Sometimes high theory loses the human point of the exercise.
One of the joys of teaching is you learn from your students. When fifty-odd years ago, I was at the University of Sussex, a student doing our first-year economics course, Jim, came to me, saying he was pulling out because it was all abstractions and all he could think about was people. So Jim abandoned his law degree and took up literature. He got into acting. Later I saw him as the principal actor in a student production of John Arden’s Serjeant Musgrave’s Dance. The production ended with a crucifixion. I think Jim was reminding me that others thought that humans were important too. I have never forgotten that lesson. No matter how abstract economics can be, it should be about people.
Abstraction can be necessary. When Newton explained why planets moved in ellipses his model assumed that a sphere could be simplified to its mass acting at the centre. Uncertain, he put the publication aside, thought about it, invented calculus and ‘voila!’, the assumption was right. Good abstraction for his purposes, but an astronaut landing on the moon would be unwise to use it because they would crash into the surface long before they got to the centre of gravity.
Economics often gets overwhelmed by abstractions. When we think about unemployment but we think of the numbers rather than the individual unemployed man or woman; the same with poverty. We model the ‘representative consumer’ or ‘representative firm’ but ignore the variety. (One of the reasons that many of the economic models failed so badly during the GFC was that they ignored the quite different responses by individuals which did not average out in a representative consumer.)
In a footnote I have put a highly abstract definition of the economy which most readers will find opaque. It is from Gerard Debreu’s Theory of Value which led to him being awarded a Nobel Laureate in 1983. A foundational study in price theory, it is a long way from how prices actually work. Economists need to move on to being closer to reality.
Not all do. There is many an economics paper which is bereft of any mention of people (or businesses) and give no sense that the author(s) had any conception they were writing about humans.
This is not to say that the Rogernomes understood the details of Theory of Value. But their theories were so abstract that they overlooked how their policies were impacting on people – especially people who were very different from them. The tax changes meant their sort of people did very well out of the neoliberal policies but those in the middle and at the bottom of the income distribution suffered tax increases and benefit cuts to enable the rich to be funded. Poverty rose. The Rogernomes were so out of touch that they seemed unaware of this happening; if they knew and ignored, they were deeply morally flawed.
I have worked on poverty-related issues from about the time I met Jim. In all the work I have done – much sophisticated statistical analysis – I have tried to keep the actual people I am writing about in mind. (One person is a tragedy; a million is a number.)
A lot of poverty ‘experts’ do not. Instead, they use abstract concepts and statistics with a theoretical empathy as shallow as their thinking. They avoid case studies, such as those the Child Poverty Action Group pour out, telling of dreadful stories about the interaction of individuals with the authorities. (One is less surprised at the Oranga Tamariki stories when you have looked at the ones the CPAG tells.)
About a decade ago I was asked to look at a particular case. My task was to estimate how much income a particular beneficiary family needed to be able to participate in and belong to society – to lift them out of poverty. It required over $100 more a week than their benefit – something we should remember as the government has been increasing the real benefit rates by much smaller amounts; they are welcome increases but are not nearly enough.
Kathryn was very well organised given her circumstances. She had been to a budget advisory service and showed me their calculations. They must have despaired because her income was way too low. To make the budget work she had heavily cut back on her (and her daughter’s) spending on food, although she knew it was unhealthy. She was overweight and she ate chips. Rather than condemn her, I consulted dieticians who explained that chips are a very cheap way of filling one’s belly; Kathryn was behaving perfectly rationally in her straitened circumstances.
Sadly Kathryn died in her fifties. It is a tragic story. Certainly she had underlying health problems and some of the things that happened to her and her family had little to do with the state. But equally certainly the way the state treated her, from the miserable level of the benefit to some of their interventions, hastened her death. We can avoid the thought by a high level of abstraction; many do.
We are lucky to have the report on her life published by the Child Poverty Action Group. Kathryn, thankyou for sharing your life with me, for keeping me in touch with a reality way outside of my own and for approving the report Kathryn’s Story before you died.
And thankyou Jim for alerting me to the issue. Jim Carter did not complete his degree, dropping out to join a fringe theatre group in Brighton and going on to the London scene. You have probably seen him, for his is an impressive career in theatre, television and film. He is probably best known for being the butler in Downtown Abbey. His wife, Imelda Staunton also appeared as the higher-class Maud Bagshaw; they never appeared on set together because, so Jim says, he did not want his wife to think he was a butler. He won nominations for his performance.
Footnote: Bourbaki in Economics.
An economy E is defined by: for each i = I, . . . , m a non-empty subset Xi of Rl completely preordered by ≼; for each j = 1, . . . , n a non-empty subset Y, of Rl; a point ω of Rl. A state of E is an (m + n)-tuple of points of Rl.
Gerard Debreu (1958) Theory of Value: An Axiomatic Analysis of Economic Equilibrium (p.75).
PS. The expression ≼ is not quite right, but finding the precise symbol has defeated me. Strictly it is a preference ordering ≺ across i.