What is Wrong with Economics?

It is saddening to see the candidates in the most recent elections I'm following (in Canada and the US) pretend that political decisions we face and options available to us can be cast solely in terms of economics. Jobs. Growth. Competitive industries. GDP, Debt. We need to wake up to the fact that economics has never been a reliable measure of human welfare, never a "science" and the worst possible guide for political action.

In fact, the Achilles heel of economic theory is the fact that it is ultimately based on the needs and behavior of human beings. Paradoxically "laws" of economics only make sense when you forget the people involved.

Take the "law" of supply and demand. A special case would be the supply of labor. Wages will fall if the supply of labor exceeds demand. There is no limit to how low wages will go. In fact, according to this "law", wages can go to zero as the number of workers exceeds the number of "jobs". The problem is that this means people go homeless or die in large numbers. In such situations, "politics" intervenes, automatically pitting the "poor" against those who say that the problem arises simply because of the "law" of supply and demand. No point complaining about gravity, right?

Thinkers of the right wing, most notably Alan Greenspan, had faith that the "laws" of economics, left to themselves, would somehow result in maximum happiness for everyone. This is a religious conviction. Like many religious convictions, it appeals most to the ones who benefit most from it, allowing them to regard their victims as morally inferior.

"Laws" of supply and demand obviously do not apply to "needs" that are manufactured by the advertising industry -- a category of goods that covers almost everything we consume.

"Laws" such as supply and demand are not the only fatal flaws in current economic theory.

Capitalism is really a philosophy about "money" and how it can "flow" to projects of maximum benefit to (guess who) the owners of capital. It says nothing about the benefits of the projects and assets funded to the wider public, but capitalist apologists tend to assume that the public in general will somehow benefit from the free flow of capital. In the early 21st century, it is hard to make a case for this point of view. At the very least, we cannot treat it as an axiom. On the face of it, the free flow of capital these days benefits a very small number of people while the "laws" of economics increasingly mean widespread suffering as capital "flows" away from industries that formerly created jobs and "flows" into industries like oil and gas and weapons manufacture. It takes decisive political intervention to make capital "flow" into truly worthwhile projects, such as green energy. Even then, politicians must make sure that the owners of capital are duly compensated for the use of their capital through tax breaks and subsidies. The "capitalist" assumption is that all capital (actually everything) is owned by somebody and the owner of capital has a right to a reasonable return. This "right" often trumps the "right" of ordinary people to life itself.

But "capital" boils down to "money" and the things that money can buy. Until the 20th century, when you gave something to somebody, you gave something up. Money could not be copied and most of the things money could buy couldn't be copied either. Now, the cost of many of the things we buy includes a large element of "information" in the form of software and patents -- ideas. Information can be copied endlessly. "Laws" of supply and demand don't apply to such things. However, companies such as Monsanto make an effort to own ideas and ruthlessly punish anyone who deliberately or accidentally allows plants to grow without authorization. The old "ownership" ideas are being stretched to ensure that "capital" is protected. Such ownership is being extended even to human genes. It is time for a radical challenge to the idea of "ownership" itself.

"Economics" talks about only things that can be owned. Capitalism assumes that everything is owned by somebody. We are beginning to see that things like clean air, drinkable water and a livable climate are things that have been "falling through the cracks" for a long time as we cheated in our cost/benefit analysis. We have not been counting "cost" of things nobody owned (and were therefore worthless). This has included the health or the very lives of workers and innocent bystanders. In fact, many of things, such as a livable climate or the survival of thousands of species driven to extinction, turn out to be priceless--totally beyond the reach of economic theory at all. In order to obtain an economic "benefit" for a few, many of the "assets" of the planet have vanished altogether and forever.