10 January, 2007

The Deconstruction of Economics

Posted by alex in economy, Financial Column, George Lenz at 12:42 pm | Permanent Link

By George Lenz

George Akerlof

Since the 1960s many Western institutions of political, economic and social life were deconstructioned. The institutions that were once close and helpful to the people suddenly became alien and hostile, even though they often look the same and were staffed by the good-meaning and hard- working White people. As the result, political, economic and social life seized to function effectively, and Western standards of living declined with no end at sight. The most terrible thing that happened to the people within those institutions were that no matter what they did and what policy they tried nothing seemed to work and only made things worse: they were helpless.

The feeling of general helplessness is one of the hallmarks of the successful deconstruction – it first reduces a whole to a mechanical sum of parts, and then replaces those that do not suit the deconstructionist (or “change agent” in democratically politically correct terms) purpose. In the process an institution – a living evolving social unit that is shaped by and is a part of culture – becomes a mechanical, and hence non-living, shallow of its former self. At first it may look unchanged to a populace it serves, but soon enough something alien and cold is felt at previously people-friendly institution, bursting with life. Its positive impact on local community deteriorates fast and then disappears, and nothing seem to improve it (no wonder since the institution in question as a cultural unit is already dead) The feeling of helplessness and anxiety people working at or served by a such institution is understandable: it is akin to the feeling of living man being in a hermetically closed coffin. This feeling is precisely the deconstructionist’s aim: while people are helpless and afraid, and thus unable to act, it gives a deconstructionist time to turn a now mechanical institution into a proxy for its aims, often inimical to those of community it serves, or establish and entrench a competitive institution, especially if mass media are under his control.

The deconstruction is not limited to institutions: it also happens to sciences, especially social sciences with similar results. The current object for such deconstruction is economics. The deconstructionists first started with finance, attempting to turn once robust art of balancing local traditions with sound business practices and community interests into a little more than a branch of mathematics, mechanically introducing now legalized usury into any kind of financial transactions. What they achieved is rending once unified field of finance in two: mathematized financial engineering and classical finance, each with separate methodologies, objects of study and often conclusions – and each taught separately. Each now more and more have a differing group of practitioners, and even differing groups of institutions where they are practiced: mathematized financial engineering is practiced by large multinational banks, while classical or as it is sometimes called European finance is practiced by small and medium-sized local community institutions, the gap between which is increasing. As a whole, financial institutions now offer less useful credit products at much higher interest rates, with little concern for the well-being of the borrower – and no wonder that borrowers are now worse-off and the number of defaults is rising exponentially, as well as the number of liquidated or insolvent financial institutions that served their masters’ purposes.

Not content with the decline, they wrought upon once prospering field of finance, the “change agents” now want to deconstruct economics, and they chose the annual meeting of the American Economic Association last Friday as the place to declare their intentions. George Akerlof, an establishment’s economist, with little original contributions to the economic theory and most works concentrated within consumer behavior theory and management science is attempting to destroy the foundations of economic science that kept it together more than 200 hundred years – the premise of rational economic agent, that is the notion that an individual or business behaves rationally, e.g. maximizes profits or economic surplus. Akerlof – educated at Yale and the Massachusetts Institute of Technology, and currently a professor at the University of California, Berkeley – is at the heart of the U. S. economic establishment. His wife, Janet Yellen, a top economist in the Clinton administration, is president of the Federal Reserve Bank of San Francisco. Their son, Robert, is a Ph.D. candidate in economics at Harvard.

The traditional way in economics has always been always assume rationality of behavior, and to build the initial economic model describing interrelationships of economic indicators based on this assumption. Then model’s constraints can be calibrated to approximate for existing economic inefficiencies, and the ways of overcoming these inefficiencies can be presented. Akerlof wants to change this foundation: take human behavior as it is, and to build economic models accommodating it, with no references to outcomes under rational behavior assumption, or suggestions for making economic agent’s behavior more rational. In short, this Akerlof’s proposal amounts to destruction of existing standards or yardsticks in economics, by which a particular economic agent’s behavior can be judged to be efficient or not. Why would he want to do that?

The answer is simple. During the last century economic science acquired vast amounts of knowledge: now we increasingly know why some societies and population groups are poor, and some are not – and how to help them to break the vicious circle of poverty and become successful and financially independent. The globalistic economic elites are unhappy about this challenge: they want most people to be poor and thus dependent on the will of the elites. Hence Akerlof, the obedient instrument of the elites, wants to deconstruction economics, by removing foundations of its success – the centuries-long standard in relation to which every economist determines what is wrong with the particular economic agent’s behavior an how it should be corrected – thus turning economics into a powerless shallow of itself, declining in relevance and effectiveness. He chose well the tactical aim of his attack – the works of Milton Friedman, a jewish economist, not especially popular with the establishment, who however successfully helped a few nations to find way out of poverty and dependence and fully earned his Noble Prize for strength and originality of his ideas – and he frames himself as a follower of Keynes, being devoid, however, of significant talent of the latter. “The early Keynesians got a great deal of the workings of the economic system right in ways that are now denied,” Akerlof said in a study newly posted on the Internet that closely tracks the text of his speech. “They based their models, as Keynes put it, on ‘our knowledge of human nature and from the detailed facts of experience”

Akerlof argues that the Friedman approach is based on false assumptions about human behavior. For example, he says, people don’t automatically insist on raises that keep their pay on par with inflation. They often are happy with smaller raises, considering them a compliment from the boss for valued work. That makes pressure for higher pay less inflationary than the Friedman approach would assume. What he does not mention, however, is that the empirical evidence of long-term consequences of wage inflationary pressures correspond rather to Friedman’s conclusions, than his own theories.

Would Akerlof succeed? I don’t think so: many schools of economic thought, including institutionalism, development economics, the Austrian school, monetarists etc. have already declared opposition to Akerlof’s proposal. What is likely to happen however, is the field of economics re-united by Friedman 40 years ago, is likely to be rent into the rivaling fractions, that would include followers of newly orthodox Akerlof’s dogma, at beast useless and at worst damaging in practice and the followers of sound classical economics, that can be called European. The damage to those most vulnerable and unfortunate, who would listen Akerlof’s proposal, both in terms of economic theory and economic policy, can easily foreseeing with near certainty.

George [email protected]


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  7. 7 Responses to “The Deconstruction of Economics”

    1. Donald E. Pauly Says:

      The Jews have turned economics into mumbo jumbo just like pschiatry. They want to keep the knowledge of what happens to an economy when the Jews are expelled secret. Prosperity instantly spreads over the entire country. It is a little known secret that the main principle of the National Socialist Party was:

      “Abolition of Income Unearned by Work”.

      This did not sit well with Wall Street Jews.

      http://www.sendemback.org

    2. Evil Hater Says:

      This is nothing new. All models that assess consumers always assume that
      a rational consumer is one who would horde all available goods if he could.
      In what world would such a consumer be deemed rational? A world defined, controlled and populated by jews and their wannabes.

      Studying economic theory has always been a study of the jewish mind.

    3. sgruber Says:

      Economic Man is a psychopath bent on getting everything for nothing. If you can sell your honor for a penny, do it. Broom Grandma if she has no value on the open market.

      A deracinated man, cut off from ancestors and descendants, subsitutes money as the meaning of life. But since money is only a tool of exchange, his god is actually the products money buys – and in a deracinated society, the products (over and above staples like food) are what? The latest sports car. The flashiest diamond. The most expensive Brooks Brothers suit. The coolest yacht, and a plane to land on the yacht. In other words, “status” symbols. These determine your status as a person, i.e. define your identity. Who says so, who decides what is a status symbol, who controls your life? Who are the marketers? Who deracinated society?

      Cut off from the vine, enjoying a colorful decay…until eaten by insects.

      Race, family, the continuing line is the first principle of life, defining what’s valuable. Proper economics flows from that head.

    4. fdtwainth Says:

      2 Evil Hater

      What’s new in this: previously, economic models should tell what is the best possible economic outcome under the best possible use of the existing resources, and how to arrive at it. Under Akerlof’s proposal the economic models have to tell only what the ourcome under existing inefficiencies be. The economic bureaucrats would love it: nor more even potential accountability on why economic results are as bad as they are, and nor need to show the general public the right way to improve their fortunes, since the unifrom standard on which things are judged to be efficient or not in economics is destoyed. They will blame the results of their failed policies on “ineffiences present in people’s behavior”, and would continue such policies ad infinitum, easily contructing economic models to justify them. This thing smells like “creative accounting” in Enron; only the results would be even more disastorous.

    5. Hoosier Says:

      Here’s a guy who bebunks the “Austrian School of Economics”

      http://www.axiomaticeconomics.com/

      I deeply suspect that the so-called brilliant Jew economists have been selling Yiddy snake oil for some time. Why would economics be anything different than anything else they touch?

      Excerpt:

      http://www.axiomaticeconomics.com/doublestandard.asp

      “It is now well-known that Murray Rothbard blacklisted me in 1993 because of a letter I wrote him in which I revealed that I had a background in mathematics. He was incensed that a mathematician would have the nerve to express original ideas about economics, claiming that mathematicians are good only for running errands (e.g. compiling statistics) for real economists who developed their theories independent of the data found to illustrate them.

      It is not hard to figure out where he got that attitude. His master wrote:

      The mathematical method must be rejected not only on account of its barrenness. It is an entirely vicious method, starting from false assumptions and leading to fallacious inferences…. There is no such thing as quantitative economics.

      I would argue that my blacklisting should be lifted for two reasons:

      1) The Austrians clearly have a double standard when they recruit modern economics students by telling them of Mises’ “gift of prophesy” while simultaneously heaping abuse on men such as Dent and Batra for their “entirely vicious method.” Such a double standards is the mark of a cult.”

      Later, Brothers

    6. Shabbos Shabazz Says:

      Deconstruction of MSc. Victor M. Aguilar (Austrian economics debunker):

      “Victor Aguilar graduated from Texas A&M University in 1986 with a BS in Agronomy and in 1998 with MS in Agricultural Economics.

      His professional experience includes the management of a cattle and sugar cane farm in Guatemala for eight years. From 1993 to 1997, he worked as Agricultural Specialist for the Foreign Agricultural Service, USDA, in the American Embassy in Guatemala. After getting his masters in degree in 1998 he worked for the company Agrimar in College Station, Texas advising local corn producers to insure their crop in the commodities market. After 3 years as financial advisor for Merrill Lynch, he is currently the investments team leader at two JP Morgan Chase branches in Houston, Texas.”

    7. Victor Aguilar Says:

      My middle initial is J. The bio you found on the internet is somebody else. I have some biographical information at http://www.sniperflashcards.com/bio.php