A more interesting proposition, imho, is that NPE immensely contributed to social construction of economics as science.
Historically, economics is nothing more than a certain form of moral philosophy, more or less on equal footing with Sunday sermons or after dinner speeches. Application of mathematical models does not make it more "scientific" than, say, numerology, because it does not establish empirical connections between numerical models and physical reality. In fact, a "proof" in economics oscillates between these two extremes, establishing formal relations among mathematical functions and providing anecdotes from the repertoire of Sunday sermons and after dinner speeches (invisible hand, Jack and Jill ice cream stand, baby-sitting cooperative and the like.) In between, there is a whole bunch of politically motivated opinions supported by selective reference to the said anecdotes and empirical observations.
Missing, however, is a crucial element that makes a certain form of analysis science - bona fide attampts of empirical refutation. Anyone can find an example or two in support of even most nonsensical propositions and conveniently ignore examples that contradict those propositions. The trick, therefore, is to look for evidence that can potentially falsify a proposition, and accept that proposition only if no such evidence can be found at the moment. This is what sets apart science from, say, after dinner speeches or Sunday sermons.
In economics, however, no such falsification attempts exist. Models are a priori accepted as valid and only corroborating evidence is accepted. If such evidence is not found, or if contradicting evidence is discovered instead - it is dimissed as either bad data or "irrational behavior" (i.e. the econoic theory of human behavior is right, it is just those stupid humans who do not know how to behave.) Consequently, preditictive validity of most economic models (at least of the neo-classical variety, but macro-economics does not fare much better) is close to nil.
With such a dismal track record, economics would be nothing more than a bunch of morality tales, taken as seriously as Sunday sermons and after dinner speeches. Enter the NPE, which associates economics with natural sciences (physics, chemistry, physiology etc.) and presto! - economics becomes a "science" in the minds of the chattering classes.
This transformaton from a morality tale to science is useful in creating legitimation mythology that justifies the existing power relations in which businessmen and politicians serving their interest have disproportionally more power than any other social group. Legitmation is an essential element of power relations, because it is instrumentla in people voluntarily accepting the authority of those wielding power. Without legitimacy, the powers that be would have little in their arsenal short of bayonettes to compel people to obey the authority. And we all know that one can do many things with bayonettes, excpet to sit on them (not a very attractive long-term prospect for any power that be.).
Legitmation of power used to be perfomed by official religion in the form of suppling claims of "divine" origins of the current rulers (i.e. god save the queen, the czar and other crowned heads.) In the era of reason, however, few people would take such religious legtimating myths seriously. Modern power has to be "rational" i.e. not only originating in a "rational" process (such as weighing popular preferences) but also having "rational" capacities (that is, able to steer social and natural processes in a desirable direction.) The ritual of elections forms the basis of the legitimating myth of democracy, the pseudo-science of economics (micro- and macro-) is one of the pillars of the legitimating myth of rational control - other being various managerial ideologies attributing extraordinary skills and capacities to managers, and risk management procedures and "theories creating an illusion that certain undesirable situations (such as effects of
industrial pollution, or threatening criminal behavior) are "under control."
In sum, economics is nothing more than a form of moralizing that forms the basis of legitimation mythology that justifies the disproportional power of the business class in modern society. It can serve that function by creating an illusion that it is "scientific" and therefore "rational." The NPE is a key element in social construction of that illusion.
Wojtek
----- Original Message ---- From: B. <docile_body at yahoo.com> To: LBO Talk <lbo-talk at lbo-talk.org> Sent: Tuesday, February 17, 2009 5:29:00 AM Subject: [lbo-talk] Another Nobel economist - not Krugman! - weighs in on stimulus
ROBERT MUNDELL!! :)
http://www.global-leaders.tv/en/archive/robert_mundell.asp
Robert Mundell: [...] What the government does to the corporation today is take thirty five percent of the profits of the corporation. And without putting anything in. So with the 35 percent of corporate tax, they take all that, draining the corporation from that, without putting anything in. And so what the best thing to do for stimulus is to reduce or eliminate the corporation tax.
It is a double taxation anyway, because the capital pays the tax to the corporation and the profits are taxed at the corporate level after 35 % is taken out. And then there are also tax in the individual level. So eliminate it. By the way the revenue isn’t going to be very much because the corporate tax used to earn 5 % of GDP in revenue. It’s gone down about 1,5 % of GDP. So it doesn’t add too much. And in a recession period there won’t be any profits and tax, so the revenue will be very little. So you don’t loose too much, but you would, if you stimulate economy all the other taxes will increase. And the revenue then from the tax cuts of corporations will increase the tax of every other corporation. Just recently, Germany has cut it it corporation tax from 25 % to 15 %. That’s a very good move and that’s what the United States should do. I think, I was going to say from 35 % to 20 %, but it would be even better if they do it to 15 %.
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