Chief Source of Our Economic Woes

I’ve been doing some reading and it seems that the source of our present economic woes can be narrowed down to one or more of the following explanations:

Explanation                       School of Thought

Workers overpaid                  neoclassical
Jobless don't want work           chicago school
Falling rate of profit            orthodox marxist
Falling real wage share           marxian
Government choking business       right-libertarian
Rent seeking                      classical
Excessive growth                  ecological
Liquidity trap                    orthodox keynesian
Demand deficiency                 post keynesian
Net saving desire > NFA           MMT
Ineffective regulation            institutionalist
Wrong target (NGDP)               market monetarism
Wrong target (FP)                 MMR
Hyperinflation                    austrian
Imperialism                       trotskyist
Moral malaise                     religious right
Socialists in government          gun lobby
Government's run out of money     official government position

Support for these competing theoretical explanations appears to vary across segments of the community. As best as I can tell …

Rentiers mostly prefer the argument that workers are overpaid (neoclassicism), but those who suspect interest and rent come out of surplus value might flirt with orthodox marxism. The claim that the government has run out of money (official government position) remains popular as a defence of austerity. Classical ideas on financial parasitism are not well received.

Workers are divided between those who think they are overpaid (neoclassical), those who think they don’t want to work (chicago school), those who think they should be paid more (marxian), those who blame big government (right-libertarian), those who fear hyperinflation (austrian), those who think God is punishing them (religious right), and those who believe the government is doing the best it can with scarce money (official government position).

Capitalists and business people tend to regard the competing theories as mostly insightful or instrumental, which is why work on them continues to attract funding, but there are a few ideas they consider unhelpful. They like the insight that workers are overpaid (neoclassical), that their profits are too low (orthodox marxist) and that the government chokes them (right-libertarian). Beliefs such as the government is running out of money (official government position) due to its socialism (gun lobby) and bringing down God’s vengeance (religious right) are regarded as instrumental, if not insightful. Suggestions that growth could be harmful (ecological), imperialism destructive (trotskyist), workers underpaid (marxian), or business under-regulated (institutionalist) are considered unhelpful. Buzz terms such as liquidity trap (orthodox keynesian), demand deficiency (post keynesian), net financial assets (modern monetary theory), NGDP-targeting (market monetarism) or Full Productivity (modern monetary realism) tend to fall into the WTF category as far as most business people are concerned, but in the spirit of “the more the merrier” these concepts are tolerated as long as they add to the general confusion.

Politicians prefer theories that excuse their own corruption and incompetence. Among their favorite explanations of our economic woes are moral malaise (religious right), workers don’t want to work (chicago school) and the central bank is out of money (official government position).

Finally, economists themselves are somewhat divided, as the large number of competing theories indicates. There are those who would like to see a synthesis of existing explanations into a single coherent framework. But many others feel that if funding levels for theoretical research are to be maintained, especially in the universities, it is perhaps best that the product differentiation into competing approaches continues at about the present rate. The above list of theories numbers eighteen, yet remains incomplete. With the right blend of diligence, careerism and self-promotion it seems conceivable that by the end of the decade the number of distinct theoretical explanations for our ongoing economic woes could triple.

7 thoughts on “Chief Source of Our Economic Woes

  1. Yes, admittedly I was reduced to reading about workers, mainly in the Murdoch press. I trust this is a reliable source? 🙂

  2. John tried to provide a link about MMT being in the news over the last few days. His message got caught in the spam filter, from where I accidentally deleted it. Sorry, John. I am guessing it was one of the following links (if not, feel free to provide the link again):

    You know the deficit hawks. Now meet the deficit owls.

    MMT in the Headlines

    MMT Had a Banner Day

    Here’s another link by a different John at CNBC:

    John Carney – Modern Monetary Theory’s Big Weekend: The Problem with Surpluses

    Positive signs.

  3. The best part? When “schools” crossover and score “own goals”. Like pointing to the massive growth during WWII, when the government hired anyone with a pulse (hi, Rosie the Riveter!) and controlled most of the production, while advocating the superiority of the private sector to maintain price stability and virtually zero unemployment. Always, AWK-ward. :-O

  4. you forgot to add #19

    Orthodox economics: “static model for a dynamic system”

    Sums up perfectly what anyone coming from a different field recognizes right off the bat.

    Economics is traditionally practiced as a religion, by a ruling class, from an assumed static position of control. A colonial management theory? Ben Franklin said essentially the same thing ~1755. Two hundred years on, why are still even discussing this obviously broken model?

    Watching the movie “Moneyball” reminded me of how close we as a culture are to capturing coordination on a greater scale. If we can capture the statistics that discriminate optimal sports teams from the sum of players, then surely we can capture the distributed statistics that describe a coordi-nation. The alternative is to remain nations that are no more than the sum of their uncoordinated parts.

  5. Peterc thank you for your kind explanation, though it was not really needed.

    What I would like to see more of is MMT theorists on tv and radio programs, e.g. NPR’s Brian Lehrer Show, Pacifica’s Letters and Politics with Mitch Jeserich or Against the Grain.

    Not that I’m a hardcore MMTer (I do not have enough expertise to have a truly informed opinion, and do not like to take ideological positions for the sake of having an ideological position), but a wider spectrum of economic views being aired can only be to everyone’s benefits.

  6. May I suggest that we get out from this tragical-stupid-hilarious situation by igniting the progressive holomovement engine at…

    Warp schpeed! 🙂

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