The Strategist

How to Use Economics to Make our Economy Better

06/17/2015 - 17:21

As with other skills in life - such as learning to ride a bike, learning a new language or trying to learn how to use a new tablet - a cultivation of economically active citizens inside ourselves becomes easier with time, it’s just enough to overcome the first difficulties. Cambridge economist Chang Ha-Joon explains why we should not take our word for professionals and how knowledge of economic theory helps to make our world better.

Economy is a political argument

You do not have to believe any economist claiming that his scientific analysis are free of value judgments. Economic theory has always been a part of politics, not science. Economics has no objective truths, which can be set independently of the political and often ethical judgments. Therefore, faced with the economic argument, you need to ask yourself the age-old question, which was asked by another Roman statesman and orator Cicero: Cui bono? (Who benefits?).
Sometimes it is not difficult to see the political nature of economic theory, because it is clearly based on dubious arguments that take into account the interests of certain groups. The political and ethical judgments are clear even in a supposedly value-free activities, such as the definition of the boundaries of the market. Deciding that belongs to a particular area of ​​the market is an extremely political act. Once you manage to drag something (say, water) to the market, you will be able to apply the rule of "one dollar - one vote" principle to decisions regarding this product, allowing the rich more easily influence the outcome. Conversely, if you are able to remove anything (eg, child labor) from the area of ​​the market, it becomes impossible to affect it with money.

The figures are just a theory

German writer and scientist Johann Wolfgang von Goethe once said, "All factual is already a theory." And it should be borne in mind when studying the economic "facts." Many people assume that the figures are a direct and objective data, but each of them is based on the theory.
The figures in the economy are always the result of attempts to measure the definitions, that are often very controversial, or at least contested. This applies to even the most basic figures, which we take for granted, such as the GDP or the unemployment rate. An exception of the housework and unpaid care for people from the GDP has led to a lack of evaluation. The standard definition of unemployment underestimates the true scale, as it excludes discouraged workers in rich countries and people with part-time in developing countries.
We need indicators that make it possible to get a measure of the magnitude of our economic world and track its changes; we simply should not take them lightly.
Do you consider yourself only consumers of information produced by professional economists? What do you do with this knowledge? Keep in mind three important things:
1. You must be willing to challenge the professional economists.
Because they do not have a monopoly on the truth, even when it comes to purely economic issues. Sometimes expertise leads to tunnel vision thinking. Some healthy dose of skepticism should be applied to listening to experts from all walks of life, not only from the economy. But in the latter case, it is particularly important because the political argument here often try to play off coming out as science. The economy is too important aspect of our lives to give it at the mercy of a professional economist. Willingness to challenge them should be the foundation of democracy. If we do not want our society ruled by a bunch of self-proclaimed experts, we need to learn to understand the economy and challenge the professionals.
2. We should listen to the other side.
This Latin motto is inscribed on the walls of City Hall of Gouda in the Netherlands (Audite et alteram partem). That kind of attitude you have to have when discussing any economic issue. Of course, this does not mean that you should not have an opinion, but it's not the same thing as a deep conviction in your own right.
3. Changes difficult to implement, but even the most ambitious of these is possible, if you try to hold them hard and long enough.
It is very difficult to change economic reality - whether low wages in poor countries, tax shelters serving super-rich, excessive corporate power or too complicated financial system. Sometimes the complexity is caused by the active attempts of those, who benefit from the existing mechanisms, to defend its position by lobbying media propaganda, bribery or violence. However, the status quo is being protected even without special action by the specific people. The market rule "one dollar - one vote" severely limits the ability of the poor to confront the measures imposed by the subjects initially received a large share of income and wealth.
Awareness of the difficulties, associated with the change in the economic status quo, should not make us give up the fight for the creation of a more dynamic, stable, equitable and environmentally sustainable economy, than that operated during the last three decades.
Of course, change is always painful, but when many people are fighting for something, there seems a wonder about to come. Just think, 200 years ago, many Americans thought that even to discuss the abolition of slavery is impossible; 100 years ago the British government sent women to prison for demands the right to vote in elections; 50 years ago the majority of the founding fathers of today's developing countries were hunted as terrorists by the British and French secret services. As said the Italian Marxist Antonio Gramsci, "we need intelligence pessimism and optimism of the will."
Final thoughts: It is easier than you think
The global financial crisis of 2008 caught most economists by surprise and became a cruel reminder of all that one cannot give the economy at the mercy of professionals and technocrats. As economically active citizens, we all have to participate in its management.
Of course, it is not that easy. Many of us are physically exhausted by daily struggle for survival and mentally engaged in our own personal, including financial, challenges. And the idea to become economically active citizens, that is, to study economics and to pay attention to what happens in the economic world, may seem daunting. However, making such an investment is much easier than you think.

based on Economics: The user's guide by Chang Ha-Joon