Excerpted from the Preface and Introduction of How Economics Can Save the World: Simple Ideas to Solve Our Biggest Problems by Erik Angner, published by Penguin Business. Copyright © Erik Angner, 2023. All rights reserved.
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I never meant to be an economist.
If anything, I meant to be the opposite of that. My impression of the discipline was shaped by the economists I saw on TV and in the news. They did not impress.
I went into philosophy of science in part because I was interested in the nature of science and the scientific method, the proper use of science in the policy process, and the boundary between science and pseudo- science. Economics struck me as intriguing, with what I saw as its gap between pretension and actuality.
To make sure I knew what I was talking about, I decided to take PhD-level courses in economics on the side. The experience was eye-opening. The material bore little resemblance to what I had expected. […] In the end I learned two things. One, the public perception of economics is out of whack. (I blame mainly the economists themselves, by the way, for being terrible at describing what they’re up to.) Two, economics offers not only thoughtful analyses about where we are and how we got here, but also actual tools that can help us make the world a better place – a place more for fit for human flourishing. […]
This may surprise you. Many people believe economics is about predicting the stock market, in the best case, or promoting the interests of the ruling class, in the worst case. There are economists who do such things. But as a general matter, it’s not true. Economics has wide scope. It’s not only, or even primarily, about making predictions. It’s not just about the stock market, unemployment indicators, and such. And economists’ proposals are quietly radical. They’re often focused on improving the lives of the least well off – liberating the poor and oppressed, making their lives more bearable and their futures brighter.
What is economics? Where did it come from? What good is it?
Cambridge economist Arthur Cecil Pigou is known as the father of welfare economics. He tried to answer those three questions a century ago. Pigou said that some sciences aim to bear light, while others aim to bear fruit. Some give us knowledge that we want for its own sake; some give us knowledge that we want because it helps us make the world a better place. Some satisfy a purely intellectual craving; some satisfy a desire for social or other improvement. To Pigou, economics falls squarely in the second category. He wrote: ‘It is not wonder, but rather the social enthusiasm which revolts from the sordidness of mean streets and the joylessness of withered lives, that is the beginning of economic science.’
Far from a disinterested, cool, and calculating project, economics sprung from deep disappointment with the state of the world – and a passionate desire to improve it.
As Pigou emphasized, economics was born from frustration with misery and destitution. It’s driven by a desire for social improvement. It thinks of improvement in terms of human welfare. Welfare, in this sense, is what you have when your life is going well. Welfare is what’s good for a person. It’s something that you have – not something that you’re on. So, at a fundamental level, welfare is the subject matter of economics. It’s what economics is about. Improving economic welfare is the central task of economics. It is also what economists are trying to promote in their policy recommendations. It is the fruit of economists’ labour, when things go well. And welfare is the standard of evaluation – the measuring rod by which we can tell if economics is a success or a failure. Economics is, in Pigou’s view, a deeply moral enterprise. […]
Far from a disinterested, cool, and calculating project, economics sprung from deep disappointment with the state of the world – and a passionate desire to improve it. Far from a technocratic effort to tinker along the edges of the economy, economics hoped to rebuild the world and make it better – including eliminating poverty and ignorance. Far from a narrow pursuit focused on money and riches, it is about everything that humans want and need. It’s about everything that helps humans live satisfying, rewarding, fulfilling lives – lives worth living. […]
The solutions may surprise you. Some people expect economists to ‘solve’ every problem by means of privatization, deregulation, or liberalization. Economists do, indeed, sometimes suggest such measures. But sometimes they actively oppose them. The specific advice will depend on the problem to be solved, as well as the context in which it appears – including the values of the people involved. There are problems that economists wish to solve by raising taxes, giving money to the poor, promoting equality, boosting humility, or empowering communities. One thing that these solutions tend to have in common is that they’re far from conservative, in the sense of defending the status quo. Economic solutions are quietly radical – and frequently liberating. […]
The economic way
How do economists know what works? It’s a fair question, especially now that social and traditional media are overflowing with ‘experts’ on every conceivable topic. I’ll give you an idea of what makes serious economics different from that. Economists’ solutions – unlike those of some opinion holders I could name – aren’t just pulled out of thin air. I won’t be able to review the entire empirical record underlying the various solutions. But I’ll outline both where economists’ solutions come from, and what makes economists think their proposals will work.
The conspiracy theorist assumes that everything that happens must reflect some devious design or other. But the economist knows that many social phenomena emerge without there being any design at all.
The key is to understand the tools that economists deploy to investigate and improve economic reality. There are many such tools. Laboratory experiments, field studies, field experiments, and surveys all allow economists to gather data about people’s beliefs, preferences, and behaviours under a wide range of circumstances. Econometrics – statistics for economists – makes the data speak. Theory and models help the economist paint a picture of the world, provide structure for the empirical data, and offer guidance when making inferences. The number and sophistication of tools that economists use to investigate the world keeps increasing. The standard toolkit now includes futuristic brain-imaging techniques borrowed from neuroscience. Such techniques allow us to peek under the hood, as it were, of the brain making choices.
The economist’s toolkit also includes a certain way of looking at the world. It’s the economic way of thinking. The economic way of thinking is a collection of heuristics or rules of thumb. Heuristics don’t in and of themselves tell us anything about the world. They tell us, instead, how to approach it. One central heuristic tells us to think of social phenomena as the unintended and perhaps unanticipated outcome of individual choices. Some people see conspiracies everywhere. The conspiracy theorist assumes that everything that happens must reflect some devious design or other. But the economist knows that many social phenomena emerge without there being any design at all. […]
Why pay attention to economics at all? The most obvious reason is that we care about ourselves, other human beings, human communities, and the world that we live in. It’s not as though economics can answer every question and solve every problem – certainly not by itself. I don’t expect it’ll fix your love life, and it won’t remove pesky pilsner stains from your lederhosen. But insofar as economics can help us improve ourselves, our lives, our communities and the world around us – and it can! – everyone who cares has reason to try to learn what economics can teach. […]
Also on the Forum Network: Why economics is too important to be left only to economists by Diane Coyle, Bennett Professor of Public Policy, University of Cambridge
Every year since 2012, economists and other experts gather in Bristol, United Kingdom, to debate with each other – and their audiences – some of the key economic questions of our time. Diane Coyle, Bennett Professor of Public Policy, University of Cambridge, describes her experience as Director of the Festival of Economics.
The fact that economics delivers solutions– and not just understanding – is particularly important in an era when we’re bombarded with information about the problems facing humankind. Economics can offer some degree of hope, where hope is in desperately short supply. […] You might never have thought of economics as uplifting. And yet, as a thoroughly policy-oriented and problem-focused discipline, it can be.
Learning more about economics is good for another reason: it allows you to make its solutions better, more responsive to human needs. Economic policy requires input from the community and other stakeholders. Economic science, in and of itself, can’t tell us what the most urgent problems are. That’s for the heart (and philosophical reflection) to say. Nor can economics tell us what solutions are morally permissible. It can’t tell us what values are most important, or what considerations should go into its cost– benefit analyses. To be as good as it can be, economics requires community input. Even a well-considered economic policy won’t work in practice without some degree of buy-in from the people on the receiving end. And if it’s going to be implemented at all, it needs to be endorsed by policy makers and the population to which they’re accountable.
To be as good as it can be, economics requires community input.
Learning about economics is equally useful no matter what your politics. If you consider yourself right wing, you’ll find suggestions that comport with pre- existing conceptions. But you’ll also learn that there may be something to be said for interventions that you might associate with the left – giving money to the poor, for example. The same thing is true if you’re left wing. A decent left- wing society can’t be run off of unicorn fluff. It still needs to solve problems of production and distribution. If there are going to be resources that can be used to help the poor and downtrodden, somebody must produce those resources. Managing a decent society – a society you’d be proud of living in – requires economics. [….]
Pigou and his fellow travellers were right. Economics is not perfect, but relying on it is better than not. Economics is a science – yes, like physics. Calling it a moral science is not an oxymoron. It helps explain and predict things that would otherwise be puzzling. And not only that. It upholds the promise of improving our own lives and of making the world a happier, better, and more just place for us and our children. This is particularly true when it comes to the poor and dispossessed – the people whose misery caused Pigou and his fellow travellers to revolt more than a century ago.
Economics really can save the world.
Find out more about How Economics Can Save the World: Simple Ideas to Solve Our Biggest Problems by Erik Angner (2023, Penguin Random House)
Our world is in a mess. The challenges of climate change, inequality, hunger and a global pandemic mean our way of life seems more imperilled and society more divided than ever; but economics can help! From parenting to organ donation, housing to anti-social behaviour, economics provides the tools we need to fix the biggest issues of today. With a healthy dose of optimism, and packed with stories of economics in everyday situations, Erik Angner demonstrates the methods he and his fellow economists use to help improve our lives and the society in which we live.
And learn more about the Organisation for Economic Co-operation and Development (OECD) and its work to build better policies for better lives