Mainstream Economics - What were you thinking?

They rest of you students, do you experience some kind of deeply surpressed anger when your lectures focus on misguided topic or even tell you incorrect points?

I do. Normally in socialist topics such as Public Policy, but today - last lecture of the semester - I'm directing my critique towards Economics. First a disclaimer. My impression is that someone regarding Economics as a hoax and their practicioneers as evil advocates for capitalism, would be somewhat surprised by the fact that economists disagree on things. Yes, we do. Quite strongly.

Ok, so large parts of the prestegious education given in Economics is what's normally referred to as Mainstream Economics or Neo-Classical Economics developted and originated in association with University of Chicago (thus, Chicago School of Economics). They normally come out in favour of free markets and limited government intervention, thus the resemblance with us, Austrian Economists. From today's lecture, I'll highlight some points that set us apart.

Redistributing Wealth from Rich to Poor

Our lecture was making the point that, overall, from a societal point of view, taking £1 away from a rich person in order to give a poor person food, would be beneficial. This, on the grounds that the marginal utility increase for the poor guy would be a lot larger than the marginal utility loss of the rich guy. The way Neoclassicals would go about this is that such an action would produce better effects for all, thus worth doing. Some kind of utilitarian moral ground.

Anyway. For Austrians this is proposterous, and somewhat bothersome that a hundred students of economics might carry such a claim into their work-life, employing that knowledge. Why? Because such a statement would require you to make interpersonal utility comparisons. That is; compare how much utility person A derives from any event in comparison to how much person B derives from identical action. This is impossible, and where Neoclassicals' mistake lies. You simply cannot make such comparisons; it is inherently incorrect - and even if it weren't, how are you to measure that? Rather, who is to measure that? People prefer stuff, rather than value them according to a numerical, measurable list in their heads. Any kind of statements of the sort that "Person A gains 5 units of utility from playing a video game, and Person B losses 2 units of utility from producing such a game" is misguiding. Humans don't act that way: we prefer something over something else, a preferance that constantly changes. The only way we can conceive this, thus giving us economists something to work with, is through prices paid on a voluntary basis.

So, no, you can't conclude that £1 is more useful for a starving poor person than taking away £1 from a rich guy. Simply incorrect.

Personal IRONY of NeoClassicals 

Lecturer: I don't like working for the government.
Student: Why not?
Lecturer: I did research in a consulting project once, where we came to a conclusion only to find that the government refuted the findings. "That's wrong, we can't use that", they said. I don't want to work for someone that decided the outcomes before I've made the research.

Seems credible, right? That's funny, because that's exactly what Austrians accuse NeoClassicals for;

Walther Block uses the example of his PhD studies at University of Chicago on the effects of Minimum Wage, and found that sometimes minimum wage was correlated to increased employment - contrary to what the NeoClassicals normally concludes. He checked his numbers, but they were correct. What did his supervisor say? "Block, you moron! Do it again, get the correct result!".

Funny that my lecture refuses to work for the government, on the grounds that they only want a particular outcome of any study, and then goes on lecturing NeoClassical Economics, which is guilty for the exact same charge.

"In the Exam you're not required to show comprehensive knowledge

- You're required to show textbook knowledge"

Ok, do I even have to assert this one? Lovely way of showing the NeoClassical idea that everything is the way they've once concluded it to be, and diverting from that renders you 0 points on an exam. Funny, especially when so much in their teachings is made on epistemologically senseless grounds.

Another day at University. It never ceases to surpise you, does it?