Economist, a word that requires an adjective

By Mike Lundy

The journalist was interviewing the Prime Minister about a government proposal for boosting jobs. The proposal had no modelling, no risk analysis, no costings - no detail in fact. She asked him how he knew the program would work without any of this basic groundwork being completed.

She asked, 'Why should the Australian people trust your word?'

'Well’, he replied, 'because I am an economist, Leigh.'

In the political fog that makes it difficult to find facts and detail, this comment struck me as particularly alarming. I think the prime minister thought he was providing a genuine and satisfactory answer.

It's not any sort of answer actually. It just raises a whole lot of questions.

When a politician justifies their view by saying they are an economist, does that mean their views are correct? Why is economics a matter of 'trust'? What expertise are they claiming? What gives an economist authority to comment on the hugely complex economy of a developed industrial country? Why does the prime minister think that an individual economist can forecast the outcomes of fiscal policy, even without doing any modelling? (And I have to add, can the prime minister even claim to be an economist? Studying a Bachelor of Science (Hons) in geographic economics - a subfield of geography - and then never working in the field hardly makes one an economist. But then, that's probably the least pressing of the questions I have about this field.)

Let's start at the beginning: what is an economist anyway?

A dictionary definition is

a specialist in economics.

Or this marginally less unhelpful one from an investment website:

a social scientist devoted to the study of the relationship between human behaviour and supply and demand.

But now I realise my first question should be what is the economy?

That should be easy to answer. Money is what comes to mind first. I think of the price of products and services, working to earn money to pay for things, the interest rate I pay to borrow money, budget surpluses or deficits, the cost of childcare, tax I have to pay, tax havens, the share market. Then there is the' black economy' - cash in hand work; the gig economy - short term insecure work contracts; as well as a green economy, a brown economy, a red economy, and other colour economies too. But what about unpaid work, in the home, in volunteer services, caring for our families, each other and the natural environment? Sometimes I read about that as part of the economy. What about the work of artistic endeavours? And if I don't work: is my choice to go for a walk rather than work on a paid writing project an economic decision? What about specific focus areas, like the health economy or the economy of sport, etc. What about politics and economic policy itself? Is that all part of the economy?

Each of these involves human behaviour and the supply and demand for goods or services.

I'm starting to wonder, is 'the economy' actually 'just about everything'?

Well, yes, it is, according to the website Economy (UK). It says the economy is:

...really just seven billion people’s stories, experiences, and choices. It involves everything from consumer choices we make in our homes, to the jobs available to us when we start work, to the system our governments have in place to support us in old age.

Trying to draw a clear boundary around the edges of what the economy is seems impossible. It's pretty easy to see a link between our behaviour, supplying and using things and services, our money systems, and almost everything in our world. It's what we humans do all the time.

So, if 'the economy' is (just about) 'everything', what does that make the field of economics?

Back in 1920, Alfred Marshall wrote the classic Principles of Economics with this definition:

Economics is the study of mankind in the ordinary business of life.

Here's some other definitions written for people who are not economists:

Merriam-Webster: Economics is a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.

Investing answers: Economics is the academic study of the production, distribution, and consumption of goods and services. The study of economics has spawned numerous theories about the nature of human production and consumption including Marxist theories of production, the Chicago School, which advocates free market and monetarist approaches, and the Austrian School, whose approach is underscored by the emphasis on stock market price mechanisms.

Wikipedia: Neoclassical economics is the dominant form of economics used today and has the highest amount of adherents among economists. … Its definition of economics comes from Lionel Robbins in 1932: "the science which studies human behavior as a relation between scarce means having alternative uses."

More from Wikipedia: Mainstream economics … begins with the premise that resources are scarce and that it is necessary to choose between competing alternatives. That is, economics deals with trade-offs. With scarcity, choosing one alternative implies forgoing another alternative—the opportunity cost. The opportunity cost expresses an implicit relationship between competing alternatives. Such costs, considered as prices in a market economy, are used for analysis of economic efficiency or for predicting responses to disturbances in a market.

Economy (UK): Economics needs a broad definition: It’s how we make the things we want and decide who gets what.

thismatter.com Introduction to economics: Economics is the study of how a society uses its resources to produce output that it desires. … Although economics can be a complex science, it is based upon a few simple principles. The primary principle is the efficient allocation of scarce resources.

Interesting. Given that ‘the economy’ covers 'just about everything', and is about everyone doing things everyday, I think economics is not so much a bounded ‘field of study’ (like biology or dentistry), but rather a perspective on the world. A frame through which to look at the world.

Some recurring words in the definitions provide a clue as to this perspective: choice, production, consumption, behaviour, resources, alternatives. It is a 'commodifying', cost/price-assigning, measuring, 'accounting' perspective. We know that what gets measured is what gets our attention.

Economics is a perspective on the world involving measuring and quantifying the worth, usefulness or importance of things, services and human behaviour. 

We don’t need Wikipedia to tell us that one approach, the neoclassical school of thought, dominates economics. We see it all around us in Australia. This is often referred to as mainstream economics because of how widely it is adopted. It dominates western societies and government policy. So much so, I get the impression that our politicians think there is no other way to frame the economy.

Okay, I'm not an economist, but I live in ‘the economy’ (which seems to mean 'the world'), and I hear the 'economic theory' with which my politicians justify their decisions. And a lot of it is hard to make sense of. Not because the words are 'economic jargon' that we non-economists couldn't possibly understand, but because the words are poorly defined and shift their meaning at times, sometimes even in the same political speech.

Let's explore a little with the simplest of economic terms. Here's my collation of the definitions above, which highlights the key terms:

MFB Lundy (2019): Economics is the science of the efficient allocation of scarce resources.

However, the meaning of the words efficient, allocation, scarce and resource are all contestable.

One person's idea of efficiency is another person's idea of inhumane robo-debt collection; health prevention is efficient long-term but involves allocating more ‘limited’ resources short term; one person's concept of allocation (i.e. sharing and distribution) is another person's idea of an unfair tax break, while another thinks any allocation to an unemployed person creates more 'bludgers'; one person's old growth forest fits the concept of 'scarce', but to another, it is just more trees to cut down (you can always grow more); even one person's idea of what a resource is can vary between those who manage their own limited resources by frequenting cheap family restaurants and those who think the Amazon rain forest is an irreplaceable shared resource that shouldn't be cut down for grazing cattle to make burgers for that family with modest budget.

In effect, any one person's idea of how best to manage 'the economy' (i.e. ‘the world’) - what they think is best to do with 'scarce resources'; what needs to be factored into 'efficiency' (money, time, effort); which costs of production should be passed on to consumers and which 'externalised' (e.g. waste or pollution costs); what the measure of value is of all types of things and services; what will be fair or reasonable for everyone - is different from another person's. The ideas of our prime minister are completely different from those of David Suzuki, and lead to different economic choices and decisions, and thus different 'worlds'.

In economic textbooks you'll find ongoing debate about these basic concepts. Often, these books provide narrow context-specific definitions for its jargon, but these are not the meanings used in the ‘economic speak’ we hear from our politicians. It’s all a bit of a mess and hard pin any of this down.

And this is only at the simplest word level (upon which the more complex and obfuscating technical jargon of economics is built).

If economics involves such a large number of contested words, how well can it actually set out to ‘measure’ these things?

In practice, we all vary in the meaning we give these types of words. These words refer to abstract constructs and not to observable things (Fred explains this in Nomological). Abstract constructs are notoriously difficult to define accurately and definitively.

How you interpret each word depends on your values and beliefs - what you value in ‘the world’ (which seems to mean 'the economy'.) This applies to me, you, and to our politicians.

If we go back to the idea that 'the economy’ is the sum of our choices to make or use things and decide who gets what, multiplied by seven billion people in the world, then 'the economy' means 'everyone making choices in their lives'.

How much money we have is only one factor in how we make our choices. We make fundamental life choices based on our opportunities for sure, but also on values and assumption we have about other people and about the natural world, and our beliefs about the sort of society we want to live in.

And we apply this to the way we think about 'the economy' too when we hear politicians proposals. In terms of economic policy we support, it comes down to our values and beliefs, not about the cost of the various programs. If we assume people get what they deserve based on how hard they work, we will support economic decisions such as cutting benefits to unemployed people. If we assume that even a wealthy society provides limited opportunity for certain groups of people despite their best efforts, then we will support programs based around robust social welfare. If we believe that the natural world exists for humans' use and enjoyment, we will support economic policy that puts a price on the material in the natural environment and allows profit-based businesses to exploit natural resources without limits. Alternatively, if we think the natural world has an inherent value regardless of human activity or need, then we would lobby to balance human needs and environmental systems. If we value individual wealth over collective wealth, we would more likely be in favour of specific economic decisions, such as tax cuts for wealthy people. If we believe that our safety is threatened, we will accept high levels of public funding to be spent on defence, even at the cost of other services we value, like health, education, research, arts, etc.

Given that 'the economy' seems to equate with 'the world', when we discuss economic policy, we are talking about the society we want to see. We are talking about what we each value and believe. If every choice is an economic choice, what should we base our decisions on, for example, when we go shopping or when we look for work. What is important - to me and to my community? What do I think is fair and reasonable in Australia?

Which brings me to the biggest question for me is, given the central role that values and beliefs play in economic choices, what are the values and assumptions of the discipline of economics? Or the values of the economic academics who write the textbooks. Are these assumptions valid and something I agree with? What sort of society do they think is desirable? What are the values of the particular economist providing the modelling behind government policy? What is their view about who should be advantaged, who should be controlled, how do they think government can influence individual and societal choice-making? What things do they leave out of their economic models? Are those things actually important to you and me? What are economics’ tacit assumptions about human nature, about human decision-making, about the value of the natural world?

My reading on the philosophy and values of economics did not provide any clear answers - instead yielding extensive discussion of the definitional and territorial difficulties and controversies. Interestingly, once the topic moves to values, the concept of ‘mainstream’ versus ‘heterodox’ (unorthodox) economics comes into view.

You can find extensive writing on Islamic economics, Catholic economics (Distributism), Buddhist economics, feminist economics, ecological economics, and many more. They are not 'impractical' or 'unorthodox' alternatives, as they are conveyed by those from the mainstream. What they do is present targeted challenges to the unspoken and unacknowledged values and assumptions of mainstream economics.

The numerous 'heterodox' economics schools serve to highlight the values base of any theory or perspective of 'the economy' (i.e. 'the world'). 

These heterodox economies start with an explicit articulation of the view of society that the economic decisions are intended to achieve. Our desired view of society is where we should always start. Once this is established, the words efficient, allocation, scarce, and resource all assume a specific meaning, and decisions about these concepts are based on a shared set of desirable outcomes.

Economists should not be telling us what kind of society we want to live in, what a 'fair' allocation of resources is, how much of our natural environment we want to protect, how much we should allocate for public services like health and education, how much to spend on defence or the arts, or what I should purchase today.

Because these are about values. Values are entirely up to each of us.

But mainstream economics has done a con job on us all. By adopting statistical and modelling methods, mainstream economics presents itself as an objective approach It claims that because it uses facts, figures and models it a science and it is value-free. But as Fred wrote in Spurious, a whole pile of values sits behind what gets included and what gets left out in any measurement and  analysis of figures. Those values need to be made overt so we can decide if we agree with them.

Mainstream economics, and the politicians espousing it, hide behind a façade of objectivity and fail to acknowledge that they are referring to a set of values about humanity and about what sort of society is 'desirable'.

http://smbc-comics.com/comic/2013-01-0

As one of my favourite cartoonists, SMBC, so pithily says, economics is the mathematising of a specific set of values and assumptions.

All economics schools of thought, in fact, are values and assumptions bundled into ideologies dreamed up by theorists or philosophers. Many political ideologies have been a direct product of reflection on the values and assumptions underpinning various or dominant economic systems. Marx, for example, is regarded primarily as a philosopher, his most famous work being on the ethics and values of the economics of the capitalism system.

As happens with dominant and widespread ideologies, the underpinning values and beliefs of mainstream economics have become invisible and the result of policy based on these values has become accepted as 'just the way the world is'.

I think the contemporary 'economic problem’ is that we do not have this first critical conversation about values. The far-from-objective values of mainstream economics have disappeared from our conversation and our politics. And politicians attempt to use 'economics' as a neutral, value-free justification for their decisions.

So, here's my new definition that integrates what I’ve been talking about:

Economics is a method for identifying choices about the allocation of resources that will create and maintain the type of society that people want. It rests and reflects a set of values and beliefs about how society is and how it should be, which lead to various methods and choices to foster that type of society.

From my reading, it appears that academic economic theory is more and more divorced from what people understand the government's role in managing 'the economy' actually is. Or what the government tells us its role is. Contemporary economic courses are often quite broad, academic economic debate is robust, the over-reliance on theoretical models has been challenged, and the link between economics and politics is under considerable scrutiny.

However, right now in Australia, the graduates of these courses get jobs in business or policy roles that are based on mainstream economics. Our government’s economic decisions continue to be based on outdated and no longer accepted economic theories from the turn of the 20th century. And sometimes, controversial economic decisions are rammed through by politicians making up economic theory to suit themselves (see Economics 101).

Economic policy is rigged: the economic theory, values and assumptions of those making economic policy determine the questions that are asked and the options that are presented.

We let outdated mainstream economics guide what, in principle, our society should look like. We accept the pronouncement of politicians and their false claim to objectivity.

I think the first step is to challenge the claim of the prevailing mainstream economics that it is objective.

If we are going to accept advice from an economist or a politician referring to economic theory, we should at least know what values and beliefs about society this advice rests upon.

We should never let anyone justify a decision with 'Because I am an economist'. We need to know more about the perspective that economist takes; we need the word economist to be preceded by an adjective or two, maybe more.

The word economist always requires an adjective.

So, in reply to the question, 'Why should the Australian people trust your word?' I think we should always require a more informative answer than 'Because I am an economist, Leigh.'

The prime minister needed to say, 'Because I am a right-wing, conservative, prosperity-theology, tribal, neoclassical economist, Leigh.' 

That bundle of adjectives makes overt the underlying values and beliefs: 'I believe that some people are naturally better than others, the 'better' people are on top of society and god ensures that material rewards come to the deserving, and I look after my friends so I apply neo-liberalism economic principles like free markets, competition and regulation selectively to advance my friends and disadvantage my enemies.

So, the Australian people can trust me, Leigh … to pursue those values.'


Image credits

Trust me: https://jojofeelings.wordpress.com/2012/07/11/trustm/ 
Money image: https://dragonartz.wordpress.com/2009/02/12/3d-golden-money-symbols-graphics/

KPIs: Drucker quote 
Wealth for war: I could not find an original source; this version from Meme generator 
Before economics: SMBC at http://smbc-comics.com/comic/2013-01-04 (No information about sharing provided; if I can't use this please let me know!)