“Does Economics Do More Harm than Good?”

“Does Economics Do More Harm than Good?” 1

Political scientist and econoclast Mark Blyth interviews George DeMartino about his new book which critiques economics as an often destructive endeavor. From the overview to this talk:

In 1849, the historian and philosopher Thomas Carlyle referred to economics as the “dismal science.” The pejorative stuck, and is still slung by critics of the field today.

But what if economics is worse than “dismal”? What it’s…harmful?

George DeMartino’s recent book, “The Tragic Science: How Economists Cause Harm (Even as They Aspire to Do Good)”, makes exactly that claim: that economists aren’t just ineffective at solving social problems; they often end up creating new ones. Worse still – since economics lacks a meaningful criteria for defining what harm is, economists often don’t know how to measure (and fix) the problems they create.

George is an economist himself, and his work isn’t just a pile-on against the field. Rather, his critique points a way towards a more socially engaged version of economics – one that takes the notion of harm seriously.

I suspect those who live in the areas that have been losers to globalization, like those still in the Rust Belt, or were hurt by the financial crisis, or are in a country that had its labor and/or environmental laws steamrolled by ISDS (investor-state dispute settlement) requirements in trade deals or was on the receiving end of the IMF’s tender ministrations, are already plenty leery of orthodox economics.

As you will learn in this interview, DeMartino makes new additions to the critique of economics. As readers likely know, familiar tropes include that economists think the world should be organized to suit a pathological homo economicus, that they ignore or deal badly with externalities, as is costs of doing business imposed on innocent bystanders, or cling to demonstrably false and destructive ideas like the loanable funds model.

DeMartino reframes some traditional objections, like of the equilibrium model, where economist handwave that any disruption is temporary and eventually the old normal trajectory reasserts itself. DeMartino points out that many shocks are not like dropping a stone in a pond, but much more like an avalanche, where a comparatively small event can produce a cascade. More generally, he argues that economics has no notion of economist-induced harm, and highlights that as a huge and conveniently self-serving blind spot.

DeMartino points out that economists have influence but no power, ironically the same position McKinsey occupies. That allows them to shrug off bad results by arguing their policy was not implemented properly. DeMartino argues that if a policy is not robust enough to survive less-than perfect production, maybe it wasn’t robust enough to recommend in the first place. similarly debunks the idea that if a policy change on paper produces more net gains than loss, the winners can alway pay off the ones who suffer. But not only does that seldom happen, DeMartino points out that some losses are incommensurable, that they can’t be reduced to a monetary calculus (like species loss).

There’s a lot more juicy material here, so I’ll stop before I risk over-summarizing.

By Mark Blyth. Published at The Rhodes Center Podcast

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