Whenever I tell people that I’m studying economics they usually ask me how to solve the recession or what to do about the banks. Each time I’m embarrassed over the fact that we have never even mentioned these issues in lectures. In my course I have basically been taught that the free market is the most efficient and best system in the world and trouble always results when it is interfered with. In my textbooks recessions are not mentioned, they do not happen. There is no explanation of unemployment, the biggest issue of our times. There is no mention of profit, the heart of capitalism. Nor do they talk about banks or money or advertising or how systems are guided by power relations. No mention is made of poverty, in effect ignoring three-quarters of the world.
Economics didn’t see the recession coming because in their world, recessions don’t happen. The free market is always right. The idea that the market could fail is never given a moment’s thought. The market is always assumed to be in equilibrium, providing the greatest good for the greatest number of people. If you thought the current crisis would have changed this thinking then you would be wrong. The older pre-recession editions of textbooks are essentially the same as the newer post-recession textbooks. Mainstream economics has cut itself off from the real world and instead built a fantasy utopia.
Unemployment is a thought never far from mine or my generations mind. It is the biggest problem affecting millions of people the world over, yet traditional economics offers no explanation of it. I will graduate with a degree in economics in six months time, yet I couldn’t tell you why some people are unemployed. It is the elephant in every economics lecture. It is assumed that everyone who wants a job gets one and works as much as they want. This is a serious problem because these same people who do not acknowledge the existence of involuntary unemployment are the same people who will be asked to come up with a solution.
The central driver of capitalism is profit, which is why it is daft that profit is never mentioned. Normal companies are assumed not to make any profit. It is only monopolises or other market distortions that allow profit to exist. This is jaw dropping madness. It’s like an economist stepped through the looking glass and into wonderland and described what he saw. Trying to describe economies without profits is like trying to explain nights out without alcohol; you’re missing the central point. (Technically textbooks assume profits equal opportunity cost rather than zero. By this they mean, if you quit a job that paid 10,000 a year and set up a business, you will only make 10,000. This absurdity is accepted as conventional wisdom in discussions of firms in the market.)
Economics is all about money or so you would think. Actually economics assumes there is no money in the economy. That’s right; the people who are supposed to save us from the crisis think we live in a barter economy. You can’t make this stuff up. If money isn’t mentioned then neither is banking or debt. Many economic models don’t include banks in them. Now do you know why economists neither saw the crash coming nor have any idea how to get us out of this one? Mainstream economists are at a loss to explain what to do about the banking crash or even to explain how it happened. Pull up a chair at the Mad Hatters tea party.
There is no talk of power. Instead we are all assumed to be equal. The boss and janitor are two equal individuals who reach a fair and balanced contract between themselves. The idea that one could have power over the other is not considered. If you ignore power relations how can you understand Mr. Burns and Smithers, or Dilbert cartoons, which are funny because they’re true. Wal-Mart, Apple, Microsoft and Exxon are just firms like any other, the fact they dominate their industries is ignored. Our lives are governed by power relations but this is removed from textbooks. Rather economic dwells in the fiction of equal individuals bargaining fairly. Without discussing power you cannot understand the role of government, big business, the 1%, the media, big labour or interest groups or their impact on society. Which is bad because they basically run society.
Economics treats the economy as though it is full of rational logical individuals each coming to independent decisions and conclusions. It does not mention the massive advertising industry who existence is contrary to this. Advertising is all about manipulating people to buy products by playing on thoughts and feelings, subliminal or otherwise. Advertising is all about convincing people to buy something they weren’t going to buy. Its aim is to push the market away from the natural equilibrium of perfect competition. It creates brand loyalty where consumers buy products even if they’re not the best price or quality. It adds to the herd mentality and the importance of fashion. Failing to recognise advertising leaves economists at a loss to explain why the market never reaches equilibrium.
Economics does not talk about poverty or even try to guess why people are poor. Open a textbook and you find a world where everyone has enough. It would almost seem rude to ask why are their poor people in the world. In doing so, economics ignores three-quarters of the world and instead retreats to a narrow corner. Instead of grappling with the major problems facing the world, orthodox economics dances with faeries of utility, equilibrium, surplus and efficiency.
Economics does not talk about fight club.
I study economics because I want to explain (and hopefully solve) the problems facing the world. I disagree with Marxists but at least they are asking the right questions, even if their answers are wrong. Why are some people rich and others poor? Why are we stuck in recession and Europe on the brink of collapse? Why is it that so many people cannot find work no matter how hard they search? What are we supposed to do about the banks? Why are factories lying empty, workers lying for idle and people without the necessities of life? How do the power elite run society? Economics does not talk about these issues and instead risks relegating itself to irrelevance.