A provocative speech implores mainstream economists to recognize the need for a new approach to understanding rising economic inequality.
Economists need to stop pretending what they do rates as a neutral science and start recognizing the moral imperative for economic justice. The massive racial inequalities that exist in the United States, they also need to recognize, reflect systemic problems that demand systemic solutions, not individual choices.
Darrick Hamilton delivered this message to the National Economic Association in a recent address to the group. Hamilton, an economics professor at the New School and the Association’s current president, wants his fellow economists to understand they can be both academically rigorous and rooted in the moral crisis of our time.
Hamilton’s must-read speech offers insight into how mainstream economists might begin to shift their focus toward the trailblazing “stratification economics” framework that Hamilton and Sandy Darity at Duke University, among others, have helped develop.
Undergraduate economics classes, at least the ones I sat in, do not teach morals. Instead, economists convey an aura of science that positions people as always rigorously rational actors and markets, to quote Hamilton, as “somehow natural, transparent, ‘efficient,’ and inevitable.”
This orthodox approach to economics also presumes markets to be “self-regulating,” meaning that the smart, hard workers get the rewards they deserve while the lazy, less astute get what they deserve, too. In other words, markets operate fairly.
Hamilton lays out in no uncertain detail that this framework has no roots in reality. And this absence of a reality base doesn’t just make for an academic problem. Orthodox economists play an outsized role in maintaining existing inequalities.
For decades, mainstream economists and the politicos who echo them have claimed that individual choices made by black and brown families drive the racial wealth divide. Blacks need to start taking personal responsibility and get a good education, the argument goes, and they’ll get ahead.
This paternalistic approach ignores the unfair inherited advantages and deeply unfair economic conditions that constantly confront black and other subaltern communities.
“Black families whose head graduated from college,” Hamilton points out “have only about two thirds of the wealth of white families whose head dropped out of high school!” [pullquote]Education cannot serve as a panacea for rising inequality.[/pullquote]
Education, Hamilton makes clear, cannot serve as a panacea for rising inequality. Neither can other often cited approaches to reforming individual choices, like financial literacy programs.
“Financial behavior and financial literacy,” Hamilton notes, “are practically useless for households with little to no finances to manage in the first place.”
We need to look at the system that creates poverty, he points out, not the individual choices of the people who are living in poverty.
The key systemic problem Hamilton addresses? That’s the creation of a surplus population. The central policy question elites face: What to do with this group?
On the one hand, the surplus population does not “contribute immediate profit or production to the industrialized economy.” On the other hand, the surplus population — disproportionally black and brown — plays a “useful” role in a capitalist system, keeping wages down and workers disciplined.
Our current morally bankrupt approach to this surplus population involves policy approaches that include mass incarceration and outcomes that range from extreme poverty to social isolation among. A more just policy approach, Hamilton suggests, would start with reparations, baby bonds, and a federal job guarantee.
Hamilton implores his fellow economists to recognize the moral imperative of economic justice that civil rights heroes throughout American history have rightfully claimed. One hopes they will listen.
To read the full speech, see the Institute for New Economic Thinking.
Josh Hoxie directs the Project on Taxation and Opportunity at the Institute for Policy Studies.