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Thursday 30th June 2022

Monday, April 11th, 2016

 A chorus of discontent has emerged from the academy against the way economics is taught. The chorus has consolidated and diversified across the globe forming an orchestra of admirers of the economic epistemology but disgruntled at its pedagogy. Known more broadly as the Rethinking Economic movement, its intent, according to its website, is to demystify, diversify, and invigorate economics. It achieves this by forming groups around the world committed to discussing, strategizing and altering the economic curriculum, moving it away from its current preoccupation with Neoclassical thought and strident empiricism, and towards accommodating the plurality of economic thought.

A key supporter of the movement is Cambridge University’s Ha-Joon Chang, a Reader in Economics. He has yet to become a full professor, due to what he believes is his criticism of the orthodoxy, but he shows no signs of changing his point of view for the luxury of career progress.  Economics: The User’s Guide is, therefore, far less objective than its title would imply; Chang’s opinions shines through with palpable intent as he tries to provide an exposition of the subject of economics.

The objective of Pelican books, published by Penguin, was to provide cheap, accessible explanations on non-fiction, specialist topics such as economics. In short, Chang was purposed to demystify economics to the non-specialist, an irony considering his support for the Rethinking Economics movement. Indeed, the book is not so much an introduction as it is a ‘manifesto’ as John Sunyer in his review for the FT described it. Chang is visibly upset that the subject he holds dear has descended into scientific babble.

Economics has become exceedingly mathematical.  Chang’s employer, Cambridge, requires Higher Level Mathematics, not Economics, for entry into undergraduate studies.  Thereafter the economic odyssey for the student is repeated confrontation with calculus in order to understand macro and micro economics. This was not always the case. Adam Smith, considered the father of economic thought, wrote his two masterpieces as philosophical investigations on the economic behavior of man and state. His first book was even titled The Theory of Moral Sentiments. In the 19th century, a shift to a more scientific approach paralleled the intellectual zeitgeist of the time. The positivism of David Hume was profoundly influential on the physical sciences, encouraging thinkers to view the world as rationally explainable, without need of the thaumaturgy of religion. An emerging class of economists, such as UCL’s William Jevons and Cambridge’s Alfred Marshall, affixed to this idea with aplomb and sought to construct economics under the same paradigms. Marshall was instrumental in moving economics from being taught under the banner of moral philosophy into an independent subject, scientific in its approach, replete with equations that would not be amiss in a physics class. Rapidly, economics became a niche of mathematics.

Chang is clearly unimpressed with this mathematical obsession. Economics is a study of human behavior, and behavior is notoriously whimsical. In consequence, attempting to structure economics as a series of certainties is opening the subject up to the failure of theorization in explaining the real world or obscuring the subject sufficiently for people to be uncertain as to its relevance. Just as the study of pure mathematics can often times tend towards the arcane, economics has grown more turgid to this effect. Hence, the economics profession encountered an intellectual thrashing following the Great Recession of 2007 for its inability to be sufficiently prognostic.

Economists were accused of unflinching support for neoclassical thought. Chang takes a bat and repeatedly batters this school throughout the book. He is keen to show that economics is a philosophical endeavor with amorphous boundaries. There is no one theory fits all, and each theory has its strengths and weaknesses. However, each theory has to be measured against the reality of the world it is seeking to explain. While he does not conclude that ineffectual theories should be abandoned, he does expose the occasional incongruence. Theories on GDP measurement, bounded rationality, the Kurznet’s curve, conceptualizing employment, efficient hypothesis theorem, and others receives censure from Chang’s deft penmanship. Indeed, Chang writes with clarity and clear prose, which unpacks impenetrable aspects of economic thought.

The book is divided into two sections. The first section explores the purpose of economics, expressly wanting the reader to “get used to it (economics). It provides a brief history of economic thought and the growth of capitalism, before explaining the importance of an economist in understanding the world. The second section reveals the practitioners practice of economics, or as entitled “using it”. Each chapter is essentially a sub-topic of an economics curriculum: macroeconomics, microeconomics, financial economics, development economics, labour economics, and the political economy. These chapters present theory followed by real-world statistics to show, more often than not, how theory has diverged from fact. The problem is that this can appear too self-righteous. Economics, like any subject, is polemical, and differences of opinion will be manifest, especially when it comes to measurement and interpretation of statistics. Chang himself acknowledges this, even quoting Benjamin Disraeli who said “There are three kinds of lies: lies, damned lies, and statistics”.

Nevertheless, his overarching argument is that economics should not be parochial and self-aggrandizing. In this regard, the book is successful in highlighting the kaleidoscope of economic thought.  Hence, it would not be out of place as a preliminary text to the study of economics in university. It accentuates key economic terms (market failure, oligopoly, Gini’s co-efficient) in bold although it misses other important concepts such as marginal utility. Chang is also adept at bouncing from theory to practice, which is assuring for those that believe the probative value of economic theory lies in practice.  Overall, this is a thoroughly good read, and a commendable ‘manifesto’ for the Rethinking Economics movement. For the orthodoxy, however, it is worthy of a read, but unworthy of effecting change. The heterodox Chang probably knows this to be the case all too well.

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Rizwan previously worked at the World Bank, Human Rights Watch, and Imran Khan & Partners. Since 2008 he has been...
read more about Rizwan Rahman