Economics is the primary institution of our modern age. It frames our concept of the good life, it provides tools for achieving it, it animates our disagreements, dreams, dramas, and, at its core, it is a mystery around which taboo, inclusion, wealth, power are determined.
This is not yet the place to question its scientific credentials - which is how it achieved primacy, profiling itself as the science of everyday life. Nor is it a place to attack the embedded ethics of any particular economics.
First, I want to look at the framing effect that economic thinking has on society. This is the most powerful its effects - because universal, unnoticed and as such even shared across divides.
It's well-known that economics as a word comes from the ancient Greek οἶκος + νέμω: 'the management of the household'. This is the metaphorical sense in which economics claims to be the science of every day life.
It makes sense: is there grain in the jar? if not where will it come from? which grain should be bought, for what price? should we buy more grain or more oil, with the limited resources available?
It's also remarked that the word ecology, comes from a similar Greek root: οἶκος + λογία, 'the study of the household'.This conceptual and metaphorical brotherhood should have invited deeper collaboration between economics and environmental scientists. But already, a check of these etymologies lets us surface a conceptual residue, framing, that is not part of the active debate on economics, and more or less never has been: what we mean by household, what is it we are managing?
Economists answer this with a recursive premise: what is being 'managed' in economics is ... that which needs to be managed. This works on the surface, very well:
if the grain is running out, get more grain; economics tells you how.
But if the question of what is being managed is probed deeper, this approach runs out of road. What happens when what needs to be managed in the household is … the house itself. What actually is the role of the house in the 'management of the household'?
When you worry about grain running out and how to solve it, the empty jar that needs filling, the shelf on which it sits, and the kitchen in which you cook, and finally house in which you eat and do everything else, are all taken for granted. More precisely: there is context that is stable, static, and not subject to the constraints and questions of the urgent questions of the day, in any formulation of economic activity.
Economics does have vague tools for describing things that don't change very much, or at all, during normal economic activity. These include amortization and economic rent. But these really only serve as backdrops to the more sexy focus on things that change all the time.
This framing approach, leaving the boring, static, actual house outside the frame of exciting, dynamic, 'management of the household' has two enormous costs.
First: the main debates of economics don't spending time studying the nature of things that don't change very much, that aren't produced and consumed in conventional terms or traded on the market - which means society has limited capacity to understand how these things might influence or govern everything what is inside the frame of economic focus.
For example, if you ask what it is that confers economic rent, rather than profit, the answer you end up with is something slightly mysterious like:
- assets which are not transformed during market activity, but are scarce and valuable
- assets which the market cannot directly produce more of
such as valuable land, or the natural environment, or talent, or intelligence.
It's strange that something so powerful in economics is not more directly inside the frame of focus: how you get hold of and keep rent-producing assets, if the market is not producing more of them, ought to be a central question! But it's even more worrying when things go wrong with these things that are not inside the frame - and economics doesn't have a good answer for what to do.
The second, most harmful, framing effect of economics is the implication that what is valuable is is what is managed: in leaving the 'house' outside the frame, its value is lost to view, and only the grain, and the resources and efforts expended to get more, are associated with economic value.
Ecology, unlike economics, has a conceptual floor for these distinctions: the difference between stocks and flows. The meanings are straightforward: stocks are sets of resources that accumulate and then don't change very much, flows are sets of resources that change from moment to moment. In ecosystems, these differences are evident: tree trunks are stocks, water flowing into and out of the tree is flow; the body of a butterfly is stock, the air currents on which it flies, and the energy flowing through its wings, are flows.
What has happened in economics, which is devastating, is this: flows of resources constitute the market economy, and when they flow correctly, wealth is created; stocks of resources are ignored entirely…except as inputs to flow. In terms of the ancient Greek economy: trading grain is the market economy, and is how value of every sort of is created; the house in which that takes place is … not valuable, except as something you can trade.
In this way, every attempt to understand the house, as the stable context of the household, or even more scientifically to consider natural resource stocks as the counterweight to flows, ends up mangled by the way economics frames its focus: the market is flows is value—everything else is a distraction.
This biases us to buy, use, and dispose of things on flow-management basis, rather than buy, user and conserve things on stock-management basis. This is surely part of the materialization and consumerization of concepts of human wellbeing that has happened since the rise of economics.
In fact, this first framing effect of economics - the implication that if something cannot be 'managed', if it is not a flow resource trading in the market, then it is not valuable - perhaps underlies or at least gives permission to a whole family of other framing effects: the resistance to the concept of limits.
The smartest responses to the 1970s challenge to economics regarding limits to growth have shown that those limits apparently don't exist. The trendlines, extrapolated from the 1970s, relating to population, resource availability and environmental impact, have proven less threatening over, particularly population growth rates.
But: does the fact that the limits to economic growth conceinved in the 1970s have been proven wrong mean … there are no limits to economic growth? No. And here's the framing issue: yet again, economics refuses to acknowledge a context, in this case limits, to darling economic activity of transformation of resource flows through market trading.
This is not just about environmental resource limits: so much so that we can leave out of this discussion whether other limits might as be pressing in similar ways to those suggested in the 1970s. We are talking here about the general limitability of economic function, not as moral threat, or ecological caution, but as science fact.
What might these be? Well, they are everywhere!
One favourite way in which economists block resource concerns of environmentalists regarding resource limits is with the following legend:
the market will raise the price of resources which are desirable but becoming more scarce, to levels at which they are not longer used or alternatives have become available.
This is very clever - and has proven true in many cases! But what happens if a set of valuable resources become scarce faster than society can find alternatives, or get used to living without them? In such a case, the limit is not the resources themselves: it's the speed of adaptation of the market to its own changing conditions.
How is it possible that brilliant economic minds are not focussed on these other limits, given the potential for economic shocks and damage to society that they cause? You don't need to be an environmentalist to do so.
The limitability of the economy is abundant, when you start looking.
You can see the time required for an economy to adapt smoothly to changing market conditions as an example of a time limit - or of a risk limit, if it uncertain either way. One of the main risk limits for the modern economy is nothing to the environment imposing limits: it's about geopolitical rivals imposing limits.
For example: a lot of anti-environmentalists and new wave ecothinkers are in favour of nuclear fission, claiming it is safe and cheap and doesn't run into the same limits as fossil fuels. But it does run into political limits. Uranium mining is not possible everywhere, and its transport could be restricted in principle anywhere. The risk limit here is the amount of uncertainty or damage an economy could take if its reliance on uranium was tested.
Everywhere you look, there are more limits. And almost all of them are somehow placed outside the frame of economic focus, as they become normal. One of the largest limits, that is somehow enormously absent from economic discourse and policy, is ethical limits.
Milton Friedman said 1970, with refreshing candour, that "the social responsibility of business is to increase its profits", or—the business of business is business. This gloriously unadorned focus on raw productivity ignores limits universally accepted: you cannot just do what you want to make money. Were that the case, organs would being forcibly harvested, children would be working the fields, and grocers would be putting water in milk and chalk in bread.
The invisibility of ethical limits are a great example of the framing effect of economics: we just don't, in polite economic circles, talk seriously about ethical constraints on economic activity, let alone the expansion of them—even while we very while know the economy is already delimited by them, in profound and yet entirely accepted ways.
For some reason, yet again, this removal from view of limits means: we don't want to talk about what kind of metaphorical house we want to live in—with what view, at whose inconvenience, built of what—we just want to fixate on the 'management of the household'. Why is this?
There are more aspects to the framing effect of economics. A final speculation for now might be: losing sight of the difference between making more happiness, and reducing unhappiness.
Economics sometimes premises itself on the notion that human desires are limitless. Certainly, it is hard to disagree with the idea that almost everyone almost always believes they could be at least a bit, and often a lot, more happy.
So, if the economy by design makes more stuff, more cheaply, and people willingly buy it, there's a strong case—which data supports—that economic growth, to a certain degree, makes people more happy. Particularly those who lack basic material satisfactions, including food, water, sanitation.
But is this the same as reducing unhappiness? It's easy—we just did it—to reduce some of the variables to happiness to things that a growing economy can address. But unhappiness appears to be something very different from just a lack of happiness. Economics hides this difference under such ideas as 'utility', and 'revealed preference', but it's not hard to understand that sometimes we want less of things, not more.
How might we show this clearly? From the vast amount of unhappiness still present in rich societies. In these contexts, it's almost grotesquely obvious that at some of the growth in economic activity, ultimately exhibited in the form of consumption or just stored wealthy, is just an attempt to deal with the infected wound of persistent unhappiness by…spraying perfume on it.
This is a tragic mismatch of techniques. You don't heal a wound, by covering it with pretty distractions: you remove the cause, cleanse the trauma site, and let things be. The result is health and happiness.
This is not as abstract as it sounds. The world is not made better by more hospital beds, and more medical treatments performed, per se. It's made better by less fundamental need for them.
Yet again, the framing effect of economics has a profound implication. Not only do we not, but we are unable to, think in terms that challenge the focus of the primary institution of our time. In this case: whether growth of any economic activity is the right or best way to create a beneficial outcome.
Sometimes, if you are running low on grain, a useful thing to do may be something other than 'managing the household' to just get more.
Instead: do you always need or want to eat so much grain? why not buy less grain, so you have time to work less, and then sit back enjoy your fine house? just why is there so much management of the household, once we're all fed and clothed?
To go beyond the framing effect of economics, we may have to find a new primary institution for society, with all the functions that requires, both operational, social, psychological and mythical. This doesn't mean economics isn't used—just that it isn't used for everything.