Friday, June 3, 2011

Econ and Philosophy

One of the major things I learned in economics was that the world, according to economists, can be reduced to equations. These equations range significantly in complexity, but the end result is always the same. A series of numbers and symbols that represent the state of affairs in the world. For these equations to be in balance, the relative number of each symbol has to adjust accordingly. The idea is that the inputs equal the outputs and there is always a trade-off.

When the world is reduced to numbers, messy things like emotions, suffering, and irrational choices do not have to be accounted for. In a lot of respects, that is what we call the western perspective. The western way, leads to western development schemes, and western philosophy, and western democracy. Eventually the hope is that there will be a uniform way of doing things that leads to a rational world where our economic systems function perfectly.

Of course that isn't the case. And I fundamentally believe that the problem lies in our basic units of measurement in economics—money, utility, and productivity. Utility is supposed to mean happiness, and it is quantified as a precise unit. Money is of course any form of currency that is used to exchange goods and services. And productivity is how we measure output versus input, the lower our inputs and the higher our outputs, the better our productivity.

This works great in helping economists balance out their equations. There is a certain amount of precision involved in worlds where the very intangible actions that we do everyday result in more money, productivity, and utility. There is also something fundamentally missing from using those measurements.

To some degree, modern philosophies of development have tried to alter that perspective. The Human Capabilities Approach and the Sustainable Development Approaches to development and economic systems look at a wider range of criteria for judging the effectiveness of an economic system or program, but they have little to offer in terms of restructuring macro-scale economic structures or even to influence the underlying philosophy.

So here is my proposal for how I believe economists and economic policy should always be evaluated. First, money, productivity, and utility should be evaluated not as entities in themselves, rather they should be looked at like words—descriptive bits. These bits provide insight into what the meaning of the word is, for example an apple, but it does not add anything to the actual noun. An apple is an apple and will continue to be one irrespective of what a human calls it. In the same respect these units of measurement—over simplifying reality—represent a nation, a state, a structure, and fundamentally a human. We seek, through analysis and policy recommendations to constantly improve the human condition. Economics, the study of how we deal with standardized transactions, was created to better understand how to improve our lives through these systems. To make policy recommendations without regard to that piece, we miss the greater goal.

It is not idealism to understand that economics is not just a study of what is, but also of policy recommendation. That means that the field uses the scientific method to evaluate the present and make not just accurate predictions about the future but also to make policy recommendations that can be followed. If we sacrifice higher employment for higher “productivity” (an absurd equation of measurement that puts jobs in conflict with output) then we miss the greater point. The point of economics is to understand our transactions to improve our quality of life. Money is not a precise measurement of happiness, and the vague way that we quantify utility is not a real measurement of my quality of life. So what do I propose?

I'm not sure, perhaps I am proposing that economics modify its stated goals. That perhaps it pursues a different line of thought. Perhaps economics should really be the study of standardized transactions and how those transactions can modify the quality of life for individuals, groups, and nations. I'm not a neo-marxist, I'm not trying to overthrow any established systems. I suppose I am asking for open-mindedness. Chemistry was not initially the study of atoms and how they interact together; it evolved with the discovery that atoms are the building blocks of the materials that they sought to manipulate and understand. Open-mindedness is the biggest virtue of science; a willingness to change. Economics to continue as a respected social science, in line with the scientific method, should at least be willing to experiment with its potential as an agent for change and deeper understanding. Economics is not the study of equations and numbers, vaguely and incompletely symbolizing the human condition, rather it is the study of how the transactional institutions we have set up affect our lives in both a positive and negative way.