PHM-Exch> New Blog Article: "The Failure of Economics in an Unequal World"

[David Woodward]

Having said in my previous e-mail that economics rightly has nothing to say about equity, that doesn't mean it should have nothing normative to say about inequality. Part of what I was trying to get across in the blog is that inequality is about efficiency (where economics could and should have something to say) as well as equity.

Re poverty lines: I agree with Riaz that the $-a-day based measures, though useful (as the most widely agreed measure) are very problematic. For a summary of the problems, a critical review of alternatives, and a proposal for an alternative approach, see my paper "How Poor is Poor?" at http://www.neweconomics.org/publications/how-poor-is-poor.

David
________________________________________
From: Sam Lanfranco [Lanfran at yorku.ca]
Sent: 19 March 2013 17:43
To: Riaz K Tayob
Cc: David Woodward; phm-exchange at phm.phmovement.org
Subject: Re: PHM-Exch> New Blog Article: "The Failure of Economics in an Unequal World"

Riaz,

Thanks for your contribution to the dialogue. It is true that
classical economics used Utilitarian utility theory for its analysis,
replaced later by revealed preference theory. It is also true that
neoclassical economics piles assumption on assumption about the
operation of markets to get theoretical market outcomes that justify
its deference of market non-intervention. That of course ignores all
the ways in which powerful players "game the market", including being
"too big to fail" or "to big to prosecute", I might add (Ref: Recent
HSBC wrist slap for its laundering of drug money).

In their original form both utility theory and revealed preference
theory were clear about the fact that they had nothing to contribute
to the normative issues of equity and inequality. Unfortunately, that
disclaimer/distance has been clouded to the point where attacks on
economics proper are based on the mistaken belief that economic
theory supports inequality.

My fears here are that this results in: a wasteful battle against
economics per se; a failure to being evidence to bear on policies and
practices that drive inequity; and critics being marginalized, or
dismissed, by having their positions characterized as "off the map".

A growing bimodal income (and wealth) distribution is a ticking time
bomb. Dialogue needs to shed light on its causes and my fear is that
time will be wasted treating economics as a Trojan Horse scapegoat. I
am not making that accusation in this dialogue, just putting my
concerns on the table.

Sam Lanfranco

----------------------------------------------
"It is a disgrace to be rich and honoured
 in an unjust state" -Confucius
----------------------------------------------
Dr Sam Lanfranco (Prof Emeritus & Senior Scholar)
Econ, York U., Toronto, Ontario, CANADA - M3J 1P3
email: Lanfran at Yorku.ca   Skype: slanfranco
blog:  http://samlanfranco.blogspot.com
Phone: 613 476-0429 cell: 416-816-2852

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