Dean of Business at GWU Calls for Reconsideration of Economic Theory

http://www.forbes.com/sites/dougguthrie/2012/01/17/the-need-for-a-radical-reconsideration-of-neoclassical-economic-theory/

This morning I came across the above-linked opinion piece that appeared on the Forbes web site a couple of days ago.  Dr. Doug Guthrie, dean of the business school at George Washington University, proposes that recent failures of capitalism are rooted in the failures of economic theory taught at our universities.  He observes:

There remains an unconscionable chasm between economic theory and reality.

… Americans and their leaders are ready for a deeper conversation about the role of economics in society—a dialogue that is not dominated by economists or marked by abstruse debates about the core assumptions underpinning theoretical mathematical models.

… We need a field of economics that thinks in broad social scientific terms and is engaged in real world problems rather than entrenched in dogma and theory.

Hallelujah!  This is what I’ve been saying all along, that the solutions to our problems won’t be found in the political arena, since politicians merely follow the advice of their economists.  There are no solutions that don’t begin with some soul-searching by the field of economics itself; that don’t begin with some economist brave enough to challenge the ridiculous claim that man is clever enough to beat down any challenge to growing our population indefinitely. 

That’s not specifically what dean Guthrie is proposing, but it’s certainly a step in that direction.  Perhaps economists will overcome their reluctance to consider population growth when they grow even more uncomfortable with the growing derision of their academic peers (like dean Guthrie) that now seems to be taking root. 

I submitted a comment to Forbes which is repeated below for your convenience:

The problem with neoclassical economic theory – indeed, with the entire field of economics – is that it has turned a blind eye to the most powerful force at work in our economy today: population growth. Following the beating endured by economists in the wake of the seeming failure of Malthus’ theory, economists steadfastly refuse to ever again give credence to concerns about overpopulation. Man, economists say, is clever enough to overcome any challenge that population growth may present.

While mankind may be able to push back technological boundaries, there are other economic consequences against which we are powerless. While population growth stokes macroeconomic growth, total consumption and total sales volume, it also spawns overcrowding that is steadily eroding per capita consumption. And, since per capita consumption and per capita employment are inextricably linked, worsening unemployment, falling incomes and poverty are inescapable. The inverse relationship between population density and per capita consumption is irrefutable. The data is there for all to see.

The ramifications are enormous. Huge disparities in population density from nation to nation result in huge disparities in consumption, driving global trade imbalances. Badly overpopulated nations are desperately dependent on manufacturing for export to employ their bloated labor forces, and equally dependent on the resultant trade imbalances that threaten our financial system. And with each passing day, the supply of labor grows more out of balance with demand, making nations more dependent on deficit spending to maintain an illusion of prosperity. Unsustainable debt loads now threaten our financial system with collapse.

There is much more reason for concern about overpopulation that mere stress on resources and strain on the environment. Until the field of economics overcomes its cowardly refusal to even consider the subject of population growth and its full range of implications, matters will only grow worse.

Pete Murphy
Author, “Five Short Blasts

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