Ha-Joon Chang on why we all need to learn (some) economics

If economics isn't really your thing, but you're curious and want to know little bit more about how it all works, try checking out the work of Ha-Joon Chang. He's written some really readable books on economics. Here he explains why he thinks we should all learn a bit more about it.

There‘s been a widespread perception since the 2008 global financial crisis that many economists have miserably failed in their job of managing the economy. Unfortunately, the world has been too forgiving, for despite the fact that they've completely bungled their jobs, the same economists are still telling the world what to do!

However, this state of affairs may not last for long. Student movements like Rethinking Economics have been calling for greater openness and plurality in the teaching of economics. Employers have become more vocal in complaining about the quality of the 'products' (graduates) that they get from economics degree programmes – highly trained in mathematics and statistics, but ignorant of real world economies.

More importantly, it's increasingly recognised that:

a) Ordinary citizens need to get involved in economic debates
b) It's not as hard as you think
c) It's not a science like biology's a science
d) There are lots of different ways to think about it

In a democracy, you'll never get a decent policy in any area unless the voting public is interested and knowledgeable enough about it - and the economy is no exception.

It's doesn't have to be boring...

Despite this recognition, most people are reluctant to learn economics because there's a widespread perception that it’s a very technical subject that's beyond the reach of non-specialists (and even a bit boring). This fear of economics has reduced the ability of citizens to influence economic policy-making, making them increasingly feel powerless and thus disinterested in democratic politics.

This need not be the case: most of economics can be understood by anyone with a secondary education if it's explained in an accessible way, as I argue in my book, Economics: The User's Guide.

It's not a science like biology's a science...

Many economists believe themselves, and tell other people, that economics is a 'value-free' science, like physics or chemistry. However, my book emphasises that economics is a fundamentally political and moral subject. Whereas the particles and compounds studied by scientists do not hold political and moral views, human beings who populate the economy do, and so we cannot fully understand the economy without understanding politics and ethics.

More to the point, even the boundary of the economy – and thus the scope of economics – is determined by ethical and political judgments. Think of child labour, which used to be a perfectly legitimate object of market transaction until the early 20th century, even in the richest countries. This means that the market itself is a political construct, rather than a natural order that should not be tampered with by 'political' intervention. Once we realise this, we begin to see how no economic argument can be free from politics.

There are lots of different ways to think about it...

All of this means that there cannot be one correct way of 'doing' economics. And indeed, there are nine schools of economics (and that’s only counting the major ones), including three varieties for free-market economics alone (classical, neoclassical, and Austrian). They all make different political and ethical assumptions, focus on different things, and have different theories about how economies operate and change.

It's important to learn about different types of economic theories and their respective strengths and weaknesses, because the reality is complex and therefore we can understand it in its full complexity only when we have a range of theories at our disposal. To deal with today's economic problems we need different economic approaches for different issues.

The dominant neoclassical economics can be very powerful when we analyse well-specified problems in a setting in which technologies and politics are stable, but we need the Austrian and the Keynesian approaches in order to better deal with situations characterised by uncertainty and instability. We should use Institutionalist and behaviouralist approaches more, if we’re to come up with robust solutions about systemic reforms – be they about finance or the welfare state. To think about reviving economic dynamism in the long run, we have to learn more from the Schumpeterian, the developmentalist, the Classical, and the Marxist schools.

It's time to get 'active'...

It's not necessary – or even possible – for citizens who aren’t economists to learn economics at a professional level. However, I believe it is possible – and necessary – that they acquaint themselves with the main economic theories and their respective strengths and weaknesses. When combined with some knowledge of real world economies, such knowledge will enable them to make informed judgments on economic issues and exercise what I call 'active economic citizenship'. It's time that we demystify economics for good.

Ha-Joon Chang teaches economics at the University of Cambridge. This article is based on his 2014 book, Economics: The User's Guide. He is also the author of 23 Things They Don’t Tell You About Capitalism, Bad Samaritans, and Kicking Away the Ladder.