Sunday, December 27, 2009

Economics and ideology

I just sent the following note to NPR:

After the segment of "The Best of Public Radio" concerning laboratory research on the psychology of money, the host said that economists talk about "how prices efficiently direct the allocation of resources." The word "efficiently" does not belong there, as it expresses ideology rather than science.

While prices do direct the allocation of resources, there's no unanimity among economists about how efficiently they do so, nor even about how "efficiency" should be defined in the context of an entire economy. Efficiency is meaningful only in relation to a specific objective. What is the specific objective of an entire economy, comprising a variety of individuals and institutions with varying objectives?

I could have added that such an objective can be defined only insofar as some sort of collective subjectivity, a public will, has actually been constituted. Yet the doctrine that prices "efficiently" direct the allocation of resources assumes that any expression of a public will can only "interfere" with the market's "efficiency." In this way, an ostensibly scientific statement serves to disguise a mere tautology, "proving" the market's efficiency by simply defining the efficient allocation of resources as whatever the market produces.

Eric Hamell

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