Can economics explain everything and solve all our problems?

Deane, Kevin (2020). Can economics explain everything and solve all our problems? In: Deane, Kevin and Van Waeyenberge, Elisa eds. Recharting the History of Economic Thought. London: Red Globe Press, pp. 287–302.

URL: https://www.redglobepress.com//page/detail/Rechart...

Abstract

Economics, in its mainstream guise, has begun to permeate popular culture in the form of an expanding range of books that seek to provide explanations of human behaviour and society through the application of standard neoclassical economic tools and principles. Current well-known books, generally targeted at the general public and positioned as an attempt to demystify and promote economics, are titles such as Freakonomics (Dubner and Levitt 2006), The Undercover Economist (Harford 2007), and The Economic Naturalist (Frank 2008). The topics of these books are not necessarily the economy, but rather take an economic approach to a wide range of issues such as whether sumo wrestlers cheat (Dubner and Levitt 2006), why American teenagers are having more oral sex (Harford 2007) and why your fridge has a light but your freezer does not (Frank 2008). Whilst the need for these issues to be explained or not can be debated, the manner in which they are approached is illustrative of the way that economic tools are applied to topics that are not traditionally considered to be within the scope of the field of economics. These books are very clear about the sort of economic principles that are being applied. For example, Frank (2008) discusses the opportunity cost and the cost-benefit principle (essentially the marginal principle) in which the additional benefits are weighed against the additional costs (of a given action), and Harford (2007) places central importance on the rational behaviour of individuals (see Chapter 2) as a vital tool in helping us peel back the layers and understand the complexity of the world around us (Harford 2007). These principles have been discussed at length in this book, and should be recognisable as central to the standard textbook economics that most students are exposed to. The importance of this application of the core neoclassical concepts also rests on the degree of explanatory power ascribed to this framework, with Harford noting that ‘if you do not understand the rational choices that underlie much of our behaviour, you cannot understand the world in which we live’ (Harford 2007), and Frank (2008) claiming that ‘economics explains almost everything’ (Frank 2008).

The final chapter of this book discusses the question of whether economics can explain everything and solve all our problems. As previous chapters have shown, economics as a discipline addresses many important issues that are related to our daily lives and the society that we live in, from shedding light on questions concerning why and how we consume products (Chapter 5), how we produce these goods in the first place (Chapter 6), to broader issues concerning global economic crises (Chapter 10), the environment (Chapter 14), and gender relations (Chapter 13). This has hopefully convinced the reader that economics, in its many and varied guises, has something important and unique to say about the real world. Further, the motivation for this question arises not just from the books discussed above that lay claims to the explanatory power of the mainstream Neoclassical framework, but a general recognition that economists working from different perspectives throughout the recent history of economic thought have exerted great influence. As Heilbroner (2000) notes:

[The great economists] commanded no armies, sent no men to their deaths, ruled no empires, took little part in history-making decisions. A few of them achieved renown, but none was ever a national hero; a few were roundly abused, but none was ever quite a national villain. Yet what they did was more decisive for history than many acts of statesmen who basked in brighter glory, often more profoundly disturbing than the shuttling of armies back and forth across frontiers, more powerful for good and bad than the edicts of kings and legislatures. It was this: they shaped and swayed men’s minds.

This chapter will compare and contrast a range of approaches that put forward claims of the overarching explanatory power of economics and the ability of economics to solve all our problems. The chapter commences with a comparison of the Neoclassical and Marxist frameworks, which both lay claims to an expanded explanatory power, though in very different ways. This is followed by a discussion of Keynes’ views on the power of economics to solve the central human problem, and his speculation that this could lead to a downgrading of the importance of economics. However, alternative approaches view economics as the problem, including calls for a new direction that focuses on human well-being and sustainability above economic growth.

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