People are, and have always been, able to persuade themselves to believe the weirdest things. If a theory is not testable then it is either rejected or it becomes a matter of belief, which people can be readily persuaded to accept and even proclaim with varying degrees of conviction. Economic theory is by no means unique in this.
A hundred years ago, there being no tv, cinema or even radio, people tended to socialise mostly face to face with real people. And even in godless England, much of that interaction was within the context of the Christian church. Children attended Sunday school, went on Sunday school treats and outings, and in due course were confirmed as church members and regularly attended its services. That was where girls and boys very often met up. In the absence of mass hi-tech entertainments, they joined church youth clubs, played sports for church teams, contributed to church concert parties and drama societies, participating in, and being entertained by, their various amateur productions. As a consequence they were imbued with a set of values which were essentially benign and had some influence over how people behaved to each other. Fairness, honesty and generosity were at the core of those values and were publicly proclaimed, far beyond the church, as the acceptable way to behave. It didn’t mean people believed all the detail the churches promulgated. They didn’t have to. Christian doctrine was a matter for theologians. The mass of people were not overly exercised about the details of belief.
As noted on this site a few weeks back, in mid twentieth century, Harold Macmillan proclaimed the country had started ‘going to the dogs’ when people stopped going to church on Sundays. His argument was they had also stopped the other church based socialising which had encouraged the adoption of that set of values. The mass entertainments to which people turned were delivered free of commitment to any particular ethic. Interestingly, Macmillan hadn’t referred to when people stopped believing, because he was well aware the mass of people never had been very much concerned with the matters of belief.
Economic theology has filled the void left by declining church influence. It has not contributed to social interaction, but it has inserted its own set of values. It would be possible to envisage a neoclassical creed, something along the lines as follows: “I believe in the almighty power of ‘the market’, and in its efficiency, creator of full employment. I believe in free trade and open access. I believe in competition without regulation, in small government, minimum taxation, and in the power of private property. I believe in maximising utility, profit and owner value,” and so on. It is a creed which demands blind faith in things which are certainly no less extraordinary than God creating the world in seven days, the virgin birth and so forth.
The problem with neoclassical economic belief is that the ‘madmen in authority’ shape our world in accord with its literal and fundamentalist interpretation. They act according to its detailed prescriptions, and demand acceptance, even though common sense suggests, very often, that the actions it prescribes are counterproductive, if not plain stupid. And the values it espouses are the exact opposite of fairness, honesty and generosity. The neoclassical economy depends on everyone seeking to maximise their own self-interest without regard to the interests of their fellow human beings, only to the law. It is a prescription for greed and inequity.
Thank goodness most people, at least outside the financial sector, have not been totally seduced, as is demonstrated by their generosity every time there is some calamity befalling others. Now the calamity threatens to be universal, the ‘madmen in authority’ need to grow out of their weird neoclassical beliefs and consider where fairness, honesty and generosity might lead.