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Poisoning the Well, or How Economic Theory Damages Moral Imagination

by Julie Nelson Monday, Oct. 10, 2016 at 5:08 AM

Markets are human inventions. Today's neoliberal economic dogma creates myths that strengthen the most powerful, most greedy, and most short-term economic actors and undermines the normal longings of people.Structures must change


Economy and Ethics. Interview with Julie Nelson

[The feminist US economist Julie Nelson does not believe in the Homo oeceonomicus who expels everything social, empathic and unselfish – in short, everything not masculine – to an "uneconomical" parallel world. The economy is never value-free but is as good or bad as we make it. This interview published on 4/7/2016 is translated from the German on the Internet, www.woz.ch.]

WOZ: Julie Nelson, you are a female economist who says economic theory damages moral imagination. Do you expect moral input from students at economic lectures?

Julie Nelson: The moral message of most economic courses is faint and almost insidious. The "value-free" economic primacy of profit maximization is lectured, not an explicit morality. Students are not told explicitly "Go and be selfish." They are merely told that is how the economy functions. Some young people identify with the principle self-interest in an almost obsessive way. Others reject egoism as part of their personal morality but still believe the economy works that way.

What do you oppose to the dominant neoliberal economic theory that largely shifts social and ecological interests to the outside?

Firstly, economic models are ways of understanding the world – and not the world itself. The dominant description of the economy as a value-free, antisocial, and controllable system driven and regulated by the energy of individual self-interest is a very narrow model. Ethical conduct has no place in this economy following completely profit-oriented mechanical laws. In reality, money and markets are deeply human and social inventions. People do not lose their status as social or ethical beings as soon as they enter the economic sector. In the good and the bad, they bring along all their values and hopes.

Was there a time when the economy was understood more comprehensively than today?

When the first economic faculties arose in the US at the end of the 19th century, the American Economic Association was also founded, one of today's largest associations of economics. In its first program of 1885, the association declared: Knowledge and needs, industrialists and workers should be brought together for the well-being of society. These pioneers had a mission and knew what they wanted from the economy. In the 1930s, many economists in the US advised governments and stimulated and expertly accompanied the genesis of social state programs. Then economic theory withdrew to increasingly narrower definitions.

Was that true in the 1960s and 1970s, a time when social inequality was less crass and the social state was stronger?

The fundamental conviction that the economy is an amoral and mechanical thing reached far into the left-liberal camp at that time and still today. How often do we hear politics "interferes" in the economy! Whoever speaks that way assumes the economy is here and politics is over there. I find that absurd. An economy never exists without people, without society, and without politics. The state is a complex part of the economy.

Why does this mechanical understanding of the economy have so much weight?

A first plausible explanation is that everything is a question of power. For rich and powerful persons, economic themes like distribution should not even come up for discussion. These persons want to be confirmed as "academic"… This model of all-pervasive self-interest has an inclination to self-fulfilling prophesy because we people act selfishly when we believe others do this.

There is still a second, somewhat broader interpretation: the extremely masculine prejudice or bias of economic theory. Orthodox economics only considers a part of human conduct and possible forms of knowledge. Other parts are excluded according to a very definite model. The ration is accepted, feelings are rejected. Separation and autonomy are included but not connection, dependence, and obligation.

The economy decides for mathematics and against language, for reason, and against intuition. The cultural connotation of all these terms makes clear economics always sides with the "masculine" side and rejects the softer "feminine" qualities as "uneconomical." Today's economists – the majority being men – see themselves as physicists and think they are more clever and scholarly than sociologists and other social scientists. However the opposite, the reverse of the "strict" natural sciences, is dogma, not soft science, political science, psychology et cetera.

How harmful is today's neoliberal economic dogma?

This economic theory creates myths that strengthen the most powerful, most greedy, and most short-term economic actors while the normal ethical sensitiveness and the normal longings of people for a flourishing, just, and sustainable society are undermined. Even with the left, this narrow way of looking at things damages the moral imagination. Solutions that do not simply represent the exact opposite of the status quo are hard to imagine. I see this kind of reactionary opposition in the social criticism of the US left: markets are immoral by their nature and businesses must maximize profits. Thus we must begin right at the beginning and do the exact opposite. Globalization is bad; everything local must be good. Competition is bad; everything must be built on cooperation. Money is a terrible medium; we must abolish it and create something different…

Time and again we should remember the economy as a machine is an ideology, not reality. Then we must start in what we have before us today and not take off for some utopia.

How do you judge alternative economic structures?

In the US, so-called Benefit Corporations, B-Corps, have existed since 2010. These are businesses explicitly committed to social or green goals. B Corps are certified as such similar to biological or fair trade products. Such parallel constructions are not even really necessary. Businesses have so much more freedom than they think or claim. Obviously, they can use this freedom in very different ways. Lacing up absurd CEO remuneration packages is a "free choice." Businesses could spend their money differently, for environmental measures, daycare centers, or raising the minimum wage. No law prohibits this. If businesses weren't urged dogmatically to make profit maximization their highest goal, this would not be misused as an excuse for all kinds of evil conduct.

How can the economy become more ethical in its core and not merely with ethical leanings?

Misusing ethics as whitewashing or green-washing of the neoliberal economy is actually very simple. Authentic leadership is necessary for a genuine economic ethic. The people on top must believe in the ethical goals and not merely act opportunistically. They must live their lives in an ethically responsible way and do their business in an ethically responsible manner. However, even the strongest motivation is not enough. The structures must be changed so ethical conduct is possible. For example, different incentives are needed. Ethical conduct means stopping management from cutting wages and quality of work at every opportunity. The information flow, the transparency, must change. CEOs can fool themselves that they act ethically when they don't act ethically in truth when they are completely screened from the damages inflicted by their firms. The business reports and industrial studies must be drafted so leaders are directly confronted with the effects of their business activity and can fulfill their ethical monitoring duty.

Where can this transformation begin – at the universities?

Unfortunately, the universities, particularly the private universities in the US, are taking the same path as businesses. Many university administrations are more interested in financial returns than in the students and the comprehensive education task. People speak now of the "corporatization" of universities. I consider that a misnomer since it suggests corporatization automatically means orientation in net profit. But competition and exploitation are also problems in the non-profit sector and in public administration.

I believe every individual can and must look at what is happening in the immediate environment and then ask how it could be better and more responsible. I personally practice expert criticism and try to expand the term economy. We economists are already part of the problem – where we allow the spread of radically simplifying and anti-ethical statements of the predominant economic theory without resistance.

Julie Nelson – The US economist Julie Nelson (60) teaches at the University of Massachusetts in Boston. Her special field is the feminist criticism of the model and methodology of orthodox economics. She is a founding member of the International Alliance for Feminist Economics (IAFFE). In her latest studies, she focuses on the theme ethics and economy in connection with climate change.

Here is a link to her 18-page study "Poisoning the Well, or How Economic Theory Damages Moral Imagination" published on October 28, 2012:


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