Three useful things to know about economists
Conflicting visions obscure the road to appropriate and realistic policies
As a social science, economics has been described as dismal but it has also given rise to levity. Such as asking an economist for her phone number and she gives you an estimate. Or that economics is the only field in which two people can share a Nobel prize for saying opposing things.
The uncertainty of economic predictions famously exasperated US president Harry Truman, who cried: “Give me a one-handed economist. All my economists say, 'on one hand' ... then, 'but on the other …'.”
However circumspect their forecasts, economists are influential in public life: setting policy as the heads of most central banks and as key advisers to branches of government, financial institutions, regulatory bodies, corporations and more.
Geoff Harcourt AC, now an honorary professor in the school of economics at UNSW Business School, has been a distinguished and much-published academic economist for more than 60 years, teaching mainly in Adelaide and Cambridge.
Here, he provides three insights for understanding economics.
“How economists ‘do’ economics depends on their ‘vision’ concerning what makes economies and societies tick,” says Harcourt.
“There are two conflicting ‘visions’. The dominant mainstream one sees the consumer queen attempting to maximise her lifetime expected satisfaction by choosing between consumption and saving, with all other decision-makers and institutions dancing to her tune.
“The main alternative approach sees, at the driving force, the swashbuckling and ruthless capitalist class (industrial, commercial and financial) for whom profit-making and accumulation of capital are ends in themselves.”
The wolf pack
“Allied with these two alternatives are contrasting views on what constitute the principal processes characterising major markets and, indeed, whole systems,” says Harcourt.
“The mainstream stresses strong and stabilising equilibrating forces at work, at least over the long term. The alternative stresses cumulative causation forces – either virtuous or vile – dominating.
“The differences between the two may be illustrated by a wolf pack analogy. Consider a wolf pack running along. If some wolves detach themselves from the pack, in the mainstream’s view strong forces come into play to return them to the pack.
“The other view has forces coming into play which take the detached wolves further and further away from the pack, either in an upward direction (virtuous) or a downward one (vile), at least for long periods of time.”
“Many non-mainstream economists agree with John Maynard Keynes that economics is a branch of moral philosophy,” explains Harcourt.
“Economics was not, therefore, an intellectual pursuit in its own right but the means to the end of creating a just and equitable society through realistic but appropriate policies. Especially making policy to protect those least able to protect themselves.
“The mainstream is much more inclined to regard economic analysis as value free and objective. That this was not so, that ideology and analysis were indissolubly mixed, has been argued by outstanding progressive persons. The most important of whom, in my opinion, is the late Hugh Stretton, whose 1969 book with Routledge, The Political Sciences, is now a classic.”