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Current economics is flawed

What is the current state of economics today? Contemporary economics appears to rest in a state of polarization between two opposing philosophies: capitalism and neo-Marxism. My opinion is they are both wrong.

According to the heterodoxy economics program at the University of Massachusetts, capitalism and socialism all rest on the same underlying concept and goal and that is utilitarianism, the goal of which is to spread around the greatest good for the greatest amount of people; it’s goal is to allocate “maximum and optimal utility.”

Economics has done a poor job of understanding the economy, as demonstrated by the failure of metrics, statistical collection of data, academic monitoring and the minds of millions of economists, all of which failed to predict the 2008 recession, despite indications to the contrary. Economics fails because it can only understand the economy in abstract terms, and so it is seen clearly. Economics appears to primarily study large corporations and small businesses with the catchall term of “firms.”  These are rudimentarily considered as existing within simple supply/demand/opportunity cost constructs and other economic concepts, which more often than not are an extension or enhancement of the core principals.

The economy, with regard to firms, is understood in terms of its end product – the consumer product – and so the firms they focus on are small business and corporations which serve those needs. They do not understand the majority of the economy exists outside of creating consumer products. There are a plethora of firms that sell directly to businesses and millions of companies which serve as pivotal interconnection components that do not exist simply in the business cycle. Some link smaller firms to final consumer products but also add to the economy in a way that exists beyond that.

Economics fails to take into account human nature as the greatest driver of behavior and when it does, it’s still in the entirely wrong terms. Human nature is studied in the subfield of behavioral economics, which essentially tries to explain why people are “irrational.” Instead of understanding human nature as immutable, it considers it as flawed and seeks to study fallacies in economic terms in hopes of changing it in pursuit of increased production.

Quantitative metrics, such as per-capita income and median income, are flawed, primarily because they can easily be skewed by the higher wealth of small communities where wealth is highly centralized. Consequently, per-capita and median income may have been useful ways of measuring wealth and the distribution of wealth, however, applied to the immense complexity of a contemporary economy, they are no longer accurate or representative.

Massachusetts is a perfect example: we are one of the richest states in terms of GDP and per capita GDP and median GDP. Yet most of that wealth is concentrated in the Boston area and certain areas of the Berkshires. West of Boston and outside of pockets like Amherst, this state is very impoverished, and yet you could never possibly understand that by looking at state metrics or even the metrics of those cities/towns. Economics does not understand that poverty does not conveniently exist between three classes separated by income, but that these classes are often stratified, and within these stratifications, economic classes are then redefined.  Qualitative metrics and sociological examination are needed.

When contemporary economics discusses issues affecting the economy, it determines their importance and their meaning based on numbers and dollars. X illness is costing x amount, x stress at work is causing x loss of productivity.  A monopoly causes x raise in prices.  Elasticity of x is causing price of a product to be y. The end result is exactly what? It is exactly of what meaning or value? I could not think of a more irrelevant science, and even considered as a science economics is fractured.  It is neither a social science nor a math; it haphazardly oscillates between the two.

Mason Woolley is a Collegian contributor. He can be reached at mwoolley@student.umass.edu.

Comments
8 Responses to “Current economics is flawed”
  1. sjd says:

    It’s not flawed, it’s misunderstood by the writer. Please catch up. Human decisions and “feelings” can be anticipated. That you don’t like that it can be, and the results are counter to your feelings is another matter. Moreover, data is available for most places however small, so you can accentuate the plight of just about anyplace in isolation from the wealth that seems to bother you. you’d be surprised at how relevant economics really are to you should you apply yourself to the science as well as the art.

  2. Woolley Mammoth says:

    Here is what I understand from this article. Economics understands your flaws, your flaw is you do not understand economics…

  3. some econ guy says:

    Mason, you are correct about the flaws of standard (neoclassical) economics, but that is precisely the kind of economics that is challenged and criticized by the Economics Department here at UMass. Unfortunately, it is true that most of that challenging and criticizing is done by professors in their writing, not in class. So when you go to class you still get standard neoclassical economics 99% of the time.

  4. Andres says:

    I understand the author’s point of view, he is considering economics not solely as a math but as social science as well. I would not say it is fundamentally flawed; but economics has applied the same way of measuring the economy and understanding it for the past century despite the fact the economy since then has grown immensely more complicated. I agree the old methods have become outdated.
    Kudos to the writer to taking the courage to examine economics in a new lens.

  5. Ben says:

    > Contemporary economics appears to rest in a state of polarization between two opposing philosophies: capitalism and neo-Marxism.
    It doesn’t.

    > Instead of understanding human nature as immutable, it considers it as flawed and seeks to study fallacies in economic terms in hopes of changing it in pursuit of increased production.
    I’m pretty sure economists are interested in building structures that compensate for human weaknesses, not in recoding the human genome.

    > Quantitative metrics, such as per-capita income and median income, are flawed, primarily because they can easily be skewed by the higher wealth of small communities where wealth is highly centralized.
    What? The whole point of using a median is that it’s not skewed in the way you describe.

    > Massachusetts is a perfect example: we are one of the richest states in terms of GDP and per capita GDP and median GDP. Yet most of that wealth is concentrated in the Boston area and certain areas of the Berkshires. West of Boston and outside of pockets like Amherst, this state is very impoverished, and yet you could never possibly understand that by looking at state metrics or even the metrics of those cities/towns.
    The problem with political subdivisions is that they don’t always correspond to social divisions. We can deal with this by using different subdivisions for demographic purposes, like “Western Massachusetts” or “Boston” or “white young adults attending public 4-year universities”. You have to select relevant sample sizes if you want to get results that tell you anything. That’s as true of economics as it is of any social science.

  6. mason says:

    It’s had to explain your thoughts in a the tiny space of a column but my point there has been more than sufficient sampling of communities in Massachusetts but it’s not because of that they are flawed it’s because they cannot accurately reflect the reality of the economic conditions of those areas because the metric is too simple and we’re using methods that have not been updated to reflect the modern complexities of an economy. This is not typical of of a true science, the natural sciences constantly evolve, you do not see this in economics.

    I say that economics is polarized between capitalism and neo-Marxism but don’t elaborate. This another problem with economics and it further degrades it’s status as a a science. A true science is only interested in the pursuit of objective truth and than discovery made is than engineered for useful applications.

    What I have seen studying economics and the classes I have taken at both amherst college and umass is that professors teach a curriculum around either capitalism or the idea that capitalism is flawed via neo-marxism. Both economic ideologies have merit and expose certain strengths and flaws in their analysis of the economy and methods of applying that via fiscal policy but this very strong emphasis on ideological understanding of the economy and basing studying around that is inherently biased and leads to a parochial view and understanding of an economy.

    The last paragraph is a criticism of utilitarianism. Utilitarianism is the modern foundation of economics and of both schools of economics, hetrodox and orthodox. Utilitarianism has different definitions depending if you examine it sociologically, politically or economically but the core concept is the idea of distributing happiness to the maximum amount of people in the greatest amount and in my opinion the way economics views this concept is almost absurd.
    It’s this foundation is one reason why economics is concerned with price controls, the price of products,c/p surplus, monopolies et cetera. It goes so far to assert that “marginal utility” is somehow an indication of happiness and that economic application which increases utility is somehow going to make people happier.
    This is a central flaw in economics I think and is really the central debate between capitalism and heterodox economics. Capitalism asserts that most wealth can be allocated to the most amount of people by free enterprise and and the opposing viewpoint asserts that wealth must be reallocated institutionally.
    This debate has raged since the new deal in the 1930s and has consumed America since than and it’s created a distraction. In one sense it’s important to ensure that we help the lower class however beyond that what difference would ensuring more money to the middle class makes?
    How will ensuring a market is more efficient leading to x decrease in a product going to improve a person’s life? Instead of providing a means to provide happiness as it was originally envisioned by adam smith and karl marx and has perpetuated by economists. Economics has instead of liberating a means of happiness, encapsulated the parameters of it and created the definitions in which it can exist.
    Now we are lead to believe happiness is a progression and through this progression can our goals of happiness be attained, it forges a singular view of life that can only be lived within it’s confines and the politicization of economics has divided our nation instead of bringing it together

  7. mason says:

    you say that economics is polarized between capitalism and neo-Marxism but don’t elaborate.***

  8. mason says:

    How much of the of the SGA budget is allocated for clubs?

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