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There is no Nobel Prize in Economics: Then, let us have one

A New Nobel Prize: Economics in the Interest of the Common Good

“The single goal of scientific research should be the discovery of new knowledge, either through correcting past errors or through the discovery of previously unknown truths. Truth, however, does not appear to be a primary concern for the Prize committee in economics… the actual goal of the Prize committee has been  to  promote  skilful research according to  the  mathematical fashion, whatever  its  validity.”-Nikolay Gertchev

“A Nobel prize in economics implies that the human world operates much like the physical world: that it can be described and understood in neutral terms, and that it lends itself to modelling, like chemical reactions or the movement of the stars. It creates the impression that economists are not in the business of constructing inherently imperfect theories, but of discovering timeless truths.”-Joris Luyendijk

"The Nobel prizes are awarded to those who have contributed most to the common good in the areas of Physics, Chemistry, Medicine, Literature and Peace." A sixth, for Economics, which is financed by the Swedish Central Bank (Riksbanken), was first awarded in 1969.

Nobel Prizes in Economics to those who have contributed most to the common good: Wow! That is a very tall order!!

"Calling this 'Nobel in Economics' perpetuates the fraud begun in 1969," wrote Christopher L. Simpson in a comment in The New York Times.

"Feeling that the 'science' of economics lacked legitimacy, some Swedish bankers founded this prize and in wholesale commission of fraud named it after Alfred Nobel (who has no connection with economics whatsoever) in order to gain for it the prestige that Nobel in his will, chose to reserve for physics, chemistry, literature, peace, etc.," he wrote.

In 2004, three prominent Swedish scientists and members of the Nobel committee published an open letter in a Swedish newspaper savaging the fraudulent “scientific” credentials of the Swedish Central Bank Prize in Economics. “The economics prize diminishes the value of the other Nobel prizes. If the prize is to be kept, it must be broadened in scope and be disassociated with Nobel,” they wrote in the letter, arguing that achievements of most of the economists who win the prize are so abstract and disconnected from the real world as to utterly meaningless.

“Few realize…, that the prize in economics is not an “official” Nobel. . . . The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden’s 300th anniversary.” Yes, you read that right: “a marketing ploy.” (Just like the modern economics itself, I wish to add)

“The Economics Prize has nestled itself in and is awarded as if it were a Nobel Prize. But it’s a PR coup by economists to improve their reputation,” Nobel’s great great nephew Peter Nobel told AFP in 2005,adding that “It’s most often awarded to stock market speculators .... There is nothing to indicate that [Alfred Nobel] would have wanted such a prize.”

Members of the Nobel family are among the harshest, most persistent critics of the economics prize, and members of the family have repeatedly called for the prize to be abolished or renamed. In 2001, on the 100th anniversary of the Nobel Prizes, four family members published a letter in the Swedish paper Svenska Dagbladet, arguing that the economics prize degrades and cheapens the real Nobel Prizes. They aren’t the only ones.

As for example, Nikolay Gertchev has observed, “the Prize Committee is most commonly accused of ideological bias in favour of neoclassical, monetarist and free market approaches developed primarily by American men, and against less mainstream and more socially oriented paradigms, including post Keynesianism, developed by male and female scholars from the developing world. Thus, the Prize would reflect and reinforce the existing race and gender power hierarchies in economics, and its exclusive focus on social relations in terms of prices and markets would be a barrier to new thinking.” 

Furthermore, Gertchev notes, “one essential object [of the laureates’ research] has been to get away from the vague, more “literary” type of economics.” Hence, from its very inception, the Prize announced its little respect for all scientific achievements accomplished by verbal economists and decided to promote the view that economic science is only mathematics and measurement. From the outset, the Prize appears in radical opposition to a centuries-long tradition in social sciences.”

This, according to Gertchev, can best be seen when the first Nobel Prize in Economics was awarded to Profs. Frisch and Tinbergen for their pioneering efforts “in the development of economics into a mathematically- specified and quantitatively-determined science.”

Given the above and more, it is time to understand, I firmly believe, that the majorproblem   with   the   construction   of   social   theories   on   mathematical foundations lies in the latter’s complete independence from and indifference to human action. By themselves, abstract mathematical categories cannot account for the real-world purposeful human behaviour, as Gretchev remarks.

“The  essence  and  consequences  of  different  types  of  action  cannot  be fathomed by means of mathematics at all. Moreover, a formal mathematical analysis could actually lead to effective loss of knowledge. A case in point is the vanishing of the fundamental distinction between voluntary exchange and forced transfers, so much present in the pre-mathematical verbal economics.  This   one   dimension   of   human   action   cannot   be   accounted   for   by mathematical economics, as exemplified in particular by game theory,” which has been the one of the core values and the justification for awarding the Prize in Economics.

The pertinent question surely must be, then, why the Prize Committee is persisting in its ways and means, when we all know that, mathematical economics is not neutral with respect to the scientific conclusions it reaches.

And moreover, “with respect to the validation process of its conclusions, mathematical economics   faces   a   fundamental   problem:   the   issue   of   causality.  If mathematics is indifferent to the category of causality, as it is, how then could a social law, i.e. a definitive causal relation between social phenomena, be established?”

In short, lest we forget, neoclassical economics - economics as taught and practised today and heavily promoted by the Nobel Prize Committee - “is a mask for power and greed, a construct designed to justify the status quo. Its claim to serve the common good is specious, and its claim to scientific status is fraudulent. The latter is sought mainly by excessive mathematical formalism to the neglect of concrete facts and real values. The mathematical formalism is in imitation of nineteenth century physics (economics viewed as the mechanics of utility and self-interest), but without any empirical basis remotely comparable to physics.”

Here the wise words of Herman Daly, reviewing ‘Economics Unmasked’ ring so true: “The hallmark of a real science is a basic consensus about fundamentals. There is no real consensus in economics, so how can it claim to be a mature science? Easy, by forcing a false “consensus” through the simple expedient of declaring heterodox views to be “not really economics,” eliminating history of economic thought from the curriculum, instigating a pseudo-Nobel Prize in Economics, and attaining a monopoly on faculty positions in economics departments at elite universities. Such a top-down, imposed consensus is the opposite of the true bottom-up consensus that results when independent minds all bow before the power of the same truth. “Mathematics was simply built into the laws that describe the behavior of the atomic nucleus. You didn’t have to impose it on the nucleus.  The same cannot be said of people, even atomistic homo economicus."

All in all, with all we know now, it is fair and correct to assume that: Far from celebrating those who have “conferred the greatest benefit on mankind” as Alfred Nobel intended, the economics prize has done more harm than good. The prize has fostered a faith in economists that is often misplaced. Friedrich Hayek, who won in 1974, said he would have advised against creating the award. The title, he said, “confers on an individual an authority which in economics no man ought to possess”. 

Laureates, he suggested, should be required to take “an oath of humility … never to exceed in public pronouncements the limits of their competence”. Sadly, economists, as a caste, have showed no such humility. The Nobel imprimatur has encouraged us to exaggerate the scientific quality of the dismal science.”

In all, the Nobel Prize in Economics, in contrast to what was intended, has tragically removed the Common Good from economics and has turned the discipline from good to bad; creating crisis after crisis, with tragic consequences for all.

If the Swedish central bank wants to give away 10 million kronor a year to an economist, (mainly and predominantly to an American economist from the Ivy League universities, as if they have monopoly to wisdom)* that is their business. But, this should not stop all people of goodwill - those who know better - to come together and try to stop this annual charade and circus of arrogance.

Now I would like to offer the following as an alternative path and prize to make economics good once again:

Nobel Prize in Economics in the Interest of the Common Good

The Prize should be given to those economists who can prove beyond reasonable doubt that they are now truly “Recovered” economists and not “toxic” anymore. 

This “Recovery” can be established by their willingness to sign up to the following statement:

As a “Recovered” teacher of economics, I acknowledge that the teaching of economics today is a scandal. Furthermore, I now know that I was wrong to believe:

that we do not want any philosophical or empirical questioning of the canonical assumptions upon which the whole superstructure of mathematical deduction in modern economics is based, and that growth must not be questioned because it is by definition the solution to all problems — even those that it causes.

I now recognise that our socio-economic problems are closely linked to our spiritual problems and vice versa. Moreover, socio-economic justice, peace and harmony will come about only when the essential connection between the spiritual and practical aspects of life is valued. Necessary for this journey is to discover, promote and live for the common good. The principle of the common good reminds us that we are all really responsible for each other – we are our brothers' and sisters' keepers – and must work for social conditions which ensure that every person and every group in society is able to meet their needs and realize their potential. It follows that every group in society must take into account the rights and aspirations of other groups, and the well-being of the whole human family.

I declare that I have given up my arrogance. I am now a humble economist and am able to show my humility by accepting and supporting the following principles:

Dialogue: Communication is the most appropriate vehicle for understanding “others”, enhancing intercultural cooperation, creating goodwill, and establishing sound international relations.

Justice: Justice is the key factor in dealing with all human relationships and activities. It is the creation of a global atmosphere in which all people are treated in a humane and just manner. Justice in society is not possible without a greater commitment to a more equitable distribution of both income and wealth.

Sustainability: In this fast changing world of today, our choices will determine not only how we live in the short run but also how succeeding generations will live in the distant future.  We must bear in mind the needs of future generations.

Ecology: Human society and human economics must also make room for other species to thrive. This also is a moral imperative.

Service: The most appropriate personal and collective actions through which we can achieve social justice and ecological integrity throughout the world.

And finally, I will do my utmost to achieve the above by teaching my students to discover “simplicity, patience and compassion” as they embark on their studies, by reminding them of the wisdom of ancient traditions and philosophies:

“Some say that my teaching is nonsense.

Others call it lofty but impractical.
But to those who have looked inside themselves,

this nonsense makes perfect sense.
And to those who put it into practice,
this loftiness has roots that go deep.
I have just three things to teach:
simplicity, patience, compassion.
These three are your greatest treasures.
Simple in actions and in thoughts,
you return to the source of being.
Patient with both friends and enemies,
you accord with the way things are.
Compassionate toward yourself,

You reconcile all beings in the world.”-Lao Tzu

Dear Nobel Prize Committee for Economics and Board of Riksbanken, 

I hope you are listening. I would like to conclude by saying that economics must find its true path and needs to re-ground itself in moral philosophy to cope with the deeper, broader questions of human existence, meaning of life, and happiness, ever mindful that humanity is part of a larger community of multiple species and elements, necessary for our survival and health.

The current, continuing and deepening global crises of social injustice, inequality, loss of community and thereby dire economic insecurity for hundreds and hundreds of millions of people shows no sign of ending soon.  At the same time the environmental crisis, consisting of climate change, habitat loss, pollution, and waste, grows exponentially, even as human institutions and structures prove themselves to be both incapable of dealing effectively with the crises and at the same time standing in the way of needed progress.                                                                                 

It is time that all those economists aspiring to be good acknowledge that  we, as a global human society must set our sights upon the Common Good and this involves four basic realizations:

1) Human Beings need contact with other human beings.  We need relationships as we are social beings.  It is in our relationships that we find genuine happiness and meaning.  

2) Human Beings need community, apart and distinct from our individual relationships with other human beings. There is a connection to the whole, a belonging to the community which is key to happiness and meaning. Such is manifest in socializing and education among many other aspects of community.  

3) A respect for the Common Good is essential for the psychological and spiritual health of the individual.  

4) Nature, the web of life, and the integrity of the earth are also part of the Common Good, and neither the human community nor the individual person can be healthy without this aspect of the Common Good.

In order for Economics to be not only part of the transition and change which is so desperately needed, but also to play a leading, constructive role, of which it is capable, we call for a significant change in Economics and among Economists in the face of the need for dialogue to find specific solutions.    

Good economists must acknowledge that, there is a need to go well beyond the standard models and the typical mathematical assumptions.  We must reach out more deeply and more broadly for wisdom.  Now is the time for a revolution in Economic thinking.  

Economists must find ways to incorporate all of the lessons in equality, social justice, ecological balance, and respect for the earth, community and relationship into its standard approach.  And that incorporation will be the revolution in economic thinking for which I am calling.  

Economics must change. Economists must change. What we teach students must change.  It must change if it is to play a constructive role in solving the multiple and multi-dimensional crises that have engulfed our world, our species, the fabric of human community, relationships, and the web of life.  We are running out of time.  If our discipline does not change, if the revolution in thinking we have called for does not happen, if we do not revisit the rich and fertile soil from which our subject sprang, that is moral philosophy, to find answers to the broader questions of human existence, meaning of life, and ecology, then not only will we have retreated from the chance to play a constructive role in solving these crises, we will inherit well deserved scorn and contempt.  The opportunity is upon us.  Let us seize it.  Carpe Diem!

References: The following articles and websites were used to prepare this Blog:

1-     Nikolay Gertchev > The Economic Nobel Prize

2-    Don’t let the Nobel prize fool you. Economics is not a science | Joris Luyendijk | Comment is free | The Guardian

3-    Is economics a science? Not according to the founder of the Nobel prizes - CSMonitor.com

4-    There Is No Nobel Prize in Economics | Alternet

5-    Alfred Nobel

6-    Economics Unmasked « Center for the Advancement of the Steady State Economy

7-     Dynamite the Nobel prize in economics

8-    The Nobel prize for economics may need a bailout of its own | Jayati Ghosh | Comment is free | The Guardian

9-    Economics, Globalisation and the Common Good: A Lecture at LondonSchool of Economics

10-Economics and Economists Engulfed By Crises: What Do We Tell the Students?

Further readings:                                                                                 

Yet another Nobel Prize in Economics: An affront to humanity and truth

Why Economics, Economists and Economy Fail?

Calling all academic economists: What are you teaching your students?

*See the list of Nobel Prize laureates in Economics- 1969-2015:   

     List of Nobel Memorial Prize laureates in Economics - Wikipedia, the free encyclopedia

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