We Rely on Economics Too Much

I think I am with Tony Judt on this one. I am reading the new collection of his essays written between 1995 and his death in 2010, and have had my memory jolted: he gave us many very considered critiques of modern economics, although they were usually dressed within the context of a book review. The point I am agreeing with is this statement he gives us in his 2009 speech called “What Is Living and What Is Dead in Social Democracy?”:

“But how did we, in our own time, come to think in exclusively economic terms? The fascination with an etiolated economic vocabulary did not come out of nowhere.”

Etiolated? Lovely, but I disagree. Our economic vocabulary is both robust and way too vigorous to be etiolated. On the contrary, economics has become a weed infesting society in every corner, and our use of it is far too frequent to consider it etiolated at all. Indeed our reliance on economic vocabulary belies the gaping holes in the theories that those words depend upon for their relevance.

But the larger point: that we overuse economics, that we see our world in economic terms rather than in other, perhaps more relevant, terms, and that we have come to depend too much on economic analysis to justify our actions is one I wholeheartedly endorse.

How on earth did we get this way? After all economics is a deeply divided and fractious discipline. It offers as many opinions as it has disciples. It sits upon a highly contextual and ideologically dependent base. Its pseudo science is exactly that: pseudo. It is a science only in the sense that it has a veneer of formality to paper over its ideological intent and content.

Don’t get me wrong: the logical structure that sits atop its axiomatic base is a wonderful intellectual achievement. But that axiomatic base looks mighty selective. Indeed it looks so selective that we could be forgiven for mistaking it for a political agenda. It fairly screams at you: “governments are bad things”, after which the logical structure which yields that exact comes as absolutely no surprise.

So I repeat: how on earth did this agenda insinuate itself so successfully into our everyday lives? How on earth did it become that we scarcely act without asking what our actions will contribute to growth, productivity, employment, profit, or trade?

Whatever happened to plain old right and wrong?

I am not consciously paraphrasing Judt when I think like this. These are questions we need to ask. His eloquence in asking them is sorely missed as we watch the breathless way in which the media evaluates our elections, not on their potential social outcomes, not on whether we will all lead better lives, but on what the market will think.

To which we all know the answer: the market will go up. Or it will go down, probably both within a short time. So what? That’s what markets do. One day they tell us housing is worth millions. The next day they tell us it is a worthless pile of junk. Apparently economics has no way of distinguishing value other than to say: “it is what it is”. This is hardly a premiss for bold action. It is more a truism to be ignored. It has no content.

That’s the problem hidden behind all that fancy language and math: the more you poke into economic thought the more likely it is to evaporate or to reveal itself as superbly dressed up but intuitively self-evident truths. Ask an economist what a market actually is. Ask for a description. What are the artifacts that denote we are looking at a market? People? Buildings? Structures? No. We are looking at prices.

But aren’t prices an outcome of market activity? Then the outcome defines its own generator? Isn’t this circular?

Then again: it is what it is.

If you keep pushing and prodding long enough what you end up with is the general observation that humans tend to want less of things when the cost rises, and more of those things when the cost falls. Beyond that lies a whole lot of clever window dressing and conjecture.

Yet here we are paying homage to the economic analytical process as if it was a great truth and a solid foundation for a harmonious society.

It isn’t. Indeed it doesn’t even try to be. It seeks to be amoral. It prides itself on its “positivity”. Economists are prone to shrug when they condemn workers to penury: hey its just where the analysis took me! It’s what the market wants! Tough! Get a job no matter what the pay. The key is to get any old job. So stop whining. It’s what the market wants!

And we all know you can’t defy the market.

The problem, I think, is that economics gives us that veneer. It provides us with an easy escape from having to weigh and opine in moral or ethical terms. It appears clinical. It is what it is. We can’t fight the great hidden hand. We cannot avoid the opinion of the market. We therefore must calculate. We must come up with numbers. And we must obey the direction in which those numbers suggest we chart our course. Right and wrong are too difficult to conjure up. After all they involve subjective opinion. Obeying the market avoids the argument that comes along with trying to resolve subjective points of view. So listen, one and all, hear the voice of the market. It is the simple truth we have all been waiting for.

So, I ask again: what, or whom, is this market?

Judt reminds us that Keynes once said:

“ A study of the history of opinion is a necessary preliminary to the emancipation of the mind”

Perhaps we all need to review a history of economics. After that escaping its grip ought to be easy: it doesn’t have much to say about the real world, whereas we do. We live there.