Posted
November 16, 2007

Post-Autistic Economics

A new economics journal brings the dismal (and often wrong science) into the real world.

It is something of an open secret that neoclassical economics has serious limitations as a way of understanding the world. But because the intellectual mindset has become so pervasive – despite its remoteness from empirical realities – it is weirdly functional. “Everyone” believes it, so it must be true. It reminds me of the closing joke in Woody Allen’s film Annie Hall about a guy with a crazy brother who thought he was a chicken: The doctor says, “Why don’t you turn him in?” The guy says, “I would, but I need the eggs.”

How refreshing to discover an online economics journal that tries to re-integrate economics with the real world. The Post-Autistic Economics Review has a monthly dose of what its tagline promises – “Sanity, humanity, science.” As the Review puts it, “The PAE movement is not about trying to replace neoclassical economics with another partial truth, but rather about reopening economics for free scientific inquiry, making it a pursuit where empiricism outranks a priorism and where critical thinking rules instead of ideology.”

The basic idea is to bring a broader conception of human behavior to economic inquiry. This entails a recognition of culture and history, a theory of knowledge that does not segregate “facts” from “values,” a greater focus on empirical research, and more interdisciplinary dialogue. You can read a history of the post-autistic economics movement here.

Here’s a further flavor of what a few insurgents within mainstream economics says about their redoubtable peers.

Herbert Gintis:
Undergraduate economics is a joke – macro is okay, but micro is a joke because they teach this stuff that you know is not true. They know the general equilibrium model is not true. The model has no good stability properties, it doesn’t predict anything interesting, but they teach it …

Ian Fletcher:
Economics is supposed to be social science, i.e. an intellectual discipline resting upon empirically-observed facts, in which mathematics and conceptual frameworks are tools for understanding. But in contemporary mainstream economics, the tools are often in the driver’s seat, declaring evident facts impossible and reducing the subtleties of the real world to whatever clockwork economists best know how to build. Post-Autistic economics is the attempt to escape the tyranny of these tools and build new ones that will work properly.

The May 2007 issue of the Post-Autistic Economics Review has an article that illustrates the kind of refreshing thinking that is possible with an open mind and a humanistic sensibility. Economist Joseph Stiglitz calls for a new way to finance and incentivize drug research because the current patent system is grotesquely inefficient and unfair to people in developing countries. It gives pharmaceutical companies a lucrative (temporary) monopoly on their research – via patents – while producing few therapeutically significant drugs at very high prices. Poor people get few benefits from this system despite paying the high prices for the few drugs that can serve their problems.

Stiglitz sums up the problem nicely:
Drug companies spend far more money on advertising and marketing than they do on research, far more on research for lifestyle drugs (for conditions like impotence and hair loss) than for lifesaving drugs, and almost no money on diseases that afflict hundreds of millions of poor people, such as malaria. It is a matter of simple economics: companies direct their research where the money is, regardless of the relative value to society. The poor can’t pay for drugs, so there is little research on their diseases, no matter what the overall costs.

A promising solution to the inefficiencies of patents, Stiglitz proposes, is a medical prize fund that rewards those who discover cures and vaccines. Since governments already pay for a great deal of drug research – either directly or indirectly via prescription benefits – why not steer that money to the most devastating and widespread medical problems, rather than to research for “me-too” and “lifestyle” drugs?

An expert scientific panel could set priorities, award the prize funds and then license the resulting drugs at an incremental-cost-of-production basis. The idea is to make important drugs a global public good so that they can do the most good for the least cost: Truly a post-autistic idea!

For more on the prize fund idea, check out Jamie Love’s work at Knowledge Ecology International promoting this alternative system for financing drug research.