In Blame Economists for the Mess We’re In, Benyamin Appelbaum skewers the false prophets — and prophecies — of economic orthodoxy in the 20th century:
Liberal and conservative economists conducted running battles on key questions of public policy, but their areas of agreement ultimately were more important. Although nature tends toward entropy, they shared a confidence that markets tend toward equilibrium. They agreed that the primary goal of economic policy was to increase the dollar value of the nation’s output. And they had little patience for efforts to limit inequality. Charles L. Schultze, the chairman of Mr. Carter’s Council of Economic Advisers, said in the early 1980s that economists should fight for efficient policies “even when the result is significant income losses for particular groups — which it almost always is.” A generation later, in 2004, the Nobel laureate Robert Lucas warned against any revival of efforts to reduce inequality. “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.”
Accounts of the rise of inequality often take a fatalistic view. The problem is described as a natural consequence of capitalism, or it is blamed on forces, like globalization or technological change, that are beyond the direct control of policymakers. But much of the fault lies in ourselves, in our collective decision to embrace policies that prioritized efficiency and encouraged the concentration of wealth, and to neglect policies that equalized opportunity and distributed rewards. The rise of economics is a primary reason for the rise of inequality.
And the fact that we caused the problem means the solution is in our power, too.
Markets are constructed by people, for purposes chosen by people — and people can change the rules. It’s time to discard the judgment of economists that society should turn a blind eye to inequality. Reducing inequality should be a primary goal of public policy.
Time for economics based on biology, ecology, and complexity — embracing chaos and rejecting equilibrium, seeking to counter inequality and not to accept it as an unavoidable by-product of capitalism. Or else the world will rise to tear the blind machinery of the market economy down.