By Hazel Henderson and - -
ST. AUGUSTINE, Dec 1 2004 (IPS)

The so-called \’\’Nobel Memorial Prize in Economics\’\’ is not a proper Nobel Prize at all but an award set up in 1969 by the Bank of Sweden to legitimize the economics profession as a science, writes Hazel Henderson, economist and author of Building a Win-Win World and other books. As this year\’s Nobel Prizes were awarded, a number of scientists went public criticizing the mis-labeled \”Nobel\” Memorial Prize in Economics as an embarrassment which diminishes the value of all other Nobel Prizes. In this article Henderson quotes Peter Nobel, Alfred Nobel\’s descendent, as saying \’\’Two thirds of these prizes in economics have gone to US economists, particularly of the Chicago School, to people speculating in stock markets and options. These have nothing to do with Alfred Nobel\’s goal of improving the human condition and our survival. Indeed they are the exact opposite.\’\’ In awarding the economics prize, the Swedish Central Bank, in its continuing and subtle campaign to legitimate economic as a \’\’science\’\’, still hopes to portray the field as politically neutral. It is precisely these claims that economics shares science\’s \’\’value-free\’\’ objectivity and mathematical precision that have given economists their mystique and predominant role in public policy-making worldwide.

The widely-touted, so-called ”Nobel Memorial Prize in Economics” is not a proper Nobel Prize at all. For many years, I and others have sought to correct this widespread error by reminding people of its actual name: The Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel. The Bank set up this $1 million prize in 1969 in order to legitimize the economics profession as a science.

Since then, economists with their claims of knowing how to manage national economies, have wrought untold damage, from the ”shock treatment” they advocated for Russia to their ”Washington Consensus” formulas for economic growth (free trade, privatization, floating currencies, opening to global capital flows, etc), which contributed to financial instability and excessive debts.

In a recent interview with me, Peter Nobel, Alfred Nobel’s descendent, emphasized that ”there is no mention in the letters of Alfred Nobel that he would appreciate a prize for economics. The Bank of Sweden, like a cuckoo, has placed its egg in another very decent bird’s nest. What the Bank did was akin to trademark infringement – unacceptably robbing the real Nobel Prizes.” Nobel added, ”Two thirds of these prizes in economics have gone to US economists, particularly of the Chicago School, to people speculating in stock markets and options. These have nothing to do with Alfred Nobel’s goal of improving the human condition and our survival. Indeed they are the exact opposite.”

As this year’s Nobel Prizes were awarded, a number of scientists went public criticizing the mis-labeled ”Nobel” Memorial Prize in Economics as an embarrassment which diminishes the value of all other Nobel Prizes. In an Op-Ed in Sweden’s main newspaper, Dagens Nyheter, December 10, 2004, mathematicians, Mans Lonnroth and Peter Jagers, both members of the Swedish Academy of Sciences, proposed that the prize in economics be either broadened in scope or abolished. They reiterated similar criticisms of the economics prize by other mathematicians and physicists, because it is often given to economists who mis-use mathematics to claim that they have optimal ways of organizing societies. Lonnroth and Jagers cite this year’s economics prize, which was awarded to Finn E. Kydland and Edward C. Prescott as typical of this mis-use of mathematics.

Prescott and Kydland’s work in a 1977 paper describes a mathematical model which they purport can be used for guiding whole economies (and therefore, societies). The implication is that such political guidance is best left to economists rather than elected politicians. The statement of Sweden’s Royal Academy of Science, which selected Kydland and Prescott, argues that, ”Already, in their 1977 article, the Laureates work has had a far-reaching impact on reforms carried out in many places (such as New Zealand, Sweden, Great Britain, and the Euro area) aimed at legislated delegation of monetary policy decisions to independent central bankers.”

This is exactly what many democratically-elected legislators oppose. In awarding the economics prize, the Swedish Central Bank, in its continuing and subtle campaign to legitimate economic as a ”science”, still hopes to portray the field as politically neutral. It is precisely these claims that economics shares science’s ”value-free” objectivity and mathematical precision that have given economists their mystique and predominant role in public policy-making worldwide.

In my Politics of the Solar Age, published in Swedish in 1982 as False Priests, I showed how the theories of economists were largely unprovable hypotheses — quite different from those in other hard sciences, which could be empirically verified or refuted. For example, the equations which guide spaceships to the moon or in constructing a bridge must be correct or the bridge will collapse and the spaceship self-destruct. On the other hand, economists’ so-called principles are mere concepts, which often conceal political or social ideologies behind smokescreens of fancy mathematics.

Austrian physicist, systems theorist and best-selling author, Fritjof Capra told me that ”The dimension of meaning, purpose, values and conflicts is critical to social reality. Any model of social organization that does not include this critical dimension is inadequate. Unfortunately, this is true for most theoretical models in economics today.”

Psychologist, David Loye, author of Darwin’s Lost Theory of Love goes further and shows how Charles Darwin’s great work was co-opted in Victorian Britain to emphasize ”the survival of the fittest” and justify class divisions and competition, which Darwin mentioned only briefly. This model of human nature was adopted by economists as their ”rational economic man” who maximized his self-interest in competition with all others — a concept still taught in economics. Darwin focused instead on the evolution of altruism, cooperation, bonding, sharing and trust as one of the bases of human success (for more, visit www.thedarwinproject.com)

It seems that a major scientific scandal is brewing, with historians of science joining the fray, including Robert Nadeau, author of The Non-Local Universe, and its devastating dismissal of economics as marked by assumptions that have little basis in reality. Stay tuned! (END/COPYRIGHT IPS)

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