2007 - 2022

The Ideology of Nobel Economics


THIS year’s (so-called) Nobel economics prize has gone to three US-based academics – Abhijit Banerjee, Esther Duflo and Michael Kremer. Banerjee and Duflo (who are married) work at the Massachusetts Institute of Technology, while Kremer is a professor at Harvard. They received the £728,000 prize for work in, er… framing policies to alleviate mass poverty in India.

Duflo is only the second woman to be awarded the Nobel in economics since the prize was instituted in 1969, thanks to a cash bung from the Swedish central bank, the Sveriges Riksbank. The awards committee has picked only two female economists in half a century – which tells you all you need to know about the Royal Swedish Academy of Sciences,- which does the choosing. This year the Academy covered itself in opprobrium by handing the literature prize to the Austrian apologist for Serb fascism, Peter Handke.

Economics is more ideology than true science – an ideology crafted to justify capitalist exploitation and despoliation of the planet. I say that as someone who was an academic economist for 25 years. The ideological function of economics is glaringly obvious if you look at the roster of bourgeois economists chosen to get the Swedish central bank’s version of the Nobel.

Over 50 of the Nobel winners are American, since clearly economics is focused on how the world’s largest capitalist economy performs. The universities that appear the most as homes to Nobel economics winners are American ivy league – Harvard, MIT, Columbia, Chicago, UCLA and Berkeley, Stanford, Johns Hopkins, Princeton, Yale, Cornell, and Carnegie Mellon. And no wonder: these elite institutions are heavily funded by US business interests.

In the first decade or 15 years the Nobel economics prize was being awarded, there was a lot of catching up to do. The annual prize was doled out to economists who had done significant work in the preceding couple of generations, covering the inter-war depression, World War II and the subsequent global boom in the 1950s and 1960s, when it looked (briefly) as if capitalism had stabilised and would make everybody prosperous.

It is significant who got the tap on the shoulder in this catching-up exercise – and who didn’t. There were still a few of the original Keynesians around in 1969, the high point of the Keynesian Revolution. John Maynard Keynes, the quintessential English bourgeois academic, had reinvented the discipline with his General Theory of 1936, perhaps the most influential economics text apart from Karl Marx’s Das Kapital. Keynes had literally saved capitalism by offering a convincing theoretical model for state intervention to get the world out of the Great Depression (though the techniques were first applied to fund World war II).

Keynes was long dead by 1969 but his immediate co-workers were still around and who merited a Nobel. In particular there was the great and flamboyant Joan Robinson, then in her youthful sixties and still causing trouble. I attended a seminar she gave on development economics and the Chinese Cultural Revolution – she turned up in a sexy black Mao suit. Robinson’s work on monopoly and the dynamics of long-run growth were seminal. Of course, Joan Robinson was never awarded the Nobel for economics, even though she lived till 1983: (a) she was too critical of US capitalism and (b) she had the temerity to be a clever woman.

Instead the early economics Nobels went to the in-crowd: Paul Samuelson (1970) whose textbook convinced the post-war generation that slumps had been abolished; Simon Kuznets (1971) who invented GDP accounting; Kenneth Arrow (1972), who explained how capitalism always tended towards market equilibrium; Friedrich Hayek (1974) for explaining that socialism also led to totalitarianism, while free markets guaranteed ‘freedom’; and Milton Friedman (1976) for convincing us that capitalism was the best thing since sliced bread.

Occasionally, the Swedes threw in the odd Third World development specialist, Soviet apparatchik or Scandinavian native son, in order to disguise this abasement to US academic colonialism. But the bulk of the early economics Nobels were dedicated to honouring the ideologues of American industrial and consumer capitalism, the better to export that model to the rest of the world.

Even mild critics of the system were blackballed, notably John Kenneth Galbraith, a mentor to President John Kennedy whose books on consumerism and the reality of US monopoly capitalism were vastly popular at that period. And if you were seriously critical of capitalism – competition theorists Paul Baran and Paul Sweezy come to mind – then you didn’t waste time waiting for the phone call from Stockholm.


The 1970s brought the end of the post-war boom, a series of inflation crises culminating in a successful onslaught against industrial unionism in America and Britain, and finally (in the 1980s) the emergence of what we now call neo-liberalism and globalisation. The Nobel prize for economics moved on to justify this neo-liberalism – the doctrine that markets always know best, that unfettered free trade brings universal prosperity and happiness, and that global finance capitalism makes the world go around.

Accordingly, the main recipients of the economics Nobel in the later decades of the 20th century and early Noughties were contemporary academics who justified the new neo-liberal order. In particular, a new breed of mathematical economists came to the fore who justified the so-called ‘efficient’ outcomes of financial markets free from regulation, and who supplied the mathematical models used in derivatives trading. No surprise, this new breed of academic economist was heavily funded by the investment and hedge funds who used these complex new trading models.

Among the Nobel winners in this neo-liberal era were: Lawrence Klein (1980) the pioneer of (bogusly accurate) computer forecasting models; James Buchanan (1986) who used ‘economic’ arguments to claim elected politicians were self-interested, justifying wholesale privatisation; messers Sharpe, Miller and Markowitz (1990) for the capital models whose use led to the 2008 Bank Crash; Robert Lucas (1995) whose so-called ‘rational expectations’ theory did the most to justify the de-regulation of financial markets; Merton and Scholes (1997) who created the insanity of derivatives trading; plus a bunch of statistical whiz kids in the early Noughties who got the Nobel cheque for inventing the forecasting models that proved the 2008 Crash could never happen.


Which brings us up to the present day when a contrite Swedish central bank and Nobel awards committee has been busy covering their tracks by giving the prize to less damaged academic goods. The new fad of behavioural economics has got a lot of attention from the Nobel committee because it avoids confronting the obvious question that if capitalism as a whole is a failed model, then why have the Nobel economics prize winners for the past half century not offered an alternative?

Behavioural economics looks at the psychology of individual choice. That’s not an invalid subject but – as practiced – it abstracts from looking at how those individual choices are circumscribed by existing power relationships. At how banks, hedge funds and concentrations of capital limit the choices of individuals, be they industrial workers, poor peasants or marginal slum dwellers (the fastest growing demographic on the planet).

The three latest Nobel winners – Banerjee, Duflo and Kremer – fit into this new category of recipient. “Our goal is to make sure the fight against poverty is based on scientific evidence,” Ms Duflo told a press conference. “Often the poor get reduced to caricatures and even those [who] try to help them do not understand the deep roots of what is making them poor… We try to address problems as scientifically as possible.”

Actually, the vast inequalities of wealth ownership in India are what makes people poor, not their psychology. Once again, the Nobel prize for economics is ideological mince.

Comments (17)

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  1. Alan says:

    I believe the official title if the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The use of Nobel name for this purpose and the conflation with the Nobel Prizes has been opposed by descendants of Alfred Nobel. Like much else in modern economics, it’s a fraud.

    Behavioural economics is lipstick on a pig. It doesn’t solve the problem that the discipline of economics lives in fantasy world where economic behaviour exists independent of culture and politics.

    As documented by the late Gavin Kennedy, one of Paul Samuelson’s great contributions to the discipline of economics is to misrepresent the work of Adam Smith in his famous textbook, leading to several generations of economists (and right-wing think tanks) to spout complete shite about Smith. Apparently none of these people are capable of reading the great man’s work for themselves or wouldn’t stoop so low as to pay any attention to what intellectual historians and academics in ‘lesser’ disciplines have to say about Smith’s writings.

    1. Angus says:

      Indeed, Smith’s invisible hand included necessary redistribution to prevent monopolies and the over concentration of wealth thus undermining the functioning of the market. It did not mean ‘greed is good’ etc. It was primarily an antidote to Mercantilism and recognised what is now known as ‘the problem of information’ in command control in complex systems. It’s logic and why all central econ plans have failed so disasterously as for the plan to be realised you necessarily need to know what is happening at every point in the economy at every moment. Otherwise the real function econ soon bares no resemblance to the plan and info at the centre. This principle is why all complex systems such as the human body have a reflexsive element – the central nervous system.

  2. Daniel Raphael says:

    Thank you for this. Wish I could universally distribute this instead of only tweeting it.

  3. Angus says:

    ‘I attended a seminar she gave on development economics and the Chinese Cultural Revolution – she turned up in a sexy black Mao suit. Robinson’s work on monopoly and the dynamics of long-run growth were seminal. Of course, Joan Robinson was never awarded the Nobel for economics, even though she lived till 1983: (a) she was too critical of US capitalism and (b) she had the temerity to be a clever woman.’

    i actually laughed out loud at this bit.

    How about (c) That central to the Cultural Revolution was the purging of the entire intelligensia (Teachers, doctors, nurses, non compliant students, engineers etc – regardless of being communists also) to slave labour in the countryside while these professional positions were replace by illiterate peasants. Oh, but not after public ‘struggle sessions’ and tens of thousands of deaths and the eventual collapse into outright factional civil war. All so Mao could rule the roost.

    What next? What can we learn from the educational policies of Pol Pot?

    Incidentally, you don’t have to be a fan of the increase of inequality within development – relative poverty – and the simple fact that the market (for better or worse) has reduced absolute poverty by 90% in east asia, and they aren’t about to quit any time soon because the developed west are no longer the recipient beneficiaries of industrialisation. Hence the most ambitious infrastructure program int he history of the world (Belt and Road scheme). Pretty sure Africa and South America feel the same way. Ask yourself where you would rather live. South Korea or North.

    Not that I’m defending the current set up. Just pointing out that it isn’t a binary and completely black and white as it is often portrayed.

    Not sure how this attracts moderate No voters either.

    The best account of the Cultural Revolution in fiction is in Liu Cixin’s The Three Body Problem. Just the first opening chapters.

    1. Angus says:

      Here’s thee goodreads link. Has the first chapter. Really chilling stuff.


      Plus is’t a really good novel, even if you don’t like Sci-fi.

    2. florian albert says:

      With regard to Joan Robinson the ‘clever woman’ in a Mao suit.

      Another Nobel Prizewinner, the Russian born poet, Joseph Brodsky, was once asked why so many clever people were taken in by the likes of Stalin and Hitler. He replied that no clever people were taken in by such gangsters. Being clever is not a matter of winning prizes or professorships. It is about being able to see such people for what they are.

    3. Me Bungo Pony says:

      Have you not jumped to conclusions here? Mr Kerevan merely stated he attended a seminar Ms Robinson gave on the Chinese Cultural Revolution and then that her work on “monopoly and the dynamics of long-run growth were seminal”. The former does not necessarily imply support for Mao and, even if she was, is in no way a prerequisite of the latter. Are you not just looking for things to get outraged over?

      1. florian albert says:

        The ‘Mao suit’ is not a minor detail. One of the depressing traits of 20th century history was the willingness of ‘intellectuals’ to act as cheer leaders for the century’s biggest mass murderers. Stalin had G B Shaw; Hitler had Martin Heidegger and Mao had Jean Paul Sartre.
        I remember hearing Tony Benn speaking entirely positively about the Cultural Revolution when it was happening. We did not know all that – thanks to the likes of Frank Dikotter – we now know but it was crystal clear, even as it was happening, that it was an exercise in political hysteria.

        I do not feel ‘outraged.’ There are people who need to be made aware of, or reminded of, the points I have made.

        1. Angus says:

          Indeed you are right Florian, we do need to be reminded given that Xi is showing distinctly Mao ish tendencies – cult of personality and all that.

        2. Angus says:

          And there was the fact that he came out with stuff like this and meant it.

          “I’m not afraid of nuclear war. There are 2.7 billion people in the world; it doesn’t matter if some are killed. China has a population of 600 million; even if half of them are killed, there are still 300 million people left.”

          A lesser known point of history is that it was Khruschev who threatened to nuke Beijing if Mao nuked America which he wanted to. Then Sino Soviet split then led to the Nixon visit.

      2. Angus says:

        Also, the Great Leap Forward came before the Cultural Revolution and would have given some indication as to whether wearing a Mao suit was a bright idea [- given that it caused the deaths of over 30 million people. I feel a Beatles song coming on. ‘you say you want a revolution…’

  4. Derek Henry says:

    Prof Michael Hudson did a fantastic piece in December 1970 about the prize.

    It is superb, an excellent read and one of those pieces that stands the test of time similar to the Jimmy Reid Alienation speech.


  5. Derek Henry says:

    Michael Hudson’s piece above briefly covers the myth of ‘ free trade” and the Nobel prize farce.

    “Free trade ” the most spoken two words in the last 36 months that mean the complete opposite of what the majority think they mean.

    The parts covering both Japan and South Korea below are simply not allowed to be told.

    The case against free trade – Part 1


    The case against free trade – Part 2


    The case against free trade – Part 3


    The case against free trade – Part 4


    Let’s face facts “free trade” is why most people voted to leave. It is not the golden bullet most people think it is.

    “Fair Trade” should have been the two most used words in the last 36 months.

  6. James Mills says:

    ”Economist – an expert who will know tomorrow why the predictions he made yesterday did not happen today ! ” Laurence J Peter

  7. Pradip Biswas says:

    This is the best commentary on the pretentious but bogus subject called Econmics that I have read so far. It sums up everything around the subject,called Economics, which are Capitalism and why mankind should religiously follow it for everthing good, including “removal and alleviation” of proverty by Capitalism and Capitalists. This articles (and the author) has not shied away from naming (exposing) each individual names from the “hall of ” the fames.

  8. S M ASHEK HOSSAIN says:

    I just can’t fathom why we could not yet find a solution of such a simple problem ‘economic inequality ‘. Hence, I have planned to write three books and propose a probable solution using common sense. The title of the series is ‘The Clash of Titans : Economics, Politics, and Morality ‘ ; first being ‘The Clash ‘, second – ‘The Dominance ‘ and third ‘The Way Out ‘.

  9. Derek Henry says:

    Remainers are all saying they want an economic impact assesment of the brexit deal.

    Why doesn’t anybody say that is impossible until they finish the trade deals. The next part of the process ?

    This was always the reason why no deal was never a factual description of reality. Even moving to WTO. Deals were always the next part of THAT process.

    Somebody needs to highlight this in Parliament.

    Why voters were so scared of project fear again. A project fear of no deal that did not represent the actual process.d

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