Economics and the Public Sphere: The Rise of Esoteric Knowledge, Refeudalization, Crisis and Renewal
While I was traveling, I meant to post the introduction and a link to this (relatively long) essay on crisis and renewal in economics -- I was interested to see what comments you might have -- but something went wrong (I pushed the wrong button) and it never appeared:
Economics and the Public Sphere: The Rise of Esoteric Knowledge, Refeudalization, Crisis and Renewal, by Erik S. Reinert, Tallinn University of Technology, Estonia: After receiving the National Bank of Sweden’s 1973 ‘Nobel’ Prize in economics – shared with development economist Gunnar Myrdal – Friedrich von Hayek (1899-1992) held an unusual dinner speech where he quite explicitly criticized the prestigious prize he had just received: “…if I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it. One reason was that I feared that such a prize … would tend to accentuate the swings of scientific fashion.” Hayek believed that economics was different than other sciences, and his 1973 speech shows a degree of humility towards the complexities of economics which, in my view, differs profoundly from today’s professional attitudes. An insight from a 1952 book by Hayek strengthens the argument: “Never will man penetrate deeper into error than when he is continuing on a road which has led him to great success.” In other words: when being right and successful, mankind will ‘overshoot’ into error.
The origins of what colleague Mark Thoma refers to as the “Great Disconnect” between professional economics and the public sphere can be better understood by taking a closer look at Hayek’s propositions. Observing the economics profession over time, it indeed appears to be subject to cycles of fashion as Hayek suggests: apparent theoretical success overshoots the scientific fashion into error and irrelevance.
Other economists have contributed, from different angles, to describing this ‘overshooting’ phenomenon. Norwegian-American economist Thorstein Veblen (1857-1929) suggests that knowledge exists on two different levels. Highly abstract and esoteric knowledge, like that of high priests, carries much prestige, but is – in practice – often fairly useless. On the other hand there is exoteric knowledge – useful knowledge – based on facts and experience, that carries little prestige. Using Veblen’s terminology, we can argue that Hayek’s overshooting of scientific fashion corresponds to Veblen’s idea that irrelevant education may contaminate healthy instincts of useful and exoteric knowledge.
In this paper I shall provide examples of historical instances where esoteric knowledge has created crises, and how these crises were only solved by resurrecting alternative, sometimes near-defunct, paradigms of knowledge. The paper identifies four different periods (1848, 1890s, 1930s – and neoliberalism today) where the same tendencies recur: a rise of academic monoculture (of esoteric knowledge), refeudalization (tendencies towards a Plutocracy), crisis and renewal. These sequences and their recurrence define the changing relationship between economics and the public sphere, and it is only through activities in the public sphere that any renewal will take place. ...[continue reading]...