The Challenge of Sustainable Development; From technocracy to democracy-oriented political economics

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Abstract

Mainstream neoclassical economics as well as heterodox schools should be regarded as different kinds of “political economics”. There is no value-free economics. We therefore need to bring democracy into economics. The present challenge of sustainable development suggests that a new conceptual framework in economics is needed. In this essay, a political and democratic view of individuals, organizations, decision-making, markets, assessment of investment projects and policy options is proposed.

The imperative of democracy also implies that the close to monopoly position of neoclassical theory and method at university departments of economics has to be replaced by pluralism. There is a continued role for neoclassical theory and method, considering the fact that millions of professionals globally have been indoctrinated in this particular way of understanding efficiency and governance but the idea that neoclassical theory is best for all purposes has to be abandoned.

Posted for comments on 20 Mar 2020, 11:03 am.

Comments (2)

  • Rafael Galvão de Almeida says:

    Reading the article, I thought it to be interesting, although the writing seems a bit flighty, with jumps from references to another, as if remembering them in an improvised talk. However, I do believe the article makes a few interesting points.

    I have interest in the theme of ideology in economics, and I agree with the author and his references on value-free economics is anything but a delusion. I don’t consider the mathematization of economics to be a problem as more dangerous than the value-free delusion, because the biggest danger of excess of math is to turn the economist into a reductionist or Larry Summers. However, value-free economics has a more important issue because of the contradiction of using a value-free approach to value-ladden results.

    I cite again this Lionel Robbins’s quote (which I cited elsewhere in this site): “No less an authority than Gunnar Myrdal has devoted a whole book to the argument that, explicitly or implicitly, all propositions of economic theory, all classifications of happenings having an economic aspect, must involve judgments of value. I do not agree with this position. I don’t think that the proposition that, if the market is free and demand exceeds supply, prices will tend to rise, has any ethical content whatever.” (Robbins, 1981, p. 4)

    Robbins remembered Myrdal because he was gentleman, because, out of all winners of the Nobel memorial prize, I believe Myrdal is the most forgotten one, I suppose because of his opinions that would be seen as radical and unflattering to today economists. But ignoring Myrdal’s critique has a lot of consequences, because it blinds economists to a self-critique. In fact, Waterman (2020) argues that the hypothesis of value-free, along with rational choice, is so fundamental that it is one thing that remained constant in the evolution of different definitions of “orthodoxy” and why orthodox economists ignore heterodox ones, if they can’t accept, there is no pointing in arguing with them (which, in turn, in my own experience, creates ugly debates where nobody discuss anything and they are just throwing snarky and malicious comments at each other).

    I think one thing the article lacks is a proper exposition of how applying neoclassical economics to sustaintability can have bad consequences, like how William Nordhaus’s use of discount method and defending a rather large temperature limit in climate change economics (Hickel, 2018; Kelleher, 2019).

    Robbins, again, already proposed a distinction between economics and political economy. But your article must emphasize this distinction does not exist, so engaging with his argument should take this in consideration, to show why Robbins is incorrect (I know that this argument has been built for decades, but, even at the risk of simplifying too much, Robbins is usually the “face” of this argument, because he was the one that spoke about it so openly in the beginning, on his 1932 book).

    That being said, political economics is a term that has been already used to refer to rational-choice based economic analysis of politics (see Persson and Tabellini, 2000), and they used this term because they considered previous economic analysis of politics wasn’t value-free enough. In fact, in spite of public choice theorists aggressively claiming their approach is value-free (e.g. Boettke and Piano, 2019), nobody believes them. But still, mainstream political economists have defended their approach is more value-free than the alternatives, how would they be wrong? Your article might provide a clue why, because their approach only tends to consider market solutions that benefit whoever controls the market and might not be sustainable because of growth (which is Nordhaus’s argument).

    The efforts of including ideology in the calculation of a successor to cost-benefit analysis is what I consider to be the most important contribution, because if you remove ideology of a person, you’re simplifying too much – you are removing one of the most important things that guide someone’s choice.

    On ideology, although North had a much more open-minded view of economics, he still subordinated his views, including of ideology, to the rational choice theory (Almeida, 2019, ch. 4). And the democratic participation would benefit from readings from Albert Hirschman, I think he would be a good discussant, because he also opposed rational choice theory in these terms (Almeida, 2019, ch. 5).

    However, although I consider the article makes a few good points that would need rewriting to be in publication state, I have to wonder what exactly your article differs from your previous article “Toward sustainable development: from neoclassical monopoly to democracy-oriented economics”, published at the Real-World Economics Review last year (Sördebaum, 2019), which is not referenced in the bibliography, even though lifts a lot of material from it. The article shares a few excerpts such as identical citations to Myrdal and North, the discussion on cost-benefit analysis and positional analysis, and it is better written than the one submitted to this journal. Because, it might need resubmitting if it is the case.

    Almeida, Rafael Galvão de. 2019. Dreaming of unity: essays on the history of new political economy. Thesis, Doctor in Economics. Belo Horizonte: UFMG.
    Boettke, Peter and Ennio Piano. 2019. Public choice and libertarianism. In Roger D. Congleton, Bernard Grofman and Stefan Voigt, (eds.). The Oxford hanbook of public choice. Oxford: OUP.
    Hickel, Jason. 2018. The Nobel prize for catastrophe failure. Foreign Policy, December 6, 2018.
    Kelleher, J. Paul. 2019. Reflections on the 2018 Nobel Memorial Prize awarded to William Nordhaus. Erasmus Journal of Philosophy and Economics, 12(1), 93-107.
    Persson, Torsten and Guido Tabellini. (2000) Political economics. Cambridge: MIT Press.
    Robbins, Lionel. 1981. Economics and political economy. American Economic Review, 71(2), 1-10.
    Söderbaum, Peter. 2019. Toward sustainable development: from neoclassical monopoly to democracy-oriented economics. 87(19), 182-195.
    Waterman, A. M. C. 2019. The Evolution of” Orthodoxy” in Economics: From Adam Smith to Paul Samuelson. Independent Review, 24(3), 325.

    • Peter Söderbaum says:

      Thank you Rafael for the comments: Does the article manuscript differ from my previous article in Real-Life Economics Review (later published again in the book by Fullbrook and Morgan “Economics and the Ecosystem”?) There are certainly similarities but no text (except citations from other scholars such as Myrdal and Kapp) is directly taken from my previous articles, book chapters or books. I try to take steps forward by avoiding to bring in text from previous publications.
      My question is instead: How can I contribute to a heterogenous journal such as “EconomicThought”? Have value issues and Myrdal´s contribution been discussed sufficiently in this journal? Have the implications for economics of taking democracy seriously been discussed? Is the theme of sustainable development part of the dialogue in “EconomicThought”? (Part of the claimed newness of this manuscript is the emphasis on democracy. Have we as heterodox economists already internalized democracy into our thinking?)
      I agree that the example of Nordhaus and how he uses traditional CBA in relation to climate change would have been a good illustration. But my manuscript does not exlude contributions by others. I am already writing too much, it seems.

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