Introducing a New Economics

Pluralist, Sustainable and Progressive

Jack Reardon, Maria Alejandra Caporale Madi, Molly Scott Cato

• Éditeur: Pluto Press
• Année: 2017
• ISBN:
  9781783712182
• Édition: 1
• Sujet: Economía
• Sous-sujet: Política económica

Introducing a New Economics is a groundbreaking textbook that heralds a revolution in the teaching of economics. Students and lecturers alike are rejecting the narrow curricula and lack of intellectual diversity that characterise the mainstream. They demand that the real world should be brought back into the classroom, insisting that this is the only way to confront the current crisis. With a firm commitment to theoretical, methodological and disciplinary pluralism, the renowned authors of this book challenge the current hegemony head-on. This unique textbook reflects a new ethos of economics education, highlighting sustainability and justice in its discussion of work, employment, power, capital, markets, money and debt. This volume is a work of progressive, heterodox economics that will set the standard for years to come.

1

Introducing Economics with a Judicious Mix of Pluralism, Sustainability and Justice

Alfred Marshall wrote in his best-selling Principles of Economics (1890 [1946]: v) that ‘economic conditions are constantly changing, and each generation looks at its own problems in its own way’. Our generation is confronted with many problems, including climate change, environmental damage, a global financial crisis, a palpable disparity in income and wealth, escalating debt and a healthcare crisis. These problems are mutually reinforcing and, unless we take radical action, will only worsen. Knowledge and education can help us understand them in order to devise effective solutions.

This chapter will discuss and define economics and its relationship to the other social sciences. We will also discuss how economics is interwoven with sustainability, pluralism and justice – our guiding principles.

1.1 WHAT IS ECONOMICS?

The word ‘economics’, like so many other English words, derives from the Greek language. It combines ‘oikos’ (house) and ‘nomos’ (manager), and literally means ‘household management’. Given our text’s central focus on sustainability, it is interesting that economics shares a linguistic origin with ecology, which studies the relations of organisms to one another and to their physical surroundings. We are happy to write a textbook that unites the two words by returning them to their common origin.

While managing households is a concern in all societies, the modern discipline of economics is relatively new, dating to Adam Smith and his The Wealth of Nations (1776). Originally called political economy, the discipline recognised the interconnection between economics and politics.

While the definition of economics has changed over time, we prefer (and will use) the modern definition: Economics is a social science concerned with how societies provision. Or alternatively, ‘how societies organise themselves to sustain life and enhance its quality.’ (Nelson, 2009: 61)

Three points are obvious from this definition:

(1) Economics is a social science, meaning that it studies human society and its social relationships, as opposed to physics or chemistry, for example, which study the physical world. Nevertheless, the dividing line between human society and the physical sciences (and thus between the social sciences and the natural sciences) is not as clear-cut as first appears. The physical world is changing, affecting human society; conversely, how we act socially and economically changes the physical world. Indeed, this interconnection was noted by The Intergovernmental Panel on Climate Change (IPCC) in their Fifth Assessment Report (2014):

Human influence has been detected in warming of the atmosphere and the ocean, in changes in the global water cycle, in reductions in snow and ice, in global mean sea level rise, and in changes in some climate extremes. This evidence for human influence has grown since 2007. It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.

(2) Economics is concerned with how we provision (from the Latin word providere, ‘to provide’) so that individuals can lead quality lives and reach their full potential.

(3) Economics is also concerned with how we organise our societies. Knowledge empowers, enabling us to best construct our societies so that all can successfully provision.

So to redress and (perhaps) attenuate climate change, for example, we humans must change our values and behaviour and even our institutions. We believe that economics must and will play a crucial role.

1.2 HOW ECONOMICS RELATES TO THE OTHER SOCIAL SCIENCES

While many of you might have taken, or will be taking, other courses in the social sciences such as sociology, anthropology or psychology, you might wonder how economics fits within the social sciences. Table 1.1 presents a definition of other social science subjects. While each is taught as a separate discipline and is offered as a main degree at most universities, the commonality is striking – every discipline involves the study of human beings. So why do we compartmentalise each discipline? Does that help or hinder understanding the problems of our generation?

One reason for such compartmentalisation within the social sciences is the attempt by economists during the late nineteenth century to emulate contemporary physics by becoming ‘scientific’. To do so, ‘political’ was dropped from ‘political economy’, to focus almost exclusively on how rational individuals maximise their happiness by allocating scarce resources amongst unlimited wants. Thus, this ‘new’ economics, or ‘neoclassical economics’, limited its approach to one narrowly defined as ‘scientific’, and mostly focused on the question of rational choice rather than the investigation of the economy’s ability to provision. Needless to say, not all economists accepted this constricted scope and method, giving rise to the proliferation of many schools of thought within economics, which we will discuss in this chapter.

Table 1.1 Definitions of Specific Disciplines Within the Social Sciences

Discipline	Definition
Anthropology	The study of peoples and their cultures.
Communications	The study of how individuals and communities devise symbols and languages to communicate with each other.
Economics	The study of how societies provision.
Geography	The study of how human action both affects and is affected by the physical features of the Earth.
Law	The study of custom and rules.
Politics	The study of activities and policies of the government.
Psychology	The study of how the human mind works.
Sociology	The systematic study of society and human action, with a specific focus on groups.

Source: Authors.

Other disciplines, particularly sociology and anthropology, formed and developed in order to investigate areas and issues jettisoned by neoclassical economics, such as group behaviour, institutions, property rights, power, culture and the historical evolution of capitalism.

Does such compartmentalisation (within the social sciences) help or hinder? Although we believe in the benefits of specialisation, we also feel that specialisation without cooperation is limiting and self-defeating. Each discipline can and should learn from others. One of the goals of education should be to recognise that in the real world our problems are not demarcated by discrete disciplines. For example, climate change is neither a sociological, environmental nor economic phenomenon. We need the insights of all disciplines to solve our problems, and yet each of the social sciences is a work in progress, since there is a lot we do not yet know. Perhaps one of our goals as social scientists should be to reduce the barriers, blend the disciplines, and/or work across disciplines: that is, to be interdisciplinary.

Exclusive reliance on only one discipline gives a misleading and myopic understanding. For example, if we want to study financial bubbles, how can we claim understanding without knowledge of psychology? Or if we want to establish a government that benefits all, how can we do so without knowledge of history, which teaches us what works and what does not, along with sociology, economics, politics and psychology? If we want to effectively address global warming, how can we do so without knowledge of how and why people form and behave in institutions and groups?

To use an analogy of a homeowner, while we respect the property rights of our neighbours, rather than wall off our gardens from each other we prefer an open space to mingle and talk – a commons, if you will – which, among other things, fulfils a basic human need for social contact and interaction. Thus, given a common problem we can come together to develop a solution. It is hard to do so when each garden is walled off, so we don’t know our neighbours or any aspect of their lives.

In the social sciences, not only are the ‘neighbours’ different, they frequently don’t speak to each other:

disciplines and sub-disciplines largely form their own small worlds of methodology, assumptions, language, meaning and identity . . . Disciplines are like tribes, they have a specific culture and specific habits, norms and rules, and they do not easily accept outsiders.

Weehuizen, 2007: 165

1.3 DIFFERENT IDEOLOGIES (OR SCHOOLS OF THOUGHT) WITHIN ECONOMICS

For us, a very emotional and evocative photograph is that of the Earth taken by the Apollo 8 astronauts (titled Earthrise) in December 1968. It looks peaceful and somewhat idyllic, and it is hard to imagine that people living so close together against the infinite background of space can be so truculent. To a lesser extent, the same truculence exists within economics. It is a discipline rife with ideological disagreement, based on different ideas and visions of how the world works and how it should work. When neoclassical economics was founded, it became monist (the opposite of pluralist), espousing only one privileged viewpoint. But, as we explain in the next section, not only is monism inconsistent with democracy but, as we devise effective solutions for our generation’s many problems, why constrict our thinking to only one way of seeing the world? Wouldn’t we benefit from a healthy discussion involving all viewpoints?

For better or for worse, there are a number of competing ideological positions within the discipline of economics. We believe, however, that disagreement livens economics and enlarges its scope and applicability. Consequently, our approach (consistent with our theme of pluralism) is to make you aware of the existence of the different ideologies and, where appropriate, mention the origin of certain principles and concepts and how they fit in with the overall discipline of economics.

Thus, our goal is to search for commonalities between the different ideologies and across the social sciences. We ask you to be cognisant of the differences and to realise that it is difficult to prove one view superior to others. We offer you a new framework to learn the principles of economics within a pluralist and sustainable context, to help you conceptualise and solve the problems of our generation. It is not expected at this point that you fully understand the major tenets of each view, since most of the concepts will be discussed in later chapters. The major ideologies (or schools of thought) within economics include:¹

Classical economics: Begins with Adam Smith (1723–90) and includes Jean-Baptiste Say (1767–1832), Thomas Malthus (1766–1834), David Ricardo (1772–1823) and John Stuart Mill (1806–73). The classical economists wrestled with the big-picture questions of their time, especially the advent and development of capitalism – a new dynamic system defined as the private (i.e. firms and individuals) ownership of the means of production (i.e. resources used to produce the goods and services that people need) (see Box 1.1). With ownership comes the obligation to decide what to do with the resources and how to use them to produce society’s needs. Since it was not immediately obvious how private ownership could ensure that the necessary goods and services would be produced, Classical economists searched for underlying laws of the economy. They also investigated how wealth was produced and distributed between workers, landowners and capitalists. Conflict between different groups and the existence of power was recognised as central and as a legitimate area of study for economics. Classical economists also investigated the source of an item’s value, concluding it was labour: the more labour to produce an item, the greater its value. This is known as the labour theory of value. According to Adam Smith (1776 [1976], Vol. I, Ch. 5, p.37) and accepted by all classical economists, ‘Labour alone . . . never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.’

Neoclassical economics: Traces its origins to the late nineteenth century. Its principal founders include William Stanley Jevons (1835–82), Leon Walras (1834–1910) and Alfred Marshall (1842–1924). Heavily influenced by eighteenth-century physics, it adopted an ostensibly scientific veneer by divo...

Table des matières

• Cover
• Title
• Copyright
• Contents
• List of Boxes, Figures and Tables
• Acknowledgements
• Preface
• 1. Introducing Economics with a Judicious Mix of Pluralism, Sustainability and Justice
• 2. Knowledge and the Construction of Economic Models
• 3. Sustainability, Resources and the Environment
• 4. Power and the Distribution of Resources
• 5. Inequality, Poverty and Disempowerment
• 6. Livelihoods and Work
• 7. Unemployment and Employment
• 8. Money
• 9. Economic Value
• 10. Firms, Industries and Markets
• 11. Economic Democracy
• 12. Economic Governance
• 13. Consumption, Investment and Savings
• 14. Recessions and Financial Crises
• 15. Justice, Political Economy, Global Development and Governance
• 16. Trade, Exchange Rates and the Balance of Payments
• 17. Contemporary Global Economic and Financial Trends
• 18. Which Way Forward?
• Bibliography
• Subject Index
• Author Index