The Time of Finance
- Details
- Published on Sunday, 29 November -0001 16:00
- Written by editor
~~~~~~~~~~~~~~~~~~(((( T h e B u l l e t ))))~~~~~~~~~~~~~~~~~~~
A Socialist Project e-bulletin ... No. 1549 ... January 29, 2018
________________________________________________________________
The Time of Finance
Martijn Konings
The global financial crisis has done next to nothing to change the convictions of mainstream economists. But the widespread lament over their willful blindness seems misplaced: there was never a realistic possibility that the economics profession would voluntarily break with the methodological sophistication and statistical formalism at the heart of its identity. Far more frustrating than the resilience of orthodox economic thinking is the obsessive concern of more critical minds to prove mainstream economics "wrong," in the most literal way possible. Perhaps that shouldn’t be too surprising either. After all, it has been the preferred mode of engagement for decades. In a characteristic told-you-so tone, this work chides orthodox economists for their infantile belief in efficient markets and their... inability to recognize the systemic nature of financial instability. And it sees these pernicious ideas and equilibrium models as being at the root of our economic troubles.
A prominent example of this entire genre of critique is Steve Keen’s widely read book Can We Avoid Another Financial Crisis? The book attacks debt, or the societal scourge of overindebtedness, arguing that high levels of debt must always lead to financial instability and crisis. Keen works in the "post-Keynesian" tradition, which reacts against the way mainstream economics has integrated Keynes’s work by suppressing his most important critical insights. Post-Keynesians typically formulate Keynes’s key contribution through the lens of risk and uncertainty. Orthodox economics thinks in terms of objective risk or uncertainty that can be statistically quantified. As a result, it cannot handle situations where we do not have such probabilistic knowledge about the future, where we are genuinely in the dark about where things are going. The recognition of this element of true, irreducible uncertainty undercuts claims about market efficiency and equilibrium and so upends the theoretical edifice of orthodox economics.
