In his review of the book, Varoufakis launches into a devastating attack on Postmodernism as any sort of viable epistemology or method for economic science.
His critique is taken from an earlier article (Varoufakis 2002c), and an online version of this with its comments on Postmodernism can be read here. I quote below from the online article, as well as referring to the full review.
Now admittedly I do not know whether Mr Varoufakis continues to hold the views he expressed in his 2002 paper, but they are still excellent criticisms, and I have not seen anything that would lead me to think he has repudiated them.
First, Varoufakis notes how Postmodernism shuns any group of people who believe that they have found objective truths, since such experts are deemed to be “privileging” their own “metanarrative” at the expense of other people’s narratives (Varoufakis 2002a: 389).
Although Varoufakis sees some merit in many of the papers in Postmodernism, Economics and Knowledge (2001), including what looks like a very interesting one by Philip Mirowski (2002), nevertheless his verdict on Postmodernism is damning.
Varoufakis notes that strong and effective advocates of neoclassical economics have existed for years and long before Postmodernism (Varoufakis 2002: 392). The Postmodern method demands an utter rejection of the view that modern capitalist economies can be regarded as coherent systems, since this would be a “metanarrative” (Varoufakis 2002a: 392). The question arises (though Varoufakis himself does not pose it): how is that compatible with Post Keynesian economics?
Worse, according to Varoufakis, the Postmodernist method has “no future” (Varoufakis 2002a: 393).
Why? Varoufakis argues as follows:
“… despite its considerable oeuvre, postmodern criticisms of economics are doomed to shrivel and be absorbed by mainstream economics; the predator turning into unsuspecting prey. I risk this prediction for two reasons.Ouch! Varoufakis is saying that Postmodernist criticisms of neoclassical theory, by the intellectual vacuity of Postmodernism, will subtly blend into neoclassical economics.
First, postmodernists allow economics to parade as equally scientific as the natural sciences (albeit on the grounds that no discipline is truly scientific). They are right of course to think that all theory resembles religion, since it also seeks to give meaning to the practices and expectations of whole communities. However some theories are capable of transcending religion and approaching objectivity better than others. Nature’s habit of working independently of our beliefs about it means that the natural scientist can devise experiments which have the power disinterestedly to discard falsity and thus forge knowledge and progress. Society, on the other hand, is corrupted to the very marrow of its bones by our collective beliefs about it, and can therefore provide no objective test of social theory (the latter being part of the very web of beliefs that society is made of). Thus social theory, unlike thermodynamics, is condemned to remain untestable, and stuck in the realm of opinion. Economics valiantly attempts to extricate itself from this fate with a touching commitment to mathematics but, sadly, it only ends up as a religion with equations.
Postmodernity errs in thinking of this as the inevitable failure of all Modernist enterprises. It lambastes economists’ churlish reliance on an Outer Wall of Algebra and an Inner Wall of Statistics but overlooks their success at never even coming close to the nature and the dynamics of contemporary capitalism, thus shielding the latter from rational criticism. But such is the fate of all idealisms which give language an existence independent of the material conditions of social life and reproduction. If only postmodernist critics understood theology and mathematics a little better! Perhaps they would have recognised in economics the greatest proof that Modernity is saturated with its negation.
Which brings me to the second part of the argument: Postmodernity not only lets neoclassical economics off the hook but, more worryingly, reinforces it copiously before dissolving into it. Consider what the postmodern rejection of metanarratives means at the individual level: It means the loss of any capacity to scrutinise one's private urges rationally on the basis of some collectively constructed notion (or metanarrative) of the Good. Stripped of those capacities, the individual fragments into a community of selves, a bundle of ordinal preferences, and ends up with no one self whose preferences those are. In this Empire of Ordinal Preference the only possible data that social theory can go to work with are the differences in individual whims and freely chosen identities. These data are then, courtesy of their ordinal properties, impossible to compare across persons (for this would require a metanarrative) or procure a view of capitalism as a system. Thus in a fully-fledged postmodern schema, social relations are confined to interplay, voluntarism, tolerance and exchange; society is the playground where the latter unfold; and discussions of the General Will, exploitation and developmental freedom make no sense. Does this all sound familiar?
If it does the reason is that neoclassical economics went down that alley decades ago. ….
For Oscar Wilde the supreme vice was shallowness. For Postmodernity this is the New Jerusalem. Its playfulness allowed it to thrive in the friendlier waters of literary and cultural studies at a time when ‘margins’ were becoming central and classical stuffiness was going out of fashion. But now postmodernists have entered shark-infested territory. Neoclassical economics, another purveyor of shallowness, threatens to bend them to its will, gain strength from them and subsequently reinforce hierarchies more oppressive and totalising than those the postmodernists set out initially to dismantle.”
Varoufakis, Yanis. 2002. “Postmodernism: Conspiring with the Orthodoxy,” 10 June
Varoufakis also commits himself to a reality that has objectivity, and presumably objective truths, to which science can approach in its testable and falsifiable hypotheses and theories.
And, says Varoufakis, current popular and academic movements to reform economics should reject Postmodernism:
“In recent years many dissident voices had to adapt themselves to postmodern-speak in an attempt to be 'included' on the postmodern bandwagon. The PAE [Post-Autistic Economics] movement must release such voices from this obligation. Social criticism of economics must reclaim an awareness that to reject the scientific status of economics is not to reject science in general or to espouse postmodernism.Bravo! We can add to this John King’s (2002: 195–196) observations that Postmodernist epistemology is incompatible with core Post Keynesian principles, such as objective reality and objective truth, and even something as basic as Nicholas Kaldor’s “stylised facts” about modern capitalist economies.
Indeed irony and ambiguity were utilised, long before Postmodernity, by thinkers eager to come to what a more confident past once knew as the truth. To re-establish irony, ambiguity and indeterminateness in the discourse of economists would be a triumph of the spirit. But it would not be a postmodern turn. For the latter has no monopoly on an appreciation of the radical indeterminacy of social processes (as Hegel would be all too eager to remind us) or the importance of not taking our selves, and our theories, too seriously. On the contrary, Postmodernity undermines itself by offering Modernity’s most awful purveyor another means of extending its dominance. ….
The postmodern turn will be chosen by pseudo-dissidents whose prime interests lie in acquiring a chic image; one that the self-effacing postmodern criticism is good at imparting. The less fashionable option of working towards historically grounded knowledge will appeal to the truly ‘unreasonable’ dissidents; those driven by an unbending commitment to a rational transformation of society.”
Varoufakis, Yanis. 2002. “Postmodernism: Conspiring with the Orthodoxy,” 10 June
Cullenberg, Stephen, Amariglio, Jack and David Ruccio (eds.). 2001. Postmodernism, Economics and Knowledge. Routledge, London and New York.
King, J. E. 2002. A History of Post Keynesian Economics since 1936. Edward Elgar Publishing, Cheltenham, UK and Northampton, MA.
Mirowski, Philip. 2001. “Refusing the Gift,” in Stephen Cullenberg, Jack Amariglio, and David Ruccio (eds.). Postmodernism, Economics and Knowledge. Routledge, London and New York. 431–458.
Varoufakis, Yanis. 2002a. “Deconstructing Homo Economicus? Reflections on Postmodernity’s Encounter with Neoclassical Economics” (review of Postmodernism, Economics and Knowledge), Journal of Economic Methodology 9.3: 389–396.
Varoufakis, Yanis. 2002b. “Postmodernism: Conspiring with the Orthodoxy,” 10 June
Varoufakis, Yanis. 2002c. “Why Critics of Economics can Ill-afford the ‘Postmodern Turn,’” Post-Autistic Economics Review 13 (May 2): article 1.