Obviously I am not the first Sri Lankan to start down the path towards a career in Medicine taking the Biology stream in A Levels and then take a 180 degree turn. I was one of those staunchly science oriented types. Other than my affinity for history and politics I rarely ventured into other topic areas. That was of course until Model UN landed me in the 2nd Committee of the General Assembly and I had to defend Russian economic policies. Never once did I think that would drive me to consider a Masters in Economics 4 years down the line. But here I am today studying Introduction to Economics as one of the optional subjects in my International Relations degree. I saw it fit to present my current notions of economics before it manages to convert me completely.
Many Economists of the past are guilty of the practice of presenting it as a definite science. The fact is it’s not really such a definite science. It could have been such if ‘the economy’ had retained its initial Greek meaning of household management. Yet today it stands as the study of this anthropogenic creation with a life of its own that govern many aspects of daily human life and the very decisions of mighty nation-states. Economics has been presented as the science of studying that human creation. Maybe it was because in the 19th century, economists wanted to be respected as much as the scientists of natural science. It has created the greatest crises of economics and might have even made the overall economics field oblivious to the coming of the 2008 Recession.
Sciences have various theories. Economics also has many theories. But there is a fundamental difference. Theories of science that are accepted to be equal to universal laws have been verified over and over again through scientific experimentation and some have even been overturned as new scientific evidence emerge. Pluto’s status as a planet is a good example. On the other hand it is almost impossible to do this with Economics.
There are a number of major schools of economic thought; Neo-classical, Keynesian, Schumpetarian, Developmental, Institutional, Austrian, Behavioural etc. Can the Neo-classical school prove that its dominant assumption that individuals take rational decisions to maximise their utility ? Truth is it’s a very good assumption to draw nice diagrams to instill a basic understanding of how a market/economy operates to an amateur. Can the Institutional school evidence the impact that institutions have on the decisions of individuals in the economy? It is common sense that the government can influence what we consume through its tax policies. An abstract limited experiment can prove that impact, but it is not going to be as definite as one of Rutherford’s experiments on atomic structure.
The Behavioural school attempts to link various factors in society which affect individual decision making. But again proving those links is near impossible. Patriotism might induce us to consume a domestically produced good as opposed to a foreign good. The decision is based on an emotion that might change overtime. Even neuro-science is not developed sufficiently to explain the impact of emotions on decision making. One can only make a common sense assumption on the matter. Latest MRI scanning techniques can only reveal limited conclusions. In that sense maybe economics will benefit as science develops. Maybe Economics and the Sciences need to collaborate in that sense. It will definitely make economic sense to certain actors.
Ha Joon Chang presents Adam Smith’s Wealth of Nations as being political economics. The text keeps in line with the then social and political realities; from the pin industry to the colonial expansionism. Yet that has changed dramatically since then. Economics was made very much apolitical and sometimes asocial by the dominating Neo-classical school. It was probably to distance the field from social sciences and to bring it closer to natural sciences. But doing so has only made economics blind to many factors that are influencing the economy and its actors.
The era of boom between the 2000 dot.com bubble and the 2008 crash was as political as it might have been ‘natural’. The global economic boom was pretty much dependent on the deregulation carried out by the Bush administration in its attempt to keep domestic economic concerns as the last thing on its list of problems to handle as it invaded Afghanistan and Iraq. A post dot.com crisis regulatory framework would have curtailed the growth that was founded on the financial sector’s new derivatives market. A slow economy would have meant opposition to the $600 billion defense budgets that were necessary for the global counter terror crusade.
Continued growth is seen as a facet of a ‘healthy’ economy. It does not matter if that growth comes at the expense of environmental degradation. The economic value of that degradation if added into the calculation might indicate a massive recession that has been running for some decades. Climate change is the domino effect of that addiction to growth. It is already slowing down economic growth globally. Addictions are usually harmful and the economy has being sickened because of the addictions economics has to growth.
Many prominent economists like Joseph Stiglitz have come out speaking against the prevailing economic presumptions. They have spoken against the addiction to growth and even warned of a crash prior to 2008. But the mainstream economic orthodoxy had convinced people it was all natural growth. Which rational human being would question the science behind growing pay checks ?
The issue has been the ignoring of the bigger picture. Economic assumptions of a dominant school of thought do not form a science. Many pure economists might never see my point of view. After all they have been competing for equality with the science students since high school. In stark contrast I was one of those science students who used to consider economics as a second rate field of study, who is currently studying politics, attended the UN General Assembly as a Youth Delegate and now looks to a future career in economics. For me the bigger picture consists of science, politics, economics and a bit of diplomacy.
So I tell the economic orthodoxy that I am not going to let it convert me completely. However, if I ever do get converted, just stick this article in my face.