Econocracy? More Like Idiocracy!

On Newsnight last night, there was an interview with an economics student called Joe Earle, who has co-authored a book entitled Econocracy (article link below) that has gone on to create a new student movement that looks to challenge how economics is supposedly out of touch with reality and defined by the views of the elite.

The founders of Econocracy, as the title suggests, want to make economics less about the wisdom of economists and more about the views and beliefs of our democratic nation. By making their discipline all-pervasive, the author argues that economists have turned the subject of economics into too much of a scientific discipline in a way that apparently undermines the democratisation of economic viewpoints:

“We live in a nation divided between a minority who feel they own the language of economics and a majority who don’t. As Ed Miliband and Jeremy Corbyn have found, suggest policies that challenge the narrow orthodoxy and you will be branded an economic illiterate. Academics who follow different schools of economic thought are often exiled from the big faculties and journals."

Alas, the book's authors and the reviewer in The Guardian do not really understand what is actually happening, and this is because they are missing the most important point - that despite highly charged protestations, most people really are very unapprised of even the basics of economics, and it is only because their views are subjected to rigorous analytical and empirical scrutiny that they find themselves on the periphery of rational enquiry.

To give you a fourfold and very topical example, in recent times we've seen evidence presented that tuition fees do not reduce the number of working class students (as Jeremy Corbyn claims); that Corbyn's favoured living wage increase has been shown in Seattle to engender all the negative outcomes economists have been warning about for decades; that Corbyn's favoured increase of corporation tax has been shown to be a simple sideways transfer of costs picked up by staff and by consumers and being unbeneficial to those struggling; and worst of all, that Corbyn's fairly recent praise for Venezuelan socialism and his desire for Britain and America to adopt that model as a 'rejection of neo-liberalism' is without question one of the most foolish and dangerous assertions any modern politician has made.

 

Now, if Corbyn and his cult of personality acolytes were in any way friendly to empirical evidence - that is, open to what is actually true and factual about the consequences of their views - they would humbly repudiate those four false beliefs, and honestly declare that a rethink of their position is necessary. But you just know that is not going to happen, because what these people care about is not what is true and factual, it is what best serves their own interests.

Of course, economics didn't need those four evidential examples to feel vindicated - this is what economists have been arguing for decades, and this is what the Econocracy crew do not get - economics is not for the elite because it is elitist, it merely appears to be for an elite group because that group contains a relatively small proportion of society's individuals that actually care about the truth and understand the evidence and logic to arrive there.

So when the author says “We live in a nation divided between a minority who feel they own the language of economics and a majority who don’t.", well yes, we do, but that is not really any different from a pastor in a predominantly young earth creationist church saying we have a few evolutionists in this church who feel they own the language of biology in a majority church congregation that don't. Quite! If you marginalise yourself by believing foolish, counterfactual things, expect to find yourself marginalised from the mainstream.

That is also why, when the author says "As Ed Miliband and Jeremy Corbyn have found, suggest policies that challenge the narrow orthodoxy and you will be branded an economic illiterate" - well again, yes, if you publically hold beliefs that are economically illiterate you will be branded an economic illiterate, just as if you go around breaking people's garden fences, plant pots and car wing mirrors, you will be branded a vandal. If the cap fits, and it has your name on it, you are going to find a lot of people asking you to wear it.

Economics as a science

Economics is scientific, so it is only democratic to the extent that people value evidence or don't value evidence. Economics is about human preferences and behaviour played out in the form of mathematics. Therefore although it falls into the category of soft science, it is an empirical science nonetheless. For example, indifference curves represent a series of combinations between two different economic goods, and they play out in geometrical terms when slopes of indifference curves on a graph reflect marginal value. Economics is a proper empirical method for assessing what humans prefer given many combinations of goods.

If this process is interfered with in a way that imposes unnecessary costs on individuals that know their own preferences more than politicians, then economists understand in advance why the ill-effects of scrapping tuition fees, the Seattle-effects of raising the minimum wage, and the consumer-effects of increased corporation tax culminate in undesirable outcomes. 

Try chemistry as an illustration. Chemistry is a noble science, and one which returns reliable and consistent empirical data. The main reason for this is that natural laws that underpin the material constituents are not compromised or retarded through human interference. When considering gaseous compounds, the masses of one constituent that combine with a fixed mass of the other constituent are in the ratio of (small) integers to each other. But, if scientists interfered in this law so that it was no longer obeyed by all gas mixtures, the fundamental constituents of chemistry would be undermined.

 

This applies pretty neatly to economics as well, at least to the greatest degree. Economics resembles science in that its truths are based on empirical observations and patterns distilled from data. If we treated economics as rigorously as we did chemistry we would find one of the golden rules of economics - the fundamental principle of least resistance (otherwise known as maximum efficiency) - playing out much more prominently, and economic growth happening even more readily.

 

The upshot it, the only way that the Econocracy movement is going to get its wish for a more ubiquitously democratic economic discipline is when there is a more ubiquitously informed society. Economics is a bit like string theory in that only a relatively small proportion of society understand it. The main difference though is that with string theory most laypeople do not go around opining as though they are experts in the subject.

* The article about Econocracy in The Guardian.