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February 5, 2002

Revisiting Economics

Reservations re. "Market Fundamentalism"

While I've written much over the years that promotes a free-market approach as the better way to tackle many things in life, I don't buy it as the automatic cure-all that some people say it is, based on the premise that price automatically indicates the worth of anything. The fallacy, it seems to me, lies in the claim that the market caters to majority needs as indicated by price, whereas in reality it caters to the whims of those most able to pay. Eventually the have-nots get angry or desperate enough to try and take, with all the consequences we're familiar with.

A reader by the name of Hassan Masun agreed in a letter, part of which reads:

Absolutely. Any study of market prices, and their drastic change given relatively predictable events, puts paid to the strong efficient markets hypothesis?using market prices as an indication of underlying value (or of long-term value for uncertain futures) is clearly stupid in many cases. Examples include every bubble (and subsequent crash), high volatility, sudden market movements without good exogenous causes, and the myriad of mismatches between monetary valuation and physical / environmental / social well-being.

Hassan also drew my attention to a movement that began with a group of French economics students in 2000 calling for changes in the teaching of economic theory, which seems to be generating a vigorous following worldwide. Among the things that the students protested against were:

  • The uncontrolled used and treatment of mathematics as an end in itself, and the resulting "autistic science"
  • The repressive domination of neoclassical theory in the curriculum
  • The dogmatic teaching style, leaving no room for critical and reflective thought

Among the demands:

  • Connection with empirical economic realities
  • Science in place of scientism
The network that has resulted is called the Post-Autistic Economics Movement. Web site at www.paecon.net
 
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