Against “new economics”

One of the most negative intellectual developments in recent years is the emergence of “new economics”. Although there is no universally accepted definition of the genre it typically includes ideas which are sceptical towards economic growth, accept ecological constraints and are in favourable towards sustainability. For example, see this proposal for the establishment of a New Economics Institute in America.

Admittedly Britain’s New Economics Foundation was founded back in 1986. But now the top guns of the economic world are explicitly endorsing new economics. As Anatole Kaletsky outlines in today’s Times (London) the Institute for New Economic Thinking will start with a grant of $50m (£33m) from George Soros and several Nobel laureates in its pocket.

“On Thursday, a galaxy of academic economists, including half a dozen Nobel laureates, current or former departments heads from leading universities and top policymakers from institutions such as the IMF, will gather at King’s College, Cambridge, alma mater of John Maynard Keynes, to launch the Institute for New Economic Thinking.

“Funded with an initial grant of $50 million from George Soros, Inet has already had pledges of millions of dollars in additional matching funds from other donors to create research institutes in leading universities in Britain, America and around the world.

“Their purpose will be to reopen many of the debates closed down by unrealistic theories based on assumptions of rational and efficient markets. These concepts became increasingly dominant from the 1980s and gradually acquired a virtual monopoly on senior university appointments and research funding. This intellectual monopoly has ended up not just crushing the competition but also destroying itself from within.”

The New Economics Institute is in some respects a new organisation too. It spent 30 years as America’s EF Schumacher Society but is in the process of transforming itself.

Traditional economics has many faults but the new economics promises to be even worse.