I picked up this book because I realized that I hadn’t read anything that wasn’t on a computer screen in over a month, and I love to read anything that critiques mainstream economics, which I have always held with a high degree of suspicion.
The book, which promises to “reveal…ten ways in which economics has failed us all” certainly delivers. It is a rigorously researched, meticulously argued deconstruction of the tiresome notion that the free market can provide for us all. Orrell, a mathematician specializing in complex systems research, is in an excellent place to do this. In the book’s ten chapters, he debunks ten myths that proponents of neoclassical economics would have you believe:
1) The economy does not behave according to simple mathematical laws. It is, in fact, horrendously complicated and seems to defy easy mathematical prediction.
2) The economy does not consists of atomistic individuals who act independently. It is actually made up of populations which communicate and are, subject tho social phenomena such as herd mentality.
3) The economy is not intrinsically stable. It came perilously close to total collapse during the 2008 credit crunch.
4) The current models of economic risk are not adequate. They are based on faulty assumptions, and their predictions do not fit the historical data.
5) The economy, and all the people that make it up do not behave rationally and efficiently at all times. If this were true, then advertising would not work.
6) The economy is not gender-neutral. The 2008 credit crunch could very well be seen as “a guy thing”.
7) The economy does not distribute resources fairly, and actually has a mathematically proven tendency to concentrate wealth in an increasingly small number of holders.
8) The economy can not grow indefinitely. We are already consuming more than our planet can sustainably provide.
9) Economic activity does not maximize happiness. The correlation between wealth and happiness disappears above a very modest income.
10) In conclusion: The economic models currently employed leave an awful lot to be desired.
Many critics of the economic status quo will recognize these points of contention from previous debates. The weakness of what has been done so far is that it relies heavily on soft sciences and humanities. Orrell clearly holds these disciplines in high esteem; he incorporates familiar arguments from the so-called soft disciplines into every chapter and finishes the book with an appeal to ethics. What Orrell brings to the table is his mathematical rigour, which surpasses anything seen in an economics journal. In doing so, he effectively cuts off a line of retreat for the neoliberal economist. I’m sure many economic justice activists can recall conversations where they are told that they are imagining a utopia that economics (read: SCIENCE!) says cannot exist. Economists use math, while activists use words, and math is considered to be superior. Orrell cuts off this line of retreat. With this book in hand, one can effectively refute neoclassical economists’ claims to mathematical superiority. After Orrell’s devastating argument, mainstream economics can claim neither idealism nor realism.
The biggest flaw I might point out is that in the final chapter, Orrell gets a little bit conspiratorial, comparing mainstream economics to the outdated computer employed in Bernie Madoff’s ponzi scheme. He suggests that a complex story has been concocted to pacify the public, while the financial sector plunders society to secure its billion dollar bonuses. I can see why it might be attractive to draw a parallel with Madoff’s scheme, but I would prefer to apply Hanlon’s razor to the situation: Never ascribe to malice what could be adequately explained by foolishness.
The foolishness at the heart of mainstream economics can be traced back to the early days of the scientific revolution. Through my studies of scientific history, I have noticed a pronounced trend for people to take the best science of the day, and try to apply it to human behaviour. The prediction of human society has apparently been somewhat of a holy grail of science. Like the holy grail, it is a an extraordinarily difficult object to find, and may not even exist. This did not stop the treasure-seekers, however, and they eventually settled on neoliberal economic theory as the solution to the age-old problem. They have stuck with it not out of a desire for personal profit, but because it is the best oracle we currently have. Perhaps it is time to abandon the desire to mathematize people.
This is a fairly minor quibble with what is otherwise a fantastic book. Regardless of whether it is borne of malice or foolishness, mainstream economics have lead to disastrous social policies enacted in the name of a free market which does little to improve welfare. Orrell convincingly argues that human desires, volitions and choices are far more difficult to model or predict than Milton Friedman and his cohorts would have you believe. Economics cannot mature as a discipline until it accepts that fact.