Thursday, 23 February 2012
What is the role of time in economics?
So I've been blogging away again, over on another site - about time and economics, this time. I've been a bit polemical, actually, but do have a look to see what you think.
My basis argument is that modern orthodox economics doesn't take account of institutions, of learning, of the structures of relationship between state and society, or between citizens and the government if you want me to be less jargonised. I think that's right - one-short neo-classical economics just says 'here's a price, here's a demand, there's where the lines meet, that's revealed demand and supply, that's the price'.
But things are much more complicated than that.
Okay, okay, so I know that lots of elements of economic policy - for instance inflation targeting - specifically take account of public views via (for instance) opinion polling about views of future price and wage rises. It's an approach that's caught on around the world, with the Federal Reserve in the US now mulling over adopting a specific target (by the way, I think that would be a mistake).
But even here, I would say that the technique's popularity has more to do with what Pierre Rosanvallon (above) has termed 'counter-' or 'anti-democracy' - a phenomenon that is linked to the tendency of markets, bond-holders, voters and banks to lose faith in governments and their promises. Independent scrutiny, in the shape of central banks in this case (though Ombudsmen and women, insurance agencies and independent scrutineers of all types are other good examples) are thus set up to 'watch the watchmen'. Inflation targeting itself doesn't deal very well with shocks and crises - partly because its view of 'the past' is a very near-term and cramped one. It's adoption is often a strategy and a matter of convenience, not necessarily a dawn of intellectual conviction.
So we need a new economics that takes account of how the world really is - the fact that most bondholders live in the country bearing the debts (outside of disaster areas such as Greece, of course). The fact that politics will always play a key role in the quasi-markets that are created to live and breathe under those semi-independent agencies of pre-commitment and monitoring. Take a look at the latest news about the debacle in English Higher Education - where the Governemnt is threatening universities with unspecific 'action' over widening participation, without the powers (or even a proposed Bill) to do so. There's an example of 'you wouldn't start from here' - or charge basically a £9,000 flat fee everywhere.
Where will the new economics come from? Stay tuned. I'm thinking about that one.