Pseudo-economics

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Modern economics is a pseudoscience about the ineffective squandering and destruction of the unlimited resources of the universe in order to dissatisfy even the primary needs of man and maintain him in an animal state.

According to the main position of the theory of market economy, many entrepreneurs, hungry for profit, at the expense of the “invisible hand” of the market and free competition, moderate their appetites and come to the most efficient distribution of benefits from the point of view of society. Since the days of Adam Smith, we have been told that aggressive negative programs of getting rich at the expense of others compensate for each other and degenerate into a positive program. In my opinion, this is the same as putting the most terrible murderers in one cage and from their pleasant communication with each other at a local time interval to conclude that they have been re-educated. As soon as the cell fails, they will tear each other apart, their negative program will seek a way out, and as a result, the most intelligent and cruel will suppress everyone else.

We know very well from life that even realizing good intentions, it is not always possible to come to public well-being, but we hear amazing words that people with a negative social program and a desire for monopoly power suddenly achieve social efficiency and prosperity. What common sense can such theses be combined with? But the whole methodology of the theory of the market economy is now based on this.

For a reasonable person, what has been said above is sufficient for the recognition of economic and disciplines derived from them as pseudoscience. However, for the sake of completeness, let us analyze the main criteria for the scientific character of knowledge as applied to economics.

Among them, in our case, two are of key importance: verifiability and consistency. Consistency is understood as the consistency of knowledge. In the modern scientific environment, the compliance of knowledge with a scientific criterion implies not only coordination within a scientific discipline, but also coordination with other areas of scientific knowledge. The consistency of many modern sciences among themselves is one of the strongest qualities, which is designed to assert the reliability of scientific knowledge. An equally important criterion is the verifiability of scientific knowledge. Scientific knowledge should be confirmed by practice and allow predicting the development of the object of research or, at least, explaining it after the fact.

The object of the humanities and economics in particular is a person as a social being, however, no science can predict his behavior unambiguously. Human behavior is at least based on a large number of factors. This list has not been reliably formed. Moreover, there is no idea how you can do it. In addition, the influence of factors is individualized: it depends on the individual experience and skills of a person, as well as on the natural abilities of a person, which differ. It is obvious that it is not possible to describe the behavior of each person, even if significant scientific resources are involved in studying one person.

But since society is constantly faced with new tasks that require solution, the humanities are forced to go for tricks in order to keep the social sciences afloat. The most simple and widespread phenomena can be considered two: 1) narrow limitation to some kind of activity or type of behavior; 2) limiting the scope of scientific knowledge (up to a tautology like "economics studies economic relations").

From this position, various concepts are introduced that limit the object of research in economic science. The most important in classical economic theory is the concept of an economic person. The essence of the concept is to simplify the understanding of human behavior to a rational subject, the main goal of which is to maximize individual income. It is assumed that when making decisions, an economic person is guided exclusively by his own benefit. This concept was developed in the theory of marginalism, which is also called the theory of marginal utility. From the point of view of the approximation of economic science to the description of an objective picture of human behavior, the fundamental difference of this theory is the law of diminishing marginal utility. Although this law is based on the model of an economic person, it indicates that the value of a good for a person decreases with an increase in the amount of its consumption. An example is often given of a poor fellow in the desert, for whom a glass of water is more valuable than an ingot of gold, while in ordinary life, where a person has practically unlimited access to fresh water, the value of water is very low, and the value of money, on the contrary, is high, since there is an opportunity exchange them for other goods. Thus, it is assumed that, under certain conditions, the value of an economic good for a person may become extremely low.

In continuation of this law, we can bring a model from another economic discipline - management - Maslow's theory. In contrast to the marginalists, who did not consider what happens to a person's behavior after saturation of one need, Maslow suggested that with saturation, there is a transition to higher-order needs. He identified five levels of needs: 1) physiological needs; 2) security needs; 3) social needs or needs of socialization; 4) needs of respect; 5) the needs of self-expression. The latter type of needs was divided into three groups: 1) cognition; 2) aesthetic and 3) self-actualization needs. This model is widely accepted and has proven itself well in practice. Proceeding from it, if needs of a higher order prevail in a person's value system, then his behavior does not correspond to the model of an economic person. A self-actualizing highly moral person, thirsty in the wilderness, will behave as he pleases. For example, he may refuse water altogether if, for moral or ideological reasons, it is unacceptable for him to communicate with its distributors. Thus, the marginal usefulness of such water will be zero even with unbearable thirst.

Maslow's hierarchy of needs and the theory of marginal utility do not contradict each other, since the latter studies the demand for specific types of goods as their consumption increases. However, there is a contradiction between the concept of economic man and Maslow's theory. The first is accepted as an all-encompassing component of human economic decision-making, which contradicts Maslow's theory. Thus, the coherence of economic sciences in relation to the key concept of modern economic science is violated. If we relate Maslow's theory of needs to Smith's classical economic theory, then the latter can more or less correspond to real human behavior only if the needs of a lower level are satisfied - physiological or, to a large extent, safety and social. And then only in the case when the needs of a higher order are irrelevant for individuals, since people who strive for spiritual values and interpret their individual income from the point of view of the development of their own consciousness or spirituality, even with extreme physiological need, will perceive in a different way the marginal utility of perishable material good. This theory will not work at all in spiritually developed societies, regardless of whether the needs of the lower order are satisfied there.

At this point, the economy violates both the requirements of consistency and the requirements of verifiability, in fact, out of all possible human choices about a glass of water in scientific consideration, only elections to the levels of animal instincts remain, the rest are declared non-economic behavior, are not predicted or even described by economic mathematical models. In fact, an "economic man" is an animal driven only by necessities and instincts, lacking the will, the ability to put public interests above their petty needs.

At the same time, the problem of the contradiction between the concept of economic man and the real behavior of people, which is already embedded in many applied sciences, was also realized by economists for a long time. In particular, it served to develop the directions of Keynesianism and institutional theory in the first half of the last century. But at the same time, these theories did not try to build a new base, but rather were aimed at substantiating new realities within the framework of Adam Smith's theory. Keynesianism proceeded from the premise that a perfect market cannot be achieved in certain cases by only one action of the forces of supply and demand. State intervention is necessary. But at the same time, the supporters of this theory did not deny that the so-called "market of perfect competition" is the best economic model. Therefore, they saw government regulation as the goal, in particular to stimulate demand, to restore the conditions for the functioning of the market. In this elegant way, instead of coming to a study of the validity of the existing market model (which obviously contradicted the interests of almost all influential economic forces), a mechanism was created to finance the problems of this model at the expense of society. Actually, Keynesianism has never been considered and could not be considered as an independent economic trend, but served as a kind of support for classical economic theory. Then, for almost a century, various Keynesian instruments were used by a large number of developed and developing countries as a mechanism to support the economic system in conditions when the market was unable to perform its functions.

Institutional theory had a slightly different relationship with classical economics, but very similar results. Institutionalism in general is a broader discipline that encompasses not only economic relations, but social relations in general. Unlike, for example, economic theory, there are no axioms that determine the optimal type of socio-economic system. That is, if economic theory says that the highest level of efficiency of the economic system can be achieved in conditions of a large number of buyers and sellers acting as economically rational economic entities, then institutional theory indicates the importance of social institutions, but does not indicate what structure of social institutions is preferred. This theory has also been widely adopted by the proponents of classical economic theory. In the absence of an optimality criterion in institutional theory, the same criterion of the “market of perfect competition” was adopted as such a criterion. Numerous studies and even independent theories within the framework of institutionalism have been devoted to the creation and development of institutions that will bring markets closer to the perfect model.

In fact, despite different approaches to understanding the process of making economic decisions by a person, for the entire historical period after the classical economic theory spread in the economic environment (that is, for 250 years), it had no alternative, except for the labor theory of value. Other values and motives of human activity, besides egoistic ones, acted as auxiliary and secondary ones, and not as independent ones. Although the question arises about the level of confidence in the theory, which required constant refinements in the form of hundreds of justifications and models that would support its scientific character in situations where it did not work.

The labor theory of value, formulated by K. Mark, revealed the nature of the formation and distribution of value in the market system. First of all, she showed that the only source of value formation, besides natural rent, is human labor. But at the same time, the created value is distributed within the framework of the capitalist system in such a way that the creator of this labor - man - receives only the share necessary for the reproduction of his labor skills. Everything else is assigned by the owner of the business and the owner of the capital (often different persons in the context of the development of the credit system). The importance of this theory was that it for the first time challenged the capitalist market as the only criterion for the effectiveness of the economic system. As a counterbalance to the selfish interest of the economic person, the public interest was set. Within the framework of the labor theory of value, it was argued that the final value of the good also includes a large share of socialized labor in the form of means of production and productive forces. On its basis, the communist movement developed, which demanded a change in the mechanism for distributing the created value on the basis of the principles of social justice.

However, the Soviet experience showed the inconsistency of the communist ideology in competition with the classical theory of the market. Selfishness and craving for consumerism became one of the factors in the disintegration of Soviet society, along with an obvious stagnation in economic development. Over the decades, the USSR has made significant progress in various industries, but not in the consumer sector. At the same time, the Soviet state provided numerous social guarantees, which reduced the population's interest in labor, while the constant expropriation of added value in Western enterprises required workers to make maximum efforts, to lay down their health to ensure an acceptable standard of living. The final verdict on the Soviet system was made by the development of the same consumer society in the West and widespread lending. The thesis of the exploitation of workers began to burst at the seams. This was especially evident against the backdrop of empty counters and a meager assortment of goods produced in the USSR in the consumer sector.

Thus, the whole history of classical economic theory was a triumph of the concept of an economic person, although in essence, this concept does not allow satisfying other needs, except for the basic level, and forming an effective economic system from the point of view of the harmonious development of the individual and society. At the same time, the idea of a market economy as a system that best meets the interests of a person was artificially imposed in society. In reality, though, it is based on persistent unmet basic needs. A bone always looms in front of a person, which is pushed away from him as he moves towards it. For most people, this means a senseless race long in life, which leads them nowhere - to meet the needs of another group of people.

Money

Money has played one of the most important roles in the development of the modern economic system. Before the advent of money, the possibilities of satisfying the needs of a person were limited to what he could create himself, and also exchange in the nearest district. The exchange of goods between producers was limited by the weak development of communications - transport, information, etc. Initially, money served as a convenient commodity that could be used to exchange for other goods. These were coins, usually from a rare material, the cost of which was high relative to its size. Instead of bringing the goods with them, the buyer could bring such coins, which was much easier and more reliable. Thus, money initially acted as an intermediary between various producers and buyers. Subsequently, due to the high liquidity of money, they began to acquire other functions, such as accumulation, a measure of value and world money. As a result, money acquired the role of a worldwide instrument for the exchange of goods. This made possible the division of labor and an almost unlimited exchange of goods between people. This made it possible to increase labor efficiency, but at the same time the standard of living of workers did not change significantly, since part of the created value, which exceeded the means for his survival, was withdrawn in the form of payment for means of production, land, etc.

Together with the positive role of money, which they played in the development of material production, another role that changed human behavior is often silent. Since money has greatly expanded the possibilities of satisfying the material needs of a person, the goal of a person focused on satisfying basic needs was to receive as much money as possible, allowing him to acquire material wealth.

The measure of a person's satisfaction with material goods is deeply subjective, but since a person lives in society, it is determined, first of all, by accepted social norms. Most people are guided by that lifestyle, and, accordingly, the benefits that they see from people in their social environment. The modern social environment is so integrated and interconnected that information about new types of material goods becomes quickly available. At the same time, the owners of a more prestigious smartphone or car model feel a sense of superiority over other people who do not have these benefits, and often the rational sense of the purchase is lost. For example, the purchase of an expensive phone, which differs little in its functional non-functional characteristics from others, carries the meaning only to stand out socially from the local community.

However, the problem of any material wealth in the modern world is the temporary nature of its value. If, under a subsistence or feudal economy, goods were invented very rarely and spread slowly, then modern products appear very often and, even despite the complexity of individual technological processes from invention to mass production, the product often passes through in less than a year. A person is constantly in an endless process of satisfying his material wealth, while as his income grows, the nature of this consumption becomes more and more irrational. From buying expensive phones, the consumer goes into buying expensive cars, from buying cars to buying expensive houses and yachts, although these purchases no longer have any effect on the level of satisfaction of material needs.

Money, thus, became the form through which humanity received unlimited opportunities to expand the needs of people. In the existing system, it is not possible how a person could fully satisfy his material needs. In addition to this, the function of storing value with money also stimulated the accumulation of funds in excess of the current needs of the person.

The paradox of this situation is that money itself is a representative of the goods that have been created. The withdrawal of money as the main instrument for regulating economic processes is a clear separation from the materialistic nature of the understanding of economic good. Money can be printed in additional quantities to receive additional benefits for it. Although there is no real material value behind this money, as it was when using, for example, the gold standard. The value of money has become a deeply subjective category, albeit associated with the formation of public perception. Different states can and do print their own money, but the degree to which this money is valued is actually subjective and has nothing to do with its real value. Money has value as long as it is massively accepted in exchange for goods. At the same time, their essence does not change in any way in the event of a decrease or increase in consumer confidence in them.

A good example of the gap between the actual value of money and the state of the economic system is the functioning of stock markets, including commodity futures markets. In practical economic activity, many, if not the overwhelming majority, prices for goods are set in financial markets on the basis of some fragile consensus of individual groups (traders, banks, etc.), which takes into account a large number of subjective factors, for example, the expectations of individual players in the market regarding the further dynamics of prices and demand. It is clear that this category is so subjective that there is no need to talk about its accuracy. Because these markets for money and quasi-money are so distracted from the wealth that they trade, it is not possible to predict changes in these markets with any scientific precision. At the same time, market stabilization is based not on some objective economic data, but on the perception by market participants of the level of adequacy of reaction to certain changes that may affect the functioning of the market. That is, in other words, speculators who play on the prices of secondary financial instruments that are completely divorced from reality determine how much it will cost a driver to refuel his car.

With the development of the financial market, the establishment of prices for economic goods is less and less correlated with the real ratio of their supply and demand. The largest international markets for raw materials and foodstuffs with perfect competition, a huge mass of producers and buyers have long forgotten about these producers and buyers and are living their own lives, hiding behind various secondary financial instruments, indices, imaginary categories (such as residues of oil products at US gas stations). If within the framework of national markets there are government regulators that can reason with speculators and fraudsters, then with the transition of trade to the international level, the ball finally disappears from the three thimbles, and pricing in the largest money-intensive markets completely loses its connection with the fundamental factors of supply and demand. In other words, if we recall our metaphor, the killers have already escaped from their cage and, having no institutional restrictions at the supranational level, are realizing their vocation.

Giving money the function of a universal universal equivalent is acquiring more and more hypertrophied proportions over time. They become the measure of all things, the means and purpose of existence, replacing the real benefits that once stood behind them. Moreover, in a society of victorious dialectical materialism, money becomes the only way of dialogue between people, this method is promoted by the power of money and capital itself and is rapidly replacing other, above all, moral methods of social contract and dialogue. Thus, the only possible option in general to negotiate in such a society is the monetary one.

Lately, monetization is gaining momentum unprecedented hitherto. Votes are sold, family relationships are monetized through marriage contracts and children's toys, for the sake of money, people are ready to change their profession, place of residence, destiny, and sexual orientation. It should be understood, however, that consent obtained through buying a point of view is highly unreliable. Both participants can regret him: one fool bought - another fool sold. In the end, Judas regretted most of all, having sold (betrayed) all that was holy for thirty pieces of silver.

Risks

In practical economic life based on a market approach, the role of a substance called risks is very important. Risk is the likelihood of a hypothetical event occurring. Risk implies a certain level of uncertainty. Uncertainty indicates that the consequences and likelihood of an event cannot be estimated with a high level of confidence.

Financiers have learned to make money on risks best of all. A huge branch of financial instruments has developed in the financial market. The turnover of this industry is currently measured in tens of trillions of dollars a year. The main goods that are bought and sold on the derivatives market are not goods or services, or even future goods or services and the risks of price changes for these goods.

An event that is assessed as a risk does not exist in the material world. Evaluating such events and making decisions based on them indicates that consciousness plays an extremely important role in economic reality. At the same time, there are no unambiguous mechanisms for such an assessment. Individual social groups can use similar methods, including those based on mathematical analysis. For example, many large consulting companies, rating agencies, research institutes have their own algorithms and methods for assessing various important economic data and the risks associated with them. Moreover, the more volatile and unpredictable these economic data are, the more public interest they are and the more different evaluators appear. For example, there are a large number of different proprietary models for valuing exchange rates and commodity prices. Differences in the assessment of economic events by different actors are an integral part of most transactions in the market.

In many of the largest exchange markets, the risk of price changes is more tradable than the commodity itself. This means that with the same indicators of world supply and demand, grain prices can differ from year to year by two times. To do this, just enough "rumors about drought", terrorist threats or the recommendations of a respected financial institution. And where is the perfect market that determines fair prices?

Spiritual values

The financial situation of a significant part of the world's population has significantly improved over the past century. Tens of millions of people every year buy cars that are stuffed with electronic systems that only serve to improve comfort, which is in no way comparable to the situation of people in the Middle Ages. Hundreds of millions of people are willing to pay substantial sums of money to buy a product of a certain brand. The results of modern economic development of mankind are due to the linear model of needs, which has always been considered in economic science. Despite the fact that Maslow's theory and a number of other theories indicated that the satisfaction of human needs occurs from lower to higher, the whole theory of a market economy was built on the basis of the development of material needs. In the modern economic system, subjects (primarily manufacturers and traders) are not interested in the transition of human needs from the material sphere to the spiritual sphere. Profit from activities in the field of culture, art is very limited, in contrast to the needs for cars, houses, electronic devices. The development of higher-level needs is seen as a side effect of the motivation of people engaged in intellectual types of professional activity.

But if, in reality, the question is that the goal is to satisfy the needs of a person of a higher level, then is it logical to consider the entire economic system from the standpoint of satisfying only material benefits? The coordinate system should be different, although it should take into account the need for a person to satisfy his basic needs, since we cannot deny the existence of the material world and the urgent needs of a person in it.

A person's spiritual needs are significantly different from material needs. They are closely related to another category - values. Inherently, values can be extremely heterogeneous. Some will be interested in social status, others in art, and still others in material goods. Values are the core of the human spirit. They are not associated with any specific actions or thoughts and are difficult to undergo any changes. A person's values determine his interaction with the world around him, including in relation to material goods and the mechanisms of their acquisition, distribution and use. Values or traits that are shared by social groups and passed down from generation to generation shape culture. The value system of each culture can have a different structure. But one way or another, a full-fledged culture includes answers to key questions of the existence of the world.

Different cultures, therefore, differ in their value systems. The impact of this system can hardly be overestimated. It finds direct expression not only in human actions, but also in language, models of socio-economic relationships, raising children, etc. For example, the world religions - Christianity, Judaism and Islam - are part of the modern culture of the countries of Europe, the Middle East, North and South America. In each of these religions, the ultimate goal of a person's material life is the "Judgment of God", when it is decided whether a person will go to Heaven or Hell. This system gave cultures a goal-setting function. This can be seen most clearly in comparison with non-Semitic cultures such as, for example, Indian or Vedic. In Indian culture, the concept of the purpose of human life is blurred. Man should strive to merge with nature. In the indigenous languages of India, target and causal constructs such as "in order to" are practically absent. In Christian culture, a person's life is associated with a constant choice of the goal of his existence. Culture has a responsibility to provide a satisfactory answer to this question. It is almost impossible for a Christian to explain why the answer to this question is not an obligatory attribute of a person's development. But this target function - “to get to Paradise” - has grown so closely into the culture for two thousand years that it is reflected in all elements of human consciousness. In Indian culture, by contrast, building a harmonious relationship with nature is fundamental to existence. Often the idea of such an existence has something in common with the concept of a person's reincarnation in various entities. This is a very subtle and important detail that justifies the unhurried nature of a person's life. There is really no need to do everything in this life. There will be time to correct some mistakes and to know the future together with the whole world after another rebirth. Such a consciousness is seen initially as more preferable from the point of development of a person's consciousness, since the concept of an eternal soul allows a person to find peace in the race for benefits and pay tribute to spiritual development.

Classical economic theory, in fact, describes only the turnover of commodity and material values, without having a holistic methodology in relation to intangible and even more spiritual values, although from a subjective point of view, the nature of the values around us for a person is not separable and is revealed by the same categories.

Entrepreneurship

Considered in a broad sense, the profit making and the activity of economic agents in the market economic system does not actually consist in the creation of a perfect market, but in an attempt to distort the market behavior from the rational one. J. Schumpeter's theory of economic development is widely known and widespread. In it, she includes a new factor in the list of factors of production - entrepreneurship. Unlike classical economic theory, which sees the development of an economic system on the basis of market development, Schumpeter views entrepreneurship as the basis for qualitative changes in the economic system. However, he does not deny the classical theory of the market. Schumpeter in his work argues that an economic system without innovation develops quantitatively and can be described within the framework of classical theory. However, for a qualitative change in the system, innovation is needed. Innovation is driven by entrepreneurs. The profit that an entrepreneur receives is due to his innovations and the risks that he takes in the implementation of innovative projects. Innovation is nothing more than an attempt to change the existing market, which, in accordance with classical economic theory, should come to market equilibrium.

It can be said that the company's profit-making is the result of poor market efficiency. At the same time, in the materialistic understanding of the world, profit is the fundamental motive of entrepreneurial activity. In a perfect competition model, no entrepreneur makes a profit. This means that in order to be engaged in business, he must have other motives, besides material ones, or give up business.

Thus, the existing understanding of the market as an ideal mechanism for reconciling the interests of the consumer and the buyer does not stand up to criticism. Upon reaching this state, the entrepreneur loses interest in doing business. The very existence of a market economic system presupposes imperfection of the market and the unattainability of an imaginary market optimum. The development of the market mechanism in this understanding has no value, both from the standpoint of objectivism and from the standpoint of positivism. From an objective point of view, such a mechanism is not an adequate description of the functioning of the economic system, since such development is not beneficial for economic entities. From the point of view of positivism, this model does not ensure either the realization of people's needs, or the achievement of the goals of entrepreneurial activity.

The “invisible hand of the market” really achieves only local results in time and space under the strict control of national regulators. As soon as a perfect market goes beyond the national boundaries (that is, it loses moral restrictions), it finally loses its ability to adequately price, since the selfish desires of entrepreneurs without the sovereign's eye very quickly find ways to manipulate or even establish prices divorced from the real market situation in their own interests.

You can imagine many more examples of inconsistency and lack of verifiability of economic disciplines, but what is given is more than enough. All modern economic theory, from beginning to end, is PALSE. Modern pseudo-economics is woven of contradictions and does not create a holistic view of social relations. Competitive equilibrium economic models do not correspond to the interests of their participants and therefore are not reliable constructions.