An Economy For The Common Good

Separating economic science from life

In his book, Licence to be Bad, Cambridge economist, Jonathan Aldred, charts how neoclassical economics has ultimately incentivised ‘rational’ human beings to do bad things, not just to the planet, but to one another.

Aldred’s thinking is the starting point for Christian Felber’s notion of an economy for the common good which challenges the prevailing economic orthodoxy of the neoclassical school that emerged in the late 1870s and whose theory dominated economic discourse a century later.

The problem as Felber identifies it, is that this economic theory of ‘pure science’ focuses on financial indicators to the exclusion of ethics, politics, ecology, gender and uneven power relations often associated, for example, with the godfather of macroeconomics, Adam Smith.

By focusing on financial indicators to the exclusion of a more holistic approach, Felber says that “the neoclassical economists of the late 19th century separated economic science from life, from democracy, from relationships, from everything.”

Felber argues that this direction of travel is wrong and says that what is needed is a reconciliation of economics with the kind of democratic values that makes life worthwhile.

This sentiment is echoed by Kate Raworth. In her book, Doughnut Economics, the renegade economist says:

“To make humanity fit into their theories, last century’s economists invented rational economic man. He stands alone with money in his hand, a calculator in his head, ego in his heart and nature at his feet. He hates work, loves luxury, has insatiable wants and knows the price of everything. But the trouble is, on being told that he is like us, we actually become more like him.”

Self-interest is woven into the fabric of neoclassical economics whose rationalizing logic is paradoxically damaging to our societies, environment and eco-systems. Birthed at Cambridge University in the early 1900s, this economic school gave rise to the damaging ramifications of neoliberalism.

Emulating physics

Since its inception, neoclassical economics has aspired to emulate a mathematically precise science like physics by pushing out ethical and philosophical questions. Felber cites the inability of neoclassical economists to have foreseen the 2008 financial crisis as an example of how on the surface their models appear to be as precise as natural science but are in fact predicated on a form of disconnected social science which is imprecise.

What for Felber was a major ‘earthquake’ to the system, occurred when economist Nicholas Stern and a co-author criticised the inability of academic economists to discuss climate change within their own discipline.

In Felber’s view, this criticism amounted to a reluctance among academics, more broadly, to examine the insights of neighbouring disciplines whose findings are often relevant, not only to sociology, political science and psychology, but also to true natural sciences.

Felber points out, for example, that neurobiology has discovered that cooperation motivates humans more strongly than competition and yet, as a scientific finding, this has largely been ignored.

What has also been neglected says Felber, “is the fact that every economic value comes out of nature which means that economics that excludes ecology is not a meaningful economics. How can we carve that out? If we carve it out and tunnel our focus of attention on the financial indicators, we will destroy the foundations of life and together with this, we will destroy ultimately, every economic value as well.”

Felber’s quest for new goals to meet the needs of all within the context of a sustainable planet is undermined by economic textbooks which appear intent on limiting them:

“Very interestingly”, says the writer, “I did not even find a definition of economy in economic textbooks, only markets. But markets are not the whole economy. If the economy is about satisfying basic human needs, then these needs are not satisfied by markets.”

Defining the goal of economy

Felber proposes a democratic notion of the common good focusing on metrics such as stable ecosystems, political participation and social cohesion to define the goal of economy.

Felber says there are two steps to achieving the realization of these values. The first is the requirement by the public to be attuned to the contradiction between democratic values and the values associated with the pursuit of unlimited growth propagated in economic textbooks.

The second step is to develop an understanding of a concept of economy which is aligned with our constitutions and then to ensure that the entirety of economic activity is compelled, through processes of checks and balances, to abide by these constitutional principles.

Felber argues that the most effective way to not only protect our constitutions, but also the values enshrined in them, is to ensure that economists who propagate neoclassical values be required to re-name themselves, ‘capitalists’ “because it’s the opposite of economics that they are teaching.”

Morality and human law

Essentially, the main tenet that underlies the above is Felber’s highlighting of the distinction between natural law and the legal process that human beings have constructed.

At the core of his argument is the notion that when an investment needs to take place in the economy for the common good, we are guided by those laws which are not dissimilar to many constitutions. This contrasts with with man-made laws that encourage us to be bad.

“Economics”, says Felber, “is essentially a moral science because we want to achieve the goal of the well-being of all members of the national economies. Keynes knew it and both Adam Smith and Aristotle said it. Neoclassical economists pretend to have forgotten it, but are just repressing it. It’s a manipulation. It’s an ideology disguised in a natural science.”

The writer reiterates that the rewards for the public resulting from the development of an economy for the common good will be plentiful:

“You will have a better life having relationships which you can rely upon. You will have the feeling of security in the economy and in society. You will be able to enjoy nature….. Most of all, you will have less stress, less anxiety and less fear. And all of this increases life quality”, says Felber.