December 17, 2008 at 03:51:31

Theory vs. Reality: Why Market Absolutism Fails

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By Ernest Partridge (about the author) Page 1 of 5 page(s)

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For OpEdNews: Ernest Partridge - Writer

"The collapse of market fundamentalism in economies everywhere is putting the Chicago School theology on trial. Its big lie has been exposed by facts on two levels. The Chicago Boys' claim that helping the rich will also help the poor is not only exposed as not true, it turns out that market fundamentalism hurts not only the poor and the powerless; it hurts everyone, rich and poor, albeit in different ways... The fruits of Friedman test are in - and they are all rotten." Henry Liu

An economist and his guide, while hunting in Africa, fall into an elephant trap: twenty feet deep with vertical walls.

"That does it," says the guide, "we're done for. No escape, no food, no chance of being found in time."

"Nonsense," said the economist, "I can get us out of here."

"And how do you propose to do that?," the guide asks.

The economist replies: "Well, first we posit a ladder."

Economists are no more inclined than the rest of us to live in a fantasy world not, that is, as they go about the practical business of living their everyday lives. But when economists write technical papers and teach university courses, they often enter a theoretical realm of abstract concepts such as "economic man" (homo economicus) and "perfect markets," articulated with virtuoso advanced mathematical manipulations. Very elegant, and very unreal.

Many economists, perhaps most, appreciate the limitations of economic theory in explaining and predicting social behavior and political trends. Some economists, however, claim to find in traditional (i.e. "neo-classical") economic theory, the key to articulating and proposing public policy. It's called "market absolutism," and it has dominated American politics since the Reagan administration. It has also led this nation to the brink of economic disaster.

Market absolutism has led us to this crisis because its proponents in academia, politics and the media have been bewitched by theoretical concepts that apply imperfectly, if at all, to the real world in which we live and work. In particular: they posit an imaginary creature ("economic man") that inhabits a mythical environment (the "perfect market.")

Economic Man (Homo Economicus)

In neo-classical economic theory, "economic man" is a hypothetical individual who is a complete egoist, motivated solely by the self-interested desire to maximize his "preference satisfaction." Homo Econ's motivation is manifested by his willingness to pay for these satisfactions in a "free market." Neo-classical theory also postulates that "all goods that matter to individuals ... must be capable of being bought and sold in markets" and "anything that is valued instrumentally ... can be handled by economics, be it acts of friendship or love." (Freeman and Edwards. For citation of sources, follow this link). "Economic man's" behavior is described, in neo-classical jargon, as "rational." By implication, the self-sacrificing behavior of saints and heroes is "irrational."

Clearly, "economic man" exists nowhere outside of Ayn Rand's novels and, perchance, on Wall Street. And this is fortunate, for we wouldn't want him for a neighbor.

In fact, there is much more to a fulfilled and moral life than self-interested "preference satisfaction." Such a life also includes values that can not be priced in a free market. Among them:

**Truth. Scientists and scholars offer evidence and sound arguments, not bids. In courts of law, purchased verdicts are not only invalid, they are crimes.

**Civic Values such as justice, due process, civil rights, and the franchise, are not for sale. The governing impulse of economic man (qua consumer) is "I want." The governing impulse of the citizen is "we need."

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Dr. Ernest Partridge is a consultant, writer and lecturer in the field of Environmental Ethics and Public Policy. Partridge has taught philosophy at the University of California, and in Utah, Colorado and Wisconsin. He publishes the website, (more...)

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