Joan Robinson on economics and the study of society

Joan Robinson (1973)

Apart from her voluminous academic writings, the Cambridge Keynesian economist Joan Robinson wrote several popular books. Freedom and Necessity – An Introduction to the Study of Society was published in 1970. Although some of it dates somewhat, there is plenty of interest and contemporary relevance that remains. Here are a few such extracts:

(From the preface) “It seems to me that an economic interpretation of history is an indispensable element in the study of society, but it is only one element. In layers below it lie geography, biology and psychology, and in layers above it the investigation of social and political relationships and the history of culture, law and religion.”

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Ha-Joon Chang: facts, even numbers, are in the end not objective

Chang EconomicsUsersGuideThis is the last in the recent series of excerpts taken from Ha-Joon Chang’s Economics: The User’s Guide. Chang is an economist at Cambridge University (his personal non-academic website can be found here) and specialises in development economics. He has also written a number of popular books, some of which aim to debunk many of the myths of mainstream economic discourse.

The User’s Guide is one such, aimed at the lay reader rather than academics, and engages in a pluralist introductory approach to economics. I have therefore chosen a number of quotes over the past few months which stood out for me and which I felt were worth sharing. Here is Chang on p.453-5:

“Johann Wolfgang von Goethe, the German writer (Faust) and scientist (Theory of Colours), once said that ‘everything factual is already a theory’. This is something to bear in mind when looking at economic ‘facts’.

Many would assume that numbers are straightforward and objective, but each of them is constructed on the basis of a theory. I might not go as far as Benjamin Disraeli, the former British Prime Minister, who quipped that ‘there are lies, damned lies, and statistics’, but numbers in economics are invariably the results of attempts to measure concepts whose definitions are often extremely contentious or at least debatable.

This is not just an academic quibble. The way we construct economic indicators has huge consequences for how we organize our economy, what kind of policies we implement and ultimately how we live our lives.

This applies to even the most basic figures that we take for granted, like GDP or the rate of unemployment. The exclusion of household work and unpaid care work from GDP has inevitably led to the undervaluation of those types of work. GDP’s inability to take into account positional goods has directed consumption in the wrong direction and made it an unreliable measure of living standards for rich countries, where those goods are more important. The standard definition of unemployment underestimates the true extent of it by excluding discouraged workers in the rich countries and the under-employed in the developing countries. Naturally, these types of joblessness have been rather neglected by policymakers.

All of this is not to say that numbers in economics are all useless or even necessarily misleading. We need numbers to be able to get the sense of the magnitude of our economic world and monitor how it changes; we just shouldn’t accept them unthinkingly.”

What’s the use of economics? — LARS P. SYLL

The simple question that was raised during a recent conference … was to what extent has — or should — the teaching of economics be modified in the light of the current economic crisis? The simple answer is that the economics profession is unlikely to change. Why would economists be willing to give up much of […]

via What’s the use of economics? — LARS P. SYLL

The selfish and the social

Brain-598x342Until recently, much of economic theory has neglected the roles that evolution, psychology and biology play in shaping the economy and its human constituents. This has been detrimental to mainstream economics’ narrow vision of economic man, who is supposed to behave in a selfish, rational fashion as he optimises social outcomes, primarily in the realm of markets.

A notable recent contribution which attempts to counter this conception is Rojhat Avsar’s The Evolutionary Origins of Markets. The book argues that the human brain and human behaviour have evolved in ways which make the creating and sustaining of socioeconomic institutions, not least the market and exchange, outcomes of social motives as much as selfish ones.

Avsar’s short book contains a wealth of ideas and applications of studies of human nature to the economy. I will not attempt to cover more than a few of them, or review the book, in this post. Instead I want to discuss one model of the human brain taken from the book and note its implications for our understanding of man in the economy. I will also introduce some ideas from a similar effort by institutional and evolutionary economist Geoffrey Hodgson, which also employs concepts from biology in its attempt to construct an alternative to homo economicus. Continue reading

Can the history of economics inspire a pluralistic approach to economics? — Developing Economics

Pluralistic Economics and Its History, edited by Ajit Sinha of Thapar School of Liberal Arts & Sciences, Patiala (India) and Alex M. Thomas of Azim Premji University, Bengaluru (India), contains seventeen essays. This review seeks to engage with some of the principal themes that animate the essays in this volume.

via Can the history of economics inspire a pluralistic approach to economics? — Developing Economics

The appeal of individualism in economics

Chang EconomicsUsersGuideHere is another extract from Ha-Joon Chang’s 2014 introduction Economics: The User’s Guide. I have posted a number of quotes from Chang’s popular books over the last few years. For me these works make accessible to a potentially wide audience important points about economics and political economy.

This one outlines what he sees as the “appeal of the individualist vision of the economy and its limits”. In particular, economic freedom may not always be aligned with political freedom, contrary to the claims of many free market economists.

Elsewhere Chang has argued that there is no such thing as a ‘free’ market anyway, as markets under capitalism are institutions structured and sustained by all sorts of rules, both formal and informal, whose emergence and management are frequently subject to political intervention and debate. Although this kind of argument starts becoming one of semantics, I find that it can be helpful to challenge conventional wisdom and elements of discourse and meaning which are widely influential. This reveals them as partially subjective as much as objective, and therefore able to be changed. Continue reading

Is economics — really — a science? — LARS P. SYLL

As yours truly has reported repeatedly during the last couple of years, university students all over Europe are increasingly beginning to question if the kind of economics they are taught — mainstream economics — really is of any value. Some have even started to question if economics is a science. At least two Nobel laureates […]

via Is economics — really — a science? — LARS P. SYLL

Ha-Joon Chang on the different ways to ‘do’ economics

Chang EconomicsUsersGuideIt is important to recognize that there are distinctive ways of conceptualizing and explaining the economy, or ‘doing’ economics, if you like. And none of these schools can claim superiority over others and still less a monopoly over truth.

One reason is the nature of theory itself. All theories, including natural sciences like physics, necessarily involve abstraction and thus cannot capture every aspect of the complexity of the real world. This means that no theory is good at explaining everything. Each theory possesses particular strengths and weaknesses, depending on what it highlights and ignores, how it conceptualizes things and how it analyses relationships between them. There is no such thing as one theory that can explain everything better than others – or ‘the one ring to rule them all’, if you are a fan of The Lord of the Rings.

Added to this is the fact that, unlike things that are studied by natural scientists, human beings have their own free will and imagination. They do not simply respond to external conditions. They try – and often succeed – to change those very conditions by imagining a utopia, persuading others and organizing society differently; as Karl Marx once eloquently put it, ‘[m]en make their own history’. Any subject studying human beings, including economics, has to be humble about its predictive power.

Moreover, unlike the natural sciences, economics involves value judgments, even though many Neoclassical economists would tell you that what they do is value-free science…behind technical concepts and dry numbers lie all sorts of value judgments: what is the good life; how minority views should be treated; how social improvements should be defined; and what are the morally acceptable ways of achieving the ‘greater good’, however it is defined. Even if one theory is more ‘correct’ from some political or ethical points of view, it may not be so from another.

Ha-Joon Chang (2014), Economics: The User’s Guide, Penguin books, p.111-112.

Beyond the modernist-postmodernist dualism – an application to development economics

Context matters in economics, both in theory and policy. The quote below from development economist Daniel Gay summarises his attempt to bridge and transcend the divide between the modernism which characterises mainstream economics and the subjectivism of postmodernism. He points the way to the importance of reflexivity in social science, and how the ‘background, beliefs and possible biases’ of policy-makers and their advisers should be made explicit in arguments used to justify particular decisions.

This is especially important in development economics, but also economics in general, because of the distinctive economic, social and political differences between specific countries, in and through time. This is so whether one is comparing rich and rich, rich and poor, or poor and poor. There is little room for universal theories here. Continue reading

Holistic visions in economics – philosophical lessons from the Cambridge tradition

MartinsCambridgeRevivalThe Cambridge tradition referred to here has been the inspiration for much non-mainstream, heterodox economics across the world. It tends to be left-wing politically and in policy terms, biased towards state intervention to improve economic performance and achieve greater social justice in society.

In many ways, as heterodox institutionalist economist Geoffrey Hodgson has put it, this Cambridge tradition, whether post-Keynesian or heterodox more generally, has not had the influence on mainstream thinking that the originators of its critiques and contributions have surely craved. This has been due, according to Hodgson, to a sometimes uncritical attitude towards statism and an often implicit adherence to the desirability and workability of democratic socialism. There has also been a neglect of microeconomic issues, such as alternative psychological theories of the individual which critique utility maximisation, and the institutions which shape incentives, as well as the role of information in production and markets.

Despite all this, the quote below is from a fascinating, wide-ranging book which explores the author’s conception of the Cambridge tradition in terms of its economic, social and ethical theory. It makes a case for the philosophical notions of internal relations and organicism, and from there for a macroeconomics which cannot be reduced to microeconomics.

From subatomic particles all the way to human societies, this philosophical vision of reality argues for the primacy of entities as constituted by their relationships with other entities. I find this holistic notion appealing; these kinds of ideas reinforce my own attraction to thinking about the systemic in economics and political economy, which tends to be neglected by the mainstream. Continue reading