Nobel Prize in Economics, this year, went to Hurwics, Maskin and Myerson for their work on mechanism design theory dealing with the efficiency of markets. People, as they have always done, look up to Nobel Prize winners with great awe and respect. Rarely does it occur to them that it is the worst of men who get to the top in Social Sciences.
Their ‘pioneering’ work deals with the allocation of resources in the best possible manner possible. A notion of this sort would inevitably founder over this simple, but devastating question-Whose resources? Why all these economists consider wealth, or ‘resources’, as something which hangs on their roof, which is left at their disposal for ‘allocation’. If there is any way to ‘allocate’ resources in the best possible manner, it is an uncontrolled, unregulated market. True, there are situations in which market doesn’t work that well. The fact that it doesn’t, do not prove in any way that governmental action could do it any better. We know it is the other way round by the fundamentals of economics and hard-won experience!
I too had my own share of flirtations with Game theory while in college, though I got out of it when capable of seeing through the fallacies. Game theory, Mathematical Economics and all its variants are based on so fundamental an error. ‘Man is a very complex organism and doesn’t fit any such equations’. A game can be regarded as an action, but all actions can’t be regarded as games. In a game, there is a winner and a loser, but on the market where trade happens, both win and profit. If it weren’t the case, the trade wouldn’t have been performed, in the first place. A war is not a market phenomenon. Game theorists are of no help to businessmen either, all claims and pretensions to the contrary notwithstanding. Game theory is, in essence, childish dilettantism of the gigolos of science.
Psychology, too, had joined the game long before to profit from the theory of games and statistics. I remember reading a work on manipulation, which compares the way a manipulator perceives relationships to prisoner’s dilemma. There is no reason why all this can’t be explained in pure verbal logic. It is also not clear why such tools are brought in when there is no need at all and not having any relationship to the situation.
Why are mathematical tools and models used when pure verbal logic would have sufficed? We have to get to the root of the problem to realize why some of the ‘brightest’ men in the field turn to econometrics, Keynesianism and game theory. Most universities are dependant on Government support, and are under the control of powerful political pressure groups. Research works of economists have deep political implications, and most ‘economists’ even understate their findings, in order to prevent political backlash. They restrict their activities to certain narrow abstract problems, bringing in epistemological methods which bear no relation to the science they pursue. Mathematical models and works confined to narrow spheres have not the emotional appeal of well integrated works. Men, who attempt to fight this, should pay for it. This accounts for why Von Mises never had any permanent academic job in the whole of his life, and why we see no article in praise of laissez-faire in the ‘mainstream media’.
Clarity of expression is another trait which the committee is not fond of. Men, by nature, are not impressed with things they understand well. They have confused ‘simple’ with ‘simplistic’ and maturity with ‘pseudo-sophistication’. It is one reason, among others for these adolescent pranks. Works of mathematical economists, including that of Keynes are too dull, boring and lacking in clarity that one has to read it many a times to get any idea what the author is talking about. Having done so, one gets to the fact that all the views held by the author were refuted centuries ago. When what could have been expressed clearly in words, is done in Keynesian equations, the flaws become hard to detect. It is not just that the flaws are hard to spot; it is that their epistemology can only lead to flaws. Marx’s works too are of the same genre. Few venture to refute their works. The confusion they create, acts as a screen from any cogent analysis of their works. Most men shy away from it as they would be forced to learn Mathematics at a late phase in their lives. It is a pity that these men have duped the public for so long a time.
The alleged inferiority of social sciences is another reason for this dilettantism. Economics, known as the dismal science is considered not worthy of the Nobel. All such criticisms are met by the aping of physical sciences by using statistics, mathematical models and equations. Most economic journals publish such works even when the editors don’t understand it at all. They pass on such works to the mathematicians they associate who approves of it. As long as things move as it does, such criticisms are not without any basis. Pseudo-theorists are proving beyond doubt their ignorance of both of the sciences-Economics and Mathematics. Their theorems bear no relation to reality, in contrast to that of most of the ones in physical sciences. It however, doesn’t disprove the relation of economics to practical reality and that it were the views of classical economists that paved way for Capitalism. We owe to it a lot more than other sciences.
Nobel Prize, never ever was awarded to an economist who had deserved it. Von Mises’s and Murray Rothbard’s works are cases in point. They were said to be out of the mainstream economics. Mainstream, certainly, then should have been a sewer in which germs moved about. Reasons are various. Both of them were Jews, uncompromising free marketers and ‘extreme’ a priorists. Their works were characterized by its precision and clarity. Any reasonably intelligent person could read their works and be capable of analyzing economic issues much better than self-proclaimed economists. Was it all done by compromising intellectuality? Apparently not! Mises predicted the great depression of 1929.He was the first to come up with a theory on why economic calculation would be impossible in a socialist economy, and that it would inevitably fail. He proved beyond doubt that the very term’ socialist economy’ is a contradiction in terms. Murray Rothbard was the first to present a well integrated case for market anarchism, applying the same rationale to defense and security services. He argued that Government is devoid of the information for economic calculation in a system devoid of competition. They said the truth in no less precise terms that men drunk with power couldn’t bear it at all.
No free market economist was ever given the prize. Cases of Milton Friedman and F.A.Hayek would be pointed out, as exceptions. Milton Friedman supported school vouchers and Hayek though social security to be compatible with his laissez faire system. Hayek, moreover, appealed to his contemporaries by presenting his theorems in a less clear and more acceptable manner. It is the very art of smearing which is in play here. Hail Hayek and Friedman as the exemplifiers of market and then you have destroyed laissez-faire. Whenever a free market economist is willing to compromise, he is treated well with awards and positions. The fact that Alan Greenspan, who believed in Gold Standard was appointed as the chairman of Fed is also worth noting here. It was not a coincidence that Hayek was awarded the prize for his work on ‘Misesian trade cycles’ in 1974, the year after his mentor, Mises had passed away. They waited till his death as they had to avoid the embarrassment of giving it to the man who had really deserved it. Such is the nature of the intellectual bankruptcy in our culture.