EconomistSep 27 2017

Book review: Marxism and modern economics

Search supported by
Book review: Marxism and modern economics

The Econocracy: On the Perils of Leaving Economics to the Experts by Joe Earle, Cahal Moran and Zach Ward-PerkinsReview by Michael Ben-Gad

Three recent economics graduates from the University of Manchester provide a bold vision for replacing the "econocracy", the technocratic sham democracies that govern the west, with a new form of participatory democracy comprised of lay councils and citizen policy groups.

Oddly, the authors are unaware that this form of governance was first promulgated by Vladimir Lenin (the Russian word for council is soviet) and more recently implemented by Hugo Chavez in Venezuela. What could possibly go wrong?

Lots, but it seems the chief impediment to achieving utopia is the neoclassical economics developed and now taught in our universities. How much better if students, liberated from neoclassical economics’ dogmatic insistence on internal logic, mathematical rigour and quantification, could then be trained to understand the economy by juxtaposing the duelling claims of more humanistic and totalising approaches such as post-Keynsianism, Austrian economics, feminist economics, and yes of course, Marxism.

Under these somewhat Manichean schools of thought, myopic investors, incompetent central bankers, misogynist bosses or rapacious capitalists, respectively, are to blame for all economic dysfunction.

Rather than master the language of mathematics and engage with the difficult task of understanding economies as complicated dynamic systems, composed of multiple agents and institutions that both compete and co-operate in an environment of incomplete information, or subject one’s pet theory to statistical testing and quantify its limitations, one can rail against "globalism" and "finance capitalism" in the vernacular.

(True, Marxists did correctly predict the financial crisis and the collapse of capitalism back in 2008. But so they did in 2007, 2006, and every year since 1867.)

And quantification so often gets in the way of satisfying narrative. We learn that in 2010, economics was so badly lacking in diversity that as many as 82 per cent of its UK practitioners were white. Odd that I, coming from a certain small Middle-Eastern country (some may have heard of it) failed to notice that British economics, as the authors imply sotto voce, is rife with racial and ethnic bigotry.

Fortunately, the authors exhort economists to seek out "real-world knowledge". Chastened, and now taken by the spirit of empiricism, I conducted a two-minute search on the internet. This revealed that in the census conducted a year later, whites constituted 87 per cent of the UK’s population.

Economists may never successfully explain all social phenomena, just as the natural sciences have failed to explain the physical world in its entirety. That is why there is still room for more research.

Still, we do not teach astrology or creationism in our universities, though some students might enjoy them more than physics. I concede that modern economics is often taught poorly. This book should serve as a warning. Unless we do better, more graduates will confuse weak pedagogy with bad science.

Published by Penguin

Michael Ben-Gad is professor of economics at City University