February 28, 2021

James K. Galbraith

American. Economist and adviser, author, currently Professor at the University of Texas in Austin

1. Why does economics matter?

In its present condition in the United States and most of the world, the academic discipline that goes by the name of economics is of no consequence, except to a few thousands who make their living by holding down sinecures in the field. Academic research in economics has for decades been dominated by unreadable tracts on peripheral topics, while college (and worse still, high school) teaching is largely a combination of elementary geometry and libertarian ideology, for the most part transparent and repugnant to independent minds. At least since the Great Financial Crisis of 2007-2009, sentient beings everywhere have understood that major figures in academic economics were complicit in the debacle, having acted as apologists for the financial sector and having advanced a pedagogy according to which the catastrophe seen and understood by the entire world could not have happened.

In an earlier generation, economists were trained to understand the conditions and problems of specific sectors, such as agriculture, industry, transportation, labor relations, banking and finance, and comparative economic systems. In the mid-twentieth century, economics developed a framework for macroeconomic management, highly applicable to the problems of depression, mass unemployment, war-time mobilization and inflation. A bit later, a few economists also made a significant contribution to managing the risk of nuclear war. Some of the specialists of that era brought advanced mathematical tools to bear, including linear programming and linear algebra. None of this is true of the present generation of economists, very few of whom have any experience in any specific area of economic activity or public policy, or know much about alternative institutional structures. What passes for empirical work in the discipline is largely dominated by statistical exercises and forecasting models, which are based on the prevailing theories and have, as a result, a very long record of failure.

Finally, earlier generations of economists saw the discipline as the forum for a wide-ranging analysis and critique of the prevailing economic system. While a few prominent current-day economists continue to adhere to this tradition, they will not be replaced when they pass from the scene.

2. What are the differences between economic science (academic economics) and economic engineering (policymaking)?

Academic economics is not a science. It is rather an offshoot of eighteenth century moral philosophy, dressed up with elaborate algebraic expressions that give it the appearance of mathematical content. The underlying models are built from a priori assumptions about individuals, firms, market structures and so forth that are chosen to conform with an essentially theological view of the human condition, characterized by a teleology of progress toward equilibrium and optimality. This runs counter to the structures of every scientific discipline since the emergence of modern evolutionary doctrine in the mid-19th century, and the advent of an understanding of thermodynamics at the end of that century. Economics, tied to a priori taxonomies (capital, labor, households, firms…) and modes of reasoning based largely on the mathematical devices of the seventeenth century, has never caught up with scientific thought. In 1897 Thorstein Veblen asked: “If we are weary under the taxonomy of a monocotyledonous wage doctrine and a cryptogamic theory of interest, with involute, loculicidal, tomentous and moniliform variants, what is the cytoplasm, centrosome, or karyokinetic process to which we may turn, and in which we may find surcease from the metaphysics of normality and controlling principles?” After more than a century, that question remains unanswered in academic economics. Further, economic policy-making is not engineering. That illusion went out the window with the rise of stagflation in the early 1970s, and with the advent of monetarism, supply-side economics and neoliberalism in the 1980s. Economic policy-making since then is largely the application, in normal times, of motivated reasoning to justify a politically-desired distributive outcome, punctuated occasionally by seat-of-the-pants emergency action in the face of dire crises.

3. What role does economics play in society? Does it serve the common good?

Economic activity is a major element of all human existence and has been for thousands of years. All social existence requires an economic underpinning, otherwise there is no surplus to deploy for any conception of the common good. The study of economic life, its organization and reorganization under the pressures of new technologies and social change, remains an important and challenging endeavor, and an essential element in any pursuit of the common good.

But if the question refers to the role played by the academic discipline known as economics, then the answer is different. A training in academic economics, so far as I’ve observed over four decades of teaching, largely serves to inure young men (and a few women) who plan to make careers in business and finance from thinking in any serious or critical way about the social framework within which their future careers will unfold. Economics students are notorious, for example, for an ability to frame moral and ethical arguments in self-serving terms that students in other disciplines would abhor. This is undoubtedly useful preparation for careers especially in such fields as finance, where aggressive, predatory and opportunistic traits are widely admired and regarded as essential to success.

The short answer to the question in the second sentence is “no.” In particular, the economics profession worked over fifty years to obstruct and denigrate analyses of resource quality and environmental degradation, and still to this day advances policy proposals that are based on mythical reasoning and, by and large, ignorance of scientific, engineering and human realities. Technology is treated in economic (growth) theory as a gift of science, in contradiction to the actual history of technological change. An economic theory built on “representative agents” and abstract households has nothing useful to say about race or class, and the field was caught flat-footed by the pandemic, after having been complicit in the privatization of health care and the dismantling of public health services in those countries most addicted to the reasoning of the modern economics profession.

5. As we live in an age of economics and economists – in which economic developments feature prominently in our lives and economists have major influence over a wide range of policy and people – should economists be held accountable for their advice?

Of course they should be. In particular, university administrators should face the urgent need to defund a profoundly anti-intellectual and morally destructive discipline, and to create space in universities for the development of alternative, dissident, and science-based strains of economic analysis. A true pluralism in approaches can give rise over time to a renewed culture of critical inquiry into economic systems, and that may lead to a new usefulness for economists. But the present generation of doctrinaire ideologues needs to be ushered off-stage before that can happen, and at the highest levels of the most prominent and best-endowed universities.

6. Does economics explain Capitalism? How would you define Capitalism?

The explanation of capitalism is a project to which mainstream economists have contributed nothing for about half a century. A principal reason is that capitalism is a historical phenomenon, not an abstract or ideal system, still less a mathematical model. To explain it, one needs to place it firmly in historical perspective. Here I would point to the insights of Kari Polanyi Levitt, a non-mainstream economist of the highest distinction, whose most recent book, From the Great Transformation to the Great Financialization does a wonderful job of describing the origins of modern capitalism in the globalization that began with the discovery of the Americas in the 15th century and rise of the Caribbean agricultural and industrial system, based on the cultivation of sugar by slaves imported from Africa. Capitalism is a system defined by the purchase and sale of capital assets – this is what distinguishes it from its feudal predecessor – and the original capital asset was, predominantly, the human slave. Only later did the form of industrial capitalism emerge, in which a distinction began to be drawn between “capital” in the form of machines, inventories and finance, and wage “labor.”

7. No human system to date has so far been able to endure indefinitely - not ancient Egypt or Rome, not Feudal China or Europe, not the USSR. What about global Capitalism: can it survive in its current form?

Pure global capitalism, such as it was, developed from around 1500 to the end of the 19th century. It was undermined by the Great War and collapsed in North America, Europe and the British Empire at the end of the 1920s. It was replaced over the course of the succeeding decades by a mixed economy, rooted in the pragmatic reforms of the American New Deal, the exigencies of the Second World War, and in reactions and adaptations to the competing systems of fascism and state socialism. The attempt to reconstruct a system of pseudo-unregulated global capitalism began only in the late 1970s, with waves of privatization, deregulation and austerity. That system never fully matured and it has already collapsed, first in the financial crisis, and now in the pandemic. So the question of its survival does not arise. The question now is, what should be built in its place? Answers to that question are already emerging, most prominently in China but perhaps also in Russia and in parts of Latin America. Europe, the UK and North America, where neoliberal ideologues prevailed for decades, must now come to grips with the urgent need for fresh thinking suited to free and democratic societies.

8. Is Capitalism, or whatever we should call the current system, the best one to serve the needs of humanity, or can we imagine another one?

Clearly not. And clearly yes.

About James K. Galbraith

James K. Galbraith holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations at the LBJ School of Public Affairs and a professorship in government at The University of Texas at Austin. Dr. Galbraith was executive director of the Joint Economic Committee of the U.S. Congress in the early 1980s. He chaired the board of Economists for Peace and Security (1996–2016) and directs the University of Texas Inequality Project. He is a managing editor of Structural Change and Economic Dynamics. From 1993 to 1997, he served as chief technical adviser to China’s State Planning Commission for macroeconomic reform, and in 2016 he advised the presidential campaign of Sen. Bernie Sanders (I-VT). In 2014 he was co-winner, with Angus Deaton, of the Leontief Prize for Advancing the Frontiers of Economics. He holds honorary degrees from the Université Pierre Mendes-France in Grenoble and from the Plekhanov University of Economics in Moscow.

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