Saturday, December 27, 2008

A Debate 'Rages' on Modern Economics

Richard Murphy Blogs at Tax Research UK HERE:

Readers are recommended to follow the link and see whether you agree with Richard Murphy that economics is not a science or with his protagonist, Tim Worstall, that Richard is striking at straw men and missing the point (that his caricature of modern economics is empty of relevant content). Richard keeps claiming that he has ‘won’ and that Tim has ‘lost’, though Tim keeps coming back with credible arguments in support of his propositions and in opposition to Richard’s. At which point Richard unilaterally called the debate off.

Now, I have an interest in this ‘debate’, as regular readers would note, in that I am concerned at the obsession of modern economics of understanding their models rather than the real economy. I am not too fond of notions of general equilibrium either. But modern economics has developed some useful tools to aid policy making, a point tellingly made by Tim, and studiously avoided by Richard.

There is an extensive comments section between Richard and Tim, which must be read as it elaborates many of the themes raised in the debate, most of them revealing what is at stake.

Richard seems to be firmly convinced by the Green arguments about man-made climate catastrophe and the prediction that the world is collapsing from over-consumption by the richer economies (which leaves the poorer economies future somewhat bleak). Richard doesn’t say anything about what he would do about that appalling problem, other than it’s all the fault of ‘neo-liberals’, a shadowy group which everybody can believe in if it is repeated often enough (replacing the Jews as the scapegoats of the last big depression in the 1930s?).

What was an intelligent debate seems to have slid into wild accusations towards the end; it all going one way in fact.

As a Smithian economist, I take the view that human kind is unlikely to decide about these matters by some sort of scientific agreement. Plans to ‘save’ the world will give the would-be planners comfort, but not much else, and is already this decade’s political title, self-awarded by the Prime Minister, and probably mumbled by Al Gore too.

Of course, ‘activism’ (like sitting on runways, blocking traffic, digging up GM crops, or worse) will happen. But if the ‘remedies’ of the activists are inappropriate, they may well be worse than adjusting to the discomforts of climate change (a less directional prediction to the former title of ‘global warming; it takes in a new ice-age too, and one of them of bound to be right, eventually).

So follow the link and make your own mind up, HERE:

Disclosure: I too am a Fellow of the Adam Smith Institute, but I do not follow a strictly ‘neo-liberal’ agenda, at least as presented by Richard. I favour competitive markets where possible and state intervention where necessary, as Adam Smith did.

In view of Richard's limited view of exchange relations, I recommend that he downloads my paper, "The Prehistory of Bargaining: a multi-disciplinary treatment", from the Home Page of Lost Legacy (in red near the top).



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