News Category: #politics

Economics is sometimes still seen as being the preserve of an exclusive group of specialist experts; but to address the complex challenges that society faces, we must draw in a wider, more diverse range of perspectives into the space – argue members of the Y-PERN team, including Tom Haines-Doran, Rebecca Kerr, Jamie Morgan and Andrew Brown.

Conventional thinking sees economics as a specialist discipline, very distinct from other areas of enquiry and debate. A classic divide is politics from economics. While TV and press news platforms typically lead with the politics of the day, economics tends to be reserved for a section towards the end. The language is different too: while editors make an effort to make political news intelligible to its target audience, financial reporting is replete with esoteric language, which assumes a high degree of financial literacy not possessed by the vast majority.

“As the Y-PERN project continues, we aim to show that a pluralistic approach to economics, that welcomes rather than ‘colonises’ diverse academic disciplines, can be even more inclusive and relevant to real world policy challenges.”

– Tom Haines-Doran, Rebecca Kerr, Jamie Morgan, Andrew Brown and the Y-PERN team

The form of this separation also implies that, while politics is a legitimate arena of mass debate and discussion – a situation presumably necessary for liberal democracies to function – economics is not. Understanding economics, by contrast, is for experts with the right training. And while these experts might have the credentials to play in this exclusive casino, none of us has the ability to re-write the house rules. Whereas politics can change – sometimes dramatically – the fundamentals of the economy tend to be presented as ever-present and natural.

In the academic world, the separation between economics and other disciplines has a remarkable history, in three phases (our brief account below adapts that of Ben Fine.)

“Academic experts in, say, employment relations, education, or sociology often do not see themselves as ‘economic experts’ …. [yet] their knowledge counts as economic knowledge which can be used in economic applications.”

Y-PERN team

The evolution of economics

The roots of modern economics lie in the ‘marginalist revolution’ towards the end of the 19^th Century, which created a situation whereby economics could claim to describe the functioning of the economy, while the other social sciences’ role was to explain everything ‘non-economic.’ This meant a bifurcation between economics and the rest of social science. For those in the latter camp, economics could not be incorporated into to their methodology, except as a taken-as-given outside influence on social phenomena.

The revolution did not take hold immediately but by the mid-twentieth century, marginalist economics had become firmly established as definitive of economics per se: a highly technical and mathematical ‘science’ of optimising individuals and firms, of perfect markets, and efficient market equilibrium. At its core was the notion – often rejected by other social sciences – that people in an economy are no more than individuals out to optimise their ‘utility’ (or hedonistic pleasure) through rational decisions in market transactions.

PHASE 2: From roughly the 1950s to the 1970s academic economics remained in this form largely isolated from other disciplines but with notable exceptions: public choice theory in politics, cliometrics in history, and the economics of education. These exceptions treated the non-market world exactly like a perfect market. They were the first form of what has been termed ‘economics imperialism,’ a form superseded by the phase that followed.

PHASE 3: Thanks to its success within its own field, and to important ‘tweaks’ in its content, standard economics was, from about the 1980s onwards, able to import its techniques and assumptions to resolving non-market questions. It did so typically through relaxing one or more standard assumption whilst retaining the others, e.g. a shift from ‘perfect’ markets (where agents are assumed to know everything), to ‘imperfect’ markets (where they are not). Returning to the field of politics, this phase has seen the widespread application of game theory.

A new public face or one-way street?

In the development of phase 3 in the last 20 years or so, more and more standard economics assumptions have been relaxed in one or other branch or application, including the assumption of optimising individuals. We have agent-based modelling, behavioural and happiness economics, (nudge theory) social capital theory, and so on. These are applied to a wealth of new kinds of data, often ‘throwing in’ a mix of variables – some that derive from optimising principles others that do not, for example in applications new growth theory.

These latest developments have given economics a new public face, in popular books such as Freakonomics, and led some to question if there is any core theory to mainstream economics beyond a general insistence on mathematical modelling. However, through our work in Y-PERN, we have found that the separation that began with the marginalist revolution has been nuanced and hidden, but not bridged. In particular:

• the core marginalist economics principles, centred on optimising individuals, remain dominant at the interface between economics and policy.
• economics continues to be regarded as a specialism only understood by highly trained practitioners, such that the breaking out of this core to other social sciences is still typically a one-way street.

The need for new perspectives

This creates significant problems for any project such as Y-PERN. Y-PERN’s mission statement is to connect and convene expertise across Yorkshire’s sub-regions to meet local policy demand and local expertise. Inevitably this leads us to consider fundamental questions of economics, simply understood as the study of the production and distribution of natural and human-produced resources. Most obviously, where public services are concerned, there are questions about who should get what and how, and how this will be provided and paid for, and by whom?

These are not just questions for the economics discipline. Depending on the specific public service in question, then a wide range of disciplinary expertise will be relevant – to take the example of childcare provision then this requires sociological, psychological, educational and employment relations expertise. Two difficult questions must therefore be answered:

• How, in practice, can diverse disciplines be brought together when they respectively involve opposing underlying assumptions (e.g. qualitative vs quantitative, individualistic vs wholistic)?

• Marginalist economics, as its name implies, applies best to small-scale (marginal) change, so what form of economics and what form of interdisciplinary synthesis should be undertaken for cases of large-scale (‘non-marginal’ or ‘transformational’) change?

Rising to complex challenges ahead

To meet these challenges Y-PERN champions a pluralistic approach – which means taking advantage of the full depth and breadth of systems-based and place-based academic expertise across Yorkshire and the Humber, regardless of disciplinary origin, and inclusive of multiple approaches to economics. A pluralistic approach that is both quantitatively and qualitatively rigorous, that integrates individuals and social structures, can play an important role in helping local and regional authorities make public policy decisions.

Our pluralistic approach is not without challenges. Recent experience in creating calls for evidence for local policy partners has found some reticence from our academic colleagues in ‘non-economic’ fields to take part. Academic experts in, say, employment relations, education, or sociology often do not see themselves as ‘economic experts’, despite the undoubted importance of economics in policymaking in their fields’ attendant spheres of application. We have at times found it difficult to persuade experts that their knowledge counts as economic knowledge which can be used in economic applications.

Yet, the complex policy challenges we face – e.g. planetary collapse, inequality of wealth and of health, and ongoing austerity – are, we believe, undermining previously commonsense notions of what does and does not count as economics and economic evidence. As the Y-PERN project continues, and looking towards its longer-term impacts, we aim for our practice to show that a pluralistic approach to economics, that welcomes rather than ‘colonises’ diverse academic disciplines, can be even more inclusive and relevant to real world policy challenges.

The Y-PERN team is planning to explore the issues discussed in this blog further as part of upcoming events and workshops. You can find out about these by signing up to our newsletter – or you can visit our webpages if you’re already interested in getting involved in Y-PERN.

Academics from any field are also welcome to reach out to the authors to discuss the points raised in the blog or submit a comment below.