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Can economists be innocent?

“It’s completely ridiculous of you to think that’s a sensible question to ask.” This was how Paul Krugman, public intellectual and economist, answered a question posed by one of the organisers of the Rethinking Economics New York Conference last month. The offending question was: Do economists have any responsibility for our collective failure to act against climate change?

By declaring the question invalid Krugman defined the limits of the discussion, creating the handy illusion that economists are somehow off the hook: they don’t have to take any responsibility for the application or misapplication of their theories in real-world practice.

 

Theory and application: the great leap?

In his work, Krugman makes a triple distinction between economics, economists, and policy-makers. Economics is a pure, theoretical subject of study and, in Krugman’s reckoning, is able to explain the world post-crisis. Economists, on the other hand, are human beings; they are meant to be the interpreters of the economic gospel, but they are sometimes swayed by their political beliefs or self-interest to bend the truth of the book. Policy-makers, finally, are pretty rotten, and happy to use any combination of economics and economists to justify the policies that they want. Given our collective inability to listen to the truth, why should economists bear responsibility for policy-makers’ inaction?

Other disciplines take the very opposite view for granted: theorists are assumed to have responsibility for practice. In areas like medicine and law, theorists directly prescribe what to do and, more specifically, they tell us what to do to a large number of people. Since economics is the hegemonic theoretical framework for public policy, it should be added to this first group as well. One could go as far as to argue that, even when theorists don’t directly prescribe action (or when, like Marx and Foucault, they resolutely deny that they are saying anything prescriptive), their theories still influence action in indirect ways.

In a participative democracy, what politicians, policy-makers, and voters think determines what it is possible to do. In the social sciences, in history and the humanities, theorists tell us how to understand the problems that face us – and using that understanding, we can then start to think of the answer to the question: what do we do? So why should this not apply to economics?

 

The value of Prescription

Welfare economics is a directly prescriptive discipline; it tells you, as a government actor, what to do next. Economists who want to argue that economics is a value-free science will claim that economics only gives a hypothetical imperative: in other words, it says that “IF you want to maximise welfare, THEN you must act in this way.” But this is a flimsy defence: the hypothetical is usually lost in debate, and the prescription becomes categorical. How often do you hear an economist say “this is optimal, but I don’t think we should do it”?

Secondly, there is the problem of economists repurposing moral language. If you start talking about “improving welfare”, “efficiency”, “optimality”, and so on, you must take responsibility for the fact that these words have developed an explicitly moral content. These moral words are not “on loan” from the rest of us. Most people use the phrases “best policy” and “optimal solution” to mean “what we ought to do”, and the statements of economists will be interpreted through this same lens.

 

The responsibilities of practice

The theoretical critique of Krugman’s distinction goes hand in hand with a practical critique that shows that it is not workable in the real world.

All academic practices are carried out in a world of limited means; economists, above all, ought to understand this. We are limited by research time, research staff, and research funding. The topics that economists consider worthy of their limited resources set the priorities for public debate in several ways:

– They define what it is important to focus on.

This includes all sorts of things from the invention of the GDP metric, to the measurement of unemployment, and to the new measurement of self-reported happiness.

– They define what is feasible.

This includes the selection and prioritisation of certain kinds of institutional levers to pull: public economists are obsessed with taxes, property rights, carbon caps (as opposed to, say, clean energy quotas, or other more imaginative solutions disregarded by mainstream economics).

– They explore certain scenarios over others.

These scenarios become the dominant ideas in our collective imagination of possible futures. Such possibilities then go on to dominate all decision-making regarding the status quo.

I’m not claiming a one-way cause-and-effect channel from economists to policy-makers, but there seems to be at the very least a clear interdependency: the discipline, and the actions carried out in the name of the discipline, are connected to one another.

Given that as economists we prescribe and prioritise, isn’t it much better to be upfront and honest about our power to direct action and public opinion, in more or less subtle ways, rather than deny our responsibility? This is where training and curriculum change are important.

 

Bringing the politics back in

An overwhelmingly technocratic view of economic policy has become pervasive: the economy is like a machine with well-defined functions; the role of policy-makers is to turn the arms of different parts of the machine, according to the operators’ manual written by economists. No wonder, then, that economics is not perceived in the public sphere as a debate in which people can figure and participate; it is, instead, perceived and depicted as a solid set of conclusions – with the result that politics is displaced by its ready-made, impermeable and impregnable nature.

Here, Krugman would argue that more bridges need to be built between policy-makers and economists. I agree with him, but I also believe the economics curriculum to be at fault. The field of economics is so much more diverse than the Washington Consensus of the 1990s; yet the curriculum lags behind, and creates an illusion of ready-made answers, of full certainty in the operation of the machine, and of a narrow set of possibilities.

Beyond the small number of environmental or ecological economists working deeply on environmental policy issues, there are several million economics students who pass through Economics 101 each year without ever being exposed to environmental concerns in a fundamental way. They will go on to be voters, politicians, businesswomen, and consumers. And here, economics as a discipline that is reproduced through university curricula is to blame; more so even than the economists who teach the flawed syllabus, or the policy-makers who are both influenced and constrained by dead economic concepts still seeping into public consciousness. Krugman’s ordering of his trichotomy is upside down; when it comes to the university curriculum, it is first economics, and then economists and policy-makers, that we should blame.

Our wish to deny responsibility for the political or ethical consequences of our theories is understandable since economists are not trained in either ethical or political thought. But when economists routinely address highly ethical questions such as how we should collectively value risk, how we should value future lives, and how we should value ecosystem “services” such as a walk in the woods, we are forced to make ethical calls. We are all implicated in the need for political and ethical action. As John Ashton argues, “We are not in a situation where we can all sit down and calmly work out the ideal solution; we are forced every day to act, and continue acting.” Nobody is innocent; least of all the economists.

Yuan Yang, Co-founder, Rethinking Economics

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