Firstly, there are lots of economic theories and practices guided by those theories- there is not just one economic theory, although people tend not to realise this. Some theories may be better than others. However, evaluating different theories is not the point of this post.
Nearly all economics faces some incredible difficulties.
- Economics tends to be caught up in social values. After all, economic theory encourages behaviours, forms of organisation, government policies and aims for particular results. It is difficult to conduct social theory without importing values into it, and much harder to be objective about such issues, than it can be when studying physics for example. I suspect that values cannot be separated from what a person perceives to be reality, and what they ignore of reality. Values can prompt unreality, but we cannot not have values.
- Values also get caught up in the dynamics of politics and power. The economic theories and practices which tend to be well known and used in a society will nearly always be those which support the wealth and power of the dominant groups in that society. Who else gets to promote theories and their proposers easily? Even if the theories were ok, they will be distorted by this practice, and become ideological tools to hide important processes, or to justify inequalities of power and opportunity. We could ask if some action is avoided because of economic damage, what kind of economic damage counts, whom does it primarily effect, and what might be a way of avoiding that damage?
- As a result of these political processes, most current well known western economics, tends to assume that capitalism is an inherent given, rather than one mode of social organisation among many, even in capitalist societies. For example, people generally do not treat their children as only being cheap labor, or as a cost.
- Societies and economic systems seem to be what people call “complex systems”. That means they are composed of ‘events’ which are influencing each other. A theory may have been a good theory, but after a while the practices associated with that theory change the system, so that the theory no longer works – sometimes people say that the system is ‘self-reflexive’. Complexity means that all knowledge is a simplification at best, and that the only accurate model of the system is the system itself, and that reality includes people working with the theories. [This does not mean models of complex systems are useless, they are the best we can do, but they are not completely accurate in their predictions, and this should always be remembered]. ‘Items and events’ within complex systems do not exist apart from those systems, or without being influenced by those systems.
- Complex systems don’t have firm boundaries. Economics, in its current forms tends to forget that John Stuart Mill’s removal of social factors, culture, politics and psychology was only an attempt to simplify the system to make a start at analysing it. He did not, and economists should not, think that economics is independent of these factors. If you remove these factors then you are going to be erroneous.
These factors seem to be relevant for all kinds of social and political understanding. They are one reason it is difficult to engineer a ‘good society’, whether we try to do this by regulation or unregulated capitalism.
This does not mean it is impossible to get a better society, but we probably should remember:
- Our values can distort what we perceive and what we do.
- Models can have values and politics and self-benefit hidden within them.
- Capitalism is not natural, inevitable or inherently good.
- Complexity seems to be a fact of life. Uncertainty, degrees of ignorance, unintended conseuqences, and unpredictability are normal. Useful values and policies probably have to reflect this ‘fact’. Everything we do is experimental, not given as true in advance.
- Different fields overlap. You cannot have a healthy non-ecological politics, or an economics which disregards power, the power of wealth, or the existence of varied modes of exchange.