A genuinely new economics

Several times in the last few weeks, most recently on 17 April, I have attacked the pretensions of the self-proclaimed “new economics”. To me it is remarkable that the elite of economic policy making and academic economists should see itself as an embattled minority fighting a battle against the conventional economic wisdom. It is true that mainstream economics is in a dreadful state but, if anything, its main exponents are likely to take it in an even worse direction.

But what would a genuinely new economics look like? To me the fundamental problem is the real economy is seen as essentially fixed or, to put it in another way, it has become naturalised. The concomitant of the idea that there is no alternative to the market is that the productive side of the economy is not susceptible to fundamental change. It is seen as a natural set-up more than a human creation.

From this it follows that the economy is typically seen nowadays from the perspective of consumption. Humans are vast consumers of resources and therefore creators of problems. Their productive-creative side tends to be downplayed or ignored all together.

There are other related problems with the mainstream view. For instance, it tends to be excessively individualistic. It sees society as essentially an aggregate of individual consumers rather than attempting to understand the relationships between them.

One response to this one-sided naturalistic form of economics could be to go back to the more social approaches of classical political economy. In their different ways the likes of Adam Smith, David Ricardo and Karl Marx were all concerned with the productive side of the economy and humans as social beings. There are certainly valuable lessons to be learned from these thinkers but they cannot simply be applied mechanically to contemporary society. The conditions we face today, both objective and subjective, are different from those in the late eighteenth or nineteenth centuries.

The first step in developing a genuinely new economics is probably to do a critique of green thinking as it expresses at its core the idea the naturalistic conception of the real economy. Powerful critiques of green thinking include James Heartfield’s Green Capitalism and Austin Williams’ Enemies of Progress. Heartfield’s essay on sustainable development in Sustaining Architecture in the Anti-Machine Age is also key. My Ferraris For All is attempting a similar goal to that of Heartfield and Williams by focusing on the discussion of economic growth.

A closely related task is the need to show that problems which appear to be demographic are in fact social. Frank Furedi’s Population & Development looks at the debate about global overpopulation while Phil Mullan’s The Imaginary Time Bomb is a critique of the notion of a demographic time bomb in the West.

James Woudhuysen has produced several key texts on relevant subjects. Energise!, co-written with Joe Kaplinsky, is an excellent critique of the discussion of energy. Woudhuysen has also co-written Why is Construction So Backward?, along with Ian Abley, on the debate about building methods (James Heartfield has written on the related subject of housing in Let’s Build).

Most recently Woudhuysen has been a central figure in the Big Potatoes project which aims to restate the case for innovation on a grand scale. Norman Lewis, who runs the Futures Diagnosis blog, is another participant in the project.

Given the central role of finance in the contemporary economy it is essential that any critique of contemporary capitalism examines this areas in detail. My Cowardly Capitalism is essentially a critique of how contemporary finance is understood. It argues that the mainstream view fails to appreciate the relationship of finance to the real economy or the importance of risk aversion. The book is highly relevant to the current discussion of finance although I regret not having had time to update the book to taken in the recent debate.

Important work on the discussion of development has come from several authors. David Chandler has written a critique of the notion of human rights, Ha-Joon Chang has redefined development as economic transformation, while Vanessa Pupavac has written on therapeutic governance.

There are several good studies of the benefits of economic growth and modernity. Key authors to read in this respect include Robert Fogel, Indur Goklany, Bjorn Lomborg, Matt Ridley and Michael Specter. Robert Paarlberg is good on food policy – particularly the importance of raising agricultural productivity.

Several websites provide useful material on these themes. Spiked runs many articles from broadly pro-humanist and anti-green perspective which are relevant to economic debates. Many of the authors are already named while Brendan O’Neill, its editor, has contributed several key articles, perhaps most notably attacking Malthusianism. Sean Collins writes on America and economics for spiked as well as for his American Situation blog. Rob Killick’s Post-recession blog is a useful attempt to grapple with the discussion of the British economy. Worldwrite tackles many of these themes, including development, in a more popular form and through the medium of video.

Links to most of these authors and websites are provided on the links page of this site.

Of course what I have outlined so far, while extremely important as a starting point, only represents a kernel of what is needed to develop a new economics. All of the subjects I have outlined could do with being examined in far greater detail. There are also other topics which have so far been hardly touched. Among the latter some important areas which demand further examination include:

• The impact of the rise of China and other emerging economies.
• The economics of climate change.
• Environmental economics.
• The attack on GDP.
• The financialisation of the economy.
• Behavioural economics.
• The redefinition of development.
• Studies of the state of the economy in key developed nations including America, Japan, Germany, France and Britain.
• The crisis of the euro-zone.
• A critical examination of the works of the most influential economists including Paul Krugman, Douglass North, Jeffrey Sachs, Amartya Sen, Vernon Smith and Joseph Stiglitz.

I would particularly welcome comments on this post. I have no doubt there is much more to be said on the topic.

* Additional note (15 May). I should have included Jim Butcher’s The moralisation of tourism and his Ecotourism, NGOs and Development are key readings on development. A new reading by Jim Butcher and Peter Smith, ’Making a difference’: volunteer tourism and development (only abstract available on internet), in Tourism Recreation Research also looks at changing perceptions of development.

* Another note (6 August). Just realised I made the serious mistake of omitting Ben Hunt’s The Timid Corporation (Wiley), about risk aversion in the corporate sector, from this list.