Economics and Psychopathy

This is a lightly edited excerpt from my book/pamphlet The Hegemony of Psychopathy.

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The reorientation of political ambitions after the Second World War from power and territory to wealth changed the relation between economics and the ruling elite.¹ The “science” of economics, which already had been more influential and prestigious than any of the other social sciences, now gained an effective monopoly as the official supplier of government plans and policies, putting it in the center of power, and changing its status and what was (and is) expected of it. For one thing, politics demand(ed) “closure” — that is, models that give clear and determinate answers — and the economics profession was and is happy to supply. However, closure requires simplification, and consequently, one can either have closure and determinacy or applicability to the real world. As Joseph Schumpeter remarked in 1930, when it comes to economic questions, one can choose either simple answers or useful answers, but one cannot have both.² Lured by power and prestige, economics chose simplicity and closure and gave up realism, and hid that behind rhetoric.

The two most fundamental simplifications made by mainstream economics are methodological individualism, which treats all human beings as strictly separate and autonomous agents, and the assumption that these autonomous agents always try to maximize the satisfaction of their own, individual, given preferences. The first of these two simplifications implies that communities, power relations,1 social networks, and most forms of mutual support and cooperation are outside the scope of analysis. It implies that society is outside the scope of economic analysis. The second implies among others that human motivations and other aspects of psychology as well as the nature and desirability of (particular) preferences are outside the scope of analysis. Together, these two simplifications result in a model of man that is often dubbed “homo economicus.”

It must be emphasized that there is no inherent problem with such simplifications in science. Rather, it is doubtful that science would even be possible without simplification. Accurate prediction requires (usable) models, and models require abstracting away distracting properties. Hence, simplification is a methodological choice that makes modeling — and thus prediction — possible. All theories in physics, for example, abstract away the properties that are (mostly) irrelevant in the given context. To calculate the gravitational pull between two material objects, all you need to know is their masses and distance. However, the properties that are abstracted away in the calculation of gravitational pull re-appear in other physical theories and models, and if a physicist would want to predict the trajectory of some moving object, she would combine various theories and models, and thus various or even all properties. Size and shape, which do not figure in the gravity calculation, enter the picture when friction is taken into account, for example. In other words, simplification or abstraction in physics is really just separation of properties into different partial theories that are to be recombined for accurate prediction.

Simplification in mainstream economics is of an entirely different nature, however. What it abstracts away — human psychology, for example — never re-enters the picture. Mainstream economics — in this respect—is like a physics that abstracts away shape, size, and composition in all of its theories and models. There is no such physics because it is useless: it cannot predict anything, and even its explanatory power is severely limited. But the exact same thing is true of mainstream economics and for the exact same reason: it cannot predict anything and its explanatory power is close to zero.

Furthermore, simplifications and abstractions in science are justified only if they help to reveal and/or explain the workings of some aspect of reality, but the particular simplifications chosen by mainstream economics — especially in combination with the demand for closure — only succeed in obscuring social and economic reality. Moreover, they do not just lack scientific justification, but are inherently ideological as well. They preclude the modeling and analysis of any alternative for neoliberal capitalism, and thereby also make systemic analysis of capitalism itself impossible. With the given simplifications, capitalism is the only possible economic reality. In the introduction to a collection of papers on the artificial suppression of indeterminacy in mainstream economic models, Yannis Varoufakis writes that the two simplifications and the demand for closure are

tantamount to a decree that every single mainstream economist accepts capitalism as a “natural” system. Consequently, what we are left with is a profession churning out technical studies of fictitious markets which act as mere diversions from the real task of studying capitalism. Of course, the utility of this feat — for those who have an interest in keeping capitalism out of serious theoretical scrutiny — is immense. Capitalism appears in the public’s eyes as a complex entity no less natural than the physical universe; it is, we are told, an entity to be analyzed with the clinical impartiality of a social physicist, exploited by financial engineers, tamed by “independent” Central Bankers, and only occasionally criticised by a few superannuated mainstream economists.³

And consequently, mainstream economics is “an ideologically driven pseudo-science whose power comes from successfully hiding, as opposed to revealing, the true nature of our social, political and economic relations.”⁴ (For a well written, non-academic analysis and refutation of some of the most widespread myths that resulted from this, see Ha-Joon Chang’s 23 Things They Don’t Tell You about Capitalism.⁵)

Mainstream, neoclassical economics has been under fire for well over a century.⁶ For example, in 1898 Thorstein Veblen compared homo economicus to:

a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. . . . He is not the seat of a process of living, except in the sense that he is subject to a series of permutations enforced upon him by circumstances external and alien to him.⁷

A chorus of critical voices has joined Veblen in scrutinizing aspects of mainstream economics, its assumptions, and its methodology, apparently quieting down a bit in the 1980s and 1990s, only to re-emerge in 2000 when a group of French economics students started the Post-Autistic Economics movement that grew into the main platform for criticism of mainstream economics.⁸ Most of mainstream economics dismissed or ignored its detractors, however, and continued on its way unscathed.

Occasionally, a representative of the mainstream responds to some of its critics, however. For example, in a recent paper Donald Katzner distinguished “valid” from “invalid” criticism, which is “essentially irrelevant”⁹ because it does not “evidence an understanding of, and fully recognize the real nature, purpose, and intention of that which is being criticized.”¹⁰ What he appears to mean with that — judging from the rest of his paper — is that he wants to disqualify any critique of the aforementioned two simplifications and the principle of closure because those define the field of economics as he perceives it. The response is typical. Simplification and closure are defended with the truth that abstraction is necessary in science, and criticism is brushed aside as lacking understanding of how science — and thus economics — works. But what mainstream economists apparently fail to see is the dis-analogy between their approach and abstraction in, for example, physics. Abstraction in physics is contingent and context-dependent, and physics never loses sight of the fact that in the end all relevant properties must be (and will be) taken into account. Mainstream economics, however, abstracts away all aspects of reality that it cannot fit in its mathematical universe, and then forgets about them. Mainstream economics is like a biology that abstracts away multicellular organisms because it can only model unicellular life, and then pretends to be able to analyze and predict all life on the basis of that model. It’s not the critic of such a biology (or such an economics) who evinces a lack of understanding of how science works (or should work, at least).

Furthermore, the apologists of mainstream economics are not just blind for the methodological inappropriateness of non-contingent simplification (i.e. for never returning from abstraction to the real world), but also for the implications thereof. That is, mainstream economists are themselves the firmest believers in the dogma that a kind of capitalism characterized by unbridled competition is the only possible reality, but that dogma is the consequence of abstracting away society, cooperation, mutual support, and everything else that makes us human. Hence, it is a dogma founded in illegitimate abstraction, rather than in reality.

Katzner’s paper shows what many critics of mainstream economics already knew: that criticizing its most basic choices and assumptions is taboo. As Varoufakis observed, the economics profession “works like a priesthood, dedicated solely to the preservation of its dogmas”.¹¹ (Or, in the words of John Weeks, “the role of [mainstream economics] in society is as a religious sect with an extremely doctrinaire priesthood that zealously guards its doctrines”.¹²) The dogmatic blindness reaches nauseating levels in Katzner’s warning that “invalid criticisms can have serious consequences if damaging policy decisions eventually emerge from them”.¹³ Heretics are dangerous, he tells us, with the confidence of a true believer.

From the late 1970s onward the World Bank and IMF forced the developing world to adopt economic policies based on mainstream economic dogma. These policies destroyed infant industries and decimated real wages and economic growth. Nowhere in the developing world did neoclassical economic policy reduce poverty. Countries that did develop quickly — like the East-Asian “tigers” — did so mostly because they protected their industries, against economic dogma. Most of Africa isn’t poor because critics of mainstream economics gave them bad policy advise, but because mainstream economists forced them to follow a path of economic destruction.¹⁴ And consequently, the refugees that risk their lives in an attempt to reach Europe or the US are really political refugees, fleeing the poverty and lack of prospects forced upon them by the West’s neocolonial policies.¹⁵ The destructive influence of mainstream economics hasn’t been limited to developing countries, however. The European economic crisis — and especially the economic problems of Southern Europe — are largely due to the “Hunger Games” policy based on mainstream economic dogma as well.¹⁶

More than 7 million children die each year from poverty, hunger, and preventable diseases. They die in countries that could have seen economic growth, food security, and better medical institutions, if it wasn’t for the mainstream economists’ (of IMF and World Bank) demands to open up their markets and destroy their infant industries. Probably not all developing countries could have followed the same path as South Korea, for example, but with more sensible economic policies — like they had before economic destruction was forced upon them — most of them would have had industrial growth and economic growth, enabling better health care, better education, better infrastructure, starting a virtuous cycle of growth and development. It’s difficult to give an exact number, but it seems a very conservative estimate to say that in such a scenario the yearly number of children dying from poverty, hunger, and preventable diseases would be (much) less than half of what it is now. And that would imply that mainstream economics is responsible for the death of approximately 100 million children since 1980.

And that’s “just” children, and only in the developing world. A meta-analysis by Sandra Galeo and colleagues suggests that in 2000 more than 800,000 Americans died of poverty-related causes.¹⁷ If adding up numbers of deaths is insufficient, then add, for example, the massive environmental destruction resulting from abstracting away the environment from mainstream economic models, or the deterioration of job satisfaction due to treatment of workers/employees as disposable resources rather than as human beings (or as homines economici, which is just as inhuman), and it becomes clear that mainstream economics has been one of the greatest evils in history.

And Katzner warns us for the critics of mainstream economics…

While the foregoing may explain (some of) what’s wrong with mainstream economics, it doesn’t really say anything about its role in maintaining and promoting hegemony. That role is threefold. Firstly, it provides the economic policies that enrich the hegemones, thus maintaining or even reinforcing the economic base of their power. Secondly, it gives the hegemonic belief that “there is no alternative” the air of “scientific fact.”And thirdly, it promotes cultural psychopathy.

Hegemony is a process of consent-generation, and the most effective way of generating consent with some social arrangement is to make people believe that that arrangement is natural and that there is no real alternative. That — as argued above — is exactly what mainstream economics does, and the importance thereof can hardly be overstated. Mainstream economists are the high priests of the hegemony of psychopathy.

As explained above, mainstream economics’ picture of man, homo economicus, embodies its most fundamental dogmas, but that picture is a picture of a psychopath. Of the essential indicators of the affective dimension of psychopathy and the indicators of the interpersonal and lifestyle dimensions of psychopathy there isn’t a single indicator that does not apply to homo economicus. He (or it?) is a psychopath by any standard, and thus, if mainstream economics successfully promotes that picture, then it promotes psychopathy. As it turns out, it does have such effects indeed. This is the “third role” of mainstream economics in maintaining hegemony mentioned above: the promotion of cultural psychopathy through education and through its influence on language, metaphors, and “common sense.”

In the paper “Economics Language and Assumptions: How Theories can Become Self-Fulfilling” Fabrizio Ferraro, Jeffrey Pfeffer, and Robert Sutton summarize a mountain of evidence for the thesis that mainstream economics does not just shape how we perceive social reality, but shapes reality itself.¹⁸ They show how economic theories, metaphors, and language have infected the rest of society, and how those thereby (or as a consequence thereof) have changed society itself. An obvious example of the corrupting influence of mainstream economics is the spread of policies based on mistrust and on the assumption that everyone is only concerned with their own interests. Evidence shows that this assumption is unwarranted, but that it becomes true in certain circumstances: if you treat people as unreliable and egoistic, then that is how they will behave;¹⁹ they may even start believing that their behavior should be determined by self-interest exclusively.²⁰

One of the most interesting parts of Ferraro, Pfeffer, and Sutton’s paper is their review of research on the effects of economics education on students.²¹ This research shows that exposure to mainstream economic doctrine makes students more self-interested, more deceitful, more manipulative, less empathic, less likely to feel guilt or remorse, and so forth. (And more recent research confirms this.²²) In other words, it makes students match (many) more of the indicators of psychopathy. It may not change them into full-blown psychopaths, but psychopathy comes in gradations, and there is ample evidence that “education” (or indoctrination) in the dogmas of mainstream economics makes students more psychopathic.

1. Timothy Mitchell, “Fixing the Economy,” Cultural Studies 12.1 (1998): 82-101.
2. Joseph Schumpeter, “Preface,” in Frederik Zeuthen, Problems of Monopoly and Economic Warfare (London: Routledge, 1930), vii-xiii. See also Erik S. Reinert, How Rich Countries Got Rich…and Why Poor Countries Stay Poor (London: Constable, 2007), and Yanis Varoufakis, Economic Indeterminacy: A Personal Encounter with the Economists’ Peculiar Nemesis (London: Routledge, 2014).
3. Varoufakis, Economic Indeterminacy, 17.
4. Varoufakis, Economic Indeterminacy, xxiv. See also, Häring and Douglas, Economists and the Powerful, and Michael Hudson, “Technical Progress and Obsolescence of Capital and Skills: Theoretical Foundations of Nineteenth-Century US Industrial and Trade Policy,” in Globalization, Economic Development and Inequality: An Alternative Perspective, ed. Erik Reinert (Cheltenham, UK: Edward Elgar 2004), 100-11.
5. Ha-Joon Chang, 23 Things They Don’t Tell You about Capitalism (London: Penguin, 2010). Other recommended books exposing the myths and fallacies of mainstream economics include John Quiggin, Zombie Economics: How Dead Ideas Still Walk Among Us (Princeton, NJ: Princeton University Press, 2010) and John Weeks, Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy (London: Anthem). The first of these is aimed at a more academic audience, while in case of the second, the anger is dripping from the pages. I could easily extend this short list of suggestions as there is a vast literature arguing against the obfuscations of mainstream economics. One may wonder why this “vast literature” has so little influence on mainstream thought (in and outside economics), but the answer to that question should be obvious by now: it is hegemony.
6. If one counts the criticism of classical economics by the German Historical School in the 1840s, for example, then mainstream economics has been under fire for much longer. However, while classical economics has much in common with neoclassical economics, they are by no means identical in their assumptions and methodology.
7. Thorstein Veblen, “Why Is Economics Not an Evolutionary Science?” The Quarterly Journal of Economics 12.4 (1898): 389-90.
8. In 2008 it changed the title of its flagship journal from Post-Autistic Economics Review into Real-World Economics Review, after it was realized that the label “post-autistic” is both insulting (to people with autism, not to mainstream economists) and incorrect. The movement is still known under its original name, however.
9. Donald W. Katzner, “A Neoclassical Curmudgeon Looks at Heterodox Criticisms of Microeconomics,” World Economic Review 4 (2015): 63.
10. id. 64
11. Varoufakis, Economic Indeterminacy, xxiv.
12. Weeks, Economics of the 1%, 17.
13. Katzner, “A Neoclassical Curmudgeon Looks at Heterodox Criticisms of Microeconomics,” 64.
14. Chang, Kicking away the Ladder, Chang, Bad Samaritans, Reinert, How Rich Countries Got Rich, and Erik Reinert, “Neo-classical Economics: A Trail of Economic Destruction Since the 1970s,” Real World Economics Review 60 (2012): 2-17.
15. The British Empire did not allow its colonies to develop a manufacturing industry and destroyed (most notably in India) whatever manufacturing industry there was. This policy was copied by the other colonial powers, and preventing colonies from developing themselves by denying them manufacturing industry and any other kind of economic activity that could start a virtuous circle of growth (and forcing them to focus on agriculture, mining, and so forth) became a defining feature of colonialism. Given that the policies that are forced upon the “developing” world nowadays have the exact same effect, colonialism has never ended.
16. Servaas Storm and C.W.M. Naastepad, Macroeconomics beyond the NAIRU (Cambridge, MA: Harvard University Press, 2012), and Servaas Storm and C.W.M. Naastepad, “Europe’s Hunger Games: Income Distribution, Cost Competitiveness and Crisis,” Cambridge Journal of Economics 39.3 (2015): 959-86.
17. Sandra Galeo, Melissa Tracy, Katherine J. Hogatt, Charles DiMaggio, and Adam Karpati, “Estimated Deaths Attributable to Social Factors in the United States,” American Journal of Public Health 101.8 (2011): 1456-65.
18. Fabrizio Jeffrey Pfeffer and Robert I. Sutton, “Economics Language and Assumptions: How Theories can Become Self-Fulfilling,” Academy of Management Review 30.1 (2005): 8-24.
19. Daniel C. Batson, Jay Coke, M.L. Jasnoski, and Michael Hanson, “Buying Kindness: Effect of an Extrinsic Incentive for Helping on Perceived Altruism,” Personality and Social Psychology Bulletin 4.1 (1978): 86-91, and Samuel Bowles, “Policies Designed for Self-Interested Citizens May Undermine ‘The Moral Sentiments’: Evidence from Economic Experiments,” Science 320.5883 (2008): 1605-9.
20. Dale Miller, “The Norm of Self-Interest,” American Psychologist 54.12 (1999): 1053-60.
21. Ferraro, Pfeffer, and Sutton, “Economics Language and Assumptions,” 14.
22. See, for example, Long Wang, Deepak Malhotra, and Keith Murninghan, “Economics Education and Greed,” Management Learning & Education 10.4 (2011): 643-60, and Mathias Philip Hühn, “You Reap What You Sow: How MBA Programs Undermine Ethics,” Journal of Business Ethics 121 (2014): 537-41.