The art of economics

Mainstream economic theory in need of reevaluation

The study of economics is having an identity crisis.

The relatively recent phenomenon of morphing economics from a social study into a hard science has caused economists to lose sight of what economics is.

True, there is a place for graphs, algorithms and formulas, yet these were meant only to be tools to better understand human interactions that make up economics.

Economics is about people, it’s about values and it’s about morality. It’s in high fashion to defend economics as a neutral analysis, but fundamentally it is about choices and priorities, which are inevitably value laden.

The global financial crisis has highlighted some of the shortcomings of modern economic thought because of its inability to either explain or have predicted the crisis. What is required therefore is a critical reevaluation of the underpinnings of economic thought.

We often hear politicians defend socially distasteful policies as being “simply good economics.”

What does this mean? What constitutes good economics? Presumably it means growth, yet is this truly what economics is about?

It seems to me that economics does not necessarily entail getting more, but rather has taken on this notion through discourse.

At a rudimentary level, economics is about achieving a goal in the most efficient way possible. Just as the goal with communism is achieving social equality, the goal with capitalism, in its present form, is to achieve growth.

Thus, when one says it is “simply good economics,” they mean it is a good way to achieve growth.

The dedication to growth has unquestionably been the goal of modern economic policy, yet where did this goal come from? At what point was it decided that the generation of surplus value and the maximization of capital was to be the goal of economics?

The answer is not elusive; this focus on materialism and growth originates with the father of capitalism, Adam Smith.

Smith, notoriously noted for his identification of the “invisible hand,” which leads to efficient market outcomes, was an enlightenment philosopher. His philosophical views were firmly rooted in the enlightenment tradition which viewed individuals as primarily self-interested human beings.

As he wrote in The Wealth Of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

With this view it becomes only natural that economics should rely on people’s selfish interest to generate wealth and why it is often devoid of making explicit value judgments.

When the basic philosophical assumptions of modern economic thought are brought to light, it becomes evident that economics is not solely a science. It is therefore initially puzzling as to why economics strives so avidly to brand itself as a science.

I would venture that the reasoning behind this is to gain widespread acceptance, and because of the strong conviction of the objective truth in science our society holds.

Just as justifications for social organizations pre-enlightenment were often based on religious tenants, science and rationality have come to be the “religion” of the modern day.

It is a widely held belief in western society that the social arts are subjective, and that science is objective. Science is perceived to be grounded in reason, and thus theories seeking validity will try to appeal to the scientific soundness of their views.

It is therefore natural that for classical economics to gain widespread support it must adopt a scientific mindset.

Yet underlying these formulas there does indeed lie a philosophical view of human nature, which accounts for its conclusions and methodology. It is also the reason that economics can never be a pure science, for unlike biology or engineering, there is a human element in the equation.

Any economic theory will therefore largely be shaped by the assumptions made about human nature.

Currently, mainstream economics operates either consciously or unconsciously with the belief that human beings are selfish. What would an economic theory look like if it were re-conceptualized to account for a fuller self, if the assumptions about human nature were expanded to include the empathetic and caring aspects of people?

Or if the focus were on bettering society as a whole, rather than focusing on the individual?

As much as on the practical level economic policies are in need of change and reconsideration, so too the way economics is put on a pedestal of rational science is in need of serious alteration.

Luke Hildebrand is a third-year Politics and Economics student at the University of Winnipeg.

Published in Volume 67, Number 1 of The Uniter (September 5, 2012)

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