So, I've been intended to write this one for a while, but it got put on the back burner due to election coverage and me taking a break from blogging. But I had a discussion today that made me realize I tended to write this, so I'm rewriting it from scratch and making my argument for why economics is a fairly ideological discipline, and that people should take its recommendations with its assumptions in mind. This isn't to say economics is useless and should be ignored, it most certainly is not. I'm just trying to make a case for why it should not be accepted as objective moral truth either.
A little about economics and its value system
As many people know, economics essentially is considered a value system by many people. Whether this is intentional or unintentional remains to be seen, but it generally favors laissez faire capitalism and the like. The ultimate goal for the system on a macro level is economic growth. The ultimate goal for corporations is to maximize their own profits. Full employment is also highly emphasized. Everything is often interpreted within this framework. More employment, more growth, more profits = better/desired.
It is taught that markets are made up of people who are buyers and those who are sellers. People come together in a market place to determine how much they will buy and sell products and services for. The same also happens for the labor market. It is generally implied that the best outcomes (as in, the ones that produce the most stuff), come from letting buyers and sellers do their thing without restrictions. It is generally deemed as implicitly "bad" when the government interferes with the market in many cases, because this can harm productivity and incentives. For example, taxation causes "distortions" in the market, and interferes with decision making made by agents within it. If a certain level of profit to people is taken from them for engaging in an activity, it might stop them from engaging in it because the rewards are no longer worth it. Regulations also distort markets in some ways. Minimum wages are deemed to be harmful because they can cause unemployment in the very basic models of economics. As the price is forced artificially higher, fewer businesses are willing to hire people, leading to a shortage of work. Rent control can cause shortages in housing as the government forces markets to lower their prices below which some sellers are willing to rent out apartments for. It might also interfere with the construction of new housing. All in all, economics generally implies that governments tend to mess up when they interfere with the markets, and the "best" outcomes are normally achieved when people are left alone do to their own thing.
Some problems with this
The core problem I find with economics is that too many people turn the above economic approach to life into an objective morality that should not be violated. Economics clearly has a value system that favors a laissez faire appproach to itself, but some people turn this into a full fledged moral system that becomes very conservative or libertarian in nature. Taxation and regulations become moral evils in these systems, not merely undesirable consequences.
But in reality, morality is very subjective, and I believe adherence to these economics outcomes should be taken more with a grain of salt. u/god_over_djinn of reddit once made an excellent point that economics is merely a model. It tells you some things that are useful, but it's best not to accept it as a grounds for moral truth. It is only valid insofar that its assumptions are valid, and often they are not. This is true both on a functional and a moral level.
u/god_over_djinn discussed this in many ways. He talked about assumptions like that the labor market is perfectly competitive, and in many ways it's not. I've discussed all of the problems with the labor market, for example, before, and have shown how skewed it is toward the so called "job creators" and how unfair it is to the workers, reducing them to virtual slaves. In terms of the minimum wage, it doesn't even appear looking at the macro data for minimum wage increases and unemployment that there's even much of a functional relationship between the two, suggesting that in practice that reality is far more complicated than the confines of economics would indicate. The general economic cycle seems to have far more of an impact on unemployment than minimum wage increases going by years and overall unemployment rate. If you add into your model that there is a certain level of inelasticity in the labor market, which is the fact that employers have a desire for labor regardless of the price, we might not see as much unemployment, but we will see more inflation instead as employers pass increased labor costs onto the customer. Or they might just eat up their profit margins and distribute gains more fairly.
Another assumption is the moral one, that market efficiency is a desirable outcome. If you don't believe that maximizing economic growth and employment are necessarily the goals we should be talking about, you can safely take economics with much more of a grain of salt. And let's face it, I do have a lot of differing moral views toward the subject of economics. I think that freedom to say no to work, for example, is a good thing, and that rejecting employment, even at the cost of reducing overall employment and economic growth, may be desirable. I personally value freedom of persons to spend their life as they want without economic coercion is, within reason, more important than making more stuff. I might see value in increasing taxes to pay for healthcare because the system of healthcare in a capitalistic system doesn't always help people. I might see value in raising taxes for things like roads and education too. In a lot of ways, economics tends to assume that life should revolve around what it values, and I'm sorry, there's more to life than that. If you reject those values and accept different ones instead, what is desirable becomes very different.
As such, sometimes it's also important to take into consideration the things economics doesn't take into consideration. My econ professor in college would always discuss how economics doesn't discuss the FAIRNESS of certain outcomes. It doesn't always guarantee everyone a good living. In a system of buyers and sellers of products, it doesn't discuss what happens to all of those people who can't afford products, for example. And let's be honest, in practice, economics has a lot of holes in this sense. Maybe everyone should be guaranteed a basic living for example, even if the consequences of that don't necessarily conform with the goals of maximum growth/efficiency or with full employment. I certainly believe this. I don't think a market system necessarily leads to fair outcomes in practice, and as such reject some of the values of said system and replace them with different ones. It also tends to largely ignore environmental concerns in practice.
How should economics be interpreted?
I'm not using this article as an excuse to say economics is stupid, or worthless, or should be ignored. It provides a useful model for the world under certain moral and practical assumptions and should be at least looked at and taken seriously. It gives us a worldview into the general consequences of various actions that we might consider taking. We might be increasing unemployment or causing inflation if we raise unemployment. We might be dampening incentives to work if we go with a basic income. That is reality, and it is up to us to determine if that trade off is worth it. But more research is needed than that, and maximum efficiency isn't always better. We need to decide for ourselves, given the consequences of our actions weighed against what we value, what course of action is actually optimal for us. We might be willing to put up with more unemployment if it means that people can work for wages they can live on, and that the overall good there outweighs the harm. We might be willing to sacrifice some economic growth in order to raise taxes and distribute goods and services more fairly. It really depends on what we value. We shouldn't totally discount the priorities of economics, but we shouldn't taken it as an inalienable moral truth either. Accepting economic 101's moral values as "truth" leads to the kinds of fundamentalism we see with things like libertarianism, and that's dangerous in my opinion. Often times, the economic models are much more simplistic than how things function in the real world, and we might value things differently. As such, we should accept the wisdom and knowledge economics has to offer, while at the same time not being afraid to apply its conclusions more liberally, and more in line with our own value systems. Instead of saying, we shouldn't do X because X is bad, we should be saying, X causes Y, is Y a more favorable outcome than Z within our own value system? And then we decide what to do.
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