Those of you paying attention to these lectures will realize how obsessed I am with Economics.  That flaxen-haired lady promised so much, but she has so many flaws and failings.   When we first meet her, it seems she is everything you could wish for:  she is concerned with how society should be organized, how people should be given material goods, how the benefits of new technology and material well-being should be shared with all, and how the poor should be enriched, so that they can spend their time on self-improving and fulfilling activities, like art and sport.  So much is promised!
But then, once the flirtation and seduction are over, her flaws become evident. I have been thinking about these flaws again, having just read Deirdre McCloskey’s superb 2002 pamphlet, The Secret Sins of Economics.  Many of McCloskey’s criticisms are ones I (and many others) have made before, but some are new.   I decided, for comparison, to list here my chief complaints with this blemished beauty, this feline seductress, Our Lady of the Catallacts.  Date her if you wish, but you should read these accounts by her ex-lovers before you do.
First, she is blinkered, often unable to see what is obvious to anyone else – that we are all shaped by social and cultural forces, and peer pressures.   Instead, Catwoman and her acolytes invariably assume an individualist explanation for any economic or social phenomenon, and then seek to demonstrate it.  McCloskey calls this a focus on the P-variables (price, individual prudence, profit, the profane) as distinct from the S-variables (solidarity, speech, stories, shame) which Anthropology, that Indiana Jones of academic disciplines – creative, unruly, a thorn in everyone else’s side – has focused on.   A classic example is Levitt and Dubner’s Freakonomics.
Because of her blindness to the social, Cat Lady mostly ignored (until recently) major aspects of society, such as Institutions, legal frameworks, norms, and power relationships, aspects which can make or fail the marketplaces she says she studies.   She can’t claim that no one mentioned these to her, since 19th-century economists such as Karl Marx made the study of these aspects the work of a lifetime, and their study has continued to the present by sociologists and anthropologists and political scientists.
She has also been blind to anything historical or temporal, as if all her work stood outside the mundane and messy world in which we live.  This blindness manifests itself most strongly in the complete disregard (until recently) for endowments:  how did we get to where we are?  So, for example, free trade theory says that if England produces textiles more cheaply than Portugal, and Portugal produces wine more cheaply then England, the two should trade textiles for wine, and wine for textiles.   And the choice of these products is a subtly clever one, obfuscating much, since wine needs sunshine and not too much rain, while textiles (in the 18th and early 19th centuries) needed lots of rain, in order that the damp air would ensure cotton threads did not break when woven by machines.   So, Portugal’s sunshine and Northern England’s rain, being part of the God-given climate, were natural advantages, beyond the control or manipulation of any temporal human powers.  Free trade seems to have been ordained by the Almighty. But why consider only England’s textiles and not Ireland’s?    The answer is that Ireland had no textile industry to speak of.  And just why is that?  After all, much of Ireland is as damp as the valleys of Lancashire.   The reason is that the owners of northern English textile factories lobbied the British authorities to exclude Irish-made textiles from entering England.  When Ireland lost its own Parliament in a hostile takeover by Westminster, this protectionism for English textiles was entrenched, and the growing British Empire provided the critical masses of customers to ensure bonuses in Bury and Bolton and Burnley.     (Is it any wonder that people in Ireland and India and elsewhere sought Independence, when colonialism so powerfully stifled economic aspirations.)  Northern England has no natural comparative advantage in textile production, at least, not when compared to Ireland, but an artificial, man-made advantage.  The same type of advantage, in fact, that South Korea today has in ship-building, or the USA in most computer and aerospace technologies.   Where, in the mainstream theory of free trade, are these aspects studied, or even mentioned?
And when, angered by these failings, you face her with them, the wench promises you that that was all in the past, and she will be different from now on.  Path dependence and network goods and institutional economics are all the rage, she says.   But then you find, she’s still up to her old tricks:  She says she’s building models of economic phenomena in order to understand, predict and control, just like physicists do.  But, although it looks like that’s what she’s doing, in fact her models are not models of real phenomena, but models of stylized abstractions of phenomena.  Her acolytes even use that very word – stylized – to describe the “facts” which they use to calibrate or test their models.
Of course, she will say, physicists do this too.  Newton famously assumed the planets were perfect spheres in order to predict their relative movements using his theory of gravitation.   But physicists later relax their assumptions, in order to build revised models, in a process that has continued since Newton to the present day.  Physicists also allow their models to be falsified by the data they collect, even when that data too is stylized, and overturned.     Instead, Catwoman is still assuming that people are maximizers of individual utility, with perfect foresight and unlimited processing capabilities, obeying the axiom of the irrelevance of independent alternatives, when all these assumptions have been shown to be false about us.   When was the last time a mainstream economic model was overturned?
Indeed, here is another of her flaws:  her loose grasp of reality.  She says we are always, all of us, acting in our own self-interest.  When you quiz this, pointing out (say) a friend who donated money to a charity, she replies that he is making himself feel better by doing something he thinks virtuous, and thus is maximizing his own self-interest.  Her assumption, it turns out, is unfalsifiable.   It is also naive and morally repugnant – and false!  Anyone with any experience of the world sees through this assumption straight away, which is why I think our feline friend is borderline autistic.   She just does not know much about real people and how they interact and live in the word. Who would want to step out with someone having such views, and unable to reconstruct them in the light of experience?
And, despite her claims to be grounded in the material world (Paul Samuelson:  “Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce productive resources that would have alternative uses,  . . .”), she sure is fond of metaphysical entities for which no hard evidence exists:  invisible hands, equilibria, perfect competition, free trade, commodities, in fact, the whole shebang.   As marketers say, the existence of a true commodity is evidence that a marketing manager is not doing his or her job.  In comparison, Richard Dawkins with his memes is a mere amateur in this creation of imaginary objects for religious veneration.
One could perhaps accept the scented candles and the imaginary friends if she was a little more humble and tolerant of the opinions of others.  But no, the feline femme fatale and her acolytes are among the most arrogant and condescending of any academic disciplines.  Read the recovering Chicago economist McCloskey for an account of this, if you don’t believe me.   McCloskey’s anecdotes and experiences were very familiar to me, especially that sneer from an economist who thinks you’ve not acted in your own self-interest – for example, by helping your colleagues or employer with something you are not legally required to do.  Indeed, the theft by economists from philosophers of the word “rational” to describe a very particular, narrow, autistic behavior is the best example of this.   Anyone whose behavior does not fit the models of mainstream economics can be thus be labeled irrational, and dismissed from further consideration as if insane.
Date her at your peril!  You have been warned!