[OPE] estimating the severity and duration of a capitalist economic crisis

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Sat Mar 29 2008 - 08:55:32 EDT

One thing that attracts me to Marx and the better Marxian research traditions is precisely their track record of successful socio-economic predictions. Of course it is also true that Marxian thought attracts many prophesying dilletantes with skimpy knowledge, who venture to surprise the world with a few bold forecasts they just shake out of their sleeve. 

At the beginning of the 1960s, both Milton Friedman and Ernest Mandel predicted that the long boom would end as the 1960s drew to a close, and they explained why they thought that, namely near-full employment was not compatible with price stability in the long term. That was a successful longterm prediction. In the social sciences, generally you can make few accurate and useful predictions of events beyond 5-10 years, although you can forecast some long-range tendencies which follow from a particular social structure or demographic structure.

Many investment and insurance funds employ people with a track record of successful predictions, and the proof is in the longterm profits they make. Those people most concerned with making successful economic predictions are also the people who are most motivated to obtain a realistic and comprehensive understanding of the economy. 

I reject the leftist chaos theory of capitalism, although admittedly, at times, capitalism can produce chaos. In this sense, I side with Marx and other authors who emphasize the regularities of economic life. If everything is just one big chaos, no prediction and no science is possible. Science begins with recognizing that behind the superficial appearance of chaos, there are causes and effects.

I do not deny that most economic forecasts are not much better than astrology (as AG Frank noted). But the reason for that is not that economic forecasts are impossible, but that the forecasting techniques are very poor. In particular, the theories and conceptual foundations of economics are very poor, and economists lack understanding of cause and effect in economic life. Therefore, economists employ empiricist methodologies and models which usually lack significant predictive power. Empiricism is useful and progressive, if it leads to an investigation of experiential data, but useless if it conflates a causally determined reality with the sense-data gathered about it. 

However, when very large masses of capital are involved, capitalists get the very best forecasts that money can buy, leaving the ideological nonsense of economists aside as a means to hoodwink the public. That is just to say that private property and competition can be a barrier to successful forecasting, insofar as vital information is kept secret. But when the "crunch" comes, only the very best predictions are used.

Generally, the ruling classes aim to monopolise knowledge of the future, but whether they can really do so depends on many factors. Many of the contemporary elites are rather nihilistic and uncertain, and they subscribe to mystical, religious and other non-rational theories which obfuscate foresight to the point that they miss even the most obvious realities. Marxists (if there still are any) would argue that there is a material reason for that: the elites have to cope with very complex, highly contradictory realities, involving numerous conflicts of interest which are difficult to mediate. You can tell a certain amount of lies to hide your true motivation, but beyond a certain point that is not credible, and begins to reveal your own self-deceptions and biases. This situation is reflected in academia, where all kinds of obscurantism are promoted in the name of "scholarship" and academics are no longer sure about what the questions are and what needs to be explained.

However, the more assets are tied up in speculative capital, the stronger the pressure and demand for reliable forecasting grows, and the better the forecasting techniques will become. It is just that the power of foresight becomes a commodity that is worth a lot of cash, and therefore it is increasingly monopolized by people "in the know" who prevent society from knowing the truth about itself. Hence the phenomenon of "whistleblowers".


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