Current economics is flawed

By Mason Woolley

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 [email protected]