Political economy

Theoretically, we make use of a framework that combines Andrew Baker’s work on social purpose with a novel conception of professional legitimacy, which we divide into internal legitimacy and external legitimacy. Especially when they articulate a strong sense of social purpose and are open to co-constitution, such forms of knowledge can have widespread popular appeal while being vehemently rejected by the economics profession. This means that policymakers must examine not just the potential of alternative expertise per se but also weigh the appeal of the two forms of legitimacy against one another. As a result, this framing can help us understand the complex and sometimes non-linear trade-offs associated with upstart forms of expertise.

Yet, this framing also leaves open crucial questions, that should be addressed by future research on the rise of indie economics. Indeed, as a broader field of ‘lay experts’ emerges, potentially challenging and undermining the more centralised form of knowledge production that has been dominant over the course of the long twentieth century, we will need to grapple with new questions of quality control. Science has always had to contend with tensions between scientific rigour and creativity and has developed mechanisms such as peer review to deal with it. But the changes we now face are altering the nature of this trade-off: co-constitution and the enrolment of lay actors can open new intellectual frontiers and democratise science, but they can also open the floodgates for manipulation, pseudoscience, and misinformation of various forms. Future research should explore the mechanisms of quality control (or lack thereof) that are evolving to navigate this new reality.

To return to Daniela Gabor’s question from the introduction, the rise of MMT shows in no uncertain terms we are in a political climate in which trust in mainstream economic knowledge is desperately frayed and – given this lack of trust – anti-establishment credentials become a crucial source of appeal. The rise of alternative forms of economic expertise is menacing to mainstream macro not just to the extent that it competes with it for finite attention, but also in that it is a symptom of the deeper malaise of the discipline and its failure to prove itself fit for social purpose in the face of interlinking crises.

The end product of today’s Western capitalism is a neo-rentier economy—precisely what
industrial capitalism and classical economists set out to replace during the Progressive Era
from the late 19th to early 20th century. A financial class has usurped the role that landlords
used to play—a class living off special privilege. Most economic rent is now paid out as
interest. This rake-off interrupts the circular flow between production and consumption,
causing economic shrinkage—a dynamic that is the opposite of industrial capitalism’s original
impulse. The “miracle of compound interest,” reinforced now by fiat credit creation, is
cannibalizing industrial capital as well as the returns to labor.

The political thrust of industrial capitalism was toward democratic parliamentary reform to
break the stranglehold of landlords on national tax systems. But today’s finance capital is
inherently oligarchic. It seeks to capture the government—first and foremost the treasury,
central bank, and courts—to enrich (indeed, to bail out) and untax the banking and financial
sector and its major clients: real estate and monopolies. This is why financial “technocrats”
(proxies and factotums for high finance) were imposed in Greece, and why Germany opposed a
public referendum on the European Central Bank’s austerity program.