Why Aren’t we Very Interested in Economics?


Economics for everyone

“We’ve got this profession wrong; a lot of professional economists think what they do is too difficult for ordinary people. You’d be surprised how often these people are stupid enough to say things, at least in private, like ‘you wouldn’t understand what I do even if I explained it to you’. If you cannot explain it to other people, you have the problem,” says Ha-Joon Chang.

Chang is a reader in the Political Economy of Development at the University of Cambridge and is the author of several widely discussed policy books. People have strong opinions about many things, despite non having the appropriate expertise in them, he says. Things like climate change, the Iraq war, nuclear power stations, and so on.

But when it comes to economic issues, we are not even interested.

We don't debate the future of the Euro, for example, or that of American manufacturing. Yet, these are the issues that affect our job prospects, wages, our pensions. We have been led to believe economics is a science, like physics and chemistry — there is only one correct answer to everything.

Not so, says Chang. He believes that using a wide range of economic theories — from classical to Keynesian — is useful in understanding how each has its strengths and weaknesses. His thesis — there is no one way to explain economic behavior.

In Economics: the User's Guide, Chang exposes the myriad forces that shape our financial world and how we are all interconnected. Economic theories constantly fail to predict real-world developments even in the areas in which they focus. One of the reasons why is that humans have a free will, unlike molecules.

When we learn different types of economic arguments, we develop our critical faculty to decide which one makes most sense based on circumstance, goals, and values. Our current landscape has been created by the acceptance of a few core principles — the individual as perfectly selfish, perfectly rational, able to create perfect markets by acting in her own interests.

We have ignored plausible competing theories and have suffered for it. For example, one of the flaws in neoclassical economics is that they see everyone as a consumer (occasionally we might be a buyer or seller). Other schools put the onus on our identities as workers and put the spotlight on what an economy produces. 

Chang's explanation of productivity is worth noting — as his definition includes a combination of  infrastructure, institutions, and social trust. When we talked about how to become more creative, we outlined a problem we face in a knowledge economy, which is the pressure to be more productive.

The real problem may be the word “productivity.” How do we define it? In all likelihood it is in economic terms ― the rate at which goods or services are produced, especially output per unit of labor. But this very definition does not take into account values and goals. Hence why quality of experience, service, and product, in this order, are taking a toll on unimaginative organizations. 

Chang says:

“The current lack of exposure to alternative ways of thinking and to other relevant disciplines, and this increasing belief that it is a science like no other within the social sciences, has turned economics into a strange subject that is now aptly referred to as ‘autistic’. It is a discipline now that only talks to itself. It does not speak to the world of ethics, law and culture.”

[…]

“History, in particular, is crucial to re-invigorate economics. History is a wonderful way of making people question the unstated, and sometimes totally unrecognized, assumptions behind their theoretical and moral positions.”

For a short primer of Ha-Joon Chang's main thesis watch the animation below.

 

Ha-Joon Chang's Economics is a primer, reference book, and a brief history of the subject and is meant to be used like a tool to make better decisions.

 

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