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How Conservative is Mainstream Economics?

How 'Conservative' is Mainstream Economics?

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There is quite a disconnect between mainstream economics as seen in the public eye and as seen by economists themselves. A lot of media criticism of economics - and the Guardian seems to be going mad on this recently  - paints mainstream economic theory as supporting a 'free market' or 'neoliberal' worldview, possibly in cahoots with the elites, and largely unconcerned with human welfare. Economists tend to switch off in the face of such criticisms, arguing that the majority of them, along with their theories, do not support such policies.

Now, at a basic level, I think the economists are right. Your average economist actually seems to lean centre-left, supporting things like environmental legislation, financial regulation, the welfare state, public health and education and even, yes, the minimum wage. Mainstream theory itself strongly implies a role for regulating monopolies, oligopolies and especially natural monopolies. Entire areas of economics - even at undergraduate level - are devoted to analysing the climate and natural resources, as well as how to effect development in the poorest countries. Indeed, 'welfare economics' is an entire field in itself, and criteria such as Kaldor-Hicks reflect a discipline that considers equality a priori desirable, even if this might be a bit lost in translation. Finally - and anecdotally - models such as the basic 'price floor' analysis of the minimum wage, or simple comparative advantage fables about free trade, are presented with a lot of caveats, and the field is highly aware of the empirical literature that doesn't support such 'free market' proposals. 

However, we have to ask ourselves where this image of economists as rabid free marketers has come from. Is it simply because the public and lay critics of economics are hopelessly ignorant and stupid? Some economists seem to think so. Yet I think there is a good argument to be made, not that mainstream economics necessarily implies particular policies, but that it is easily utilised to push a certain worldview, based on which questions it asks and how the answers are modeled and presented. This worldview is what the public and journalists all too frequently encounter as 'economics', which is why they often conflate neoclassical with neoliberal ideas. Here are a few ways I believe the former lends itself to supporting the latter:

First, there is a degree of importance to the questions economists don't ask. It is not unfair to say that in many economic models, economic phenomena are just presumed to 'exist', with market relations and institutions the norm. Take Walrasian Equilibrium: people exist, and they have preferences; firms exist, and they maximise profits. Both interact through the market, which presumably exists, and we find the equilibrium. But where did all of this stuff come from? Do people just behave this way or do they have to be taught to? Which institutions and laws are required for market transactions to work? That we place property rights, contract law and capitalism itself out of the picture serves to exclude them from debate, implying that they are not important or are just a normal part of the human condition. Hence, the institutions that make the existence of 'the market' possible are elevated to a place outside debate. To see how pervasive this effect is, consider how even forceful critics of neoliberalism seem to tiptoe around the market question, unable to escape the government-market mentality.

The economist might reply that they merely analyse how the world works, rather than asking how it should work, or how it came into being. However, this is itself a normative decision, entailing a judgment about whether or not the system itself is of analytical importance. If someone argued they were just looking at how feudalism, the USSR or the transatlantic slave trade worked, ignoring fundamental questions about what underlay such systems, you would surely consider it absurd. In fact, even the idea of 'just analysing how car crashes work', with no mention of why they occur, or of their human consequences, seems frankly odd. Such an analytical framework is hamstrung by the boundaries it imposes upon itself, and when neoclassical economics does this with property rights, firms or capitalism as a whole, it becomes impossible to discuss or criticise them within the models and language it uses.

Relatedly, there is the question of how people behave in economic models. Since neoclassical economics tends to model on the basis of individual agents, it is naturally compatible with an individualistic world view. It supersedes questions of class, socially determined behaviour (usually) and other such airy lefty concerns. Furthermore, while the curiously ubiquitous idea that everybody in economic models  is a selfish bastard is untrue (even at the basic level), there's little denying that the utility maximiser seems to be a consumeristic type who is seeking short term satisfaction from commodities. I really, really don't want to comment on consumerism here;  I'm just highlighting that a model which says we are all primarily lone consumers out to buy a lot of stuff naturally meshes with an ideology that praises...lone consumers out to buy a lot of stuff. Again, I would class it as a normative decision to remain silent on whether this type of behaviour is desirable, much the same way as the study of criminology cannot separate itself from ethical questions about criminality.

Finally, the main general equilibrium models used by neoclassical economics often take something like the perfectly competitive model as the baseline, into which various 'frictions' are added to create the possibility of market failure. In other words, the 'underlying' tendency is for markets to clear and everything to be hunky dory, while for whatever reason - sticky prices, the financial sector, imperfect information - this may not always work out. The question of whether or not the government should 'intervene' then becomes one of how pervasive these problems are in the real world, rather than general statements about the instability or misaligned incentives markets may or may not breed. It's thus easy to pick and choose, ignoring the caveats, or arguing they aren't significant, or that the government can't do anything about it anyway. Furthermore, there is always the fallback of the panacea of competition, which is almost always a 'good thing' in neoclassical theories. Since oligopoly theories tend to collapse into the more efficient perfect competition as you increase the amount of firms, one can always argue that 'competition' will do a better job than regulation.

In conclusion, mainstream economics does not necessarily imply conservative or 'free market' politics - your average mainstream economists is probably best characterised by "I'm pro-market but...'. However, the fact that mainstream economics takes capitalist institutions and social relations as a given; presents market failure as the exception that only requires some well-targeted policies; and combines this with outs such as competition and government failure, lends itself to an inherently pro status-quo worldview. Such a view is easily used - and has been used extensively - to justify 'neoliberal' policies, even if they aren't an accurate reflection of the field as a whole.

PS I used 'Conservative' in the title to mean 'pro-status quo', rather than any specific set of beliefs/political party.


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Mainstream economics often overlooks the possibility of multiple potential equilibria, implying that after a crash things will pretty much go back to how they were before. The role of government would thus seem to be about fine-tuning. If this were true, then modern neoliberalism (neo-neoliberalism?) would seem much more reasonable than if one thought that free-markets could lead to long periods of depressed growth.

The proper response to the Guardian would surely be to recognize the situation that we may be in, to characterise ways of escaping, and suggest some options - or at least to be able to critique the suggestions of others. Who is doing this?

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