(bright orchestral music) – Now that you’re looking at other people in my generation, whether we’re talking about economists, political economists, lay people, I get the sense that in recent years, whether we’re talking about people on sort of a resurgent left
or on a resurgent right, on both sides we seem to
be seeing a falling apart of the ability of the
mainstream economic ideology to reproduce itself. Where 10, 15 years ago most
young people would accept what the mainstream economic
ideology would have to say. I think in recent years
we’re seeing it become sort of increasingly under doubt. Whether this is from a resurgent
sort of socialist left, as represented by Jeremy
Corban, Bernie Sanders, people to the left of that, or the resurgent right
where we’re seeing questions of free markets and open
borders come under question. Ideas of protectionism
becoming alive again. So, I suppose my question here would be to what extent would you assume that the ability or, perhaps, lack thereof of economics to regain an ethical footing is a political concern
or a political question? – Now, that’s a very, very,
very good observation. I mean, are you really saying
that these resurgent movements of left and right don’t
have any solid basis in the economics that’s currently taught? They’re a political reaction
to what are perceived to be just impossible conditions, in which people find themselves. But how do you translate that into scientifically based economic policy? And that seems to be how does one justify, for example, protectionism? One might justify it politically. One might say, the people are subject to an unfair competition. To which the economist would say, well, then you’ve got to
make competition fairer. Or I’ve got to make markets
work better in some way, but certainly not take a
nationalist view of things. And economics has already told you that redistributionary policies if people want to do that,
that’s a political choice. But you’ve got to understand that that’ll make markets less efficient. Or that’ll reduce the rate of growth. So, they will say there’s a trade-off between efficiency and morality. And the economist will tell you the efficient way of doing it. If you want to do it some other way, well, economics isn’t telling
you anything about that. Which raises the prospect
of a lot of economic policy in the future won’t
have very much reference to what economists are saying. But what will they have reference to? – I wanted to just picking up on that a little bit, and just the idea of ethics in economics, I feel like much in the way that the real world functions in that I mean, we were talking about Smith and Ricardo and Marx. The way that they pictured the world was that there are certain sort of relations that exist and that are in motion, but they are sort of hidden from us in the way that we go about
doing our everyday things. Prices sort of act as this
wall that don’t let us see what is really happening. To me, the way that the
economics discipline functions, and how ethics in economic functions is very much a mirror of that. In that I feel like, definitely, there are ethics in economics. What you just said about
free trade not working means that a market is
not perfectly competitive. That is an ethical statement. That is in no way a factual statement. It is made a factual statement, because the models on
which we make the statement take certain assumptions, and those assumptions are
purely normative assumptions. I feel like that is
where the ethical import of all of this economics that
we talk about comes from. And in that sense it’s a
perfect way of fetishizing our model and fetishizing the assumptions, because real world is not
working the way it should means there’s something wrong
with the real world, not something wrong with the way that you’re explaining the real world. And so, you’re automatically
giving yourself an ethical standpoint and an ethical superiority
sort of in a way, which allows you to make
those policy predictions. And what we see now is that the policy
predictions coming from those are not working as well, which gives us that greater satisfaction that Daniel, for example, was alluding to from both the left and the right. – Well, that’s, again, a
very, very powerful point. You see, Robbins, and I suppose
the mainstream would say, the only normative requirement is that people should act efficiently. They’d also say in a way
that they do act efficiently. There’s always this
this line, isn’t there, between what’s meant to be
scientific and normative. If they’ve come to realize I mean, for God’s sake they should. It came rather late in the day that financial markets aren’t efficient. But they were trapped by an
efficient market hypothesis, which suggested that
prices were all accurately risks were all accurately priced. Was that a normative assumption? Or was that saying, this is how rational given rationality, given certain
information requirements, this is how people act? Where is the normative and
where is the positive in this? There’s always a confusion. I found it rather it’s
all the way through. And you’ve brought it out. The other point, I think, is
extraordinarily important, which is you’ve referred
to something I call and others have called
the classical dichotomy, that there’s a real world
which can be captured by economics and
particularly by mathematics. And then there’s a world of appearances, and when money gets out of order, it sort of is a veil. And it hides from you
what’s really going on. Or it hides from irrational it has irrational people. They’re deluded by the disorder of money, therefore all you have to do
actually is have a central bank that makes sure that money
doesn’t get out of order, and everything will be fine. I’ve always been struck here by the incredibly powerful
allegory of Plato and the Cave. In the cave you see only shadows. Beyond the shadows there’s maths. – So, maybe, following up on that. It’s my impression that in the last decade with the growing debates on inequality there was a sort of revival
of ethical considerations into economics, especially
in political debates relating the role of finance that has place in our economy, and so on. But I believe that most of
these ethical concerns are still pretty much relegated to
this fear of redistribution. Our ways of producing are fine. The problem is that we are
not redistributing right, so putting the problem just
as a matter of circulation and not of an integral matter of production and distribution. And I believe that there are
a lot of schools of thought, such as social economics, corporative economics, feminist economics, and, of course, as you’ve
mentioned Marxian economics, that will challenge the way
in which we are producing and the way in which we are distributing. So, how do you believe that
ethics could be reintroduced in economics from this divide? – Well, I totally agree there. I mean, there’s tremendous dissatisfaction with the distribution
of wealth and income. But it seems to me that mainstream economics says, if you want to
do something about it, that’s a political issue. And if people vote for a more equal well, that’s up to them. But what you’ve got to recognize it’ll make the productive
economy less efficient. And, therefore, they say, science is actually opposed to that these desires of people for more equal are sort of irrational in some sense, because, I mean, they’re actually
mortgaging their future by they’re not behaving
according to the dictates of enlightened self-interest. And Lucas is full of
lovely quotes about this. About how tension to distribution is incredibly distracting and blah, blah, blah. And you can multiply
those kinds of statements. But I think what you’re saying in a way reinforces the point I’ve made that the criticisms are
coming from outside economic. Now, does that mean that
they’ll be incorporated into some school of economics
that’s yet not mature, that hasn’t got a scientific paradigm, because all social sciences claim that there is some
scientific basis to them. Economics makes a very, very
exaggerated claim to that, but it’s there everywhere. I mean, what do you think
there are emerging paradigms in social economics, or the other economic I mean, we know there
is a Marxist paradigm. We know that. But what about other
things that are happening? I mean, do you–
– Yeah, there is– – Do you have hopes of– (panelist chuckling) – Actually, if I may, there is a question I would
like to pose to you on that, because, I mean, naturally there are other paradigms which coexist. They may not have the
same scale or influence. However, in your opinion,
at least in economics, what is it that makes a
paradigm the dominant paradigm, because that will determine
how it will be changed? – And just to followup on that, we have been talking
about the scientific basis and the scientific approach. And I think there is a
misleading sense there to the extent that I mean, even in natural sciences today people are discussing that actually every observation, every experience, every
fact is in fact organized according to our categories of thought. So, there is no objectivity which we can perceive without
any scientific interaction. So that takes us to the discussions about what is the scientific knowledge, how it is being produced. So, can actually the
character, the content, of the scientific knowledge
be totally separated from the way it is being produced, which is a total different
question regarding the academia, and so, today, on the one hand. But also during your lecture,
which I enjoyed a lot, the question of the definition Robbins’s definition of
economics consistently came up. And I think there is a very good reason why the economic science has been constantly emphasizing
that it is objective, that it is value-free. And this is a trap. The moment we think that
it is actually value-free, and the moment we believe
we have to re-bring values into the economic science, I think they’re in that trap, because the way that economic science, the objective value-free in science, is organized is based
on values, we see that. I mean, Jevons, when he
was writing in the 1870s, he literally wrote, the
point of departure should be to reject any absolutes as this absurd conception of
the society as a class society. He says, we have to, which
is a normative statement. We have to treat all
individuals as equals, so he just starts actually
with making a huge step in terms of introducing
his own subjectivity. You can into values or point of view. And that brings me I mean, I echo Srishta’s
point at this point. There are alternative paradigms, and what makes the dominant
paradigm the dominant paradigm. So, in my view, it is rather each paradigm, each
approach, has its values and its specific claims. And it is ultimately a system of police. And it does involve subjectivity. So, we can’t escape that. And, maybe, that can be helpful when you’re discussing also how to bring in values and ethics. – Yeah, I think again, a very, very, very valid point. The paradox is that
subjective utility leads to objective welfare function. I mean, that’s the claim. As to what makes paradigms
dominant, it’s power, isn’t it? I mean, I think Marx is unrivaled on on the role of power in shaping thought as a kind of superstructure. And also the genius of economics
in making power invisible. It’s just not there, except in the form of
monopoly in the market. But not power over the political process. I mean, that just isn’t there. Not power over the consumer. There is some producer power. And good economic policy
must aim to diminish it. I mean, that seems to
me how it treats power. You’re right, of course. I mean, the old opposition
between soft social science and hard, natural science
has been dissolving. And we, now, are much more
inclined to accept the fact that there are facts out there. But our own the way we can view them is
through mental constructs, which our mental constructs change reality doesn’t change them. The way we see reality changes. But, nevertheless, it remains true, I think,
that the physical sciences, the natural sciences, seek
to investigate matter. Whereas, social sciences
try to understand mind. There’s nothing to observe, which is objectively out there. What they’re observing is human behavior. And you can set up a
paradigm of some kind. You can make all these
very strong assumptions. And they are normative assumptions. I think Jevons is a good
example of what you’re saying. He did believe that economics had to set itself against Marx and Marx’s theory of
exploitation, class theory. But to go back to then
the weakness of ethics. If you want to use a class
analysis of any kind, or a group analysis, what’s the group? All these groups are
also in a state of flux and dissolving and reforming. And that’s why the standard
kind of game of politics is falling to pieces, because you no longer have a
working class that votes left for redistribution and other things. And sort of a business
class that opposes all that and believes in free markets. They never did believe in
free markets, actually. But they think policies have that helped them. But that’s no longer a basis. Cutting across it is the
thing you mentioned earlier, which is nationalism
has suddenly reemerged from the shadows of fascism into becoming quite a dominant movement in Western societies. But not just in Western
societies, actually. All over the world in one form or another. – I mean, I also think it’s important not to underestimate the ability of the mainstream economic approach to also co-opt a lot of the debates around even ethics and morality. I think inequality is a great example of something like that. Ricardo, when he wrote,
he said that talking about distribution is the
core of political economy. And as you mentioned, Robert Lucas said, “It was poisonous,” that
was the word that he used, that you were looking for was poisonous. – I was looking for that. – To look for questions of distribution. But their ability to discuss inequality. So, for example, what I notice today is that a lot of the debate around
growth and distribution is about how growth can impact distribution. How growth can impact inequality, will it increase it or decrease it? Yet, we never ask the question is why do we not have a debate? Why does the mainstream not
debate the reverse causality? Why is there no discussion
about how inequality, how distribution actually impacts growth? And I think that’s one of the questions that I wanted to you. Why do you think there
is no sufficient debate around how distribution impacts growth? Is it merely political
willingness or something else? – Well, I think it’s because
that kind of discussion would be deeply distressing to the powerholders in the society. There is a dissident
movement in economics, which is exactly about this. And it has a bit of ancestrian Marx but also other theories. I’m talking about
under-consumption theory, which is exactly about
how inequality impacts the progress of a capitalist society by producing crisis of overproduction, and, then, of course, Hobson
used it to explain imperialism. And then Lenin took it over, but that discussion has died away. And, yet, I think it’s
very ripe for revival, because it seems to me that shortage of mass purchasing power was actually a very important
cause of the crisis of 2008. 2008, that’s right. Too much purchasing power is heaped up in one bit of the economy, and not enough in another. And that made it very, very economies unstable. You can talk about in terms of just the increase of financialization. I mean, that be one way of discussing it. And it makes them unstable, not just because the rich
have a greater propensity to save than poorer people. But, also, because it places too much a burden on investment. And investment is volatile. So, if you want to be
an under-consumptionist, you must really be in favor in quite a strong state
investment function to overcome the volatility
of the inequality. A state investment function
can also actually deal with some of the
manifestations of inequality. I mean, it can do
something to reverse that. So, that is a discussion
that’s very important to have. But do you find echoes of under-consumptionism in mainstream? It seems it’s enough to say, well, it was just a mistake of Hobson. And he just didn’t understand the way the rate of interest
works to equalize decisions production and consumption
decisions at the margin. He just didn’t understand that. So that’s the simple refutation of Hobson. Out of the window, under-consumption. And, yet, Marxists who are
also under-consumptionists used that kind of analysis to
explain the Great Depression. And modern Marxist, quasi-Marxists,
under-consumptionists like the American Labor
Economist Thomas Palley, that’s the center of his explanation of what went wrong in 2008. So, there is this but how do you get it into the textbooks? Any dominating paradigm is very, very good at defending itself in ways
that Thomas Kuhn has explained, Imre Lakatos, and it defends itself. It’s like it may be wounded but
its defenses are strong. And one of its defenses is as
you say incorporating heresies and sort of treating them sort of in the outer areas of the subject that they can be discussed. No doubt that there can
be some research programs. But as you can’t refute the mainstream, it remains invulnerable. – On that, if I may, professor. – Yeah, yes, please. – The refutability of
the mainstream paradigm, I feel, is a bit of a
sticky situation, because again, going back to Kuhn, for example. He says that paradigms are dominant and there may be other paradigms
that exist at that time. It may not be the case
that the dominant paradigm explains the reality perfectly well. It is just that it is
the dominant paradigm. And it’s able to modify itself to keep some kind of pace with
the critiques that emerge. We had the Cambridge Capital Controversies between the two Cambridges
rage on for years, in which I’m sure we would agree that the neoclassical economics
was actually the loser of that debate in certain senses, in that they did encounter critiques about the methodology that they could not
brush under the carpet. However, 2018, neoclassical economics is the mainstream economics of the time. So, the question of refutability and the power of refutability in leading to a paradigm change, that for me is a big question. – It’s a big question, if
you can’t refute a paradigm, there’s nothing to bring it to an end. And as you say, the capital
switching controversy, it had no impact on the mainstream. They lost the battle. They said, “Oh, so what?” It’s of no importance. And considering the heavy guns involved in the controversy at the time, it sort of just disappeared, and the concept of capital as a
independent factor of production. And in a way, I mean, the Cambridge people were going back to the problem of how you incorporate capital in a cost of production theory. I mean, they hopped back to that. They lost the battle in the 19th century. They didn’t lose the battle. It’s just that it wasn’t felt that the opposition paradigm had enough useful explanatory
power or policy guidance for what people were looking for. I think I haven’t got a good
answer to what you said. And it’s a puzzle for me. But I think the general point that paradigm shifts are
very rare in economics has got to do with the fact that it’s not a hard science. I think if it were a hard science, you would get some
paradigm shifts equivalent, let’s say, to Newtonian mechanics to quantum mechanics, or Ptolemaic astronomy
to Copernican astronomy. You would get there, but I can’t think of any shifts, really, of that magnitude in economics. I regard Keynes as a failed attempt to dislodge the paradigm. And he was dealt with by incorporating some policy aspects of
Keynes into the mainstream. But not his theoretical criticisms. – I just wanna say I mean, just an example of that. So, you had the neoclassical synthesis, and today new Keynesianism
as a result of that. When you look at Galbraith and Veblen’s institutional economics, you find today the new
institutionalist economics. When you talk about Herbert
Simon in behavioral economics you have today’s behavioral economics. So, the idea, again, is the ability of neoclassical economics
to incorporate a lot of the criticism, whether
it’s about Keynesianism, effective demand, institutionalism. And then turn it into
something that becomes it’s already part of what we talk about. We talk about the imperfections
and I don’t know if you– – This is just like captors
in being able to appropriate and re-articulate
moderately radical demands. But I think there is an
elephant in the room, which we have to call it by its name. Namely, poverty and poverty relations. I mean, we are all part of academia and we know how academic
knowledge is being produced, how funding is raised, how you get positions at schools, how you get positions to teach, and so on and so forth. We all know this. And the problem, I think, to merely grasp the struggle on the level, on the terrain, of the
quality of competing paradigms is just as Srishta put,
and you gave more examples, take the Cambridge Capital Controversies. Paul Samuelson literally wrote that he wouldn’t be able to defend the aggregate production function. I mean, it is destroyed. One of the arguments, if you approach it only by ignoring the power relations, let me say, only by focusing
on the competing paradigms, well, the neoclassical theory is rather like a conspiracy theory, because all the marginalist
argument is moving in circles. And you can’t refute it. It always succeeds in reproducing itself. – Yeah, and a sponge. It’s like a sponge. The sponge becomes flappier and no decently trained
economist would subscribe to the crude version of it. But it’s there, it’s always there. The core of everything. I think the way Keynes was absorbed is well, two examples, first of all, I think the new
institutional economics has a very shaky relationship with the old institutional economics. I mean, so game theory
and things of this kind heavily brought into
play to explain norms. I mean, the sociological
explanation is straightforward, but they can’t accept that, ’cause it goes against the concept of the individual and the
self-interest, individual. They say, fine, Keynes we understand that prices are sticky, and therefore the adjustment
is a bit more sluggish than the pure theory would believe. So, we have to relax
some of the assumptions. And the relaxation is crucial for policy, ’cause we can’t actually
do the Hayek Program of allowing the whole economy to collapse. And then hoping that it’ll
be healthier and leaner as it gets back to its feet. So, the policy is good. You could also accept if you accept sluggishness
there in the price system, you can also accept the income determination
version of Keynes. I mean, that also is great and you can say, yes, of course, we’ll accept that there are
different types of equilibria, optimal equilibria. And the Keynesian types of
equilibria are not natural, and therefore there will be a tendency for them not to last. And then you get a Hayek-an criticism that if you try and do something, actually take policy measures, you are really preventing the
natural forces of recovery from doing their work, however, slowly. And so, short-run Phillips
curves are sort of part of the new Keynesian arsenal. And they’re also part of the central bank’s reaction function. And that’s why they’re
giving it a little time in carrying out their mandates. But what does this represent
in terms of a paradigm shift? It isn’t a paradigm shift. New inconvenient facts from the world of politics and social life come in, they invade economics, because a lot of economists are worried about the failure of mainstream economics to deal with these things. And then they become part of the marginal. I mean, when you talked
about the power structure within academic life, I would also like to point out that many of the heterodox schools are in less good universities. They’re sort of almost pushed out, where they have groups, and they talk, and they have conferences. And they have journals, not
highly prestigious journals. And that’s also a way of marginalizing it, while saying, but, look,
we are open to all this. If you can really prove your point, then, of course, we’re
willing to accept it. But they can’t. You can’t prove the point. – I think there’s a connection between the idea of paradigm and this idea of equilibrium with what you brought up earlier about these theological vestiges in the field of economics. When we were talking about
an idea like externalities, which you brought up, there is this sort of theological idea that these are the acceptable results that the economic system can generate. And everything outside of
these acceptable results is an externality. Or sometimes, vice versa, there are things within the results that we patently see that are not accepted. And I think this is a
big way in which power is sort of maintained or expressed when you’re talking about
a certain framework. There is this pseudo-theological idea that there is an accepted wisdom. The priesthood tells you which
critiques are acceptable. How to make those
critiques more acceptable, which results are acceptable. For example, it’s always
been in the 10 or so years that I’ve been studying economics, it’s been astounding to me that unemployment is
never counted as a product or something that the
economic system generates. It’s always taken as an
externality or it’s there. Or, in some cases, it’s there
but it shouldn’t be there. But nobody sits down and says, no, this is a product that is
generated by this system. And I think a lot of the
expression of power results on this sort of pseudo-theological ability to close the doors to certain things, and open them to others. – I think you’re right. Natural rate of unemployment could be 50%, I mean, depending on how
your labor market is set up. Economics tell you what
the consequences would be of having labor markets,
which don’t clear, then you get a lot of unemployment. – I think some of this also has to do with the way that we changed when we went from
classical, political economy to neoclassical economics. The idea of what economics
is supposed to do went from studying how human
society reproduces itself to individuals in situations of scarcity making the best decision possible. And that itself leads to
the idea of externalities. When you’re studying how an economy or a society is supposed
to reproduce itself, climate change is very much
a part of that problem. Whereas, if you are in a
completely individualized scenario in which you are a producer
wanting to maximize your profit. You have inputs and your output is just the product that you create. Climate change is just
completely out of the picture, out of the purview of economics even. So, the way that we are defining the field is in itself then back to
your sort of ethics question. That in itself is a normative
value judgment in a way. – Yeah, but economics has taken onboard climate change, finally, because, I mean, it then
reduces the rate of discount. And
(panelists laughing) and so, all those vast issues to do with what we’re doing to nature, it’s just a discounting problem. And it can lead it suggests policy but it
doesn’t give anyone a motive, really, for carrying out those policies. The other thing that occurred
to me about what’s wrong with it arose out of a number of comments. What’s wrong with the way
economics describes human behavior is that people don’t
actually recognize themselves in descriptions that economists give of the way rational people behave. They don’t recognize themselves
in those descriptions. And it’s a great puzzle. It means that actually economists and their maths aren’t
escaping the cave at all. They’re sort of trapped in their own mental constructions, which they take to be reality. But actually the people outside the cave don’t recognize that at all. And so there is this
constant dissatisfaction with what economists tell you you are, and what you feel you are or this disjunction. But that’s, maybe, a bit of a distraction. But I’m going to go back
to the point where are the I think a point I did
raise right at the end. What sort of ethics are we going to use in order to challenge the
hegemony of Stigler’s arithmetic? How are we to prevent
these kinds of issues, like climate change, from
being reduced to arithmetic? And there I think one
has to take into account that ethics itself is in
a state of dissolution. I’m conscious of being rather
your own American center when I talk about all this. And it may be that there are bigger
intellectual resources, moral resources, available
in developing countries less developing countries to sort of plot a future
that doesn’t just reproduce the trajectory of Western societies. For example, there is actually
a revival in usury theory. When people talk about
capping rates of interest they are actually they don’t talk about
the dependence of that on medieval ideas of the just price. But that’s what they have in mind, and when people talk about the
predatory lending of banks, they are actually referring
to issues of fairness between creditors and debtors. But none of that is recognized
in mainstream economics. These are voluntary decisions. And you’re just the mechanisms that are in play are simply efficient mechanisms
for allocating capital between different uses. But is there I mean, I’m thinking of the fact that in Islamic societies, they’ve
never abandoned usury law. I mean, that’s always been. But does it have anything
influence on the way the financial affairs of
those societies are conducted? I’m asking a question,
I don’t know the answer. – Not in my experience,
I think. (chuckling) Not at all. I think those usury laws are there, but in the end the draw of global capital and the need to be able
to engage with the world in a bigger way, particularly
when you’re looking at countries like the Gulf states, ends up being greatly
dominant over the idea that usury is still in principle
prescribed under Islam. And not just in the Gulf states. In the very different sort of just state of Iran you
have the same situation. Very, very rapid neoliberal reforms that are taking place right now. And the idea that sharia
says anything at all about interest rates or usury or anything like this just
seems to be swept under the rug. They come up with some fatwa or something to sort of tweak it, and they
get the result that they want. – There is in Islamic finance,
particularly Islamic banking, what you have is similar activities to what you have in normal banking. But what really differs is some of the naming that they use. So, they would use names like
(speaking in foreign language) which means participation. Or (speaking in foreign
language) which means sharing the profit. But in the end what
happens is very similar to what you would in
normal banking situations. – So, there’s yes, sorry. – I still think that the
interest rate, in particular, is an area where ethical
considerations remain pretty much present. And, for example, you have Keynes speaking about the euthanasia of the rentiers, Islamic economics, well, Marx, of course, regarding them as social parasites. So, why do you think this is the case, which, of course, not
in mainstream economics, but other schools of thought
has persistently criticized on ethical backgrounds, the interest rate?
– Yeah, I mean, there’s been always,
always a big debate about who carries the moral responsibility as between the creditor and the debtor. I mean, that’s gone right back to the beginning of time, virtually. And, of course, the debate goes on, let’s say, with the austerity policies, which are imposed on
Greece and other debtors. Is it they’re myopia that’s caused them or greed that’s caused them
to get so heavily in debt? Is it the bankers that actually were just lending the money, which they knew they’d never be repaid, because they were going to be bailed out. So, economics talks about these things in terms of moral hazard and one thing or another. But, obviously, that is
a hugely important issue. And it should influence policy. But in mainstream economics
it doesn’t exist as a problem. You’re making voluntary contracts. Now, you can talk about
inequalities of information. That, of course, is a
totally reputable subject. The economics of imperfect information. Well, I mean, Stigler’s and many others. And that’s part of mainstream, virtually. But, again, I’m not sure
that mainstream regards it as crippling for their general picture, because I have feeling they think that if you could provide better information. If you can set up organizations that produce impartial information credit rating agencies were meant to. But, of course, be impartial judges of the creditworthiness of borrowers, but they weren’t, because they were paid by the banks. But that’s a reform we
can conceive of, can’t we? We can say, okay, they
should be freed from their paymaster should be some the state or some organization which is committed to the public good, and not the interest of the– – But I wonder if not at
least part of the discussion around inflation actually relates to that. I’m wondering if at least
not just one part of the role one part of the role of
international financial institutions and central banks is to control inflation. And I’m wondering if not at
least part of that has the role with who benefits and does
not benefit from inflation, particularly you’re
looking at the people who creditors versus debtors. And who are the people that
lose when inflation happens. I’m not talking about hyperinflation. I’m talking about inflation in general. I think at least informs
part of the decisions around monetary policy– – Yeah, of course, it does
and power comes into that. I mean, the quantity theory
of money is creditor theory. And you find that when debtor
coalitions are powerful, they abandon the quantity theory of money. And then endogenous
money comes into its own. And then in other periods exogenous money. Which, of course, all one is saying is that economics is quite weak as a science. They’ve tried many, many have tried
going back to Newcomb in the 19th century, and then Fisher and then Friedman, to establish the validity of the quantity theory
of money empirically. And they’ve all broken down. As they are bound to break down. You could foretell, forecast, that they’ll break down. So, you’re in power. You’re in power situations. But what kinds of power configurations are required to break out of the cave? – That’s exactly, I mean, I thought. I was digressing too much in thought. But I think we are ending
up at the same point. I was thinking about I think the best sentence
in Piketty’s work is the price system knows
neither morals nor limits, so it doesn’t have morals or limits. And I have been thinking about I have been trying to situate the desire, the willingness, to bring
in ethics back to economics, and asking if it is absolutely the priority for us. And for that, I found myself thinking about Bertolt Brecht’s place, where one of the fundamental
contradictions, conflicts, is always some people, lower-class people, trying to act in a good way, ethical way, trying to be good people, help the others. But are not being allowed to do so by the various systemic incentives that they get from their environment, because the only way
to survive is actually to show some sort of
accordance with this system. And I can’t totally convince myself is on the premise that the primary means of fighting this systemic context is through means of ethics. I may be sounding– – You think it is or isn’t? – It isn’t. – So, what is the primary means? – Big question. (panelists laughing) – If I may be missing maybe
a little antiquarian point. Maybe, in a confrontation between ethic or when you bring ethics
and economics together, the big loser turns out to be
ethics rather than economics. Question of influence goes from these you can call profane morals
from economics are invading ethical parts, concepts of society. And there was a school of thought in the early 19th century of
English clerics from Marx group who made a very big risk defense of economics being a
completely value-free science, because that’s the only way they felt that they could protect
the rest of society from economics’ influence. So, maybe, in the confrontation between ethics and economics or in a meeting between
ethics and economics, ethics might be the loser. Economic concepts and market
concepts start invading other aspects of society. – Yeah, I mean, market concepts
have invaded everything. I mean, ethics was I mean, by 1983, Stigler was able to say, mathematics has no symbols
for confused ideas. So, ethics is confused. And economics is symbolically is symbols and treats with symbols, which are lent to express
quite precise concepts. So, ethics has been a longterm loser. But it’s, I think I was arguing that
there’s reason to believe that it’s weaker today than
it was in the 19th century. And that the attempt to isolate economics from the rest of the way the
world worked has broken down. I mean, because economics
has invaded everything else. And, therefore, I don’t I’m left with your question. I mean, if ethics is no good. Then, I suppose, Marx would say, well, power has to decide these things. And and then the hope is that the power is on the side of the good, because the good are the majority. You see, that was the
way Marx looked upon it. The interests of the
working class were better. I mean, were ethically stronger. They were bound to be, because they represented the
interests of most people. Whereas, on the other side
there were the interests of the of a class of owners. Was Marx really saying is that ethics goes with the biggest battalions, because they represent
the more general interests of the society, as opposed to the particular interests
of owners of capital. Was that what you were saying? If you were saying that you can actually, of course, makes arguments against that. But I don’t want to make
those arguments now. All I want to make is that I don’t know where the power comes from. Where a Marxist would
locate his source of power for challenging the existing system. – If I may, I think, part of it is also like
what Gunay was saying and what you brought up. Part of it is also in the given system are any ethics strong enough
to overcome the motion of capital and the motion of profit? Can the system be be guided by something other than these motives? Is it capable of making
those macro-decisions at all? And then, if not, then I think that is where the locus of
change would lie as well. To make a system which can
be guided by human intention in a predictable manner. – But it is guided by human intentions, the existing system. Someone intends things. Some people intend that
things should be as they are. It’s not that there’s
some sort of outside force that is creating this system,
that is alien to humankind. I always come to this argument. I always feel it relates to the idea of technological determinism. Much of economics treats
technologies as exogenous in growth models. But, of course, that’s
just for convenience. It’s not exogenous. I mean, machines don’t wield their future. People use the machines and they use them in particular ways. I’ve got interested recently in the question of
automation and its impact on human wealth, wellbeing. And the invariable line
of all the literature is this is irreversible. To slow it down is certainly is antediluvian. And all you have to do is find ways of managing the transition properly. And so, your education programs come in. And then the long-run vista of how everyone will have a richer life, because the burden of toil will be lifted, and more satisfying jobs. So, they very rarely talk
about more satisfying jobs. But that may be but it’s not you can’t philosophically say that technology determines
what’s going to happen. But weren’t you coming
close to saying that, that there’s a momentum here which is almost beyond our control? And all we can hope to do is, maybe, modify bits and pieces of it to make it more make us more comfortable with it. – Maybe, not technology in itself, but the logic that leads to greater technological advancement, accumulation, whatever
you want to you call it, by every single producer,
whether they want to or not. – Okay, well, then,
surely, what drives them. And, again, I think Marx
really was right about this is the competitive market. If you then create a global market, which is what globalization
has been about. An integrated global market in which national
frontiers are irrelevant. Then, of course, you have no opposition to whereas, a single country
can decide on its own rate of technological dynamism if it wants to. But if you’re part of a global market, then your material welfare starts to depend on being in
this particular chain. So, there is a case for
economic nationalism. Of course there is. You just say, well, why should we accept the
logic of globalization, the competitive logic, when what we are being offered is to take part in a race
whose end is not clear? But it’s to our advantage
to be in that race, because, otherwise, we get
left behind in some way. That’s really, I think,
the dynamic behind. I’m very skeptical about globalization. I think I’m not really
instinctively in favor. At least, I think a lot
should get much slower, a lot of these things, to give people time to adapt and be comfortable. To be comfortable as human
beings with what’s happening. – I think globalization as
such is not the problem, because behind that globalization, still, we have the driving
mechanism of the competition. And competition has its
very, very, clearcut rules. – Yeah, but how do you get globalization without competition? – Not within this system. – You used to have planned trade. You used to have all those things that were associated
with the socialist block. They allocated these things by means of central plan. But no one wants that anymore, do they? I mean, I’ve never read anything which says, let’s go back to
the economics of socialism. – Well, there are many surveys, actually, in the ex-socialist countries, in which significant
shares of the population I mean, it’s not like
saying, black and white, it was the perfect social
society, the social system, and this is the worst one. But when comparing to do most of the people, especially those who are deprived by their material wealth, and also income security and
job security and everything, do have a longing for
the socialist societies in which they lived, I guess. I mean, that’s at least
what I see in those surveys. – Almost universal from what I’ve seen across the ex-communist
countries, actually. – [Panelist] Which
doesn’t mean that these– – Obviously does not. – These systems were
free of any problems– – [Professor] And is it
across all age groups? – I mean, those, the ones
that I referred to are those who actually experienced
the periods of transition in which they were deprived actually of any benefits that they had. – Okay, the task then, maybe, to work out a form of feasible socialism. – [Panelist] I think
that’s a good conclusion. – Anyway, maybe, we should stop. – What a feasible– – That’s Gunay’s dissertation. (panelists chuckling)

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4 thoughts on “[DISCUSSION] Ethics & Economics | How & How NOT to Do Economics | Robert Skidelsky”

  1. Economic'$ is nothing but a scam
    Flawed Theories
    Redistribution all the money goes to the Top, that why we have Poverty Homelessness
    And the Banks holding the Government & We the People to Rasom, "money out nothing"
    0+0= % profit scam
    Time to close Central Banks

  2. Forget the Socialism talk and focus on parts of Capitalism that needs work…
    We know we can never solve the information problem so why is Socialism even under consideration

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