Menu Close

Bad Theory, Bad Practice: Bad Ethics

Geoff Davies

The following item is the preamble to an excellent paper presented by Dr Geoff Davies to the 2012 World Economics Association Ethics Conference. The entire paper is too long to be presented here, however the web link is:

A profession that claims to understand economies, and that has gained power over the greater part of our societies, has big responsibilities. The fundamental responsibility is to ensure its perception of economies gives some useful guidance to the behaviour of real economies. Here mainstream economics fails utterly, and has been failing for a long time. Worse, it actively resists alternative views that might overcome its failings. Ethics do not come much worse than that. The failings of mainstream economics are multiple. Its central theory, the neoclassical theory, is based on absurd assumptions and its central prediction of equilibrium is plainly contradicted by real economies. It counts the wrong things in the wrong way, using Gross Domestic Product quite inappropriately to measure well being. It is blind to the dominant roles of money and debt in the dynamics of economies. The banking and monetary systems it presides over are highly destabilising.

The financial markets venerated by mainstream economics are also destabilising, and have become parasitic. It assumes a base parody of human beings and undermines social relationships and the health of society. It has become fixated on an impossible goal – eternal growth of GDP – that is rapidly degrading the planet and will soon bring about the collapse of global industrial society. The term “mainstream economics”, as I use it here, thus refers to more than the neoclassical stream of economic theory. It refers also to those who preside over finance, banking, public policy and public accounting and drawing on an array of ancient arcane practices, rules of thumb, habits, ideology and untested beliefs, with some presumably sensible methods and ideas mixed in. It includes academics and managers in the public and private sector. It does not include a diverse

array of alternative views and people that is sometimes called “heterodox economics”. Since about 1980 this form of economics, also known as free-market economics or market fundamentalism, has been imposed on much of the world. I will refer to this period as the neoliberal era.

Contact: Geoffrey F. Davies, Research School of Earth Sciences, Australian National University, Canberra, Australia 0200 (retired Senior Fellow, now Visiting Fellow). email: website:

Leave a Reply