The Knowledge Police in Economics

Palley is the Founder of Economics for Democratic & Open Societies Project, a partner of Action for Economic Reforms.  This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, January 29, 2007  edition, page S1/4.

It is often said that knowledge is power. One implication of this is  that the powerful have an incentive to police what gets called knowledge. Nowhere is this truer than in economics since how we describe the economy has vital consequences for economic policy, providing a clear motive to police the production of economic knowledge. Unmasking this reality is critical for a democratic equal opportunity society. However, it is extremely difficult to do.

The policing of knowledge is often done through professions, and unmasking the process is difficult for two reasons. First, the very idea that knowledge might be policed in the interests of the rich and powerful creates a cognitive dissonance since we like to think of knowledge in terms of truth. Second, to the extent that professions serve a bona fide quality control function, it is easy to camouflage policing as quality control.

One function of professions is to oversee and ensure the quality of services that members provide. However, professions also work to bolster the social and economic standing of their members, and this private economic interest creates a permanent tension with their role as guardians of quality. It is easy to justify supply restrictions (such as licensing) in the name of professional standards and quality, when the real reason is to drive up pay. Likewise, technical professional discourse can suffer from the same tensions. On one hand it is needed to articulate specialized ideas and concepts, but on the other hand it excludes the public. Put bluntly, private language is a barrier to entry that confers ownership of the secrets of the temple, and it is not for nothing that professions have been described as a conspiracy against the laity.

The pursuit of self-interest by professions is unsurprising, being normal economic behavior. Economists are also professionals. Ironically, that means the economic logic of economists applies as much to themselves as it does to other professionals. The difficulty with acknowledging this is that it creates a huge dissonance with the rhetoric of academic economics, which is cast in terms of pursuit of “scientific truth.” The reality is that the practices and rules governing economic enquiry may also be partly about promoting self-interest. As with other professions, this can take the form of licensing requirements and private languages that restrictively shape discourse.

Such self-interest provides a point of entry for spotlighting far more important concerns about the role of social forces in the production of economic knowledge. Economic research is a job, and who pays the bills has an impact on the research produced. An economist working at the Federal Reserve or International Monetary Fund (IMF) will tend to produce research and advice consistent with the political and ideological alignment of those institutions. This is the route to promotion and an easier life, and institutions also tend to select economists who share their alignment. That is just a complicated way of saying that employers affect what workers produce. The only thing surprising about this is that it applies to the production of economic knowledge.

Economists are also members of society. That means they too are affected by trends and influences in society, just like everyone else. When society drifts left, economists drift left too. When society drifts right, so too do economists. Nothing surprising here except that it has consequences for economic knowledge. In the decade after the Great Depression, society drifted left and the economics profession became more progressive. The late 1940s inaugurated the Cold War, which pitted the ideology of central planning against free market capitalism, and American economists began to drift right in the wake of this struggle. Again, nothing surprising once it is recognized that economists are also members of society.

All knowledge is produced in a social context of politics, values, institutions and employment relations. This context exerts important influences on the knowledge that is produced, and this social context also influences economics. Once again, nothing surprising—unless one subscribes to the science myth in economics, in which case it is hard to reconcile these social impacts with the idea of true objective knowledge.

To become accepted, knowledge claims are subject to screening processes that warrant these claims. Tests of passage include logical coherence of the ideas and compatibility with selected facts. They also usually include a requirement that ideas are presented using the appropriate professional language, and have some degree of conformity with the political values and ideology of the professional community. Values are therefore part of the screen for warranting ideas as knowledge.

Sociologists term this screening process “gatekeeping”—which is the professional sociologist’s way of saying policing. This gatekeeping process varies with political and social climate. In some eras gatekeeping may be more open, in others more closed. Like all knowledge, economic knowledge is also screened and subject to gatekeeping. However, gatekeeping in economics is stricter than in comparative literature. It is easy to understand why. Wealth, income, and power are at stake in the former, since how we explain the economy affects law and policy governing markets.

Interestingly, the gatekeepers may not even be aware of their gatekeeping activities if they share the values embedded in the dominant knowledge paradigm. Here, the “science myth” can prove especially useful. This is because it can provide the gatekeepers with a justification for their activities that is constructed in terms of error and truth. Consequently, they can use the notion of “truth” to advance one point of view and suppress another.

This is not a conspiracy theory. It is simply the consequence of the fact that people produce knowledge, and people live and work in social contexts defined by values, institutions, and power relations. At one level, all of this is obvious. At another level, it is very disconcerting because it challenges widely held beliefs about the relation between knowledge and truth.

The important practical lesson is that we should be open-eyed about conventional economic knowledge claims, and open-minded about economic ideas that the gatekeepers have consigned to the underground. That has relevance for debate surrounding such issues as the economic impact of minimum wages, the employment effects of trade unions, the determination of income distribution, the consequences of job off-shoring, and the existence of a natural rate of unemployment.

Beyond that there is a serious problem because policing of university economics has become so one-sided that only one view is admitted. Consequently, it is as if we have two economic policy waiters—in the U.S. they are the Republicans and so-called “new” Democrats—but only one chef. What we need is another chef in the economic policy kitchen, working from another economic cookbook and producing another economic policy menu.

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