Matter of Opinion Economics

Those looking for economics to cure itself will be waiting a long time. We need a generation to die out first. Maybe two. Maybe it will never happen. Then again …

There is more than one way to understand our current malaise. The problem is that economics provides several. There’s an economist to defend pretty much any economic policy. Some say up. Some say down. Some say both up and down are merely efforts to subjugate the working class. Some say sideways is probably better when interest rates are too low. This, naturally depends on your view as to whether interest rates are too low. Some say there’s an “natural” interest rate. Others say there’s nothing natural at all in an interest rate. Some say that all economics discriminates against women and so needs to be re-written anyway. Then there’s those that see growth as the panacea. While others tell us growth is the problem.

Some say economics is positive. Others say no it’s not. Some argue for more math – it’s so logical and disciplined. Others say math just hides bias or sloppy thinking. Yet others say that the math economists use is rotten and an embarrassment to mathematicians everywhere.

There are leftist economists. There are rightist economists. There are orthodox and heterodox. There are, I am sure, both tall and short economists. There are some who think in evolutionary terms, and there are those who clearly have no idea what evolution is. There are those who believe in equilibrium, as if it were the holy grail. There are those who, having never seen one, think an equilibrium is a misleading mirage.

Some have utter faith in markets. Others suspect markets are, being human, irretrievably muddled. Some think government intervention is the cause of the malaise. Others believe that only government intervention can cure the malaise.

In summary:

There isn’t such a thing as economics. All those textbooks and academic papers are simply expressions of opinion. Articulate, numerate, and logically expressed opinion. Clever opinion.

And, yes, there are some grand thematic theories that lend a general flavor to those opinions.

For those keeping score there are really three great such flavors.

Classical; Marxist; and Keynesian. All the rest are usually just offshoots, nuanced variants, or modifications of these three.

The first arose in order to justify the unfettering of business from central authority, when that authority was autocratic or authoritarian. Its variants all advocate “freedom” – or property ownership, of workplace relations, of the individual etc – as the bedrock of prosperity for all of us. The irony of this line of thought is that it emerged in the early days of social transition from authoritarian governance towards democracy and so remains suspicious of government because it fails to recognize the legitimacy of the mass versus that of the individual. Most of its modern variants suffer from this fault even now. Austrians I am looking at you!

The second arose in reaction to the conditions that the first defended. Notably that unfettered freedom was an illusion. Some may be free, but others weren’t. Not, at least, in any humane definition of that concept. All the institutions built to defend those hallowed “freedoms” were, apparently, simply a disguise to prolong oppression. An oppression that, because of the inherent contradictions of early capitalism, would collapse anyway. Thus in contrast to the first, classical, flavor, this line of thinking fails totally to incorporate any meaningful individuality. It is obsessed with collectives. And it is based on a strangely teleological view of history: it posits outcomes as inevitable, rather than as optional.

The third arose in the midst of the very kind of crisis that Marx suggested was inevitable – he was right about so much darn him. Its context was a deep crisis within, and apparent failure of, the Classical view, along with a democratically informed rejection of the Marxist alternative. It sought to preserve the prosperity machine of the former, yet modify it by acknowledging the worth of occasional collective action. It could re-introduce government intervention as positive because governments were now often democratically determined. The choice was not between oppressive autocratic tinkering and a wild free for all, but between degrees of government activity. It was between bigger or smaller government, not none or all government.

Neither of the first two flavors fit well with modern democracy. They developed before it and assume a socio-political milieu more appropriate for the mid 1800’s than the technologically entwined global economy of the 21st century. They are extreme and tend to appeal to those searching for “pure” answers. They are impossible to implement in a world filled with human beings. They also ignore a great feature of reality: that none of us knows the future. The Classicals get around this by assuming the future replicates, at least in part, the past. The Marxists get around it by embedding us all within their theory of history, so the future is known and it’s all just a matter of navigating towards it.

These three great traditions are all well thought out, brilliantly explicated, and ready to infuse any opinion you might want to come up with.

I have no doubt there will be a fourth one day.

Why?

Because economics is contextual. It is socially contingent. And, because societies change, so too does economics, but, naturally and in order to add to our consternation, economists like to advocate policies that alter society, so there is feedback between economics and the society it seeks to explain. Society and its economy are entangled. It’s hard to tell where one ends and the other begins. Still, when a moment arrives that the three old flavors are not useful, or look quaintly out of touch with contemporary problems, someone, somewhere, will develop that fourth flavor.

And since the older flavors will no doubt linger on in some distant academic setting, all the new development will do is to add to the noisy argument and clash of opinion that passes for economics.

If you thought it’s confusing now, just wait. There will be more choice.

Whether its a better choice is, of course, a matter of opinion.