Economics of the 1%: How to Deconstruct Mainstream Theory

IIPPE in Brief Issue No. 12

by John Weeks

For many years I asked myself, why do so many well-informed people profess ignorance of simple aspects of our economy? It took me decades to realize that the answer to this question lies in great part in the answer to a second, why do students of mainstream economics graduate knowing almost nothing about the real economy, yet consider themselves budding experts in the field?

The answers to these questions are similar and simple. They motivate my book. Mainstream economists have been extraordinarily successful in indoctrinating people to believe that the workings of the economy are far too complex for any but experts (i.e. economists themselves) to understand. The economy they claim to reveal for us does not exist. They create it, the reactionary alternative to the world in which people live and work. Teaching students about this imaginary economy prevents them and the public from understanding the real economy.

The economics mainstream indoctrinates both students and the public by misrepresenting markets, systematically marketing falsehoods. As part of this indoctrination, the mainstream seized the profession, then purged it of Keynesians, Ricardians, Marxists, Institutionalists, and all other dissidents. The subject that calls itself economics is a religious doctrine for worship of markets, and the members of it are priests of the doctrine.

Mainstream economists typically dismiss dissidents as incompetent, insufficiently mathematical and technical. But, the mainstreamers are the incompetents, burdening the profession and public discourse with a dead weight of absurd inconsistencies that they present as theory. In centuries past astrologers and alchemists represented a barrier to understanding the natural world. In much the same way, the neoclassical misrepresentations of reality steadfastly prevent understanding of the economic circumstances in which people live, work and sustain themselves.

As a result of this misrepresentation there is no policy or economic outcome so reactionary or outrageously antisocial that some mainstream economist will not defend it, and most would lend their tacit support. Among these reactionary absurdities is that gender and race income discrimination is an illusion, unemployment is voluntary and the public sector is inefficient.

The mainstream propounds and practises a fake economics. They are econfakers, enmeshed in a pseudoscientific fakeconomics, just as astrologers misrepresent the cosmos and alchemists peddle the nonsense of chemical transubstantiation. The idea that market economies are always and continuously at full employment underpins the theoretical structure of the mainstream. All theoretical and policy conclusions derive from this fallacious premise. It is the unrelenting and unapologetic presumption of full employment, contrary to reality, that more than anything else qualifies mainstream economists as “fakers”. Just as the astrologers, alchemists and creationists make nonsense of the natural world, the neoclassicals propound and zealously defend a fake version of market society.

If, after appropriating the profession, the neoclassical school had driven it into disrepute – as would happen if creationists took over genetics, astrologers high-jacked astronomy, and alchemists seized chemistry laboratories – their offence would rank as a minor intellectual crime. However, they have successfully sold their dogma as unchallengeable wisdom with which to guide governments. It is not wisdom. It a virus of the intellect that corrupts the brain, making it incapable of sound thinking.

Critics complain that economists arrogantly pretend to understand far more than they actually do. This criticism is too weak. The mainstream claims profound knowledge of the economy, understands almost nothing and obscures almost everything. The assumption of full employment serves as the veil of obfuscation, misrepresenting “the economic problem” as that of allocating scarce resources. Reality is the opposite. The central economic problem in market societies is generating useful and productive work for those who want it. In market societies labour is abundant, not scarce.

In great part the undeserved credibility of mainstream economists results from the systematic fostering of ignorance over the last thirty years by neoclassical economists and the media. Understanding the economy is not simple, but no more difficult than understanding the political system sufficiently to vote. People regularly go into voting booths and choose among candidates or reject them all. The same people would profess an ignorance of economics that leaves them unable to evaluate competing claims about public policy.

My book first explains that economic relationships and processes can be understood by the general public, and what the mainstream claims as expertise is a smoke-and-mirrors show. In non-technical language I then reformulate economics as it should be: the study of societies with idle resources and how to bring the idle into productive use. This was the theoretical context for all the great economists from Smith and Ricardo, through Marx and Hobson, and on to Keynes, Galbraith and Kalecki. Rejecting the nonsense of scarce resources leads to a refutation of the reactionary parables of the mainstream, prominent among which are:

• unemployment results from high wages and/or too generous support to those out of work (workers cause their own unemployment);
• too much money in circulation causes inflation and is invariably the result of excessive public expenditure (governments cause inflation);
• competition makes markets efficient and brings benefits to all, both domestically and in international trade (competition benefits everyone, regulation hurts everyone); and
• public sector regulations interfere with people’s free choice and undermine the efficiency of markets (government is a burden).

In my book I show that these reactionary policy parables derive from the fantasy world of full employment, not from sound theory. The fake economists give them superficial credibility by presenting people as producers and consumers who seek to achieve individual gain. In the economics of the real world, people are not primarily producers and consumers. Market economies are class societies in which the vast majority seeks through social means to regulate, reform and limit the collateral damage created by market competition. And in doing so, to achieve, if possible, a productive, fully employment society fit for human life.

Economics of the 1%: How mainstream economics serves the rich, obscures reality and distorts policy (Anthem Press, 2014), £ 14, $19.