Tuesday, December 15, 2009

Getting it WRONG #1

If there is one single moment when the economics profession began to lose its way, the Nobel Memorial Prize given to Paul Samuelson for his Neo-Classical economics text is certainly in the running for that moment. I had it at the University of Minnesota--utterly detested every sentence in it. So even though this is hardly a eulogy for the recently deceased, it seems appropriate to keep the record straight. But I'll let Professor Hudson explain...

Elegant Theories That Didn't Work

The Problem with Paul Samuelson


Paul Samuelson, America’s best known economist, died on Sunday. He was awarded the Nobel prize for economics, (founded one year earlier by a Swedish bank in 1970 “in honor of Alfred Nobel”). That award elicited this trenchant critique, published by Michael Hudson in Commonweal, December 18, 1970. The essay was titled “Does economics deserve a Nobel prize? (And by the way, does Samuelson deserve one?)”

It is bad enough that the field of psychology has for so long been a non-social science, viewing the motive forces of personality as deriving from internal psychic experiences rather than from man's interaction with his social setting. Similarly in the field of economics: since its “utilitarian” revolution about a century ago, this discipline has also abandoned its analysis of the objective world and its political, economic productive relations in favor of more introverted, utilitarian and welfare-oriented norms. Moral speculations concerning mathematical psychics have come to displace the once-social science of political economy.

To a large extent the discipline’s revolt against British classical political economy was a reaction against Marxism, which represented the logical culmination of classical Ricardian economics and its paramount emphasis on the conditions of production. Following the counter-revolution, the motive force of economic behavior came to be viewed as stemming from man's wants rather than from his productive capacities, organization of production, and the social relations that followed therefrom. By the postwar period the anti-classical revolution (curiously termed neo-classical by its participants) had carried the day. Its major textbook of indoctrination was Paul Samuelson's Economics.

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