real world economicsJune 9, 2009
i knew that me and economics didn’t go well together when i tried to study it at A-level. It just seemed so confident in itself, and its view of the world was not one that i recognised: it was too rigid and linear; too eager to present an objective view of Facts. But these sorts of criticisms make me sound like a tree-hugging sandal wearer, so I’m glad that I took some time out this morning to listen to the first of Harvard Professor Michael Sandal’s BBC Reith Lectures.
His argument can, I think, be summarised by his statement that ‘markets leave their mark on social norms’. His brief introduction (looking forward to the development of the themes in later lectures) was simply that we cannot separate the study of economics from broader social, moral and political questions. To only consider what is the right thing to do from the economic perspective (e.g. efficiency) denies the consequences of introducing market mechanisms to new sites of society. They are not morally neutral.
Two good examples he gave. First, the childcare providers who began to charge parents for collecting their kids late. Economists would assume that incentives such as avoiding this fine would mean that there would be fewer late parents. What actually happened was that more parents started to be late. They no longer felt they were putting the teachers out by making them stay late, but instead that they were paying for a service. Second, on blood donation. Sandel argues that we need to consider the social consequences of turning something which had been a gift into a commodity. What does that say about society and its values? It’s not that he was saying we shouldn’t ever commoditise stuff – but rather, that we should recognise and debate the consequences of doing so.
Sandel is not alone in arguing that the dismal science becomes a whole lot less dismal when we start talking about political economics – situated in the real world, where morals and values are given parity with efficiency. Paul Ormerod’s brilliant books – The Death of Economics and Butterfly Economics – make this case powerfully too, arguing that we have allowed economists to believe that they can use their rules and theories to predict the world and to decide how to act. Ormerod believes this betrays economics’ roots, as a science that sought to understand and describe the real world as it unfolded.