Neoliberalism Is a Simplistic Perversion of Economics
bostonreview.net
bostonreview.net
Sorry if I don't want to trust the fate of the nation's economy to someone's well intentioned verbal theorizing and 'qualitative' analysis. What could go wrong? (lol)
I thought HN liked and trusted the scientific process and quantitative research methods over verbal theorizing and hand waving.
Better not to have a model than to follow a wrong model.
I don't think the market-driven ideals of 1980s economics were intended to deliver the results we are seeing today. They would not have predicted the drastic disparities, or the insecurity of working people. Therefore, even on a scientific basis, they're kinda fails.
No, I think they actually believed what they were saying. They believed the rising tide lifts all boats, and none of them would get swamped.
neo-liberalism: "a modified form of liberalism tending to favour free-market capitalism."
The movement has been very right wing, pro-corporate and pro-billionaire since the beginning.
How so? This is just empty rhetoric.
I do too. I think their primary motive was selfish and short-signed motivated reasoning about the effects of their ideas. They ignored how those ideas could harm others because they were so captivated by how they could help themselves.
This isn't my own original idea mind you. Marx called it "dialectical materialism".
Certain scientific facts can be proven. You can measure things like the speed of light for instance. But ideology always reflects the material interest of some group or another.
My point is: it doesn't follow the results we observe were the objectives those people were expecting. It doesn't make them liars.
But I do agree with you: `follow the money` is a useful compass to navigate those waters.
On what basis? The share of people living in extreme poverty globally has gone down from 43% to less than 10% since 1980. Global literacy rates have climbed from 70% to 86% in the same period. Global child mortality has gone down from 11% to 4% in the same period. Global life expectancy has climbed from 63 to 72 in the same period.
It's ironic that you claim they're failing on a "scientific" basis.
It is about the income inequality which has increased since the '70s in the USA [2]
It is about tax avoidance in the USA, and increasing taxation for the very rich, and how the discussion about it is being avoided as recently happened on Fox News or at the conference in Davos, Switzerland [3]
[1] https://en.wikipedia.org/wiki/Poverty_in_the_United_States
[2] https://en.wikipedia.org/wiki/Income_inequality_in_the_Unite...
2) The problem is that large companies such as Amazon don't pay tax which by itself is unfair. On top of that, the side effect is that small and medium businesses [on a worldwide scale] cannot compete with them, leading to less competition which is bad for the customer and bad for the economy. And it isn't just Amazon. It is also for example Starbucks, who pay no tax whatsoever whilst local coffee shops diminish.
3) Not addressing the topic of tax avoidance is political unwillingness kept intact by the rich world elite who give breadcrumbs to servants such as Tucker Carlson.
4) Given the conference was visited by billionaire philanthropists who avoid taxes, it was a highly insightful and appropriate comment.
> it was just more hand waving and blaming the ones who have been pillars of industry, creating jobs, products, and economic prosperity.
If you give me billions of USD I can also promise you I will be a pillar of industry, creating jobs, products, and economic prosperity. The lack of these is caused by the inequality. If people wouldn't live in poverty, their happiness would increase, and they'd be more productive in society; not less. Instead, they're being squeezed out.
Actually, it'd empower the free market, as we'd have more fair competition. Tax avoidance breeds unfair competition. After all, if your competitor is paying tax while you don't, then you get more profit. More profit allows you to invest more, take more risks, do more R&D, etc.
> Removing incentive structures and high taxation does cause the wealthy to leave.
I never argued otherwise; I argued if we, as humanity, fight this problem on a world-wide level the rich have no place to go.
> It's happening in the U.K. right now.
We're not addressing the problem on a world-wide scale right now (AFAICT), and it'd be a process. Not a one day project. During such a process you'll see a lot of rough edges, like with alpha software.
The response: "the plan isn't perfect" is a straw man. Of course the plan isn't perfect. Of course they can move to the Bahama's, Monaco, or what not. It isn't meant to be perfect; it is meant as a first step in the right direction, after which reflection must take place to continue to tackle the problem.
> They didn't come by their wealth through forcibly taking it from poor people. The free market dictates voluntary exchange of goods and services. They are wealthy through a long series of voluntary transactions with the public.
However if they paid their taxes fair and square they'd have less profit, and the little guy who starts their own company would have an easier barrier of entry. Hence, entrepreneurs (for whom you could argue HN is for) would benefit from this climate. Instead, what we have is a few successful ponies who get bought by the big fish.
> It is about the 1,5 million homeless children in the USA
How has this number changed over time, compared to previous time periods?
> It is about the income inequality which has increased since the '70s in the USA
How has the actual income of poor people changed in the same time period?
> It is about tax avoidance in the USA
Please explain how the statement "tax avoidance in the USA" proves market-friendly policies have been a "failure".
This one i can explain. Whether its ordo-liberalism, social liberalism or any kind of post-1929 liberalism, a market-friendly policy aim to brake cartels, monopolies and remove unfair advantages, and help new companies start even in an already competitive field.
You can easily see how tax avoidance, easier to avoid for big, international, old companies is a failure of "market-friendly" policies. This is not the only point where those policies fail, but this one of the most obvious. Sadly i don't have any english papers on this, but even really old-school liberals (like the ones you can proably see on fox, although i don't know if they invite PhD or lobbyists there) are saying this is becoming an issue.
Also income inequality should never be a problem. Wealth inequality, however, especially when more money is gained from wealth than from work, is. And its easy to fix: less tax on work income, more taxes on wealth/wealth income. There.
Do you have numbers for that?
> that doesn't mean you can just ignore problems affecting hundreds of millions of people
That's just a straw man.
> That's just a straw man.
That's not a straw man. Here's a straw man: On an article about US economic policy, Beat claimed that '80s US economic policy had failed. You disputed that based on global economic outcomes since then, refuting an argument that no one had actually made.
I edited it out because I find it, for the most part, irrelevant. I'd rather live in a world where everyone is better off to different extents than one where everyone is equally poor and miserable, as in post-reform vs. pre-reform China. Do you prefer the latter?
> It seems clear enough, therefore, that the financial policies of the last 40 years have at best not helped, and have made some things worse.
Non sequitur.
> That's not a straw man.
Weighing the costs and benefits by analyzing the bigger picture is not "ignoring problems affecting hundreds of millions of people". That's just plain stupid.
> On an article about US economic policy...
Proof that you didn't read the article, because it discusses other countries and international trade.
> Beat claimed that '80s US economic policy had failed
Where did beat say "US" in their comment?
Vaccination isn't a neoliberal triumph.
"Yet too many economists believe their quantitative tools and theoretical lenses are the only ones that count as “scientific,” ..."
Economist want to believe that economics is "scientific", while is clearly not, and you keep hinting that they are "relying on quantitative analysis as prescribed by the scientific method".
While qualitative analysis can be considered empirical, it's not something often seen when money is concerned and the stakes are high. Most often you will see papers relying on qualitative methods in the "soft sciences" such as social science. Not to mention "verbal theorizing".. this is the kind of stuff that gets laughed out of real conversations.
I would also suggest you look up what you call ”the scientific method”, it’s a misconception that there is one abstract scientific method to apply to all fields of research. The process of science necesserally differ between formal, natural and social science.
I personally like to summarize economics as ”the art of pretending that sociology (social science) is physics (natural science), by abusing math (formal science).”
On the topic of the article: The desire to focus on questioning whether a framework for economic analysis and planning is achieving outcomes for humans that we want isn't properly and morally substituted by 'rigor' papering over one's policy preferences if those human outcomes are at odds with the human outcomes we want. If that makes less sense than I intended, let me simplify: A key part of the scientific method is examination of whether what you are doing is even working.
The stakes are too high to drastically overhaul or throw out the same system that has resulted in our prosperity over the past 100 years.
The problem is that you can make a model to justify whatever you want.
"With four parameters I can fit an elephant, and with five I can make him wiggle his trunk." John von Neumann.
For instance, metrics tell us that public health system are more efficient, but this is anathema to the "neoliberal mindset" and, therefore, to their models.
That's without taking into account the big interests that are passed as sound economics. Just check who finance many of the think tanks that publish economic recommendations.
We could also talk about development economics and the recipes sold by the IMF.
Hayek absolutely did not believe that his "quantitive and theoretical lens" counts as scientific. Apart from economics he's known as an opponent of scientism.
I don't believe Friedman believed his theories to be scientific either.
Some models are useful. Some models are harmful. Do you have the means to tell the difference?
An interesting thing about neoliberalism is that it often purports to just be about 'free-market' but isn't really. It actually relies on Government to create a lot of the wealth which is shifted to wealthy people through privatisation, and relies on Government to protect monopolies, subsidise private sector activity etc.
For example, in Australia we have universal healthcare (basically the complete opposite of neoliberalism) that the right-wing of politics has been trying to cut funding to and sell off for the last 30 years or so, but so far have failed (it's political poison). At the same time, anybody can choose to use private hospitals, and to do that you really need health insurance. But our public system is so high quality that in general most people would rather just use that (the main exception being waiting times for elective surgery given underfunding). So to keep the private insurers in business, the Government brought in a health insurance rebate where they basically pay a quarter or so of your health insurance premium. At the same time, if you make a certain salary, you are penalised for not having private health insurance through an extra tax. So most people earning average wage or above do. This is purportedly to take pressure off the public system, but studies have shown that the public system is actually quite a bit more efficient than the private system here.
This latter scheme is based in the neoliberal ideology. Even though it would be a lower cost to society to just divert that rebate into the public system (where every 10c more goes to patient care for dollar spent vs. the private system according to studies), this way the private insurers are subsidised with public funds.
>Economists also often get overly enamored with models that focus a narrow set of issues and identify first-best solutions in the circumscribed domain, at the expense of potential complications and adverse implications elsewhere.
Can loosely translate to: Economists like to study optimization problems whereby rigorous mathematical models conclude that to maximize one variable, other variables may be minimized.
Thereby proving precise facts about models that are imprecise at best, and downright misleading at worst.
My point was that you can't have it all. "Inclusive Economics" whatever that means is never going to be "good enough" so it's a very easy basis for an attack on "Economics".
"offering plenty of tools we can use to make society more inclusive"
Isn't half the issue with ALL economic points of view now that actions aren't having the effect we think they should and the "tools" don't work like we think they used to?
I can't recall any proponents of neoliberalism.
This article is a good example. Everything is euphamized (neoliberalism is market fetishism). Nothing is addressed directly. There's a disagreement between camps, but nowhere does it bother to delve into what they disagree about specifically.
It's also simply not true that economics is monolithic, or that the majority of policies are based in economics of any flavour.
The EU was (i suppose, see first paragraph) a neoliberalism exercise. It promoted free trade, and dismantled all sorts of industrial structures and regulations as part of that. But, the actual goal was peace, moreso than prosperity. The history of us-china trade is similar.
In practice, on the Internet "neoliberalism" seems to be a word used by people who dislike capitalism and want another abstract enemy to complain about. If you're not doing that, the word doesn't seem very useful?
But the folks behind this article seem to want to do educational outreach about economics research and that does seem useful.
[1] https://en.m.wikipedia.org/wiki/Healthcare_in_Switzerland
Here's one site: https://neoliberalproject.org
Also see: https://niskanencenter.org
My interactions with these folks have found them very reasonable. They're kind of like reformed libertarians who've learned that we need social safety nets, etc., but still believe more in markets than standard Democrats do.
There's just lots that also believe there are some areas where markets are sub-optimal to wrong because (a) a commons is more efficient and/or (b) it's difficult to impossible to line up incentives correctly and/or (c) there are values in play that supersede market activity.
(None of these beliefs are necessarily unique to Democrats, either -- lots of people would believe that public transportation infrastructure greases the wheels of private activity, that insurance incentives are different than other goods/services, or that assassination markets might not really be a good thing)
[1]: https://en.wikipedia.org/wiki/Mutualism_(economic_theory)
A lot of ideas on the Left have government paying for and executing public services (single pay healthcare, etc.), which can work some times, but can be subject to lack of accountability and poor efficiency.
These next-gen neoliberals are more likely to recommend public-private partnerships of various kinds where the government is paying / overseeing the execution by competitive private entities.
[1] https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm