What economists are saying By Heather Witham Besides reading The Economist, one way to determine thoughts of mainstream capitalist economists is to attend the annual American Economics Association (AEA) convention. This year, approximately 8,000 economists descended upon the streets of New Orleans Jan. 4-7 to discuss all facets of the economy from many points of view. The main perspective, however, was represented in the sessions sponsored by the AEA itself. Comparing them over the past three years is telling. In 1999, six sessions were devoted to the Asian crises, five to how great the U.S. economy was and two to wage and income inequality (foreign and domestic). Last year, two sessions tackled the Asian financial crisis, two discussed crises in general (including the "near crash of 1998") and one focused on income inequality in foreign countries. This year things were different. Six revisited financial crises and vulnerabilities, especially lessons learned from Asia. Six pondered economic growth, such as determinants of economic growth, the new economy and forecasting. One thing is clear: mainstream economists are looking for answers and not just to explain the past, but to predict our uncertain future. In his AEA presidential address, Dale Jorgenson noted that two views on the current economy exist. One is that growth can be explained in the same way that the crisis in the 1970s was explained. Major, but temporary, changes in production result in major changes to growth. In the 1970s, the cost of raw materials (i.e., oil) increased, causing a slowdown. Starting in the 1990s, this was "mirrored," according to this first view, in that technological changes (i.e., the cost of semiconductors) decreased, causing rapid growth. In either situation, nothing fundamental about the economy changed. The other view on the current economy, and the one Jorgenson appears to espouse, is that this is, indeed, a "new" economy that has fundamentally changed permanently. Forecasting tools have been inadequate and the economy does not follow any textbook models. Jorgenson's own analysis of the situation, however, still relies upon old economic tools that dehumanize all inputs to production. This is typical of establishment economists, who spend their energy manipulating abstract economic formulas rather than considering the real consequences of policies. Jorgenson questions the sustainability of the growth, in any case, and echoes others who wonder if the stock market is overvalued. He believes that information technology prices will continue to decline, leading to further growth, but he's hesitant to say this would be for an indefinite amount of time. And Jorgenson calls for more research on how the new economy is causing wage inequality in America. Jorgenson and other members of the AEA ilk represent what is called "orthodox" economics: the neoclassical, accepted, mainstream theory of economics that espouses a free market, capitalist economy. The contrasting viewpoints are generally termed "heterodox" and were present at the AEA convention as well. Two of the main alternative groups were the Association for Evolutionary Economics (AFEE) and the Union of Radical Political Economists (URPE), the latter composed of both Marxists and non-Marxists. The AFEE and non-Marxist URPE members argued with mainstream economic theory and called for reforms. The Marxist URPE members tended to emphasize Marxist theory only. Generally missing from the conference, and most obviously from the Marxist URPE sessions, was a Marxist response to the current economic situation. Establishment economists believe that such things as a major political event, a significant change in the weather or a change in oil prices cause crises. But these only appear to be the cause. By focusing on these factors, said economists ignore the fundamental nature of capitalist production, the exploitation of labor and imperialism, which are the root causes of crises. The Marxists could continue this analysis by noting that there may be many "new" things about the economy (e.g., information technology), but exploitation is still done in fundamentally the same, old-fashioned way. A valid question follows from this discussion: Why should we even care what the academic economists are saying among themselves in a few hotels? The orthodox economic ideas are like a contagion that seeps into the economic policies of our cities, states and nation as a whole. Many of these economists are the very ones that we see in The New York Times and that advise policymakers in Washington, DC. If we fail to question, and even understand, what the current economic thought is, we are powerless to fight it. As a great economic teacher once said, "Know thy enemy." * Heather Witham is a member of the Communist Party's Economic Commission. _______________________________________________ CrashList website: http://website.lineone.net/~resource_base
