Postcolonial Studies, Vol. 13, No. 3, pp.

305
310, 2010

Modern economic theory as culture:

economic thought as if community
(relations and knowledge) mattered
THOMAS S BRINSMEAD

Stephen A Marglin
The Dismal Science: How Thinking Like an Economist Undermines Community
Cambridge, MA and London: Harvard University Press, 2008
359 pp ISBN 978 0 674 02654 4 (pb) US$20.65

The Dismal Science: How Thinking Like an Economist Undermines Commu-

nity by Stephen A Marglin subjects to a competent, broad-ranging critique
‘mainstream’ modern economic theory as it is taught to undergraduates and
informs decision making and public discourse in modern democracies.
Beyond mere analysis of theory, it strays into social analysis of its cultural,
and thence political, impacts. The presumptions of economics are those of
modernist culture and are blind to important communal features of human
society. This severely impoverishes mainstream understanding of social and
economic life. Political consequences include questionable government
policies that impair economic, as well as social, functioning. ‘Thinking like
an economist’, charges Marglin, actually undermines social relations and
other valuable aspects of human society. This is because economics not only
ignores community, but also misconceives both knowledge and individual
rationality. Although supposedly objective, it presumes questionable (mod-
ernist) values including both self-interested individualism and appeasing
insatiable wants.
The theoretical critique is primarily communitarian, although the author
observes that a Marxist or environmentalist critique might be even more
damning. The socio-political analysis is not in-depth, but successful on its
own terms. The implicit political agenda is to motivate development and
application of improved alternative theories.
The Dismal Science is less narrowly focused than other books in the area,
such as Keen’s Debunking Economics (2001) which is primarily a structural
critique and more technical, and so drier, more rigorous and harder-going.
Keen also emphasizes the politics of the academy more than that of wider
culture. The Dismal Science covers broader ground, and is more academic and
less polemical than either Edwards’s How to Argue with an Economist (2003)
or Hamilton and Denniss’s Growth Fetish (2003), both of which address only
the less complex of those issues that Marglin discusses. Wright’s The Ethics of
ISSN 1368-8790 print/ISSN 1466-1888 online/10/030305
6 # 2010 Thomas S Brinsmead
DOI: 10.1080/13688790.2010.510994
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Economic Rationalism (2003) covers some common ground in a tightly

structured and clear, explanatory style that is rigorously argued, yet
accessible. However, it contains comparatively little socio-political analysis
or historical background.
Chapter Three of The Dismal Science succinctly expounds the explicit
structure*it articulates, examines and evaluates the following foundational
‘myths’ of modern economics. The first is that economics is a value-neutral,
culturally universal, science. It provides no endorsement for any particular
wealth distribution alternatives; that is a value-laden political issue. A second
myth is that human society is best understood as an aggregation of individuals
pursuing their narrow self-interests, and who make rational decisions as (if)
accurately calculating optimizers of narrow goals. Thirdly, individuals’ wants
are unlimited, independent of the economic activities they engage in, and ought
not to be judged or influenced, except within the market. Fourth, a presumption
of economic thought is that the nation-state is the only appropriate scale at
which to manage economic activity. Finally, it implies that economically
relevant knowledge is best understood as being (or as if it were) developed
rationally, able to be explicitly (algorithmically) represented, and developed by
individuals. In particular, any uncertainties within the learning process
regarding the outcomes of trial-and-error are shallow, so that access to
reasonable expectations about the likelihoods of the success of the learning
process allow it to be managed rationally. Cultural knowledge developed
communally, and tacit knowledge, are economically irrelevant.
Jointly, these foundational myths restrict the conception of societal
development far too narrowly. Informing the worldviews of citizens in
modern Western societies, and applied via governmental social and economic
policies, they result in deterioration of individual satisfaction despite
increasing material comfort, of individuals’ sense of communal social
responsibility, and of community relationships. Worse, through the lens of
these myths, some of these consequences are invisible, and thus can neither be
judged nor managed. Analogous conclusions for developing countries appear
in the final chapter.
The arguments are a good introduction to the deficiencies of a dogmatic
interpretation of modern mainstream economics, a caricature arguably
dominating political discourse and hastily applied in the messy practice of
corporate policy making, law and government. The argument that economics
has undesirable social consequences is somewhat implicit, primarily histori-
cally situated (in the early modern era), and less rigorous than as an argument
that the theory is intellectually flawed. However it motivates analysis that is
more explicitly cultural.
Owing to its individualist perspective, economics cannot adequately
account for interpersonal relationships, including community bonds. Such
relationships are necessary not only for social, but also for economic,
functioning: they are a pre-condition for markets to exist. Because economics
also presumes that individuals are autonomous, rational agents, it struggles to
distinguish both incentives from coercion, and irrational from context-
sensitive decisions.
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Economics furthermore cannot recognize ‘know-how’ (tacit knowledge)

which includes much expertise*particularly about market opportunities; this
explains why economics struggles to properly account for uncertainty. Tacit
expertise logically implies incomplete markets owing to uncertainty (a client
cannot evaluate expert services). This notably includes financial markets
which are crucial to capitalist economies. Consistent with the communitarian
theme, Marglin argues that mainstream theory underestimates the (social
and) economic relevance of communal tacit knowledge, implicit in cultural
conventions (cf Popper, Keynes) and expressed as social behavioural norms.
An improved theory would recognize the chaotic nature of learning over time,
and include social and experiential aspects, and irreducible uncertainty.
The claim of applied economics to value neutrality invites peculiarly
paradoxical inconsistencies. For example, the same arguments that render
economics incompetent to evaluate the relative desirability of alternative
distributions of wealth also deny legitimacy to all other means of judgement.
Due to the (meta-theoretically established) theoretical vacuum, no distribu-
tion can be ‘scientifically’ demonstrated as superior to the actual outcome.
Thus paradoxically, the status quo’s legitimacy garners unwarranted scientific
credibility, unintentionally privileged by default.
The concept of ‘community’ is explored in a brief literature review,
including analysis of the differences among various communal perspectives
on human society and the atomistic perspective implicit in economics. It is
noted that individuals may identify with several communities, in contrast to
the implied status of the nation-state within economic theory as the only
legitimate community. However, a sophisticated alternative synthesis theory
of community that best illuminates the key arguments, and accounts for the
implications of multiple communities, remains undeveloped.
Overall, the flow of argument meanders in an exploratory manner. Chapter
One motivates a communitarian critique. It shows how economic theory
struggles to explain the quite rational decision of a couple in a financially
constrained Amish community to refuse free, state-managed, medical care for
their terminally ill, but treatable, child. The next chapters explore con-
sequences of economic individualism, including deterioration of community.
Later chapters*on knowledge as tacit and communal, the nation-state as the
relevant normative scale, and the changing nature of individual preferences*
are then connected to the communitarian critique, albeit less tightly. However,
although these issues have (indirect) implications for understanding and
preserving community and their communitarian aspects have some economic
implications, their broader direct economic impacts are far greater in their
own right.
There are several themes exploring the foundational myths; none can be
singled out as clearly primary. The book’s title misleads: only one theme
directly addresses the individualist perspective that obscures the (economic
and non-economic) value of community relationships that is implicit in the
obvious misinterpretation of Thatcher’s infamous quote that ‘society does not
exist’ (p 173). It is both less and more than a communitarian critique, as
claimed in Chapter Two, of economics. It is less, insofar as the analysis of
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community is partial and loosely connected. However, it is also more. A

broader scope of economics is analysed than its account of community, and
more than just a theoretical analysis is provided, but also a formative
sociological account of its cultural significance.
In particular the ‘foundational myths’ are not merely strictly false qua
theory; they are also sociological myths (p 38) underpinning the knowledge
and values culture of academic and practising professional economists and
politically dominant economic actors. An implicit overarching theme is that
these myths are not universal and timeless, but rather essential to post-
enlightenment modernist culture, including its values. This is demonstrated
repeatedly by reviewing the historical development of each myth, including its
political, and wider cultural, social context.
This dual meaning of myth allows two distinct, though related, arguments
to be developed. The more obvious is that, and how, economics has shaky
intellectual foundations. More politically significant is that economic theories
are responsible for, and blind to, social deterioration. Hence, economics is not
only deficient as theory; it has real, significant, and undesirable, social and
political consequences. The discussion alternates between these perspectives,
with the intellectual analysis more rigorous than the social. Consequently and
perhaps confusingly, the cultural norms of modernity, including economics,
have a dual analytical role, namely a positive one within the social, but a
normative one within the economic, analysis. While Marglin discusses
historical change in interpretation of positive and normative within economic
theory, it is a distinction that could be profitably applied to his analysis itself.
As noted (Chapter Three), only an unashamedly critical case against
modern economic theory is provided, rather than a balanced appraisal. What
remains unexplored includes what, if anything, economics gets right, whe-
ther its principles are reasonable approximations, or the contexts*if any*
where its rules of thumb are applicable. If economics enjoys a near
unassailable intellectual hegemony, then a thorough debunking does seem
required as an antidote. But there are attendant disadvantages. The analysis is
mostly non-constructive with limited exploration of workable alternatives.
Chapter Nine, outlining an alternative theory of knowledge development,
approaches being an exception. Although the theoretical problems are not
‘limited to the margins of economics’ (p 119), the boundaries within which
standard theory applies are not precisely demarcated.
Nevertheless Marglin also concedes that enormous increases in material
wealth owe much to modernist culture, including modern economics and
politics that favour free markets, while recognizing corresponding costs
(primarily social and cultural, only hinting at economic). His critique is
tempered by optimism: hope for a more holistic theory of socio-economic
development that delivers prosperity with fewer social costs than the extant
over-idealized theory.
The author’s task is challenging because there is no rigorously defined
‘canonical’ understanding of modern economics; there are at least several
schools of thought. As observed (Chapter One, Appendix), what is genuinely
established is limited, and if there is a consensus it has many variations. There
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is no attempt to draw a solid boundary around what is being refuted,

where criticism stops, and Marglin does not agonize over definitions, missing
an opportunity to clarify the target of criticism. Hence the scope of the
arguments’ validity must be inferred from their content. Instead, the overall
train of reasoning relies heavily on the strategy of providing a foundational,
rather than a structural, critique of economics. These are described and
distinguished in the book, and the greater scope of the foundational critique
is explained.
A structural critique observes that the theoretical criteria required for
perfectly competitive markets are not met in practice, hence conclusive proofs
of efficiency do not follow. In contrast, a foundational critique attacks
deeper presumptions*about, for example, human nature, social organization
and knowledge development. This implies that perfectly competitive
markets can never exist in principle, irrespective of comparatively superficial
policy, regulatory, or institutional conditions. Designing improved govern-
ance arrangements towards perfect competition is fruitless. Rather, this ideal
should be abandoned altogether, and social and economic policy goals
completely rethought based on more realistic psychological, social and
learning (in the broadest sense) models.
The structural critique refutes a wide range of economic theories, all those
relying on the same fundamental presumptions. These underpin more than
just the narrow mathematical methodologies of neoclassical economics, and
its applied descendant, econometrics. Although it is the most obvious target
(cf the structural critique in the appendix), various aspects of the founda-
tional critique are applicable to the Austrian (though not including knowl-
edge), evolutionary (not rationality), neo-Keynesian (not individual agency)
and monetarist schools.
This may appear intellectually quite devastating for economics, in that it is
shown that the mathematical idealizations are false. However a sophisticated
evaluation must examine whether the theory is approximately correct.
Demonstrating that traditional proofs are invalid does not falsify the
conclusions, or even conclusively show that the original reasoning is
worthless. Indeed determined free market supporters argue that the
strict falsity of the assumptions is irrelevant*what counts is whether the
recommended policies ‘work’ (p 145). A less tenuously self-referential
counter-argument is that although the assumptions are not satisfied strictly,
they depart from reality to such a small amount or in such rare contexts that
the ideal theoretical results hold approximately.
Indeed these and other more or less valid, relevant, counter-arguments
have been raised by free market true-believers. For example notable
economists (e.g. Friedman) regard individual freedom as a benefit of markets
(Chapter Seven), irrespective of dubious efficiency benefits or whether
consumers are autonomous agents. However many such counter-arguments
are not acknowledged, and therefore not refuted. So, although some obvious
counter-arguments to the generally well-founded critique are defeasible, they
are not examined in detail. For example, Chapter Eleven, refuting the
assumption that human wants are unlimited, concludes instead that they
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continually increase as expectations adapt to increased consumption. This is

not, despite superficial appearances, effectively equivalent; it suggests ways to
meet wants that would be ineffective if they are statically unlimited. Such
counter-arguments are not pre-empted, leaving room to rationalize that the
standard theory is not in need of a significant overhaul.
This raises sociological issues that are hinted at in the cultural analysis
implicit in the historical exposition. The numerous references cited demon-
strate that most of the arguments are known, and some well known, by many
academics. So why is the standard doctrine apparently so influential? Is this
influence illusory*is it only rhetoric for conveniently justifying foregone
decisions, to be abandoned when expedient? In practice, are the limitations of
theory unknown, forgotten, dismissed, or merely too complicated to address?
How are they actually understood and managed by communities that share
the culture of modernist political economy*from well-informed citizens
through to pre-eminent theoreticians?
As the book is primarily an intellectual critique of economic theory its
concurrent analysis of the cultural and socio-political impacts of economic
theory is provided more hesitantly, without the sociological rigour expected if
such a project were undertaken explicitly. Hence the analysis falls well short of
a full-blown ethnographic study of economics as an epistemological culture;
with good reason. That would go well beyond the methodology of both the
history and philosophy of economic thought, the genre into which this work
snugly fits, and traditional economics. Such a project might therefore be
inappropriate for an author who apparently self-identifies with an intellectual
community of academic economists.
In summary, as an intellectual critique of modern economic theory The
Dismal Science is competent, accessibly expressed and logically well-founded.
The issues covered are mostly known, so any novel contribution is to provide
a coherent summary and to demonstrate their connection to a common
theme of community. Unfortunately, the book will not change the hearts and
minds of true believers in the magic of markets, particularly those with vested
political interests. Nevertheless, it provides a reasonable introductory over-
view to some fundamental theoretical limitations of standard modern
economics and an indication of what a superior alternative framework would
incorporate. It therefore offers a reasonable basis for a constructive research
programme. Finally, in addition to motivating the development of improved
theory, it also invites a more concerted, explicit, investigation of the
sociological factors contributing to the persistent adherence to such a
questionable framework. Better understanding of this may uncover a fruitful
way forward to change the culture of economics, and the modernist societies
that it influences.

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