Daily BulletinHoliday Centre

The Conversation

  • Written by Graham White, Associate Professor, School of Economics, University of Sydney
image

Prime Minister Malcolm Turnbull recently commented that when it comes to Australia’s energy supply:

“policymakers have put ideology and politics ahead of engineering and economics”.

It’s not uncommon for a politician to accuse other politicians of being subservient to ideology on some issue. But to couch this accusation in terms of a choice between “the economics” or “just ideology” is problematic.

We should be highly sceptical of claims that the pronouncements of economists about real world economic problems stand above any ideological influence. This might in turn allow for a more sober assessment of what economics can and can’t deliver.

There’s a belief, still present within the economics profession and which still finds its way into the education of undergraduate economics students, that economics possesses a box of tools that are value-free, or ideologically uncontaminated. And that somehow this allows for economic statements about real world problems that are free of ideology.

The idea persists in part because it serves a purpose, for some, in providing a benchmark for measuring the “scientific progress” of economics as an intellectual discipline.

But things are less clear when you look more closely at how the box of tools is used.

Take the proposition, for example, that lower prices for goods and services would benefit the consumer, using some measure of consumer welfare. Or that increased competition would under certain conditions lead to lower prices.

Leaving aside the fact that the choice of measure of consumer welfare might itself not be completely untainted by ideology, using these propositions to diagnose real world problems inevitably brings ideology into play.

For example, justifying a policy to promote “efficiencies” in production as a means of achieving lower prices, which might also require people losing their jobs, would warrant some additional reasoning about society’s objectives underpinning the production and distribution of its material wealth.

This is especially the case where the economic toolbox does not support a belief that market mechanisms would automatically kick in to provide employment for displaced workers. Policy prescription in this case is inevitably ideologically laden.

The tool box can also contain, for example, propositions about how the size of the federal government’s budget deficit, the speed at which the economy is growing and the path of public debt over time are all connected.

To turn such propositions into meaningful discussions of economic policy, particularly about government spending, taxation or welfare outlays, requires additional propositions that are likely to be conditioned by ideology. This includes the amount of public debt a country should live with and, more fundamentally, what activities governments should be involved in.

For 20th-century economist Maurice Dobb, ideology enters into the picture as soon as we put the box of tools to work.

In other words, a set of formal economic propositions could only be considered immune from ideology prior to being used as a means of illuminating real world problems. But arguably, as Dobb suggests, at this stage the box of tools has little economic content.

But as soon as these propositions are used to infer cause and effect, and in turn form a basis for policy prescription, ideology inevitably enters into the picture.

Indeed, for some, even decisions about which tools go into the tool box are not completely free of ideology.

The point of all this is not that we should throw up our arms in despair at the influence of ideology in economics. To quote the Austrian economist and historian of economic thought Joseph Schumpeter:

“explanation, however correct, of the reasons why a man says what he says tells us nothing about whether it is true or false”.

Economics and ideology intertwine. This serves as a reminder that the use of economic propositions for diagnosis and policy prescription can be affected by a historically conditioned vision of how things are and “the way in which we wish to see them” (to borrow Schumpeter’s terminology).

Authors: Graham White, Associate Professor, School of Economics, University of Sydney

Read more http://theconversation.com/economics-isnt-ideology-free-and-its-misleading-to-suggest-it-is-74520

INTERWEBS DIGITAL AGENCY

The Conversation

Politics

Closing the Gap Statement to Parliament

Mr Speaker, when we meet in this place, we are on Ngunnawal country. I give my thanks and pay my respects to our Ngunnawal elders, past, present and importantly emerging for our future. I honour...

Scott Morrison - avatar Scott Morrison

Prime Minister Interview with Alan Jones

ALAN JONES: Prime Minister, good morning.    PRIME MINISTER: Good morning, Alan.    JONES: I was just thinking last night when we're going to talk to you today, you must feel as though you've ...

News Company - avatar News Company

Prime Minister Bridget McKenzie press conference

PRIME MINISTER: Good afternoon everybody. The good news is that the Qantas flight is on its way to Wuhan and I want to thank everybody for their cooperation, particularly the Chinese Government as...

Scott Morrison - avatar Scott Morrison

Business News

Top 5 Green Marketing Ideas for Your Eco-Friendly Small Business

According to studies, about 33 percent of consumers prefer buying from brands that care about their impact on the environment. This is good news for anyone running an eco-friendly business. It’s a...

Diana Smith - avatar Diana Smith

Choosing the Right Coworking Space For Your Business

As the capital of Victoria in Australia, Melbourne is inhabited by millions of people and is known as one of the most liveable cities in the world. The latter is due to the city’s diverse community...

Sarah Williams - avatar Sarah Williams

What Should You Expect from A Carpentry Apprenticeship?

Those wanting to pursue a career in woodwork, whether it be to make furniture, construct buildings or repair existing wooden structures, will have to first commence a carpentry apprenticeship. This ...

News Company - avatar News Company

Travel

Travelling With Pets? Here Is What You Should Know

Only a pet parent can understand the dilemma one experiences while planning a vacation. Do you leave your pets at home?  Will you get a pet sitter or someone to take care of them while you are away?...

News Company - avatar News Company

How to Be a Smart Frugal Traveller

You are looking through Instagram, watching story after story of your followers overseas at a beach in Santorini, walking through the piazza in Italy, and eating a baguette in front of the Eiffel ...

News Company - avatar News Company

HOW TO PREPARE FOR YOUR GRADUATION TRIP

Graduation is the stage of life when a student receives the rewards of hard work of years. It must have taken sleepless nights and tiring days to achieve the task. Now, as you have received your cov...

News Company - avatar News Company

ShowPo