How neoliberalism broke economics | Dr Abby Innes

Quick Overview

Neoclassical economics, and particularly its modern iteration in neoliberalism, has led economics astray by promoting overly simplistic models that fail to account for the complexities of human behavior and societal structures, leading to policy failures and an inability to address real-world problems like inequality and climate change.

Key Points: Neoclassical economics, particularly in its neoliberal form, has failed by relying on overly simplistic models that ignore human complexity and real-world issues. The "scientific" turn in economics prioritized mathematical formalism over empirical observation, leading to models that assume rational actors and perfect markets. This mechanistic approach, originating from Soviet economic failures, has resulted in policy blunders like the 2008 financial crisis and the cost of living crisis. Economic models often fail to account for qualitative aspects of society, such as power dynamics and inherent uncertainty, focusing instead on easily quantifiable elements. The pursuit of predictive and controllable economic models has led to a loss of relevance and an inability to solve pressing societal problems like inequality and climate change. Innes advocates for a return to more historically informed, context-aware, and less mathematically rigid economic approaches to better understand and address real-world challenges.

Context: Dr. Abby Innes, a political economist and author of "Late Soviet Britain: Why Materialist Utopias Fail," presents a critique of contemporary economics. She argues that the discipline has become detached from the realities it aims to explain due to its over-reliance on overly simplistic, mechanistic models that fail to account for the complexities of human behavior and societal structures. This detachment, she contends, is a legacy inherited from the flaws of Soviet economics and further entrenched by neoliberalism.

Detailed Analysis

Dr. Abby Innes argues that the dominant economic paradigm has become detached from reality due to its reliance on overly simplistic, mechanistic models that fail to account for human behavior and societal complexities. She traces this issue back to the "scientific" turn in economics, which prioritized mathematical formalism over empirical grounding. This led to the development of models that assumed rational actors and perfect markets, ignoring factors like inequality, power dynamics, and the inherent uncertainty of the real world. Innes contends that this "toy model" approach, originating from the Soviet economic model's flaws and later adopted by Western neoliberalism, has led to policy failures such as the 2008 financial crisis and the ongoing cost of living crisis. She highlights how these models, by focusing on easily quantifiable elements, neglect crucial qualitative aspects of economic and social life. The core of her critique is that by seeking to create a predictive and controllable science, economics has lost its ability to understand and effectively address complex, real-world problems, leading to a perpetuation of crises and a failure to deliver on promises of prosperity and stability. She suggests that a return to a more historically informed, context-aware, and less mathematically rigid approach is necessary to make economics relevant again.