Morality and Economics

Posted on September 16, 2009 at 9:10 pm,

Last night on Newsnight, Archbishop of Canterbury made an argument that economics should not be left solely to economists. Implicit in his comments was the belief that economics is a matter of morality as well as a matter of money.

He does, in fact, have a point. Although economists and the media often give the impression that Economics is a serious scientific discipline, it is really a branch of history. Science deals with things that can be tested by experiment. The scientific method is that you devise tests that could disprove your theory, and perform them repeatedly under the whole range of conditions your theory is supposed to cover. If the tests perform the way your theory says they should, then your theory is considered true until such time as a better theory comes along.

History, on the other hand, deals with events that cannot be repeated exactly, and seeks to explain things after the event. Historical study is concerned with piecing together incomplete evidence to reconstruct events and cultures as well as possible, and providing explanations as to why things happened the way they did instead of some other way. Historical debate is dominated not by theories that can be tested, but by competing schools of thought that place particular types of explanation above others (Marxist historians, for example, see things primarily through the lens of class warfare).

Economic theories clearly fall into the realm of history, not of science. Although the vast majority of economists believe that government spending is what ultimately beat the Great Depression of the 1930s, there are those that argue that it actually prolonged it. All the evidence for economic theory at anything other than the smallest scale is contained in historical events that cannot be replicated.

Therefore, there is a clear place for the non-specialist. Economic policy cannot be dictated by experts in economic theory, whose specialism often causes them to lose sight of the fact that the economy is not an end in itself, and that real human beings will be affected by their policy suggestions. It certainly should not be adopted without questioning the underlying assumptions behind their economic models.

One step towards a more moral economic policy which can be implemented quickly and easily is a small tax on currency transactions, as campaign group Stamp Out Poverty are calling for. If you’re not convinced, watch both halves of their campaign video below.