22 What is economics all about? Posted on January 26 2016 One for my new students. 22 22 Responses to “What is economics all about?” Ivan Horrocks says: January 26 2016 at 9:51 am Brilliant! Made me laugh out loud. Always a good thing before spending the day writing. Cheers, Richard. Richard Murphy says: January 26 2016 at 10:10 am I plan to play it as the intro to my lecture Ivan Horrocks says: January 26 2016 at 12:38 pm Good idea. It’ll go down well as it’s a pretty convincing spoof. If I could think of a way of weaving it into the unit I’m writing at the moment (on business models!) I’d add the link. Sylvia says: January 26 2016 at 11:22 am Fabulous, definitely a new John Oliver Jon says: January 26 2016 at 5:30 pm FKN brilliant!!! 🙂 James g says: January 26 2016 at 9:45 pm Yes. Macroeconomics doesn’t exist in any meaningful sense. What does GDP actually tell us that anyone cares about? Only microeconomics is real as applied to individual choice and action. Richard Murphy says: January 26 2016 at 9:53 pm I guess on that basis you’d also argue that the only news that matters is that in your own street and blow the rest of the world? Or even that the world must be flat? James g says: January 26 2016 at 10:52 pm Not at all. But macroeconomics is pointless. It takes events,pretty much only sees them in monetary terms, and then aggregates them together, usually adding apples and pears, and at a meaningless level. It tells you nothing of causation either. How does knowing that the total spending in the economy changed by 1% help anyone? How does knowing that a basket of goods which no one will ever actually buy in that exact configuration has increased by 1% help anyone? The economy as a whole is meaningless because no one lives in the economy as a whole. News, such as the price of fish in the market has fallen by 10% is useful. Macroeconomics was invented in order for politicians to feel in control and point to the entire economy and claim some kind of credit, largely by ascribing explanations for changes which paint them in a good light. Richard Murphy says: January 27 2016 at 6:38 am Phew. Tgat’s ok then. Let’s ignore inter estates, money, the allocation of total incomes, the balance of trade, growth and the rest. None, after all, impact well being. James g says: January 27 2016 at 8:27 am Most macro economic indicators when they appear ‘positive’ are just as likely a reflection of credit bubbles. They don’t tell us whether well being is actually improving or not. Why was growth highest just before the house of cards came down? The economy at crash minus 1 day was not the economy in its best shape, it was the economy in its worst shape. The problem is that aggregates add together both good and bad things which have an equal weighting, making the end result pointless. That is the problem with aggregates – meaning is hidden. Richard Murphy says: January 27 2016 at 8:58 am I’m sorry I can’t waste my time with this ‘head in the sand’ approach I agree macro is far from perfect but that’s because most of the time it is done by economists detached from reality, not because it is not important David says: January 26 2016 at 10:35 pm @James g Macroeconomics doesn’t exist in any meaningful sense. At first sight this seems to be a meaningless statement about being meaningful. Is this a paradox? David says: January 26 2016 at 10:14 pm There is FutureLearn course just starting that may be of interest to many of your ‘visitors’. It is entitled ‘Understanding Public Financial Management – How do governments acquire and spend public money?’ It is a FREE online course and is run by London University’s SOAS (School of Oriental & Asian Studies). The course started 25 Jan but it is still possible to enrol this week by going to this address https://www.futurelearn.com/courses/public-financial-management. Whilst the course might not be directly classified as economics, money & financial systems are increasingly seen as pivotal to the behaviour of economic systems. Daniel says: January 27 2016 at 11:45 am Thanks for this! I’ve registered for the course, I completed a Macroeconomics course on Coursera earlier this year, was amazed at how often so-called economic facts were “proved” with made-up data…. Daniel says: January 27 2016 at 4:52 pm Having now gone through the whole of week 1, I’m beginning to doubt this course will provide anything but TINA, the current austerity narrative we’re exposed to in the media. For example, I’ve already seen the “burdening future generations” argument against public deficits used by the tutors, with no mention that running surpluses now would likely leave no improvements to infrastructure, health, education et al to those future generations, and that selling public assets (privatisation) is a good way to reduce debts, again no mention of the loss of future revenue or services! I’ll stick at it (only 4 weeks long) but hopes are not high! Ivan Horrocks says: January 27 2016 at 6:35 pm Daniel I signed up this morning but haven’t ventured into the material yet so interested to hear your views. I did have a look at the staff team (not least because I work at the OU – who own FutureLearn) and wondered what their “take” on public finance might be. It seems they are mainstream – as might be expected. Richard Murphy says: January 27 2016 at 8:14 pm Disappointing David says: January 28 2016 at 3:32 am @Daniel Have to say your right. It does seem to have political overtones, for example, they are regularly using the phrase ‘PRINTING MONEY’ which is often used to disparage non-austerity viewpoints. Keith Fletcher says: January 28 2016 at 10:14 am In the US for many years it was taboo, if not completely forbidden, for schools or universities to teach anything about Marxian views on economics or philosophy. Even now it is rare for this to be present on most “mainstream” courses. It is not surprising therefore that so many educated Americans have no concept of any viable alternatives to capitalism and constantly rely on “conventional thinking” to guide them. It is the equivalent of teaching history and deliberately excluding any understanding of Galileo or the Enlightenment. Fortunately we are a little better in the UK, but I wonder how many university students who have studied economics have really been allowed and encouraged to explore the real depth and history of the subject and the rich thinking that embraces all sides of the economic debate? I have a real fear of indoctrination and instruction re-appearing (or remaining) in all of the so called social sciences (as it once was in religion and still is in many countries). This is perhaps the biggest danger for our society and others when our young (and not so young) people are not encouraged to think freely and understand the world they live in through the observation of reality rather than trying to fit life to conform to any particular theory. Richard Murphy says: January 28 2016 at 11:32 am Marx is taught at City on the IPE course I am not sure about economics Simon says: January 29 2016 at 3:42 pm Marx seems to be linked with Sociology and politics. His basic insight that economics is a system of social relationships and arrangements which is NOT God given is still a dangerous insight in the world of economists. Keith – think the indoctrination you fear is already firmly in place, in my opinion it is a noxious cocktail of free-market fundamentalism backed up by dodgy evolutionary psychology this forms the following ‘feedback loop:’ 1. Human beings are always wanting to gain advantage over each other (choose suitable dodgy analogy from animal kingdom) 2. The free market is based on manipulation and the desire for advantage and utility maximisation. 3. That’s because of-go back to 1. Marx’s was interested in Darwin but he was aware that our institutional arrangements are cultural developments and are by no means ‘hard-wired.’ Keith Fletcher says: January 31 2016 at 2:11 am I agree that Marx at heart was a philosopher, social observer and moral thinker – not really an economist as that term had barely emerged in the academic lexicon during his lifetime. I am not a convert of his or any other particular economic or social philosophy. But to exclude any particular great thinker from academic studies is dangerous because there is so much to learn from considering how all these complex minds struggled to come to terms with the world around them at the time they were living. My own view is that to try to understand the real world in an economic sense requires a wide variety of philosophical, moral, historical (and therefore political) contexts. Our individual concept of the world can only ever come from two sources: 1. our own understanding of our experiences, observations and sense of reality we have gained from living in the world 2. our understanding of other peoples shared understandings and observations of the world (through books, lectures, blogs, videos, etc. etc) So coming back to my fear of indoctrination in academia, my concern is that people are no longer encouraged to see the real world they experience for what it is right now, but rather than what they are told it should be according to how others would like it to be perceived. Translating that idea to tax for a moment, I think that is where Richard has helped shine a light on this particular subject as he explains things clearly to people as they exist right now – warts and all! As opposed to what others would like you and I to believe because it suits their personal or financial interests. That is where the real danger lies.