'Economics and economic policy matters enormously to all of us whether we like it or not. The more we all understand it the better democracy we will have and the better policies politicians will enact.' - Paul Johnson (Director of the Institute for Fiscal Studies)
Economics for everyone
Events of the past ten years, and in particular, events of the past few weeks, have demonstrated that economics is a matter for everyone. That didn’t become true overnight – UK voters have consistently ranked competence on the economy as one of their top three reasons for electing their representatives (and in some instances, voting them out). But the 2008 financial crisis and its impact on citizens brought international attention to the role of the citizen in contributing to conversations about economic policy. Attention has turned to the matter again after the Brexit vote led to a collapse in global stockmarkets as well as the value of the pound, and a hard-fought debate over the quality of information available during the referendum. Now, more than ever, there is a need to return to principles that promote informed, upstream citizen engagement in complex issues that affect their future.
The rise of groups such as the Occupy movement, the momentum behind groups such as student-led Rethinking Economics, and academic-led CORE – aiming to make economics more engaging and accessible, and the renewed interest in alternative narratives about the economy (from Thomas Piketty to Mariana Mazzucato) has drawn attention to the need to explore economics in a way that does justice to its status as a moral and political subject.
Isn’t economics just for experts?
Economics has traditionally been treated as expert-led and an objective science – and that has often been used to exclude the layperson from important conversations about decisions that affect them. But the more expert-led a domain, the more likely that profound questions about values and ethics are neglected. For example, in science and technology, pipeline models of research and innovation can throw up questions about the ethics of genome editing, nanotechnology and synthetic biology – issues that can be overlooked if a purely expert-led and narrow approach is taken. The same risk applies to treating economics as a discipline only for the experts. This bolsters the case for greater transparency and accountability about the way in which decisions have been taken, the case for broadening engagement with the public, and the case for improving the quality of information, discussion and debate in economics.
Read the prospectus for the Citizens' Economic Council (on Medium)
The object of economics is the heart and soul
Our starting point is that citizens’ lives are affected pervasively by economic policy, and that economic policy is concerned as much with what we prioritise and value, as it is with how we achieve those things. Margaret Thatcher, former UK Prime Minister, recognised this more than most. In a Sunday Times interview, she once declared that ‘economics is the method – the object is to change the heart and soul’. In saying this she understood that economics – the process, the methodology and the ‘science’ – ultimately has a purpose that relates to social outcomes that affect citizens.
Whether she thought citizens should then be involved in the process of shaping economic policy is another question – but we at the RSA make the case that they should.
About the Citizens’ Economic Council
The Citizens’ Economic Council is a programme that begins this process of involvement. This is a deliberative engagement process over the next two years which will work with a Council of 50 – 60 citizens who are independently selected from a diverse and stratified sample from across the UK. Citizens will have the opportunity to be informed about economic policy, to talk to policymakers, economists and politicians, and to collaborate with each other with a view to co-producing new economic policy ideas in time for the 2020 General Election. We will engage directly with hard-to-reach groups and communities through Economic Inclusion workshops, with 27,000 fellows at the RSA and with self-organising networks and groups who are discussing economic policy, supporting them to submit policy ideas to the Council. We will invite ideas from across the globe as well as from within the UK – recognising that countries across the world may be piloting and testing new policy ideas that may be of interest to the UK. The deliberations of the Council will be live streamed, and we will work with and empower citizens on the Council to advocate directly for their policies.
Our starting point in this journey is to ask whether citizens can be economists – and what the extent of their role in shaping and influencing policy might be. We’d like to invite you to join this conversation at the launch of our programme on Wednesday 29th June at 6pm, with our panel Simon Burall (Director of Involve), Paul Johnson (Director of the Institute for Fiscal Studies), Julie Timbrell (Occupy Democracy) and Seema Malhotra MP (former Shadow Chief Secretary to the Treasury and MP for Feltham and Heston).
WATCH: CEC launch event Can citizens be economists?
Read the prospectus online 'Economics for Everyone' (on Medium)
Download the prospectus 'Economics for Everyone' (PDF, 1.4MB)
You can register and attend the event, held in London at RSA House, 8 John Adam Street, London, WC2N 6EZ.
Find out more about the Citizens’ Economic Council.
Follow the Citizens' Economic Council on Twitter @citizenseconomy
Follow Reema at @ReemaPatelRSA
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Economics is one of those essential subjects which should have made it onto an already crowded syllabus - perhaps even at primary school level. Its absence, along with the media association of economics with governments, Chancellors, bankers, investment gurus (and economists) have made it a taboo subject amongst the general population. At an Open University tutorial in a Foundation Course - with the subject being economics - I was surprised to see the lack of comprehension of the economy, the Bank of England and how the financial system worked. Yet, taught with clarity and imagination, economics can be easily grasped - along with most subjects.
The logic of being able to understand how best to use the money one has in one's pocket, wallet or bank account is inescapable. Why then, should the portion of their hard earned money that people give to the government (to spend on their behalf) not be equally scrutinised by the population at large Why should people not be conversant - albeit on a basic level - with the external forces on the country's economy that shape the direction of government economic policy. Everyone should, ideally, not only be aware of such external (and internal) forces on inflation, trade balances, government debt, industrial and commercial success, but the extent to which they affect their daily lives.
Ignorance about the likely scale of the relevant numbers and how the figures were arrived at were part of the problem in the EU Referendum debate. Gradually, there was more elucidation but it was very slow to arrive. Politicians on both sides of the debate could sling wild economic forecasts around in the knowledge that at least some would be believed. This has implications for democratic validity within the system of government we have. I was lucky; I was force-fed economics in architectural school from day 1: lectures, tutorials, essays, examinations, project work. Essentially, economics is the best guess on human behaviour following a change in economic circumstances - more a social science than a true science. There are big numbers to play with - on how marginal changes will affect the propensity to save or spend and how international confidence affects Treasury Bond rates etc. We have a generally well educated, well informed public in the 21st century. Everyone should feel comfortable with Economics and this project is an excellent initiative.
An area which does need continuous examination. As Richard Thaler noted in Misbehaving, economists are in awe of physics. They appear to be always striving to make economics into an equivalent natural science. But this completely denies the nature of the field. It's a social science which is concerned with the idiosyncracies of people. It's about time economists woke up to this, but they already have too much invested in their land of Oz.
The charade of rational economics needs to be put into a box and can be studied as an interesting intellectual exercise, for it is nothing more than this. This would help remove the confusion of looking at behavioural economics, which deals more with the actual reality, with continual references to traditional economics .
Even Thaler in his book states that "the real point of behavioural economics is to highlight behaviours that are in conflict with the standard rational models". But as he points out "economic theory is deduced from axioms of rational choice" which psychology and neurology have shown to be specious.Unfortunately this seems to indicate that he is unwilling to cut the umbilical cord to his background of economics and must constantly refer back to it rather than focus on the valuable learnings that behavioural economics gives us as a field in itself, without any reference to traditional economics. This, despite the casuistry and obstruction which he met from the economics establishment. His resilience has been heroic.
Any journey is governed by its point of departure. Even with Thaler his key initial reference appears to be not redundant economic models but rather the list he compiled of idiosyncratic behaviour, just as he notes that the work of Kahneman and Tversy came from observation. Induction not deduction.
I was delighted to take part at the discussion that was held yesterday on this topic. I'm not an expert of economics but I deal quite well with, say, people and their societies. And indeed I'm fascinated all the attention revolving around this term 'economics' as it was the new black.With this I don't want to say that the way a country is economically run isn't important or is trivial. Quite the opposite.
Economy of a country is underlying but it cannot receive the whole attention as it was the dominant force of our society. This point for me must be crystal-clear otherwise we run the risk to built up a view/society that is too market-driven and in so doing we forget one of the essential elements: the individual.
It seems to me that economics is turning into a new form of religion (yesterday, by the way I wanted to say the religion might be a significant in defining economic processes) and this is worrisome or even worst. We are nowadays missing leading voices, those enlightened individuals, able to guide us through this difficult time and I really hope this project could fill that void. No one should never forget what the 'state' is about: the well-being of its citizens.
I'm for instance in favour of Brexit and perhaps many of you would disagree with me. We have to realise though that even if the arguments purporting the Brexit are fundamentally wrong it is still an exercise of Democracy which has remembered the European Political Elite that despite economic forecasts and proclaims people have got the power to reshape their society. The way we come to use that power is another story.
Although I'm a naturalized US citizen, I was born and grew up in Bristol, so I too, agonized over the confused, politicized "Brexit debate" and commented on our Latest Headlines at www.ethicalmarkets.com on how best to move forward . I applaud this new RSA initiative on the need to understand that economics is not and never was a science , but an over-rated profession whose models are mostly obsolete. I have written many books about all this , but my most accessible to my fellow RSA colleagues is a 56 page e-book co-published in London by the Institute for Chartered Accountants of England and Wales (www.icaew.com) and Tomorrow's Company in 2014 :Mapping the Global Transition to the Solar Age, ( free and downloadable from www.ethicalmarkets.com , click on the cover on our home page top right ). I have pretty well demonstrated why most economic theories and models are defunct and helped crash the global financial markets in 2008 , the made things worse with "austerity" policies.