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- Efficiency is ideological cover for the defense of the status quo- nothing about it is objective science
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- Atomistic assumptions of classical economics fail and make social analysis super faulty
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AT Rational Choice TheoryRational choice theory is based on the assumption of an insane amount of human cognitive power- it doesn’t describe actual behaviorBoldman ‘7 Lee Boldman, The Australian National University, 2007, The Flawed Assumptions of Neoclassical Economic Idealisation Nevertheless, mainstream economists continue to claim that economic agents in their choices optimise the benefits to be derived and that it is only rational to do so. Behavioural economists have, however, demonstrated successfully that everyday human economic behaviour is not consistent with this claim. This demonstration undermines much of the associated analysis. In particular, real human beings simply lack the cognitive abilities to maximise the benefits from their choices. Furthermore, the contexts within which we make decisions are such that optimisation—either ex anti or ex post—is simply not possible. This brings us back to the realisation that human choices involve a dynamic process relying on practical wisdom based on experience, learning about opportunities and tastes and balancing different attainable goals—rather than a crude optimisation process.
Competition and util don’t actually produce the best outcomesBoldman ‘7 Lee Boldman, The Australian National University, 2007, The Flawed Assumptions of Neoclassical Economic Idealisation This scheme draws on utilitarianism’s search for the ‘greatest happiness of the greatest number’ to propose that the consumer is motivated to purchase goods by the ‘utility’ she or he derives from it—a reflection of her or his preferences. Then it is claimed that with competition in demand, the benefit or utility received by the individual consuming the last unit of goods—for example, an apple—equals the price she or he is willing to pay. Similarly, with competition in supply, it is claimed the resource cost to produce that last apple equals the price the producer receives. Voluntary exchange between the producer and consumers in a market-clearing auction will then yield a set of prices that equates the marginal benefit of each commodity with its marginal cost. This has the practical effect of assuming out of existence the problems for the achievement of the greatest happiness that result from the existing socio-economic order and its power relationships. To the limited extent that these problems are recognised, they are seen as constraints on preferences that disappear into the background. At one stage, it was hoped that utility might be measured and thus provide an objective measure of the benefit derived. This quickly proved an illusion, leading ultimately to the development of the empty concept of revealed preferences. As we saw earlier, this means that people buy only what they prefer and they prefer what they buy; and, as it turns out, they are not logically consistent in those purchases.[46] There are even further technical problems with this most basic of models in the marginalist movement.[47] The model assumes that supply and demand curves are continuous and well behaved, but that is not necessarily the case. Prices can also be resistant to change. In any event, can this model be operationalised? The most damaging criticism of these models is that they impose impossible computational demands on individuals and firms. Real people cannot be making production and purchasing decisions on the basis of such computations. Consequently, in the real world prices cannot be established in this manner except in the crudest possible sense. The result is that it seems likely that the marginalism implicit in the model is an artefact of the analytical system rather than an accurate description of real behaviour. The whole model appears to exaggerate the influence of pricing signals on economic decisions, reducing all other influences to ‘costs’, however difficult it might be to attribute a monetary value to those costs. Nevertheless, these concerns are generally ignored. The first fundamental law of welfare economics is then derived by generalising from such single-commodity models to general equilibrium of the economy, abstracting from much detail. This involves the unrealistic assumptions of optimisation in all other markets and independence from them. We are then told that under very restrictive and unrealistic assumptions, a competitive market equilibrium is ‘Pareto-efficient’ or ‘Pareto-optimal’ or ‘socially optimal’—where Pareto-optimality is defined as that state in which it is impossible to improve the welfare of some members of society without reducing the welfare of others. In practice, those restrictive assumptions are quickly forgotten. Although superficially attractive as a definition of maximum welfare, Pareto-optimality is more than deeply flawed; it is simply not true. As Blaug writes: ‘Pareto welfare economics…achieves a stringent and positivist definition of the social optimum in as much as Pareto-optimality is defined with respect to an initial distribution of income. The practical relevance of this achievement for policy is nil.’[48] Efficiency is ideological cover for the defense of the status quo- nothing about it is objective scienceBoldman ‘7 Lee Boldman, The Australian National University, 2007, The Flawed Assumptions of Neoclassical Economic Idealisation Bromley is among the many other economists who have attacked the scientific objectivity of Pareto-optimality as a decision rule in policy analysis, seeing it as being inconsistent and incoherent with no special claim to legitimacy.[49] The claim that economic efficiency is an objective measure of objective scientists is simply wrong. Warren Samuels, for his part, has described in some detail the large number of normative assumptions underpinning the definition, showing that the concept of Pareto-optimality necessarily involves moral judgements about the existing distribution of wealth and power and the legal system, which enforces ownership rights.[50] Its imposition as a decision rule in economic policy making—the requirement that ‘economic efficiency’ ought to be the decision rule for collective decision making—is also a normative choice.[51] In short, it is nothing but a pseudo-scientific defence of the economic and social status quo.
Economic analysis rests on faulty assumptions- leads to massive failures in predictionsReiss ‘11 Michael Reiss, “What Went Wrong with Economics: The flawed assumptions that led economists astray,” 2011, http://www.amazon.com/What-Went-Wrong-Economics-assumptions/dp/146367029X In April 2007, a report produced by the International Monetary Fund concluded that the world economy was in great shape only for the biggest economic crisis since the Great Depression to hit just months later. How could economists have got it so wrong? When engineers try to understand complex systems, they are forced to make simplifying assumptions. Sadly if these are flawed, no amount of mathematical wizardry will repair the damage. This book examines the possibility that the problem with economics stems from flawed assumptions. It appears that mainstream economics set off on the wrong foot. This book uncovers many such flaws and shows how the resulting bad economic theories have devastating consequences. Dr Michael Reiss shows how, with more realistic assumptions, economics, and our economic system, can be rescued.
Lee Boldman, The Australian National University, 2007, The Flawed Assumptions of Neoclassical Economic Idealisation Among the flawed assumptions of neoclassical economics is its reliance on methodological individualism as its ‘official’ methodology. This is a research stratagem imported from Greek atomism via Descartes—with his atomistic system and mechanical rules—and then the individualistic political theorising of Hobbes and Locke. In those stories, explanation was to be located in the actions of individual actors interacting in a mechanical fashion rather than in the complex organic interplay of social institutions, groups and individuals. As we saw in Chapter 5, the emerging dominance of theoretical reasoning in political and moral theorising through the Enlightenment marked a sharp discontinuity with the practical approach to political and moral reasoning that had been derived from Aristotle and which characterised the medieval world. One important element in this transformation was the abandonment of forms of explanation based on organic metaphors and the emergence of a mechanical Newtonian metaphor as the dominant form of explanation. This atomism is an essential feature of this form of explanation, in which causal relationships are seen as being analogous to the forces operating in the movement of the planets or in classical mechanics, with individuals taking the place of the planets or of billiard balls and interacting in a mechanical fashion. As we saw in Chapter 5, however, the Newtonian mechanistic world-view has been undermined. Newtonian physics has been completely discredited as an answer to any fundamental question about the nature of the world. Physics has come to understand reality not in terms of atomism—of discrete particles that can be described independently of all others—but as a complete network, the most basic elements of which are not entities or substances, but relationships. The properties of things are no longer seen as being fixed absolutely with respect to some unchanging background; rather, they arise from interactions and relationships.[40] This abandonment of Newtonianism within its parent discipline should cause economists to pause and wonder whether the Newtonian metaphor provides an adequate master narrative for economics. Having stressed the fundamental importance of our social relationships and our socially constructed moral codes in Chapters 2 and 7, I don’t believe methodological individualism can deal adequately with these continuing social relationships. In any event, Kincaid warns us that individualism is a fuzzy doctrine: ‘Sometimes it makes ontological claims, for example, that social entities do not act independently of their parts. Other individualists put the issue in terms of knowledge: we can capture all social explanations in individualistic terms or no social explanation is complete or confirmed without individualist mechanisms.’[41] Kincaid argues that the debate about holism and individualism is primarily an empirical issue about how to explain society. The upshot for Kincaid is that individualism is seriously misguided: ‘When individualism is interesting, it is implausible; when it is plausible, it is uninteresting.’[42] It should already be clear from Chapter 2 that the claim that methodological individualism provides the exclusive proper explanatory strategy in the social disciplines is deeply flawed. It mistakes the biological entity for the complete human. To use a modern metaphor, it mistakes a discrete piece of hardware for the whole system, forgetting that the ‘software’ is an open social construct and that together they form part of a large network. In the spirit of narrative pluralism, this does not mean that methodological individualism might not be useful in some instances. It is up to the analyst using that assumption to demonstrate its usefulness and the ‘validity’ of the results. The Enlightenment tradition from Descartes and Locke onwards to contemporary mainstream economics has just assumed this question away. In economics, this strategy assumes that all individual choices are self-serving and promote individual welfare. Not only does it fail to acknowledge the social constraints on choice, it fails to confront the possibility of mistaken choices and the normative consequences of that possibility. In those cases, one could always respond that people should bear the consequences of their mistaken choices. This, however, is a normative judgement that is open to question and is something economists claim not to be making. It is also a judgement with which the rest of us might disagree—though not necessarily all the time. There is a dynamic element in choices as people learn over time what is important to them in the changing circumstances of their lives. Mistakes are an important part of that learning process. AT Alt ViolenceNeoliberalism makes violence inevitable because its concept of “stability” is jury-rigged to maintain massive inequality – only an alternative approach to knowledge production can prevent these contradictions from escalating to global conflictVattimo & Zabala 11 (Gianni, Prof. of Theoretical Philosophy @ U of Turin, Santiago, Prof. of Philosophy @ U of Barcelona, Hermeneutic Communism, pg. 136-140) The democratically elected governments of South America are also an indication of how Western democracies have submitted to those private interests without which politicians could not finance their political campaigns. The intention of our book, though it explores the status of communism, is also to provoke a reflection on the value of democracy as it is practiced in the West. We should stop considering as scandalous the idea that a revolution can occur without a previous authorization by the citizens as expressed in a referendum; after all, no modem constitution was ever born “democratically” starting with that of the United States, whose constitution was drafted by a group of progressive intellectuals. Although it is a tricky argument, one should ask oneself whether, today U.S. citizens are actually freer than Cubans. After all, the freedoms that Cubans have missed in these recent years are not constitutional but rather depend on the limitations imposed on their economy by years of U.S. embargo. This is why progressive American public figures such as Michael Moore, Oliver Stone, and Noam Chomsky have repeatedly emphasized how the effective possibilities of a fair life are all in favor of Cubans today. Although these South American governments have not yet betrayed parliamentary democracy we are convinced that they ought to be defended even if eventually they do have to violate these rules. As Mao said: “A revolution is not a dinner party or writing an essay or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous. A revolution is an insurrection, an act of violence by which one class overthrows another." We do not know how the relationship between the armed capitalism of framed democracies and Latin American governments will develop, but we must all hope it will not become a violent conflict, even though the United States seems to countenance this option. The problem we must ask ourselves at the end of this book, which tries to regain faith in a radical transformation of our current order, is well summarized in Mao’s affirmation: “a revolution is not a dinner party.” Regardless of our admiration for a vision of history that progressively excludes violence, we are not very hopeful, as the recent social, economic, and military levels of inequality caused by capitalism continue to increase, threatening any project of social transformation. History as the dialectical conflict of authorities, classes, or entire populations, has not ended. Neither has the universal proletarianization (upon which Marx made the communist revolution depend) been exorcised by the well-being spread by globalization, because globalization has not spread wealth. With the pretext of possible terrorist attacks, the intensification of control will end by forcing us to live in the “imprisoned” world that Nietzsche called “accomplished nihilism”: a world where in order to survive as human beings we must become Ubermensch, that is, individuals capable of constructing our own alternative interpretation of the world instead of submitting to the official truths. This is also why the bisheriger Mensch, “the man so far,” is the man of modernity who needs to emerge from his enslavement to metaphysics in order to encounter other cultures of the world and propose alternative ways of life. Contrary to metaphysical conservative realism, hermeneutic communism allows other cultures to suggest different visions of the world, visions not yet framed within the logic of production, profit, and dominion. Although the revolt of colonial populations is still largely dominated by Western capitalism, these revolts are increasingly aware of the possibility of becoming a cultural revolt rather than a method for an equal redistribution of wealth. While European modernity claimed to be the bearer of universal values and therefore viewed with suspicion any demand from individual communities or identity populations, today we cannot believe anymore in the necessity of say international proletarianism, that is, of a universal value. The world will not cease to be alienated by finding its identity but rather by being open to the multiplicity of identities. Nevertheless, if in order to construct such a world we must “unite all the proletarians of all the world,” then it will eventually become necessary to plan the foundation of a Fifth International, as Chavez has recently suggested.” While we also endorse Chavez’s suggestion, the communist project must always bear in mind its hermeneutic inspiration against all those metaphysical temptations and the horrors of those universalisms that have shed blood throughout the world. Unfortunately hermeneutic communism cannot assure peaceful existence, dialogue, or a tranquil life, because this “normal” realm already belongs to the winners within framed democracies. In these democracies, the weak have been discharged so that the winners may preserve a life without alterations; this, after all, must be why the word “stability” or “bipartisanship” is so often used by Obama and other presidents in international and domestic summits. But, as the recent economic crisis has demonstrated, the so-called stable world is not stable at all. As this instability increases, so do the possibilities of world revolution, a revolution that hermeneutic communism is not waiting for at the border of history but rather is trying (paradoxically) to avoid. If we prefer to circumvent such revolution, it is not because we do not believe in the necessity of an alternative but rather because the powers of armed capitalism are too powerful both within framed democracies and in its discharge. As we have seen above, these same territories at the margins of armed democracies are also part of the mechanism of armed capitalism and are therefore subjected to what Danilo Zolo calls “humanitarian wars” in order to guarantee stability As we indicated in chapter 3, hermeneutics is not an assessment of tradition but most of all an ontology of the event, a philosophy of instability. In this context, communism’s dialectical conception of history is not dominated, as in the metaphysical systems, by the moment of conciliation but rather by the awareness that Being as event continuously questions again the provisional conciliations already achieved. As a dialectic theory hermeneutic communism does not consider itself the bearer of metaphysical truths or a metaphysics of history as conflicts and clashes. Instead, it is convinced that in the current situation of increasing universalization, lack of emergency and the impossibility of revolution, philosophy has the task of intensifying the consciousness of conflict, even though everything (“stability” cultural “values,” and analytic philosophys “realism”) seems to prove it wrong. In sum, hermeneutic communism proposes an effective conception of existence for those who do not wish to be enslaved in and by a world of total organization. Although we are not thinking about the professional revolutionary figure as the only possibility for authentic existence, we are not going to exclude that such an idea is interesting. Heidegger’s thesis, according to which existence is a thrown project, is the only one we manage to suggest as an alternative to the pure static discipline of the politics of descriptions, founded on dominion in all its forms. That the transformation of the world cannot be projected in the form of a violent engagement, which would only provoke increased repression, makes much more difficult the goal of resistance and opposition and therefore communism. After all, great revolutions of the past, such as the Russian and Chinese revolutions, seem today like events that had to adopt the arms of their enemies, leading to regimes as violent and repressive as the ones that they had set out to destroy But we do not accept the desperate vision of Sartre in his Critique of Dialectical Reason, according to whom any form of renovation, after the great experience of “groups in fusion,” must fall again into the routine of dominion, in a triumph that he regarded as “practico-inert.” Today the global integration of the world offers different forms of resistance than the armed revolts of the past. Examples of nonviolent methods, from Gandhi to the “pressure” exerted by the simple existence of the communist democracies of Chavez and Lula, may operate to limit the current dominion of the great empire of capitalism. These are the most productive alternatives at our disposal today Other forms of passive resistance, such as boycotts, strikes, and other manifestations against oppressive institutions, may be effective, but only if actual masses of citizens take part, as in Latin America.” These mass movements might avoid falling back again into the practico-inert, which is the natural consequence of those revolutions entrusted to small and inevitably violent avant-garde intellectuals, that is, those who have only described the world in various ways. The moment now has arrived to interpret the world. 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