Unlearning 'economics'

Posted on February 21, 2015 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

Economics has been described as a ‘science’. A ‘science’ is a body of knowledge and methods which uses evidence and measurement linked to the exercise of testing, repeating and predicting. Most first-year students of ‘economics’ will be taught that it is a ‘positive’ science in the sense that it establishes ‘what is’ rather than ‘what ought to be’ (the latter being being dealt with by ‘normative’ disciplines and approaches). Nowadays, many economists like to think of themselves as neutral, above identity or social class interest and purveyors of ‘robust’ analysis, commentary and values-free policy recommendations based on detached ideas of ‘efficiency’ and ‘effectiveness’. Yawn.

Recently, a group called ‘Students of Trinity for Economic Pluralism’ was launched in Trinity College Dublin.  This appears as an interesting and novel development. It is not without parallel in other parts of the world. As the students behind this initiative observe:

People study economics here and go on to make decisions and implement policies that have profound impacts on the lives of literally millions of people.

Lest it may have escaped our notice – it is often the case that professional economist advice and commentary has profound impacts on the lives of literally millions of people. Economists contending over the correct measure of ‘structural government deficit’, for example, might suggest to Governments that they have more (or less) fiscal leeway to spend on health, income protection or social investment. Bound, as we are, by fiscal rules written into law and a detached European monetary policy that has one goal, only, the estimations, projections and retrospective analysis of past trends matters. Moreover lest is may have escaped our notice – economists offering such advice and commentary may be impacted in different ways to those less economically fortunate (but generalisations should not be applied here).

It wasn’t always like this. Adam Smith, the 18th century Scottish economist much loved by latter-day economic liberal theorists, wrote a book called The Theory of Moral Sentiments (1759).  He is more famous for having written The Wealth of Nations (1776). His academic training was in ‘social philosophy’ – hardly a popular undergraduate training for modern-day students of economics.

As recently as the 1970s University College Dublin had a department of Political Economy. It was renamed Department of Economics afterwards. In more recent times, the department of economics in Queen’s University Belfast was renamed the Queen’s University Management School. The ‘E’ in NERI (Nevin Economic Research Institute) stands for economic.

Somehow ‘economists believe or conclude ….’ carries a great ring than ‘sociologists believe or conclude…’. Ministries of Finance/Treasury across the world employ ‘economists’ as do many civil society organisations, corporations and some trade unions, for example. The Public Accounts Committees in various countries would be alarmed if Ministries of Finance were to start employing social philosophers. Think of the impact of Dr Regina Alexander, Chief Philosopher at the Treasury in such and such a country. What use would a knowledge of Greek philosophy be if you have hours to decide on whether or not to guarantee all bank liabilities before the markets open in the morning? Or, you had to advise your Minister on what austerity measures would be required by Monday morning. What use would Greek philosophy be in such circumstances, it might be asked (the hypothetical example is, of course, happening today Monday 23rd February 2015). Then again, a capacity in philosophy (literally the love of wisdom…) might be no worse than a detailed technical capacity in risk management analysis.

What is so special about ‘economics’? And is ‘learning economics’ what it is meant to be?

‘Economics’ as a body of  knowledge and as a way of thinking about human behaviour and associated institutions and markets has a key place in academia as well as in the media, politics and civil society. Its focus is on (i) individual actors, (ii) scarcity, (iii) choice and (iv) rationality (optimising within a resource constraint). To a much lesser extent does it pay attention to (i) communities, (ii) values, (iii) relationships and (iv) power. These are said to belong elsewhere in the academy or policy sphere.

Typically, economics focuses on human behaviour at two levels: (i) individuals or firms (micro-economic level) and (ii) regional, national or global economies (macro-economic). Economic actors or agents are said to be ‘utility’ maximising buyers or sellers subject to resource constraints. Institutions and markets set rules for behaviour and prices clear supply and demand (going down like crude oil when the supply of shale gas in the US expands for example as happened in the last year). When pressed on the matter, most economists will reveal that they regard markets as pure and efficient and that governments should not get involved except to regulate or protect competition or to supply directly some good or service that private initiative, alone, cannot provide. They tend, also, to look askance at trade unions, business groups or ‘inside traders’ as potential distorters of competition and the efficient workings of markets.  Standard economic fare has

  • a few ‘assumptions’ (those that are stated at least)
  • some abstract theorising
  • lots of data
  • many mathematical equations
  • a few tentative conclusions
  • and very few policy recommendations (and where these arise they tend to be detached from the preceding analysis on closer examination).

Missing from the standard fare are notions of cultural identity, gender, social class, state power and ethics. This is not always the case and academic economics has provided many notable exceptions along the way. But, you will be challenged to find reference to ‘class’ or ‘capitalism’ in most under-graduate and post-graduate economics courses these days. In former times, ‘left-leaning’ economists (there was always a few and usually one per economics department) provided a type of mild counter-cultural tendency. They were tolerated with a mixture of kind benevolence, humour and marginalisation.

By way of response to these realities, many pay homage to ‘inter-disciplinarity’ where economists, sociologists, psychologists, political scientists mix and talk and share work together. But, this tends to be more like an annual ecumenical prayer service given the pressures that lecturers and researchers are under these days not to mention the silo frameworks in which different schools and disciplines operate.

Inter-disciplinarity would help to go a long way to make ‘economics’ more interesting and more relevant. A distinguishing feature of the economics profession before and after the Crash of 2008 was a failure to ‘join up the dots’ and grasp the inter-conectedness between longterm secular trends in the structure and nature of production, globalisation, financialisation, the rise of neo-liberalism and the inherent unstable and highly explosive capacity for sudden stops and chaos. As the horror movie unfolded in 2008 the modellers, the commentators and the professional economists were caught off guard. Including this writer we had no sense of the scale of the disaster that was unfolding. Opinions expressed in 2008 by one economist in particular to the effect that total bad debts might come to €25 billion in the Irish banks were dismissed as ridiculous. As it turned out the bill was over €60 billion (although some of this may flow back to citizens who paid the bill but not without huge trauma, dislocation and harm in the meantime).

Failure to ‘join up the dots’ and to relate different spheres and emerging trends was part of the malaise in the economics profession. Never noted for a surfeit of humility the lessons of the Crash, there was an absence of frank acknowledgement of the damaging role played by some economists in cheering on the bubble economy and in defending the dismantling of regulatory infrastructure and the growth in inequality during the rise neo-liberalism in 1980-2007.

A new way of understanding society and economies is needed. ‘Economics’ also needs to be opened up to a wide audience. It should no longer acceptable for economists to hide behind complex models and terminology to avoid explaining what is at the core of economic activity. Texts such as ‘Economics: The user’s guide’ by Ha-Joon Chang, for example, provides an excellent overview of the area in a way that is very accessible to a wide audience (it has over 500 pages but is very readable and compact in Pelican book format).

Then there is the recently established and excellent online site

Many trade unions, in Ireland, provide educational courses including courses in ‘Political Economy’ and ‘Economics’. For example, Trademark offers political economy courses to unions in Northern Ireland and in the Republic. Recently, the Irish Congress of Trade Unions has commenced courses in a new Union College initiative. Courses in economics will be an important part of its work as it develops in the coming years. Other unions like SIPTU have had an extensive range of courses. The People’s College have also provided a valuable service over many decades.

For a short, quick, readable ‘cocktail of economics, history, sociology and psychology’ have a read of ‘Growing, fast and slow’  - a speech given last week by Andrew Haldane, chief economist at the Bank of England. He uses data estimates to paint a picture and tell a story about human development over many centuries and raises profound questions about where we might go from here. However, beware, he argues that ‘fast thought could make for slow growth’. He also opines that

‘The rising incidence of attention deficit disorders, and the rising prominence of Twitter, may be further evidence of shortening attention spans’.

Many of us will stand accused on the latter issue!

What conclusions can be drawn in relation to the future learning and teaching of economics – whether formally in institutions of education or informally in a community setting or online? The design of a course is crucial. It needs to introduce people to the basic concepts, ideas and ‘tools’ of analysis. It needs to give people a sense of the area and point to specific areas for further learning or exploration. It also needs to link to people’s needs whether as civil society activists or research analysts or just individual citizens who wish to understand and know more about this vast and complex area.  Initiatives to widen and deepen knowledge in this area especially through inter-disciplinary approaches and practical use of the knowledge in critiquing society are required.

At the inaugural Dónal Nevin Lecture given by President Michael D. Higgins in May 2013 the President stated that

All of this makes it necessary to be able to change the way we teach economics and practice economics in our institutes and academies and in turn initiate discussion on policy with policy shapers, policy makers and policy takers. I am concerned that intellectually innovative work comes in the new circumstances from the academies and institutes of countries such as Ireland.

I am far from being as pessimistic as Hyman Minsky was when he put in his Paper 82 at the mid-point of the 90’s:

“The task before today’s economists and public officials is to meet the challenges of the present without forgetting the valuable lessons of the past… Unfortunately, economists are generally ill-equipped to provide much practical guidance. One peculiarity of the preparation of economists at the end of the Twentieth Century is that modern graduate curriculum does not give sufficient opportunity to students to study either the history of economics or economic history.
In fact the curriculum is extra-ordinarily anti-intellectual: graduate programs in economics aim to train rather than educate.” Minsky, Hyman, P. “Forward: Political Economy for the Next Century” (1995) Hyman P Minsky Archive. Paper 82. 

Up to now economists have interpreted the world - the point is to change it!

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