Vapor Where? Vaporware!
Yes. I know. I can be flippant at times. Economics is fun. So why not?
One of my favorite sayings over the years — I have repeated myself endlessly — is that economists do not study the economy. Not at all. They study economics. Or, more accurately, they study the assemblage of bits and pieces of method that aggregates into what they then call economics, or, more accurately what became “microeconomics”. They revel in the arcane corners of their logic, and absolutely love their mathematics.
One consequence of this is that economists have no subject matter to study. They have methodology. They have no subject. Which frees them to wander about the intellectual landscape and butt in on other people’s fields of research. Which has given economics a bad name, but which has provided employment for generations of economists.
And it’s not just me.
Someone once said:
“Economists have no subject matter. What has been developed is an approach divorced (or which can be divorced) from subject matter.”
That’s Ronald Coase. Who am I to argue?
I am pondering this today because I recently started reading Jonathan Levy’s excellent new book: “The Real Economy: History and Theory”. That’s where I found the Coase quote.
Levy is like many of us. He asks a simple question and then gets … nothing. The question, though, would appear to be profound: What is an economy?
Anyone asking this would naturally think the answer is best found in economics. They would be disappointed. There is no answer there. Only vaporware. That is to say the method that applies to …
Anything that can be quantified and scrunched through the machinery of economic logic.
Equally, this is why it is never wise to ask an economist what “the market” is. They have no clue. As Levy points out the most likely response will mimic the opening words of Greg mankind’s textbook where we find that there “is no mystery to what an economy is” because “an economy is just a group of people dealing with one another as they go about their lives.”
In which case, as Levy ponders: why call that group “an economy”, why not a “collective” or a “society” or a “polity” and so on.
The history behind the steady removal of subject matter from economics is the topic of Levy’s book. The high points are well known to you all: what began as a study of the origins of wealth became steadily reduced into the study of people. He cites Marshall as being a major contributor to this transition. The opening words of Marshall’s Principles of Economics tell the tale:
“Political economy or economics is a study of mankind in the ordinary business of life. .. it is on the one side a study of wealth; and on the other, and more important side, a part study of man.”
Marshall hedges somewhat when he says “a part study of man”. It is as if he wants to pull his punches a little and not tread too firmly on neighboring intellectual territory. The problem is that “the study of wealth” still posits a subject of enquiry. The “part study of man”, however, suggests something else: the development of a toolkit. It suggests the beginning of the journey economics took as it recentered itself on choice and behavior. It started to become ever more a poor man’s psychology and left behind its origins as a study of wealth.
Lionel Robbins was, perhaps, the most astute observer of this trend, and it was he who gave us the iconic definition of economics as “the science that studies human behavior as a relationship between ends and scarce means which have alternative uses.”
Anyway, Levy says all this far more eloquently than I can. What I would add, though, is the influence of both geopolitics — where economics was bent to serve an ideological purpose; and national, primarily American, power politics — where economics was bent even further to serve an ideological purpose. In both these contexts it was mightily useful that economics complete its journey away from being the study of wealth towards being simply a body of logic.
Because such a body of logic can easily be re-packaged as “laws of nature” and thus futile to oppose. It sanitizes economics from appearing simply as a justification of capitalism or a justification of inequality. It is concerned with neither. It is the logic of choice. Nothing more. It has no moral stand to take because it has no content.
How convenient.
To emphasize this point, and to borrow yet again from Levy, I find it astonishing that John Hicks iconic text “Value and Capital” refers to wealth just four times. Yet both words of its title “value” and “capital” scream out loud as deeply associated with it. That a book with such a title can avoid the subject of wealth so completely tells us all we need to know about what became of economics.
It became all method.
Its subject matter was vaporized.
And as vaporware it insinuates itself everywhere whilst being nowhere near in particular.
What’s the point of that?
