Robert Skidelsky - Who Runs the Economy?: The Role of Power in Economics

The Author(s) 2016

Robert Skidelsky 1 and Nan Craig 2

The following essays are based on talks given at a symposium on Power and Economics organised by the Centre for Global Studies in March 2015.

Our symposium took as its starting point the thought of how little change the Greater Recession had brought about in the system of ideas, institutions, and policies which preceded the economic collapse of 2008. This led us to consider the relationship between economic ideas and power. It is not entirely absent; as Thomas Palley pointed out, economists discuss market power, bargaining power, and so on. However, this is a discussion within the discipline. It fails to explore the reciprocal connections between economic ideas and politics: the political power of economic ideas on the one side, and the influence of power structures on economic thought on the other. Was it correct to say, as Keynes famously did, that the power of vested interests is vastly exaggerated compared with gradual encroachment of ideas, that soon or late, it is ideas, not vested interests, which are dangerous for good or evil. Or was Marx right to regard economics as the ideology of the triumphant bourgeoisie? A key conclusion of the discussion was that power is under-theorised in economics.

This was a debate that we returned to many times over the day: to what extent are economists ignoring power, or, at the very least, ignoring major facets of powerboth their own power and the power dynamics within the social world they study? These elements overlap, as Nancy Cartwright described, through looping effects and self-fulfilling prophecies, as economic theories are picked up by the financial and policy worlds. The supposedly neutral discipline of economics does not simply describe human behaviour but, in fact, shapes it.

We began with presentations from Steven Lukes and Jonathan Hearn, detailing the basic dynamics of economics and power. Then, the superstructure of economics, with Norbert Hring of Handelsblatt and Lucas Zeise. Nancy Cartwright and John Bryan Davis completed the theoretical component of the day with presentations on economics as a science, including how power affects debates within economics.

Steven Lukes gave a triadic view of powerthat, in addition to power over decision-making and power over agenda-setting, there exists a third type of power, as described by J. K. Galbraith in his book The Anatomy of Power , which is power of conditioningthe power to shape others interests and preferences, so that they are not even aware of their real interests. This takes preferences not as exogenously given, but as shaped. In some cases, objectively observable harms do not develop into grievances.

Jonathan Hearn noted that a discussion of this third form of power is necessarily different from the first two, because it is fundamentally conceived as a critique of harm. The evidence for this third form of power is not in the behaviour of dominant actors, but in the harm done to the dominatedthat is, the difference between their true interests and their preferences.

He also argued that intention is hard to discern here or, rather, that intention and action can be complex, and that beliefs can be both prevalent and under question at the same timefor instance, in the case Steven Lukes raised of the repeal of the California estate tax, or death tax, where voters voted clearly against their own interests.

In the following discussion, Anthony Giddens questioned whether this definition of power was analytically clear enough to be useful: He added, You could argue neoclassical economic theory is kind of in denial of power; it portrays the economy as if power were not there. Yuan Yang agreed that Thomas Palley noted, There is a very old concept called false consciousness, and it seems that is what we are talking about here [] that is how I have always thought of Galbraiths conditioned power. He added, Andrew Graham added that, In the next session of the day, Norbert Hring laid out a series of shifts in economic thinking and orthodoxy over the centuries, and how these were affected by the needs of powerful interests. The four shifts he described range from the beginning of the industrial revolution in Britainthe first being the shift from protectionism, originally the natural policy to protect nascent British industries, to the promotion of free trade once these industries had become established. The second was in the nineteenth century, with the shift from classical to neoclassical economics, which Hring ascribes to the need to defend against the threat of Marxism. The third came during the 1930s, when the threat of revolution shifted to that of redistribution, with the redefining of economics to the study of the relationship between ends and scarce means. Hring argued that the fourth shift is a continuation of the third, where the dominance of methodological individualism, rational choice theory and public choice theory in economics serves the interests of the few against the possibility of collective decision-making. Finally, he argued it can be more useful to consider who or what is served by a particular idea, than whether that idea is strictly correct or incorrect.

Lucas Zeise, in his discussion of Hrings talk, agreed with his argument that ideas in economics have developed mainly along the lines required for the perpetuation of power by specific interests. He also stressed the importance of the idea of superstructurethe Marxist idea that the class system of society is established and stabilised by a superstructure that, on the one hand, is built upon the economy, and on the other, keeps the economy in its class structure, in its capitalist mode.

In the discussion that followed, Edward Skidelsky opened by pointing out that there was no clear theory to explain why economists needed to justify the ruling class. Adair Turner, in response, argued that it may be traceable to employment prospects, since the growth since the 1970s in the numbers of economists employed in the financial services sector may well make them unlikely to question theories in economics that support the financial sector. Norbert Hring argued that, in his experience of the German university system, there were clear professional advantages to espousing the most conveniently mainstream version of economicsone which is advantageous to the financial sector. In addition, he suggested, even academic economists have to train PhD economists who will go to work outside the academy and are therefore required to teach them ideas that will fit their roles in business. Steven Lukes raised the issue of physics envy, which he argued was rife in the social sciences but particularly acute amongst economists. He argued that economics has attempted to produce a unified theory, where a universally applicable theory of micro-behaviourwhich assumes that preferences are given and exogenousprovides the foundations for macroeconomic thought.