“Does Economics Do More Harm than Good?”

Political scientist and econoclast Mark Blyth interviews George DeMartino about his new book which critiques economics as an often destructive endeavor. From the overview to this talk:

In 1849, the historian and philosopher Thomas Carlyle referred to economics as the “dismal science.” The pejorative stuck, and is still slung by critics of the field today.

But what if economics is worse than “dismal”? What it’s…harmful?

George DeMartino’s recent book, “The Tragic Science: How Economists Cause Harm (Even as They Aspire to Do Good)”, makes exactly that claim: that economists aren’t just ineffective at solving social problems; they often end up creating new ones. Worse still – since economics lacks a meaningful criteria for defining what harm is, economists often don’t know how to measure (and fix) the problems they create.

George is an economist himself, and his work isn’t just a pile-on against the field. Rather, his critique points a way towards a more socially engaged version of economics – one that takes the notion of harm seriously.

I suspect those who live in the areas that have been losers to globalization, like those still in the Rust Belt, or were hurt by the financial crisis, or are in a country that had its labor and/or environmental laws steamrolled by ISDS (investor-state dispute settlement) requirements in trade deals or was on the receiving end of the IMF’s tender ministrations, are already plenty leery of orthodox economics.

As you will learn in this interview, DeMartino makes new additions to the critique of economics. As readers likely know, familiar tropes include that economists think the world should be organized to suit a pathological homo economicus, that they ignore or deal badly with externalities, as is costs of doing business imposed on innocent bystanders, or cling to demonstrably false and destructive ideas like the loanable funds model.

DeMartino reframes some traditional objections, like of the equilibrium model, where economist handwave that any disruption is temporary and eventually the old normal trajectory reasserts itself. DeMartino points out that many shocks are not like dropping a stone in a pond, but much more like an avalanche, where a comparatively small event can produce a cascade. More generally, he argues that economics has no notion of economist-induced harm, and highlights that as a huge and conveniently self-serving blind spot.

DeMartino points out that economists have influence but no power, ironically the same position McKinsey occupies. That allows them to shrug off bad results by arguing their policy was not implemented properly. DeMartino argues that if a policy is not robust enough to survive less-than perfect production, maybe it wasn’t robust enough to recommend in the first place. similarly debunks the idea that if a policy change on paper produces more net gains than loss, the winners can alway pay off the ones who suffer. But not only does that seldom happen, DeMartino points out that some losses are incommensurable, that they can’t be reduced to a monetary calculus (like species loss).

There’s a lot more juicy material here, so I’ll stop before I risk over-summarizing.

By Mark Blyth. Published at The Rhodes Center Podcast

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  1. Jackiebass63

    I’m not an economist but I believe they rely too much on made up models that rely on assumptions. You know what they say about assumptions.

  2. John

    Dr, Ha-Joon Chang has spelled out a similar case in his many books and lectures. He pointedly said at an LSE event: Economics hurts people.

    1. Eclair

      John, I recently read Ha-Joon Chang’s ‘Edible Economics.’ A delightful and easy read, especially if you enjoy cooking (and eating) foods from cultures around the globe. Chapters on garlic, limes, carrots, anchovies, chiles, and okra, leave the reader salivating as well as picking up economic principles, most of which will already be familiar to NC readers, but Chang serves them up in tasty wraps.

      1. Carla

        Paperback edition of Edible Economics can be pre-ordered direct from Blackwell’s in London for only $12.25, shipping to US included. It comes out in Sept. 2023.

    1. korual

      Agreed. I think the correct category is that of ethics, so economics, politics and law sit alongside each other in the consideration of how to organize society.

      Basing economics on either mathematical models or individual “rational” agents are therefore also category errors.

      But the trouble is, economics is all about money, so it will tend to be riven with conflicts of interest.

      1. Ignacio

        The original confusion possibly comes from the term “social sciences” as opposed to “natural sciences”. Even when social sciences often try to apply empirical methods and sometimes these are quite useful it might be possible they often fail to recognize that the empirical laws they try to build are always subject to arbitrary human and social thinking which is anything but natural or universal and very much conditioned by changing ideologies. If they want to be serious they need to set the ideological framework honestly and this is possibly the most typical failure of economics when they try to present itself as a technical universal thing. Social and natural sciences overlap when you do applied science. Engineering, medicine and again, ideology has an influence in these matters.

        1. Dick Swenson

          What about “political science?” Sadly, sources for the meaning of “science” are books by Lakatos and Popper. Not easy but very enlightening readng.

          1. KLG

            Yes, they are! Popper’s Logik der Forschung could have been a lot shorter, though: “Believe no result until you have figured out how to do the proper control experiment. Several times.” That is the practical meaning of “falsifiability.” And no, I did not read it in the original German. I did try, though. But there are also a few philosophical biologists who are worth the effort: Ernst Mayr is very accessible and appropriately harsh on those who deserve it. Somewhere he characterized the “systems biologists” of the 1940s and 1950s as biologists who couldn’t do an experiment. Pretty much, but they could do a decent gloss on Norbert Weiner. Sara Green of the University of Copenhagen is also good on the pretensions of modern systems and synthetic biology.

  3. Carla

    Jason Hickel is an economic anthropologist. I highly recommend his book, “Less Is More: How Degrowth Will Save the World.” Available from Blackwell’s in London for only $12.82, including delivery to the U.S.

    It seems to me that challenging the growth imperative at every turn may be the most important thing we can do right now. Of course, this is something Yves and Lambert consistently do, and just one reason I am forever indebted to them, and to NC.

  4. John

    I will speak from my own experience. What is lacking is a “Feedback Loop to Reality”. There is no penalty for being wrong in many if not most professions. (Economics, Policy, Social Work, Political Science, Media) As an Engineer, if I build a bridge that falls down, I pay a high price, so my designs are going to be conservative and not pushing the envelope. For many other professions this is not true.

    Even worse, being wrong seems to result in promotions, and accolades, and the people who are wrong go on and live good lives, while the victims of the Harms Done are degraded and blamed for the harm that happened to them.

    Decision Makers are so divorced for the impact of their decisions that more often that not, they are not even aware of the harm done by their decisions, let along impacted. They get all the benefits and non of the harm.

    I am a believer that we need to “radically decentralize” so that decisions are made at the community level, and the impact of the decisions is immediate and obvious and the decision maker has adjust to reality. In complex systems anyone who claims they know what is going to happen is delusional, and should be treated as such.

    The concept of “Chesterton’s Fence” or to “unintended consequences” needs to be absolutely embedded at every level of government. For this reason, policies need to be first tried at the local level on a limited scale, and only after they have been proven over a long period of time (decades) should they be implemented broadly.

      1. playon

        And the politicians who serve corporate America are protected by their ability to obfuscate and blame others.

    1. Carla

      @John — I concur with much of your comment, particularly regarding lack of accountability. But I find the last paragraph a little too broad. In a sane system radically different from the one we are in, it seems to me all proposed government policies would be subjected to a rigorous, and as bias-free as humanly possible, risk/benefit analysis. Some potentially very necessary policies may carry such high risks that they should only be tried in small, local “pilots.” In other cases, the evaluated benefits of a policy could be so great that denying them to the larger public could be criminal.

      Clearly, when we start from less than zero in terms of accountability and accomplishing the vast tasks before us, there’s a whole lot of room for improvement. Incremental change, no matter how appealing it appears on the surface, ain’t gonna cut it. My 2 cents.

      1. John

        I agree, but the only way to truly know the Risk / Benefits to actually see what happens when the policies are enacted on a small scale. Policy makers have proven themselves very inadequate with respect to predicting the impact of their policies. Most often, they get it completely wrong, but it takes 25 years to see that. By limiting the size of the impact, we can truly see what works, before buying the whole package everywhere.

        Case in point. With the Green Revolution, the protein level in wheat was increased. In 2023 we have an epidemic of Gluten Intolerance. Connected?? Possibly, but very hard to prove, and even harder to roll back. What is true is that the number of people who cannot tolerate Gluten is exploding. What is also true is that we are not talking about it, nor is any research that I know of been done to understand it. So we have a decision that was made a global level 50 years ago, and we have no understanding of its impact today.

        1. podcastkid

          “Connected??” (John)

          Good question. Maybe there’s some protein fold in the engineered version for all we know they haven’t determined yet has bad repercussions, maybe one little bond somewhere.

          “In other cases, the evaluated benefits of a policy could be so great that denying them to the larger public could be criminal.” (Carla)

          How bout some GMO policy? A show on Sputnik almost had me convinced some GMO are worth the trouble (in fact it said they were less trouble). Or, you could look at the research energy involved as wasted energy…also trouble.

          Future economics I think will deal with true improved yields/resilience [if anything is improved]…and “Connected??”

          They’ll deal with the answer to less effective antibiotics. They’ll deal with things like Cuba dealt with things. If you can’t get to bullet trains, you just can’t get to’em.

            1. podcastkid

              I agree. That’s why I wrote “future economics,” and not future economists. But, yes, I see! There might needs be a replacement word for the former.

              Consider how fans of Musk go on and on on fb. Consider how the Gates Foundation goes on and on on fb. What I think they believe is that they are carrying the torch for where-economics-should-go if it would only recognize [what in their minds are] very recently discovered potentials. They may see themselves as informed on limited quantitative potentials, yet they see themselves as having their say in the evolution of a ‘social science’…for sure when said science is emerging more from many voices than from economists. In a way Oliver Stone will be contributing to this, because he will come with numbers of megawatts needed and numbers of megawatts we can’t attain without nukes. Because there is a number of watts the mean human will require (for instance)…is why speculators out there in the open forum will conceive a larger group is morphing old economics into a kind of ‘social science’ handling greater numbers of variables and newly recognized potentials [potentials that strike me too often as fantasies].

              Now suppose against all odds they managed to do this with actually relevant quantitative needs vs what’s available quantitatively utilizing present means. I think in that case they probably for instance would put things like fusion aside, and begin trekking into the weeds re Vandana Shiva’s claims germane to GMO.

              BobbyJr has Kucinich as a campaign manager. Dr West will need you and Jack Rasmus explaining how (the old prior) economics worked, and how whatever could follow should work.

    2. witters

      For this reason, policies need to be first tried at the local level on a limited scale, and only after they have been proven over a long period of time (decades) should they be implemented broadly.

      A case can be made that China sort of does this.

  5. The Rev Kev

    It occurred to me how much modern economics resemble medieval style religion while listening to Mark Blyth. Consider – both are faith-based and will ignore the facts. People who disagree with the church dogma are excommunicated while with economists your professional career can be ended. Medieval religion had their power based in cathedrals whereas modern economists have institutions be their base of power – such as the Chicago school of economics. Medieval priest informed the flock what was in the bible as it was in Latin and only the priests read Latin. Modern economists use high order maths to hide the underlying assumptions and only they can read those maths. The Church sucked up power, wealth and prestige and you see this with modern economists as well. Old style priest demanded respect because they were priests while modern economists demand respect because they are economists. Both the medieval church and modern economists are based in the west. Questioning the dogma was strictly not allowed in both institutions. Come to think of it, this would make a good scifi story where a world has economists evolve into their own religion that rules people’s lives like the medieval church did.

    1. digi_owl

      Not sure where i picked up the idea, but many social sciences, with perhaps economics at the top, are prescriptive rather then descriptive.

      As for scifi, check out the Ferengi of Star Trek. Originally an attempt at replacing the Klingons for TNG, but ended up being comedy relief rather than a credible threat.

      So instead we got first Borgs and then Cardassians (heh).

    2. vao

      It is indeed a dogmatic ideology. The doctrine must be believed, not appraised scientifically.

      I already exposed my view on this, but in short:

      a) Take any textbook on economics.
      b) Look for the fundamental “laws”, almost always in the form of curves — supply and demand, firm’s optimal supply, IS-LM, etc.
      c) Seek the graphs showing the empirical curves based on real-world data that illustrate those laws.
      d) Observe, to your amazement, that are never — ever — examples for point c.

      The lack of empirical validation of those laws — nay, the refusal to validate them empirically, means that economics is not a science.

      1. Ignacio

        You are definitely right IMO. Doctrine, history and current circumstances. All these strongly influence economics. Economics should change with time and what might have been useful decades ago can now be worthless. We are seeing how difficult is to adapt XXth century economics to current challenges such as climate change. You cannot go on with the same principles again and again.

    3. ChrisPacific

      I have thought this for a while now. Unlike science, which creates models in an attempt to describe and predict reality, economics creates a model and then expects reality to conform to it. If the two are different, that’s the fault of reality – not the model, which is perfect.

      Anything that brings reality closer to the model is good by definition. If it also means that millions of people are impoverished, denied basic necessities, killed, or left to die, that’s a matter of indifference (or at most, vague regret). What matters is bringing reality into alignment with the model as closely as possible. Compare the Crusades.

    4. EtCetera

      The fatal flaw of economics is that it cannot possibly make any predictions so long as the mechanisms on which it hopes to base predictions are opaque, hidden, secret, which is the vast majority of economic transactions. So long as the invisible hand of the market is invisible. Economics attempts a mechanistic explanation without full knowledge of the mechanism.

  6. spud

    we will compensate the losers from free trade, that was what the free traders said all through out the reign of terror from 1993-2001. if there are so many losers that need to be compensated, its obvious free trade only benefits a few as we see today.

    there was never any real compensation, just talk, and as michael hudson says democrats are now starving children, and yet prices keep rising.

    1. JonnyJames

      Thanks Kirk. Thorstein Veblen seems to be censored from mainstream economics curriculum.

  7. JonnyJames

    Steve Keen’s Debunking Economics was another great critique. I haven’t read this from DeMartino yet.

    To be crude: mainstream academic economics (neoclassical “theory”) is little more than pro-oligarchy ideology dressed up in some fancy math models that are “internally valid” (tautology) but not externally valid (have no resemblance to empirical reality). This is supposed to make it an indisputable science when it it little more than tautology.

    The post 2008 reality should have made it obvious that neoclassical economics is a joke. But the ideology serves the oligarchy, therefore we are supposed to pretend nothing happened and that the nonsense taught in most colleges and universities is a serious “science” akin to physics or chemistry. There is no alternative offered, it is part of the Unified Hegemonic Narrative.

    Economics is the study of how humans distribute resources and wealth. Humans are highly irrational, arrogant beings, therefore economics can never be a science like physical sciences. Silly humans will legitimize the most irrational BS in order to further certain interests. Economics is politics and vice-versa. Economics is also moral philosophy, as it used to be known.

    Academia needs to revisit how economics is framed and taught – we need a major overhaul.

    1. Glen

      Yes, I’m a big Steve Keen fan. His education in economics, and then willingness to explain it (or more appropriately explain what is missing) to the rest of us was eye opening. Even just assuming that all growth, all the time is “progress” is now running into real constraints, and is starting to look more like a bizarre suicide pact than a viable economic model assumption.

      Major overhaul required!

  8. Susan the other

    Thank you Yves for this post, and thank you Mark Blyth for giving us George DeMartino. What a straight talking economist. He’s living proof that human logic prevails when all else fails. Sometimes. I’ve been blaming the big wobble in economics on the whole idea and pursuit of profits. And we are crazy enough to rationalize it all the way to extinction. Calling it religion is almost an understatement. Iterative learning is a very precious commodity. I do hope we can teach our AI software to understand the concept “not” because it could make all the difference. Maybe beginning with a bedrock statement like “profit is not profit” or stg.

  9. some guy

    ” Does Economics do more harm than good?”

    Well . . . . whose economics? Which economists?

    If Professor Hudson is considered to be doing more good than harm with his particular economics, there is an answer “no” to the question right there. Is Professor Hudson the only ” more good than harm” economist?
    Or are there others? Perhaps people here might consider naming any more-good-than-harm economist they can think of and say why they think so.

    1. JonnyJames

      But Hudson does not adhere to neoclassical ideology. His book J is for Junk Economics is a humorous take-down of neoclassical (mainstream) economic ideology. He is an economic historian, political economist, balance of payment specialist, etc. but not “an economist” in the common use of the word.

      That’s why prof. Hudson has been so accurate for all these years.

      1. Melissa

        With all due respect, I think in your zeal to defend Michael Hudson against any perceived slights, you missed some guy’s entire line of reasoning.

        1. JonnyJames

          No worries, no slight taken. It seems we used different terms, and now it is clarified.

      2. some guy

        What I am suggesting is that this article confuses ” economics in general ” with ” pro-establishment pro-neoliberalism economics ( which people call by the names “neoclassical” or other names in an effort to say what kind of ( and whose) economics we are talking about. We could also call the economics this article is talking about by the name ” propagandanomics” or ” hasbaranomics”. Or any other better name which someone can think up.

        Or perhaps this article just invites the reader to confuse “economics” in general with “neoliberal hasbaranomics” in particular. Perhaps the author knows about all the excluded economicses but figures they are not worth writing about because they have been suppressed and excluded.

        But even though they are suppressed and excluded and cast into outer darkness, they are still worth knowing about and thinking about as we desperately try to upgrade the level of reality-based thinking about political-economic affairs. And this thread might be a good place for anyone who wants to mention his/her favorite counter-mainstream economic thinkers and why they are his/her favorite and what they might contribute to thinking about these things.

        I have read in past threads that Professor Hudson sometimes gives advice to the relevant policy-makers and apply-ers in China and clearly the ChinaGov feels that Professor Hudson is doing them more good than harm.

        So . . . if Hudson, why not others?

        1. JonnyJames

          I understand. Classical/neoclassical are the terms academics use. Different definitions and terms can be confusing.

          prof Jack Rasmus is pretty good IMO.
          I agree with James Galbraith on many issues.
          I also mostly agree with prof. Richard Wolff

  10. paul m whalen

    “Page after page of professional economic journals are filled with mathematical formulas leading the reader from sets of more or less plausible but entirely arbitrary assumptions to precisely stated but irrelevant theoretical conclusions.” ~ Wassily Leontief
    Leontief was a president of the American Economics Association and a Nobel winner. He oughta know.

  11. tevhatch

    I only got through 25 minutes. However Mark works in a NED proxie thinktank at his university, I was surprised that it is only left to inference that CIA/NED and the owner/cohort of the government, Wall Street and it’s stock listed companies, employ directly or through funding of Universities nearly all Economists.

    I once had an Economist neighbor, an immigrant slotted into his job in Canada, who was so spooky the instructions were just about printed on his eyelids, and he worked for U of T. Most of his work was on killing off the welfare state.

  12. Rob

    Perhaps the problem lies not with economics per se but rather with an economics model that incorporates all the fundamental assumptions of capitalism. It’s hard to find any other model that is widely accepted these days. Possibly China’s ascent to the position of the world’s leading economy will change all that.

  13. ArvidMartensen

    Economists have a very important role in our society, and that is why they are usually paid well and listened to by governments, business and the media. They are the high priests of finances.
    As per the piece by Caitlin Johnstone on propaganda, economists generally manage the Overton Window in relation to discussions of how wealth is accrued and distributed in society. And the rogue economists don’t get much of a foothold.

    So economists are paid to manage mass perceptions of the accrual and distribution of wealth in our capitalist society.

    They are paid to convince us that:
    # wealth flows due to fixed and unchanging scientific laws (that they get Nobel prizes for “finding”).
    # there is no alternative because the laws are “science” and these laws create “the market”
    # the laws of “the market” deliver the best and most impartial outcomes for everybody
    # if you are poor then it is sort of your own fault because the “market” is dispassionately fair in its operations and so your poverty just means that you must have nothing of value to offer
    # if you are rich, it is because of your inherent superiority, intelligence and high value as decided by the scientific and unbiased laws of the market.

    So Economics has replaced “the divine right of kings” (once hammered into the UK masses by king’s servants, the priests of the Anglican church) with
    the unalienable rights of billionaires as now hammered into the masses by their servants, the economists. With day-to-day operations managed by the PMC.

    And so this is why the PMC in the WHO has the right to take control of all health decisions in the world. And the EU Commission is a law unto itself.
    And the US PMC assume that US domestic laws must apply across the western world because the US is the richest, and therefore smartest, country in the world so has the right to dictate and impose.

    1. Yves Smith Post author

      I disagree on high priests of finance. They had a seat at the policy table way way before the US and Anglosphere became financialized. They were the high priests of commerce and their role was to demonstrate and assure that a free enterprise economy could perform better than a command and control economy. Soviet Russia had gone from a peasant economy to an industrial economy in a generation, something no capitalist economy could have achieved.

  14. Altandmain

    The irony of this whole profession’s is that neoliberal economics claims to be the optimal society for economic growth.

    The end result is a system that advocates for a society that is very unequal and where a small amount of wealthy people control society. The irony is that egalitarian societies are faster in terms of economic growth.


    As far as state control vs market, the neoliberal types of course argue that a smaller state (what they really mean is not the size of the state, but a pro-rich government) will grow faster. The Chinese model is arguably vastly superior at providing economic growth. China of course has a very large state. I’m simplifying of course, but neoliberal types sometimes claim the Chinese success as their own, when anything but is the truth.

    DeMartino may be right in that the economists don’t decide themselves, but their role is public relations and propaganda. Their job is to lie to the public that the neoliberal economics is optimal, to pretend that there is really science behind their actions, when in reality, they are there to provide poltiical cover for the rich to extract economic rent seeking from society.

    One disagreement I have is that in the case of management consultants, they can do real damage to the real economy. I’ve seen it first hand the hard way. They have the ear if senior management and tend to maximize short term profits, while leaving workers with the short end of the stick.

    As Yves notes, the failures are mounting. The 2008 financial crisis, the loss of middle class jobs in the US from so called free trade agreements, and the falling standard of living in the Western world are all signs that it is coming apart.

  15. Earl Kirkman

    I can almost recall the economic texts of of those classes back in the early 70’s. All the flailing around to rationalize fake dogma, while the war consumed a generation, and the space program was a global distraction. It all seemed very beside the point, and we didn’t even have trickle-down yet. It still seems like fiction with math, certainly not rocket surgery.

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