Monday, November 26, 2012

A Challenge to the Economics Profession

GITTINS' GOSPEL: The economics of just about everything,
by Ross Gittins,
Allen & Unwin, 312pp. 

Reviewed: 24 November

There is a welter of information and analysis, online and in print, that competes to influence our views and understanding of what might broadly be called "the economy".  At least nine tenths of this is nothing to do with the underlying  structures and trends that will determine our future material and social welfare. That bulk is usually about the ephemeral trivia of market speculation - will shares and bonds prices rise of fall in the short term.  It is no more useful than the form guide for a horse race, and serves the same purpose - to draw in more speculative spending by those of us who are no better than punters betting blindly.

A few commentators make genuine efforts to cut through the promotional flim-flam and remind us that "the economy" boils down to a social contract underpinning all of our employment, production and trading activities.  It cannot be discussed intelligently in isolation from whatever human values we see as important in holding society together and meeting the common challenges of sustaining our world.

So if you are suspicious of the economic claims and counter-claims of our politicians and lobbyists, then you will enjoy reading Ross Gittins as I did.  If you are not suspicious but you care about society, then you need to read someone like Gittins. For thirty years his economic commentary columns have shone skeptical beams through the fog and dust kicked up in the name of economics, often by professional economists blinkered by ideology or by the need to sell their services to somebody.

Did you know Adam Smith, patron saint of market economics, added an important qualification to his most famous observation about the primacy of self-interest in human decision-making. Adam Smith followed it up with "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it". Rational self-interest is the founding assumption of modern economic modelling, but Gittins doubts any of us are predictably rational. Neither can our perception of self-interest be taken for granted. 

Gittins deplores the trite and self-serving neo-liberal assumption  that governments have no role until free markets can be shown conclusively to have failed.  The Global Financial Crisis is only the latest example of how unregulated markets tend to become corrupt, at vast cost to both suppliers and consumers.  Governments alone can set rules for "a better capitalism" through democractic process informed (he hopes) by more rigorous media commentary and analysis.

Gittins is not alone.  There is a growing rebellion of  behavioural economists who take a broader view, embracing a range of non-monetary considerations for economic policy – such as social equity.  Is growth a genuine economic benefit, or a short-term illusion?  Can any serious economic policy ignore the environmental costs?  Can fairness be ignored, when all history shows that inequality imposes heavy costs on social cohesion.

No comments:

Post a Comment