by means of low taxes on wealth. Whenever reports crop up about the United States abysmal education standards, we are told that we must “compete” with the citizens of Asia and Europe, and that we need to educate people better to remain competitive. That if we do not shape up, the citizens of Asia will “eat our lunch” (exact words). We also know that were always in head-to-head competition with other workers whenever we apply for a job.

How on earth does this square with the economy not being a zero-sum game?

We’re told not to worry about jobs or automation, because the economy’s ability to create jobs is essentially unlimited, and to claim otherwise is to subscribe to something they call The Lump of Labor Fallacy, or Luddism.

Yet what are the justifications for hydraulic fracturing or the Alberta Tar Sands pipeline? That we must “create jobs.” Whenever we are told about these projects, it is always coupled with how many jobs it will create. We are told we cannot tax wealth, because it will preclude the wealthy from “creating jobs.” So are jobs scare or plentiful? According to economists, it seems to vary depending on the day of the week.

So we’re worried about jobs when it involves some way for the rich to make a profit by exploiting the environment. Then jobs become scarce. But when you talk about automating the jobs of the middle class away, then suddenly the economy is a cornucopia of unlimited jobs.

If we do not exploit the tar sands or frack, or various other toxic environmental activities, won’t those jobs just be created somewhere else? After all, that’s their argument against worrying about technological unemployment. Why does this apply to one thing but not the other? All a right-wing politician has to say is that a regulation will “cost jobs” and people will turn against it. How does that square with the fact that economists tell us that the number of jobs is always unlimited?

We are told that “redistribution” via taxing the rich is immoral and punishing success. Yet the society as a whole is taxed and those taxes go to subsidize the business enterprises of the elite few, as was just revealed by the recent report that Elon Musk’s business ventures have received billions of dollars of taxpayer money in subsidies over the years. Why is that tax money funneled into the hands of a few wealthy businessmen? Why doesn’t the government just do such things itself without the middlemen, as it used to via things like NASA? Instead we funnel our taxpayer money to billionaires to do the exact same thing in the “private sector.” How is this more efficient? Isn’t this also redistribution from society to the elite few?

So taxing wealth and distributing it to those below is stealing and immoral. But taxing those below and giving it to the wealthy few is wealth creation. Got it.

Similar with incentives. Neoliberal economists love to say, "we just need to get the incentives right," and everything will fall into place via the magic invisible hand of the free market. The entire Freakonomics empire was built on this idea. But isn't the core incentive at the heart of capitalism to reduce wages and cause unemployment? Don't employers have a natural, built-in incentive to pay their workers as little as possible (since it increases profits) and to employ as few of them as possible with as little benefits as possible? Doesn't this indicate that the major "incentive" of capitalism is to immiserate the majority of people, since most people work for a living? Why not? Why are capitalists free from this incentive?

Aren’t we being played by economists? Doesn’t the above prove that they will say and do literally anything as long as it justifies what those in power want? That they will change their philosophy on a dime as long as it justifies whatever is going on? Whatever outrage the rich perpetrate on the rest of us, rest assured that economists will rationalize it with scientific jargon and abstruse mathematical equations to give them the outcome that they want.

See this story from NPR: Experts Debate: Will Computers Edge People Out Of Entire Careers? Do listen to the whole thing, it's quite short. The reporter wishes to know whether computers will hurt workers' employment prospects. So he interviews an economist who says yes. Then he goes to another economist on the very same campus who tells him the exact opposite!

So they can't even agree on this important issue? They can't get their story straight on this fundamental aspect of the economy that will affect millions and yet they call themselves a "science??" What a joke! And these people are advising the president. We're doomed!

Russ Roberts, the smarmy host of the Econtalk--part of the Koch brothers takeover of economics, has straight up admitted that his economic ideas flow from his desire to shrink the state. He's also accused his opponents of the opposite - a simplistic desire for bigger government in the tu quoque fallacy-you naturally assume that your opponents have the same motives as you (Krugman denies this claim).

When people like me deride economists and claim that economics is a political project designed to justify the status quo and particular world views while masquerading as a science, this is exactly what we mean. What they tell us directly contradicts itself. It is not a science, it is public relations. It is a pseudoscience.

Economics is a fraud. It is propaganda, pure and simple. The track record proves it.


  1. You are right about economics to a high degree, Of course we are doomed. Why?

    Human nature makes the level of Socialism required to make a low labor demand society work a non starter. Even distributism is a non starter since in an open economy, the inefficiency incentives make your goods non transferable.

    It may simply be that there are too many people and the best thing is border control and homogenization. Let the population of the West drop by 2/3 and maybe we can make it work.

    This would require heavy economic controls though and again human nature, I can't imagine a revolutionary movement that didn't want people to boss around.

    So yeah there are no technical solutions in sight. Its like the Onion said, we can't reverse the decline, We should just keep people as comfortable as possible,

    1. "in an open economy, the inefficiency incentives make your goods non transferable. Not sure what you mean there.

      The Law of Cumulative Advantage seems to ensure that wealth is always distributed via the power law no matter its initial starting point, unless certain controls are put in place (which the wealthy will always seek to undo). That explains much of history. But note too that the United States managed three decades of higher living standards for most people and less wealth in the hands of the one percent. Perhaps this was only due to a temporary situation of cheap oil, dollar hegemony, and much of the world being out of commission.

  2. You said it. Economics calls itself a science but it's really a religion, as a friend said 20 years ago. That is, plenty are doing exactly what you said--devising theories to justify the rapaciousness of the rich, since it pays well. But others actually believe this stuff, which they were taught in elite universities at a high tuition cost...so it's gotta be true, right? And it even seems to work--as long as you only look at the other wealthy people around you, and denigrate the poorer majority when you're forced to notice them at all.

    1. What's sad is how transparently wrong it is - it contradicts itself even the popular media over and over again. How can people not see through this stuff?

  3. May I recommend a book? "Power vs Force" by the late David R. Hawkins. Might help answer a few questions for you about people who are below the level of integrity but who still occupy positions of importance.

    The book claims that the percentage of human beings who are below the level of integrity is something like 75%, but personally I think it's higher, more like 85%.

    Come to think of it, statistics, like economics, is a suspect science as far as I'm concerned. Or maybe I only think so because people like to pull stats out of their @$$es to lend their bogus arguments validity. The so-called science of economics dresses up just this sort of statistics-using phony.

    I bet, however, that many people come out of school with economics degrees very much believing in what they're peddling. Useful idiots, these true believers.


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