Reflections on the Current State of Political Economy
Modern economics may be less ideologically driven than, say, sociology, but the notion that economists are scientists who objectively observe phenomenon and derive conclusions solely on the basis of empirical evidence is largely a myth, despite pretenses to the contrary. Nobel Prize winners like Paul Krugman and Joseph Stiglitz sometimes morph into almost pure ideologues, doing little or no truly serious work after receiving superstar academic recognition. And, as is oft-observed, the predominant ideological orientation is leftish, despite overwhelming evidence that many leftish policy prescriptions are failures or at least highly inefficient. Leftish intellectuals helped created the European welfare state that has been accompanied by declining growth rates for six decades, from around 5 percent annually in the 1950s to under 2 percent today. Yet, only a minority of economists uses this overwhelming evidence to suggest the nonmarket statist solutions of the welfare state are highly flawed.
Three important conclusions have come about as a result of empirical observations and theoretical advances in economics. First, the Keynesian approach to stimulate economies through monetary and fiscal policy almost always results in failure.
Second, centrally planned economies without substantial private property rights are extremely inefficient and ultimately unsustainable. Third, even economies that blended private property rights and some protection of market activity with a huge income redistributionist welfare state have been shown to have troubles sustaining material advances.