Why Economists Are Part of the Problem
By STEPHEN A. MARGLIN
This is not the place to tell the story of that revolution, a long and complex story in which both the
novelty of Keynes's approach and whether or not it constituted a revolution are disputed. Suffice it to
say that what started out as a fundamental critique of the mainstream has been absorbed into the canon.
Over time Keynes's insights have come to be regarded as minor aberrations, sand in the wheels of the
juggernaut of markets rather than a fundamentally new way of understanding the economy.
The present crisis has brought renewed interest in Keynes, and one of the consequences for economics, I
dare say, is a long overdue revival of The General Theory as a critique of mainstream economics. Some
of the insights that have been lost in the absorption process will be taken more seriously, particularly the
difference between decision making in a world of radical uncertainty, where probability calculations
avail little, and in a textbook world, where all decisions are made by optimizing agents equipped with, at
the very least, the ability to meaningfully calculate probabilities.
The influential Stern Review, a report published in 2006 and named after Sir Nicholas Stern, its principal
author, then chief economist in the British government, takes note of that difference. For him, a world
stabilized at a level he regards as about the best that can realistically be achieved "would be a dangerous
place." Dangerous indeed: "Deaths of hundreds of millions of people (due to food and water shortages
and extreme weather events)." Stern adds: "Social upheaval, large-scale conflict and population
movements, possibly triggered by severe declines in food production and water supplies (globally or
over large vulnerable areas), massive coastal inundation (due to collapse of ice sheets) and extreme
weather events."
Climate change is not the only example of economics' becoming part of the problem rather than part of
the solution. For many years, I have been concerned with the negative impact of the market on
community and with how economics has facilitated the market in that regard. The 19th-century physicist
Lord Kelvin famously proclaimed the virtue of knowledge imbued with the precision of number: "When
you can measure what you are speaking about, and express it in numbers, you know something about it;
but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager
and unsatisfactory kind." Economics goes physics one better: Anything you can't measure — like
community — simply doesn't exist. It goes without saying that economic hardship, especially the kind
caused by unemployment and shortened working hours, will make community more necessary and more
visible; people will have to rely on one another more and more as the market fails them.
Consider this: Even if 10 percent of the labor force were to become unemployed, the loss of production
would be manageable if we had mechanisms to share the losses of the unemployed among those who
remain employed, in ways that did not undermine the dignity of the unemployed. Economic growth is
the way out of recession not because we need the goods, but because the new jobs created by a growing
economy are the only way that people laid off during the downturn can reclaim an adequate standard of
living, along with their dignity as full-fledged members of society. Recessions are calamitous because
the welfare state provides too little, not because it provides too much.