Standing on the shoulders of giants: In response to Howard Reed
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Standing on the shoulders of giants: In response to Howard Reed

Recently, Howard Reed wrote a controversial piece for Prospect. This blog pushes back on Reed’s notions of tearing down classical economics. Be committed and passionate, but understand the giants of the past.

First posted on: 

Roger Farmer's Economic Window14 April 2018


I have rarely read anything as unhelpful to the task of rebuilding macroeconomics as Howard Reed’s poisonous attack on the foundations of the dismal science, which appeared in Prospect last week. I have a lot of sympathy for Howard’s position. But if you are young and committed, with a desire to rebuild economics, your first job is to understand the edifice you are rebuilding. 

Diane Coyle has penned an admirable defence of neo-classical economics in response to Reed’s rhetoric; and that is a good place to start. But there is much more to be said, particularly if you are reading this post from the position of a young uncommitted student with a desire to change the world.

Perhaps the most depressing part of Reed’s criticism is that he has an understanding of what he is attacking. But the young mind, taking his words at face value, will be deterred from studying neoclassical economics. Instead our bright young soon-to-be academic will set herself the task of reconstructing economics from a blank slate. So where should our budding reformer begin? Howard suggests that the classical economists, Smith, Ricardo and Marx, may perhaps have something valuable to contribute.

I disagree. Smith,  Ricardo, and Marx were privileged members of the bourgeoisie who injected eighteenth and early nineteenth century moral values into economics. They were students of history, familiar with a western philosophical tradition stretching back to Plato and Aristotle, both of whom were European slave owners. Marx may have had some enlightened views on the role of class, but he foolishly tried to formalise his system using elementary mathematics.

No. I believe that our reconstruction must dismiss, more than  just the mistaken neoclassical ideas of Walras, Pareto and Marshall. To truly reconstruct economics as a relevant social science, we must first tear down every part of the existing patriarchal structure which serves as a tool of the ruling elite to suppress the legitimate desires of freedom loving peoples throughout the world to receive their entitled share of global wealth. We must begin, instead, by studying Latour,  Derrida and Baudrillard.  

And I have a bridge to sell you.

The divergence of neoclassical economics from classical ideas does not have to do with mathematical formalism. It occurs when Walras and Pareto introduced us to homoeconomicus, a human being who springs fully formed into the world at the age of 18 with a complete understanding of his preferences over every conceivable outcome in his extensive choice set. That step enabled us to understand why markets are better ways of organizing economic activity than any other known form of social organization. If you disagree with that statement, go ask Xi Jinping or any one of the other 1.5 billion human beings in China who have been lifted from abject poverty in the space of a few decades by the adoption of a market economy.

Homeconomicus brought understanding that was central to the neoclassical project. But his introduction to economics came at the cost of splitting economics off from sociology, which retained the idea that our preferences are formed through social interaction. There is room for both ideas in the social sciences and economists and sociologists have much to learn from each other. But to engage in genuine dialogue we must first learn each other’s language.

If you are a young, idealistic, smart, dedicated student with a desire to do good in the world there are many ways to accomplish that goal. If economics is your chosen route, do not be fooled by snake oil salesmen who offer you an easy path. There is much that is wrong with existing economics. But to contribute to our subject, you must first understand how we got here. Neoclassical Economics was constructed by young, idealistic, smart, dedicated people, just like you, who built on the ideas of those who came before. Take a page from the book of those who preceded you. We are all standing on the shoulders of giants.