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Why Krugman and Stiglitz remain attached to mainstream economics

Lars Syll

“Little in the discipline has changed in the wake of the crisis. Mirowski thinks that this is at least in part a result of the impotence of the loyal opposition those economists such as Joseph Stiglitz or Paul Krugman who attempt to oppose the more viciously neoliberal articulations of economic theory from within the camp of neoclassical economics. Though Krugman and Stiglitz have attacked concepts like the efficient markets hypothesis … Mirowski argues that their attempt to do so while retaining the basic theoretical architecture of neoclassicism has rendered them doubly ineffective.

“First, their adoption of the battery of assumptions that accompany most neoclassical theorizing about representative agents, treating information like any other commodity, and so on — make it nearly impossible to conclusively rebut arguments like the efficient markets hypothesis. Instead, they end up tinkering with it, introducing a nuance here or a qualification there … Stiglitz’s and Krugman’s arguments, while receiving circulation through the popular press, utterly fail to transform the discipline. “ Paul Heideman.

Despite all their radical rhetoric, Krugman and Stiglitz are — where it really counts — nothing but die-hard mainstream economists, just like Robert Lucas, Greg Mankiw or Milton Friedman.

The only economic analysis that Krugman and Stiglitz -like other mainstream economists -accept is the one that takes place within the analytic formalistic modelling strategy that makes up the core of mainstream economics. All models and theories that do not live up to the precepts of the mainstream methodological canon are pruned. You’re free to take your models -not using (mathematical) models at all is considered totally unthinkable -and apply them to whatever you want -as long as you do it within the mainstream approach and its modelling strategy. If you do not follow this particular mathematical deductive analytical formalism you’re not even considered doing economics. ‘If it isn’t modelled, it isn’t economics.’

That isn’t pluralism. That’s a methodological reductionist straightjacket.

Notwithstanding that we have seen a proliferation of models, it has almost exclusively taken place as a kind of axiomatic variation within the standard ‘Urmodell’, which is always used as a self-evident benchmark.

Krugman and Stiglitz want to purvey the view that the proliferation of economic models during the last twentythirty years is a sign of great diversity and an abundance of new ideas. But it’s not that simple.

Although mainstream economists like to portray mainstream economics as an open and pluralistic ‘let a hundred flowers bloom,’ in reality, it is rather ‘plus ça change, plus c’est la même chose.’

Applying closed analytical-formalist mathematical-deductivist-axiomatic models, built on atomistic-reductionist assumptions to a world assumed to consist of atomistic-isolated entities, is a sure recipe for failure when the real world is known to be an open system where complex and relational structures and agents interact. Validly deducing things in models of that kind doesn’t help us understand or explain what is taking place in the real world we live in. Validly deducing things from patently unreal assumptions that we all know are purely fictional makes most of the modelling exercises pursued by mainstream economists rather pointless. It’s not the stuff that real understandings and explanations in science are made of. Just telling us that the plethora of mathematical models that make up modern economics “expand the range of the discipline’s insights” is nothing short of hand waving.

No matter how many thousands of technical working papers or models mainstream economists come up with, as long as they are just ‘wildly inconsistent’ axiomatic variations of the same old mathematical-deductive ilk, they will not take us a single inch closer to giving us relevant and usable means to further our understanding and possible explanations of real economies.

Source: Lars Syll blog, 30 April, 2023

Additional editorial comment: Although we recognize that Stiglitz is still anchored in at least some aspects of mainstream economic theory, he is at least more realistic and honest in what mainstream theory offers us than Krugman is. See:


The individualism of current economic theory is manifest in the purely self-interested behaviour it generally assumes. It has no real place for fairness, malevolence, and benevolence, nor for the preservation of human life or any other moral concern.

Even if we could grow our way out of the crisis and delay the inevitable and painful reconciliation of virtual and real wealth, there is the question of whether this would be a wise thing to do. Marginal costs of additional growth in rich countries, such as global warming, biodiversity loss and roadways choked with cars, now likely exceed marginal benefits of a little extra consumption. The end result is that promoting further economic growth makes us poorer, not richer.

Presumably, technology has made man increasingly independent of his environment. But, in fact, technology has merely substituted non-renewable resources for renewables, which is more an increase than a decrease in dependence.

-Herman E. Daly

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