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The dismal science becomes gloomier

The dismal science becomes gloomier

by Jim Miles

Economics as the “dismal science” was greatly emphasized in a recent Scientific American article concerned about the “unscientific assumptions in economic theory…undermining efforts to solve environmental problems.”[1] Economists are great at using wonderful looking graphs, making analysis from obscure esoteric mathematical formulas, finding correlations and calling them cause and effect, and generally trying to convince everyone else that they know what they are doing.

Common sense applied to their accomplishments denies all their self-aggrandized accomplishments. Using mathematical formulas and correlating statistics does not make economics into a scientific theory. If they are truly so much in control of the economic environment, why are they then so helpless to do anything about it? Why after a half century of neoliberalism is the world economy falling apart, sitting on the brink of disaster – not so much a roller coaster “cycle” as argued by the economists but a lemming like drive over the nearest cliff? Why did the U.S. government just bail out Freddie Mac and Fannie Mae if the market is working as it should in a free market system? Why did Lehman Brothers collapse while Bear Stearns was rescued – some arcane economic formula?

The article noted above outlines how it all started, a methodology that is so incompetent it leaves one aghast at the rationale for its use, at the same time reinforcing the knowledge that they really do not know what they are talking about. As presented by the author, Robert Nadeau, the “theory [neoclassical economics] is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.” The part about the environment is not news, as simple observation will tell an objective person that the environment is being seriously degraded in the pursuit of wealth. The unscientific part is harder to recognize, made obtuse by the many mathematical formulas used as well as the oft times incomprehensible jargon created to explain the mysteries of the economy, all used to formulate a new religion of greed and selfishness in the pursuit of more wealth and the accumulation of that wealth into the hands of the elites.

How did the “science” part of economics begin? According to Nadeau

The strategy the economists used was as simple as it was absurd – they substituted economic variables for physical ones….A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathematical scientific discipline.

Nadeau outlines the many reasons that the formulas do not work because of the unscientific assumptions that they are based on (for example, the idea of a perfect market within a closed system, no limits to growth), but even before that he states the formulas used were based on scientific formulas that in themselves failed to explain the concepts under examination (electromagnetism and thermodynamics).

It seems beyond comprehension to base a whole field of study on borrowing formulas that are incorrect in the first place and then simply substitute vague economic jargon into those formulas and call it scientific.

The final argument from Nadeau indicates that economics needs to account for “the costs of environmental problems and the limits of economic growth,” and thus “it is imperative that economists devise new theories that will take all the realities of our global system into account.” Environmental problems would – from an economists perspective – have to include the value of natural regions and there innate benefits to the environment, something that I think is ridiculous to try and establish a monetary value on, unless of course we will all be drinking bottled water and breathing canistered air before too long. It is possible to have unlimited economic growth providing that remains in the realm of numbers and not the material world, a position I am sure the economists could conjure up with a variety of misleading statistics (thinking here of the great GDP success claimed throughout the world while billions are still living in poverty and the wealthy become wealthier in comparison to the masses of poor).

There is no way that economics can account for the realities of our global system because as a truly global system one would have to include an infinite number of variables. Economics is more psychology than anything, but that belittles psychology as its new basis in genetic structures and neurobiology is a true science of working experiments with controlled variables, something economists never do.

The variables the economists would have to account for are huge, starting with the psychologies of the world’s 6 plus billion people. All the ecological variables and their inter-relationships with humans would have to be accounted for. How many extra add-ons to the formulas would be required to account for the effects of the current global resource wars (also known by most as the war on terror)? How much does one dead Christian cost? How much does one dead Muslim cost? What wonderful mathematical formula did Hurricane Katrina and its consequences fall under, along with the current wrath of Gustav, Hannah and Ike? Are not their main effects measured mainly in billions of dollars in damages with a small footnote for human deaths?

In responding to a later letter that argued economists were accounting for the many environmental variables [2], Nadeau reiterated his main point that substituting mostly undefined and not clearly measurable economic ‘variables’ into an incomplete and only partially correct physical model is “a wholesale abuse of scientific theory by non-scientists.”

At the end of it all, the reader should be able to conclude that I have absolutely no faith, no belief, and worse, no scientific respect or understanding that what economists do is really helpful to anyone. From the macroeconomic jargon of the WTO, OECD, the World Bank, the International Monetary Fund, all the way down to the local financial advisor trying to tell everyone our current miseries are all part of a natural “cycle” and will work themselves out in a year or two – all amounts to nothing more than hucksterism to control the flow of wealth upwards towards the elite.

Our world cannot support 6 billion people living at the consumptive level of the United States. The economy cannot be predicted by useless non-scientific formulas. Growth cannot last forever. Markets are neither closed nor perfect. Humans do not always put self in front of others, the neoliberal consummate greedy individual, and quite in contrast, most humans will perform highly altruistic acts to help other people.

The one thing the current global picture has that is in common with economics is the ‘dismal’ part. The environment is changing, and if previous civilizations are any indication, we will either change and adapt with it…or go the way of the dinosaurs. The global war on terror with its black and white “with us or against us” mantra ensures ongoing wars of some type somewhere. Those wars are truly about resources creating the mess in the Middle East, from Israel/Palestine in the west, to the increasingly more troubled and dangerous borders of Pakistan/Afghanistan farther east, and will not abate any time soon, either with Obama or McCain at the helm.

Then there is the economy itself. If the economists truly know what is going on, how did we arrive at the above conditions (as they obviously have many economic variables within themselves) globally? Combine that with the enormous debt structures both within the United States and internationally, how are their magic formulas going to get us out of all this?

What to do? Think pessimistically globally, act positively locally, and continue to advocate and educate as best as possible. Perhaps someday when the politicians and economists cannot deliver us from disaster, then maybe millions upon millions of little actions will eventually break through their narrowly defined self-centred focus on growth and wealth accumulation at the expense of other people and the environment. In the meantime, don’t believe anything an economist might tell you. It’s all magic.

[1] Nadeau, Robert. “The Economist Has No Clothes – Unscientific assumptions in economic theory are undermining efforts to solve environmental problems,” Scientific American, March 25, 2008.

[2] Nadeau, Robert. “Environmental Economics?” Letters, Scientific American, August 2008. p. 10.


Jim Miles is a Canadian educator and a regular contributor/columnist of opinion pieces and book reviews for The Palestine Chronicle. Miles’ work is also presented globally through other alternative websites and news publications.

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