Critique of Economic Policy

2018 edition

Carlos Ezquerra

Economic crises increase the level of social conflict and confrontation and thus stimulate the criticism to current economic theories and policies: Keynes’ ideas and the New Deal found its way through the devastating crisis of 1929; neoclassic theories and neoliberal policies succeeded after several crises in the 1970s; and the recent crisis of 2007-2008 has reopened the debate about the soundness of academic economics and the possibilities of economic policy. This research project focuses on the the latter two issues.

Economics is naturalistically understood as a descriptive and predictive science. Economies are assumed to be governed by laws such that mathematical models based on “reasonable” hypothesis can be developed, statistically tested and thus justified as guidelines of possible economic policies.

Under this view, the contrast between the predictive success of natural sciences and the failure of Economics is due to particular limitations of the latter: the impossibility to carry out experiments “sensu stricto”; the inherent uncertainty of its research object, human interactions in production and circulation of commodities; and its relative youth as a science.

In the 1960s, Cold War and the confrontation between two antagonistic economic systems, market economies and planned economies, stimulate the critiques to this naturalistic comprehension of Economics and its highest expression, neoclassic theory. However, the controversy is not academically concluded, but politically truncated with the imposition of neoliberal policies starting in the 1980s. The economic crisis of 2007-2008 has challenged the alleged success of economic theory and neoliberal policies to overcome the recurrent crises that threaten the capitalist system.

This research project is aimed at developing an impossibility theorem regarding the effectiveness of economic policy in market economies. It is understood as a part of a more comprehensive project to develop an emergency economic science capable of solving crisis and allowing production and reproduction of a society’s means of living.

The methodology employed is the reconstructive and projective technography, a development of methodical constructivism. Economic practices, system and processes will be conceptualized and reconstructed by means of a precisely constructed language, starting from the so-called perspective of the participant.

The sequence undertaken starts from the reconstruction of the crisis of 2007-2008 and the two main contrasting recipes used in terms of economic policy, together with their theoretical justifications: US turn towards more state intervention, founded on Keynesianism; and European austerity, based on neoclassic theories. The objective is to confirm the ineffectiveness of both types of economic policies and to prove of impossibility of an effective economic policy in market economies.