Weekly guest column: The god that failed
Below is the weekly guest column from Taylan Bilgic, which was published at the Daily News website yesterday- as usual, my comments are right below, but note that I guess I am not the only one at the Daily News who likes movie references; the title is paying homage to one of the first books on the 2008 crisis.
[At times of market turmoil like this, economics itself is usually called to account: Why were economists unable to predict what was coming, and why on Earth are they unable to explain what is yet to come?
As prominent economists take the center stage on TV channels, the people watch, hoping to get an answer to why their meager lira savings at banks declined by 20 percent in foreign currency terms in a few weeks. Alas, a 10-minute observation of the debate is enough to convince them that these folks are no better than a bunch of seismologists debating when the next earthquake will hit Istanbul.
The modern perception of the economist as an oracle has its roots in the market fundamentalism of the 1980s, when neoliberal currents like the Chicago School reinforced the idea that economics is not for the people, but people are for economics: the worker who asked for a better wage, the farmer who demanded a good price for his produce and the small tradesman who sought better terms for a loan all learned the hard way that what they wanted “conflicted” with the realities of economics. In time, those “realities,” to which the masses were alienated, became synonymous with scientific fact, while the “invisible hand of the free market” attained a power that could topple governments. Indeed, the Chicago School found its best laboratory in the U.S.-backed fascist Pinochet regime in Chile.
The false idea that there are things that cannot be challenged in economy – akin to the laws of physics – took a severe beating with the global financial crisis and the ensuing global recession of 2007-2010. Now, as we apparently enter a new phase in “depression economics,” the image of the almighty market and the all-knowing economist could be in mortal danger. And there’s absolutely nothing wrong in that.
Last, but not least, let me quote Duvvuri Subbarao, the governor of the Indian central bank, who in a speech compares economics and physics: “The laws of physics are universal in space and time. The laws of economics are very much a function of the context ... The mass of an electron does not change whether we are in the world of Newton or of Einstein. But in the world of economics, how firms, households and governments behave is altered by the reigning economic ideology of the time. There is nothing absolute, for example, about savings being equal to investment or supply equaling demand as maintained by classical economics but there is something absolute about energy lost being equal to energy gained as enunciated by classical physics.”
I have recently learned that Prof. Naif Türetken, an academic of physics who put his mark on thousands of university students throughout the decades, passed away on Sunday. I’m sure Professor Türetken, a defender of reason and himself a product of the finest principles of the Enlightenment, watched in disbelief as the world around us rapidly sank into a new and vile age of ignorance, dogma and arrogance. But I’m sure his trust in his students never wavered. May he rest in peace.]
Having got all my Econ. education at the saltwater schools of the East coast, I am not a big fan of the Chicago school freshwater economics, either. On some issues, I can give them some credit, but other ideas, like Ricardian equivalence, are not supported empirically, and yet still others were disproved during the crisis.
BTW, you probably noticed that Taylan is “slightly” left-wing. For an economics editor, I don’t think it is a bad thing. On the other hand, I believe it kind of helps you keep your insanity (and objectivity):)…
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