The Road to Market Serfdom: Why Economics is Not a Science and How to Fix it

This paper was presented to the May 2013 conference of the Postglobalization Initiative in Moscow, and deals with the function of economics in the modern world order. It seeks to explain why, as a profession (notwithstanding individual exceptions) economics failed to predict the crisis that opened in 2007; why it then failed to foresee its length and depth; and why it proposes no solutions that could bring it to an end. The paper challenges economics’ most fundamental claim, that it conducts itself as a science, arguing that it instead behaves as a religious system for making and justifying political decisions whose core belief is market perfection: the notion that the combination of private property in production with universal commodification is not only optimal, but cannot fail. The paper proposes a radical new conception of the ethical duty of economists as resisting untruth, which it can do by conducting itself as a pluralist science. To this end, the paper introduces a distinction between two functions of knowledge: its exoteric function through which society arranges to control nature, and its esoteric function which organises, within a rational structure, systems of law, ethics, morality, and their relations to each other. In science, the exoteric predominates over the esoteric. In religion, the reverse is the case. This explains the real function of economics, which is a disguised normative system rooted in the primary principle of market perfection. Its prescriptions are derived not by the normal scientific method of testing a variety of theories against the evidence, but by the elevation of this supposition into an unchallengeable dogma. It operates as a monotheoretic body of knowledge in which, at any given time and facing any given problem, only one unique answer is offered, denying the users of economics the basic democratic and scientific right to choose between a variety of answers on the basis of their own independent assessment of both the evidence and the presuppositions of the theories from which the prospective answers are deduced. The primary mechanism of its religious function lie therefore in its methods of theoretical selection: it permits the promulgation and indeed, development, only of those theories which yield predictions consistent with the dogma of market perfection. It is constructed to suppress any body of theory which leads to conclusions inconsistent with the assumption of market perfection, most notably those, such as the theories of Marx and Keynes, which demonstrate that the market system is self-contradictory – that is to say, that it acts so as to undermine the basis for its own existence. The more likely it is that a given theory may lead to such conclusions, the more thoroughly it is suppressed. In consequence, those theories that escape the suppressive net of economics are precisely those in which the present social order is presented as not merely optimal but natural, inevitable and eternal. Interference with this market then becomes a crime against nature. All private benefits of the property-owners become the result of natural forces: they are rich because nature intended them to be. Take their riches from them, and things can only get worse. Poverty, destitution, famine: these are sad but inevitable consequences of nature. Any policy designed to offset or overcome them is misguided. Nature, in a word, has been enthroned as a God, by excluding humans from Nature. I employ the term market serfdom to characterise such a system, because it removes choice from the field. Human agency is itself designated a crime against nature. Hayek and his followers, the paper, have erred in making an issue of the claim that ‘serfdom’ comes from interfering with the market: Actually they propose that they only course open to humanity is to submit to the market. His is the freedom of the slave who accepts his destiny. We have no choice but what the market ordains. Economics, as we now know it, is the theoretically perfected manifestation of this doctrine, just as late mediaeval Catholicism was the perfected manifestation of the doctrine of submission to the established aristocratic and monarchic order. The paper then analyzes the two principal mechanisms by which the profession of economics has arrived at this point: selection for conformity and institutional delegitimation, and briefly outlines how ‘assertive pluralism’ could, if applied systematically, restore the study of political economy to the status of a science. Slides, and a video of the presentation and discussion, will be made available through the link to this paper at https://londonmet.academia.edu/AlanFreeman