Wednesday, 17 December 2014

The Lens of Scarcity -- Economics in Contemporary Society

It is 2010 and I am a year ten pupil at a mid-decile school trying to decide what subjects to take. Economics was one of the options but it wasn't on my subject selection sheet when I handed it in. However, one of my close friends had quibbled over it himself. From what I remember of the time would suggest that if he asked me about it, I probably would've said that economics was about something like money. We all know, intuitively, that economics has something to do with the economy and the economy with money. Therefore, economics, I feel, occupies a place in the public's consciousness as something like "the study of money" or, perhaps, "the study of the economy" (which is, in itself, actually a rather nebulous term).

It is early 2011 and I am a year eleven pupil sitting in one of my first few economics lessons. My teacher is asking what the economic problem is. I think, I thought I was pretty clever and my answer, once an appropriate number of people tried and failed, was "The Global Financial Crisis". Maybe I had no idea or maybe I was sitting there thinking, "Well, that was the problem and it isn't any more: it's 2011". Whatever the case, a friend of mine sticks her hand up and says something like, "Isn't it the financial crisis?" Now I've got no idea for sure and it is readily apparent that no-one else does either. As a class we'd fallen for a trap laid and expertly sprung by a man who, in hindsight, was one of my better teachers. The actual economic problem, it soon transpires, is that of scarcity. Which is to say, having unlimited wants and needs but only limited resources with which to meet them.

It is mid-2011 and I am having a conversation with another friend of mine who not only also does economics but is also incredibly good at it. We have been learning the content for NCEA Level One's Demand and then Supply standards. This is not really what I was expecting and it, at least at first, makes me remember something really vague from maybe year seven (I'm not sure now which year it was either). However, I haven't disliked what we've been doing but my friend and I are looking forwards to the market standard which seems more interesting: it's supply and demand. I can't remember if we'd been introduced to the circular flow model at this stage but, right now (Dec 2014), I can't help but feel I was interested (at least in part) in the market because we'd be moving closer to what my expectation of economics was.

It is late 2011 and I am working on my final economics internal for that year. My main thought is that I only got merits for the other two and I need to an excellence in this one to be able to get an excellence endorsement for economics (one of my personal goals, along with getting over eighty excellences altogether... but secretly my ambition is over 100, I only met the first). While I would ultimately manage to get the E but not the economics E endorsement, what stands out very soon afterwards about this standard is its emphasis on values. Basically, like parts of the Demand standard, the internal was about understanding how and why people make choices when faced with scarcity. It's also, having checked the title of the standard, about government choice: "Demonstrate understanding of a government choice where affected groups have different viewpoints". As far as I remember, some basic polls were deployed to deal with our topic of whether or not to sell fatty foods in the Canteen (unless that's not what we did).

So, what's the idea behind these paragraphs? The idea is that what people think of when they hear economics is not, in many senses, what it is. Macroeconomics does look at the big picture and what's going on with the economy. Microeconomics. though, is something that I get the feeling economists are more interested in. At any rate, microeconomics does reveal the bigger point of economics: it's a social science. Much like geography, economics is interested in understanding the human world and it does so through what I would consider to be the lens of scarcity. It is because of scarcity that we have to make choices and it is because we make material choices that the economy is one of the things (or, arguably, the main thing) that economics is interested in. But, economics isn't just that. That's obvious when you think of economics as being about scarcity and, so, choice. It becomes apparent that economics is interested in how things end up being allocated... allocations are, in essence, how the question of scarcity is "answered" and represent the end outcomes of choices. But allocations also ask further questions and because scarcity isn't solved by them, you get more choices to make.

Economics is also a discipline that has been led astray by politics. That is, in the developed world, certain ideologies (particularly conservative ones) have sought, with a large degree of success, to own the discipline. That is, they want to convey the idea that because an idea is ideologically right-wing it is necessarily consistent with economic theory. The arguments, or rather the idea that arguments exist, gets lost on many people. But, most importantly, this just further conceals the idea that economics is actually about scarcity and choice. The position of the public becomes something like, "Economics is the study of how to achieve economic growth". The wider relevance of economics, particularly in terms of sustainability, becomes lost. If you think about it scarcity and sustainability are nearly inextricably linked. By implication, this casts extreme doubt on the ideologies that try to "own" the field because they, frequently, do not consider this idea sustainability. That's not to say that there aren't economic arguments for multiple positions. It is to say, that by trying to own the discipline in ways that arguably only history is sought to be owned, what economics is gets lost.

So, what's my point? Nearly there, but first another detour. At the University of Auckland, economics is a subject within the Business School that has to compete with other subjects for students to major in it. They, therefore, try to sell it. And they do this by introducing Economics 101 with lines like, "Voting decisions require a basic understanding of economics" and "Probably the most important reason for studying economics is to learn a way of thinking". My lecturer laughed (or made to) at the former but he also said, "Economics is amoral" or something like that. The thing is, I would disagree with that laughter... understanding this basic idea of something about scarcity and choice (and if you needed a third key word it'd be allocation) is something which I believe is absolutely crucial to a democratic party. But, it is also important to know that economics is amoral. It does, however, endow one with the tools to conclude the morality of a decision as it does study the consequences. Ultimately, what I am saying is: any education system that turns out people whose idea of economics is not best summarised with "scarcity, choice, allocation" has failed its society utterly. That is, in my view, the reality of NZ. If you don't take economics voluntarily (as I did by a quirk of fate) you will not get that impression. You will be my year ten self.

That's the problem. The solution is, in fact, not difficult. Either make economics a core subject covering what I discussed above or work it into social studies more than it is. I think, to someone who thinks like me, reading the first four paragraphs would convey my point powerfully. But we did an exercise in social studies in year ten that while I recognise it as having the scarcity, choice and allocation questions in it... while doing it, that wasn't there. What we did get out of it, however, was an exploration of fairness in international trade and the distortive effects of historical colonial actions. That's still valuable and shouldn't go, but economics needs to take on a more central role than it currently has.

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