Also, I appreciate your spelling out the problem but I wonder do you also plan on pointing towards / uncovering solutions? I'm trying to work on the latter, with a podcast and documentary in the making. If you have thoughts or would be interested in collaborating, here is a quick summary of my ToC:
In response to this piece, someone on Twitter/X asked rhetorically: what is political or ideological about the law of diminishing marginal utility or the law of returns to scale?
This question reflects a common defence of economics as a value-free and non-political science, and it is important to explain why that defence itself is political.
At first glance, these laws may appear entirely non-political. However, they shape the lens through which we study the economy, and that choice of lens has serious political implications.
Production is not merely a question of “efficiency,” which the law of returns emphasises. It is also a question of class, power, and social relations — dimensions that mainstream economics treats as secondary or outside its core analytical framework.
Similarly, consumption is not only a matter of individual “utility” preferences responding to quantities, as emphasised by the law of diminishing marginal utility. It is also bound up with inequality, identity, and ecological limits — issues that, again, receive limited attention in mainstream economics.
In this way, mainstream economics reflects political priorities in what it chooses to foreground and what it abstracts away, often relying on oversimplified mathematical formalism to do so.
What is striking is not only that these priorities are rarely acknowledged in economics textbooks as such, but that alternative ways of understanding the economy are frequently marginalized or treated as unscientific.
This is why I keep saying that, today, we're training economists who can build models but don't really understand the economy.
Essential reading for everyone. Some examples to back your article:
At the 2007 Global Derivative Conference in Paris I was asked to introduce Robert Jarrow of Cornell who was giving a keynote speaker talk on market bubbles. Since there were no questions from the audience, I asked him why economists used to deny bubbles could exist when they were visible everywhere. He was taken aback and said an honest question deserved an honest answer. He said, "Nasir, no bubbles was the starting paradigm. And if you wanted to make your career in academia that's what you worked with. You also didn't see bubbles because you only saw only the no bubbles framework in academia."
In 2017, I finally decided to learn some mathematical economics to see the actual theory behind rhetoric and laws as presented in textbooks. Prof Rangel of Caltech went through the whole Kuhn Tucker optimisation to arrive at how the market clears based on aggregated supply and demand curves from agents optimising their expected utility functions. I waited for the connection to the real world. Prof Rangel then explained we didn't need to worry about the actual utility functions because the existence of prices in the real world meant that we could work with actual numbers directly. I them sent him a written question, "So in the physicist's language, we are saying that real world observations are is due to these unknown background system potentials, but when the time comes to connect to the real world, we say that the background potentials are unknowable, but the existence of the real world proves that they lurk underneath. But all that has been shown is that there is one possible mechanism for prices and clearing. It hasn't been shown that that is the unique mechanism. One can map many mechanisms into observed data" To my surprise, Prof Rangel agreed and said it was for the very reason that he was moving to neuro-ecomomics, where he would study the effects of neurological processes on economic decision making.
Another example is from the 1980s when John Holland and Ken Arrow sat down to play a game if chess. It's related in the book "Complexity" by M Mitchell Waldrop, published in 1993. Holland made the first move, a pawn, and said "Checkmate." When Arrow looked up in surprise, Holland said, "We are both economic agents who have optimismed our expected utility functions. Now tell me, Ken, does anyone play chess this way?"
There's a hidden pearl in here worth noting, though it's a diversion from the point of the article. The line says more than one might guess: "...we have largely stopped thinking about ethics and about what constitutes human well-being. We are technocrats who focus on efficiency." In the 90s, Bhutan defined the "Gross National Happiness (GNH)" scale and incorporated it into their policy as more important than GDP. At that time it was based around preserving a sense of well-being, via cultural values and numerous other factors that would align with the dictionary definition of happiness. Later, the U.N. adopted this terminology, and hijacked the term "happiness" to include a number of economic indicators, yet completely removing the dictionary definition of happiness. Happiness was no longer a state of mind, it was a way of directing a society, and related to GDP. Bhutan no longer even qualified as a happy country. Finland consistently ranks as one of the happiest countries in the world based on the UN publication. Interestingly, Finland has one of the highest suicide rates in the world so I guess a lot of happy people are jumping off bridges.
This is a strong critique, but I’d push it one step further.
Economics didn’t just depoliticize itself, it repositioned itself as a legitimacy layer for decisions already made elsewhere.
Markets, monetary policy, and trade regimes now execute first, while economic theory explains why that execution was “inevitable” after the fact. The danger isn’t false neutrality, it’s delayed accountability.
A great point. The economic sphere has come to dominate the political one. Then, the orthodox academics are funded to reify all the falsities and mythologies that prop up such structures and policies. I’d say this phenomenon happens with most social sciences, but with economics they turn it up to 11.
Another example is the stripping of land from neoclassical theories of income distribution. This was enacted in large part to serve wealthy land-owning interests, as told by Mason Gaffney in "The Corruption of Economics".
Some days ago, we were discussing the effects of President Bola Ahmed Tinubu's decision to remove fuel subsidy with some colleagues. One of my colleagues, a PhD holder of Energy Economics, said the fuel subsidy wasn't 'Pareto Optimal.' We countered by saying that the wellbeing of people should come first, ahead of textbook theories.
As someone in an applied economics PhD program at an ivy league institution, I 100% agree with this take. Especially the statement about economics graduates being able to build a model without having the tools/framework to explain what’s actually going on in the economy. Ive spent an inordinate amount of time, studying concepts like the moment generating function of a probability distribution, but not nearly enough time actually learning about the political forces shaping the economy. I have to seek out knowledge for this myself by reading books or articles from economists in the public or private sector. I wish I had known how truly disconnected graduate training economics was from the real world before pursuing the PhD. Thanks for bringing attention to this!
I remember back in my Global Governance and International Organization class, I causally proclaimed, “every economic decision is also a political one”. I felt a wave of unease ripple through the class, and since then, I have thought about this grandiose statement a lot, to try to come up with the example of an economic decision that was stripped of any political implication. So far, I have failed.
I do feel vindicated after reading this article, which argues my spur of the moment assertion a lot more comprehensively and logically.
I only have one note though. I I do not agree that the markets cannot appear freely when people are left to their own devices. I believe they can and do appear without government intervention or influence; however, as things go, a government can intervene and reset the dynamics or a market which at one time was unsupervised or completely “free”. So, while I don’t agree with the premise, the conclusion holds. Not least because even leaving a market to its own devices is also a political decision.
I think the contention here is surely that while markets can naturally emerge, they do not naturally emerge "free" in a meaningful sense. That is, they are not stably free, and may even emerge with obvious unfree elements. It strikes me, historically and anthropologically, that heavily regulated guild society with some market elements is by far the more "natural" way for human exchange to evolve. Free markets - for all the good they have brought - are an unnatural government imposition.
You seem to be conflating "free" markets with "competitive" markets.
Monopolistic and oligopolistic markets can emerge when states protect free markets.
The allusion in the article to the dependence of free markets on the state and society was likely more a reference to the fact that property rights, which are necessary for free markets, require the force of the state (it could also refer to the necessary dependence of commerce on infrastructure, currency, etc). In a free state of nature, of course, freed from the stultifying hand of the state, "free markets" devolve into violent theft.
Yeah I do agree with that. That government intervention is the only "unfree" force in a market has to be one of the most successful nuggets of corporate propaganda.
Love how clearly you debunk this. I wrote an article drawing a parallel between economics and anthropology, showing how both of them treat capitalism as the elephant in the room. However, while most anthropology focuses on culture without looking at capital, there are schools that treat capitalism and systems of exchange seriously, from the economic anthropology that Polanyi built on, to anthropology of global systems more recently.
Kewl. I will have an article on political economy out in a couple of weeks entitled "The Neoliberal Mode of Economic Governance vs. The Social Democratic Mode of Economic Governance."
Here in Africa , violence is used to ensure implementation of neoclassical economics appears to reflect what the IMF believes o how the economy should work.
you are so on point. their "scientific" models and theories about perfect competitive markets function as a cover up for their disgusting ideologies. that is why we see a pursue for the atomization of everything from them whenever they put a theory since atomized, lonely, weak individual works very well for ruling class. mainstream economics is fake, it is actually a neoliberal priesthood, it works like religion, they say same lies over and over again: money is neutral, money is a veil bla bla bla. they intentionally reject all social realm within money.
In addition to the works I've referenced, I would recommend Ha-Joon Chang's ”Breaking the mould” (article) and Quinn Slobodian's ”Globalists” (book).
Hi Jostein, as you cite Polanyi, maybe you would be interested in contributing something here? https://www.karlpolanyisociety.com/fl-blog/
Also, I appreciate your spelling out the problem but I wonder do you also plan on pointing towards / uncovering solutions? I'm trying to work on the latter, with a podcast and documentary in the making. If you have thoughts or would be interested in collaborating, here is a quick summary of my ToC:
https://youtu.be/42oiE-VKWvg?si=dnh0aX8Dz3rK_EwA
In response to this piece, someone on Twitter/X asked rhetorically: what is political or ideological about the law of diminishing marginal utility or the law of returns to scale?
This question reflects a common defence of economics as a value-free and non-political science, and it is important to explain why that defence itself is political.
At first glance, these laws may appear entirely non-political. However, they shape the lens through which we study the economy, and that choice of lens has serious political implications.
Production is not merely a question of “efficiency,” which the law of returns emphasises. It is also a question of class, power, and social relations — dimensions that mainstream economics treats as secondary or outside its core analytical framework.
Similarly, consumption is not only a matter of individual “utility” preferences responding to quantities, as emphasised by the law of diminishing marginal utility. It is also bound up with inequality, identity, and ecological limits — issues that, again, receive limited attention in mainstream economics.
In this way, mainstream economics reflects political priorities in what it chooses to foreground and what it abstracts away, often relying on oversimplified mathematical formalism to do so.
What is striking is not only that these priorities are rarely acknowledged in economics textbooks as such, but that alternative ways of understanding the economy are frequently marginalized or treated as unscientific.
This is why I keep saying that, today, we're training economists who can build models but don't really understand the economy.
Essential reading for everyone. Some examples to back your article:
At the 2007 Global Derivative Conference in Paris I was asked to introduce Robert Jarrow of Cornell who was giving a keynote speaker talk on market bubbles. Since there were no questions from the audience, I asked him why economists used to deny bubbles could exist when they were visible everywhere. He was taken aback and said an honest question deserved an honest answer. He said, "Nasir, no bubbles was the starting paradigm. And if you wanted to make your career in academia that's what you worked with. You also didn't see bubbles because you only saw only the no bubbles framework in academia."
In 2017, I finally decided to learn some mathematical economics to see the actual theory behind rhetoric and laws as presented in textbooks. Prof Rangel of Caltech went through the whole Kuhn Tucker optimisation to arrive at how the market clears based on aggregated supply and demand curves from agents optimising their expected utility functions. I waited for the connection to the real world. Prof Rangel then explained we didn't need to worry about the actual utility functions because the existence of prices in the real world meant that we could work with actual numbers directly. I them sent him a written question, "So in the physicist's language, we are saying that real world observations are is due to these unknown background system potentials, but when the time comes to connect to the real world, we say that the background potentials are unknowable, but the existence of the real world proves that they lurk underneath. But all that has been shown is that there is one possible mechanism for prices and clearing. It hasn't been shown that that is the unique mechanism. One can map many mechanisms into observed data" To my surprise, Prof Rangel agreed and said it was for the very reason that he was moving to neuro-ecomomics, where he would study the effects of neurological processes on economic decision making.
Another example is from the 1980s when John Holland and Ken Arrow sat down to play a game if chess. It's related in the book "Complexity" by M Mitchell Waldrop, published in 1993. Holland made the first move, a pawn, and said "Checkmate." When Arrow looked up in surprise, Holland said, "We are both economic agents who have optimismed our expected utility functions. Now tell me, Ken, does anyone play chess this way?"
There's a hidden pearl in here worth noting, though it's a diversion from the point of the article. The line says more than one might guess: "...we have largely stopped thinking about ethics and about what constitutes human well-being. We are technocrats who focus on efficiency." In the 90s, Bhutan defined the "Gross National Happiness (GNH)" scale and incorporated it into their policy as more important than GDP. At that time it was based around preserving a sense of well-being, via cultural values and numerous other factors that would align with the dictionary definition of happiness. Later, the U.N. adopted this terminology, and hijacked the term "happiness" to include a number of economic indicators, yet completely removing the dictionary definition of happiness. Happiness was no longer a state of mind, it was a way of directing a society, and related to GDP. Bhutan no longer even qualified as a happy country. Finland consistently ranks as one of the happiest countries in the world based on the UN publication. Interestingly, Finland has one of the highest suicide rates in the world so I guess a lot of happy people are jumping off bridges.
This is a strong critique, but I’d push it one step further.
Economics didn’t just depoliticize itself, it repositioned itself as a legitimacy layer for decisions already made elsewhere.
Markets, monetary policy, and trade regimes now execute first, while economic theory explains why that execution was “inevitable” after the fact. The danger isn’t false neutrality, it’s delayed accountability.
A great point. The economic sphere has come to dominate the political one. Then, the orthodox academics are funded to reify all the falsities and mythologies that prop up such structures and policies. I’d say this phenomenon happens with most social sciences, but with economics they turn it up to 11.
Economists as the handmaidens of power?
Another example is the stripping of land from neoclassical theories of income distribution. This was enacted in large part to serve wealthy land-owning interests, as told by Mason Gaffney in "The Corruption of Economics".
Some days ago, we were discussing the effects of President Bola Ahmed Tinubu's decision to remove fuel subsidy with some colleagues. One of my colleagues, a PhD holder of Energy Economics, said the fuel subsidy wasn't 'Pareto Optimal.' We countered by saying that the wellbeing of people should come first, ahead of textbook theories.
As someone in an applied economics PhD program at an ivy league institution, I 100% agree with this take. Especially the statement about economics graduates being able to build a model without having the tools/framework to explain what’s actually going on in the economy. Ive spent an inordinate amount of time, studying concepts like the moment generating function of a probability distribution, but not nearly enough time actually learning about the political forces shaping the economy. I have to seek out knowledge for this myself by reading books or articles from economists in the public or private sector. I wish I had known how truly disconnected graduate training economics was from the real world before pursuing the PhD. Thanks for bringing attention to this!
I remember back in my Global Governance and International Organization class, I causally proclaimed, “every economic decision is also a political one”. I felt a wave of unease ripple through the class, and since then, I have thought about this grandiose statement a lot, to try to come up with the example of an economic decision that was stripped of any political implication. So far, I have failed.
I do feel vindicated after reading this article, which argues my spur of the moment assertion a lot more comprehensively and logically.
I only have one note though. I I do not agree that the markets cannot appear freely when people are left to their own devices. I believe they can and do appear without government intervention or influence; however, as things go, a government can intervene and reset the dynamics or a market which at one time was unsupervised or completely “free”. So, while I don’t agree with the premise, the conclusion holds. Not least because even leaving a market to its own devices is also a political decision.
I think the contention here is surely that while markets can naturally emerge, they do not naturally emerge "free" in a meaningful sense. That is, they are not stably free, and may even emerge with obvious unfree elements. It strikes me, historically and anthropologically, that heavily regulated guild society with some market elements is by far the more "natural" way for human exchange to evolve. Free markets - for all the good they have brought - are an unnatural government imposition.
You seem to be conflating "free" markets with "competitive" markets.
Monopolistic and oligopolistic markets can emerge when states protect free markets.
The allusion in the article to the dependence of free markets on the state and society was likely more a reference to the fact that property rights, which are necessary for free markets, require the force of the state (it could also refer to the necessary dependence of commerce on infrastructure, currency, etc). In a free state of nature, of course, freed from the stultifying hand of the state, "free markets" devolve into violent theft.
Yeah I do agree with that. That government intervention is the only "unfree" force in a market has to be one of the most successful nuggets of corporate propaganda.
Whatever doesnt fit within neat mathematical formulas have been given a nice name. 'Externalities' !!!
Love how clearly you debunk this. I wrote an article drawing a parallel between economics and anthropology, showing how both of them treat capitalism as the elephant in the room. However, while most anthropology focuses on culture without looking at capital, there are schools that treat capitalism and systems of exchange seriously, from the economic anthropology that Polanyi built on, to anthropology of global systems more recently.
Kewl. I will have an article on political economy out in a couple of weeks entitled "The Neoliberal Mode of Economic Governance vs. The Social Democratic Mode of Economic Governance."
Here in Africa , violence is used to ensure implementation of neoclassical economics appears to reflect what the IMF believes o how the economy should work.
Interesting article, I write about similar things, Let’s connect! https://rkto.substack.com/p/searches-for-rain-sounds-cause-economies
I would quote also Alessandro Roncaglia's 'Power and Inequality', CUP 2024.
Super interesting! Would you recommend me a book/article analyzing critically the assumptions made by microeconomic theory?
you are so on point. their "scientific" models and theories about perfect competitive markets function as a cover up for their disgusting ideologies. that is why we see a pursue for the atomization of everything from them whenever they put a theory since atomized, lonely, weak individual works very well for ruling class. mainstream economics is fake, it is actually a neoliberal priesthood, it works like religion, they say same lies over and over again: money is neutral, money is a veil bla bla bla. they intentionally reject all social realm within money.