Book Reviews Archives

Can’t talk right now, I’m transferring energy.

You work all the time. But what is work, really? And how has that changed? In Work: A Deep History, from the Stone Age to the Age of Robots, anthropologist James Suzman digs into these questions. But whether he realizes it or not, he leaves an even bigger one to us.

The future of work is a hot topic. Automation, climate, and inequality make us wonder what’s coming down the pipe, and how to prepare. We might have to change how work works by decoupling labor from pay… difficult questions. But one thing is clear: if we are to change our conception of work, it will help to understand the one we have.

So what’s work, really?

Suzman starts at the beginning—3.5 Billion years ago. Because at its essence, he argues, work is not whatever you get paid for. It is a transfer of energy.

Thanks to the law of entropy, he explains, everything in the universe tends to chaos. Life forms impose some kind of order, but creating and maintaining that order takes energy. It requires work to grow leaves or make honey or build a house. So yes, even bacteria and trees do work, despite the fact that they don’t have thoughts about it.

So, Suzman posits that the act of work has been around for a long time, but the idea of work is newer. He explains that our mastery over fire was a likely catalyst. In reducing the energy required to survive, fire gave us leisure. And that might have helped us conceive of its counterpart: work.

How has it changed?

With that energy-definition in place, Suzman talks us through work’s cultural evolution. We start with hunter gatherers: there’s a Kalahari desert tribe who still hunt large animals by chasing them down on foot, just like back in the day. They run until the animal is so dehydrated that it lays down and awaits their spear.

He points out that although such hunts are exhausting, the tribe is lounging most of the time. They conceive of the world as abundant, and have no concept of private property. You only worry about your immediate needs, which are almost always met.

With the arrival of agriculture, that’s what we lost. Because Suzman suspects that the first food surpluses also introduced the concept of scarcity. Once you have a pile of crops, that pile—unlike nature—starts and ends somewhere. And it can be said to belong to somebody.

So farming ushered in modern economics. We started thinking everything was scarce, and inequalities increased. At the same time, farmers had to wait for their crop to mature and thus needed to live on credit for much of the year. So by keeping a record of their debt we created—you guessed it—money.

After that it’s domesticated animals, machines, cities, and the industrial revolution, causing living standards to rise. Working hours rose, then fell, then rose again. Suzman takes us past Luddites, the Great Depression, JK Galbraith, and the War on Talent, all the way until the present where we continue to work a lot while AI seems to breathe down our neck.

As he sends us off, Suzman admits that we can’t go back to hunter-gathering, but hopes that we take inspiration from the tribes and broaden our understanding of work. He reminds us that scarcity and limitless needs are not inevitable truths, nor are they necessary assumptions. These are fantastic points and his detailed evolution of work is very insightful. But it’s missing a piece.

Now for the biggest question

Imagine that you decide to clean up your room, and you call Suzman in to help. He comes over and finds all kinds of junk drawers you didn’t even realize you had, and he spreads the contents all over your living room floor. Then he leaves.

He helped with a crucial step. To reorganize something, you need to know what you’ve got, and identify all the items. But to put them in a better place, you need to know what they’re for. Why did you buy the things you own? And what’s your purpose in rearranging?

To put it bluntly, Work falls short on the question of why. It’s a big book about what we’ve been doing, without much to say about what we do it for.

To be fair, there are occasions where motives are discussed. One is when he points to a rare bird that builds very elaborate nests only to break them apart and all start over again. Similarly, some people run ultramarathons. Darwin’s survival of the fittest can’t explain it, Suzman says, so it’s probably a way to get rid of energy surpluses.

I can’t explain the bird either. But ask any ultramarathon-runner, and I bet they’ll tell you they did it because it was a meaningful experience—not because they were sitting on the couch bouncing up and down and only 31 miles would do the trick.

The second occasion is consumer culture. Suzman cites Galbraith who points to the way advertisers exploit our relative needs, making us want to work more to buy more. This undoubtedly plays a role. And to state the obvious, many of those less affluent will do any work that can help them survive.

But is that it?

Consider your own case

Why do you do the job you have? Is it the easiest way to survive? Is it a means to get rid of surplus energy? I doubt it. The right kind of work GIVES you energy. How does it do that? Because it’s meaningful. Why is it meaningful? Because you are able to contribute something. You are able to make a change. You are fulfilling a purpose you set for yourself. So these are the questions to ask: What’s the work out there that we think needs doing? What should work be for?

Perhaps Suzman didn’t get to these questions because there wasn’t much room for them in the past. In that case, fair enough. It may be that today’s circumstances of relative affluence and increasing levels of automation give them real relevance only now. But if we want a concept of work that we can carry forward, we can’t let ‘em drop.

And Suzman will be happy to know that there are plenty of young economists ready to do away with the assumptions of scarcity and limitless needs. But doing away with things is not enough. We need to introduce some new stuff too. And if you’re asking me, that new stuff is meaning.

Now if you’ll excuse me, I’ve got some work to do •

About the Author: Heske van Doornen is Manager of the Young Scholars Initiative and co-founder of this blog. Twitter: @HeskevanDoornen

Buy the Book
Work: A Deep History, from the Stone Age to the Age of Robots Book
By James Suzman | Penguin Press (2021)

Want to review a book you read? YSI will reimburse you for the price of the book, and will consider your piece for publication on Economic Questions. Reach out to contact@economicquestions.org to get started.

Imagination is a serious matter—economists can’t do without it anymore.

It seems only realistic to say that we’re doomed. We can no longer picture things turning out okay, and that’s the very problem. In From What Is to What If, Rob Hopkins argues that until we can imagine a bright future, it is very hard to build one.

What does this mean for us as economists?

Hopkins explains how imagination got lost, how we could get it back, and why doing so is crucial. He encourages ordinary citizens to stop waiting on think tanks and governments to lead the transition to a sustainable future. We should open ourselves to play, to the arts, and to storytelling as pathways to regain a sense of possibility. We’ll be surprised, he says, how much easier things are to execute once they’ve been imagined vividly.

If you’re a very pragmatic, data-driven person, reading Hopkins may feel like you’re being pulled onto a dance floor against your will. But there’s a lot to learn from him, especially for us economists, since our imaginations face unusually strong opposition.

The situation

Hopkins finds that with less and less time for play, children lose their imagination quicker and quicker. “They knew what a fronted adverbial noun was,” a secondary school teacher tells him, “but when I set them a task to write a story, they broke down and cried.” And if schooling makes the first blow to a child’s imagination, smartphones make the next. By taking away our opportunity to be bored, our minds have no time to ponder. Adulthood doesn’t make things easier. At that stage, we’re meant to be productive. Arts, play, and improvisation are considered frivolous, silly, and completely unhelpful to the growth-maximizing system we’ve built.

For me, it’s a message that hits home. Living in fast-paced New York City, I often fell into the trap of doing increasing levels of busywork. I’d be patting myself on the back for how much I’m getting done, while slowly eroding my ability to contribute new insights and fresh perspectives. Allowing for quiet time and idleness seemed almost sinful. Until I finally noticed how many ideas I was getting in the bathtub. We’re all afraid of robots catching up to us, but if we’re not careful, we might reduce ourselves to their level first.

Hopkins’ solution

The good news is that our imagination, once lost, can be found again. Hopkins cites numerous examples of communities that have gathered to reignite their imagination and visualize how a sustainable future could look. Just one afternoon with cardboard and chalk and conversation already proved transformative. It also brought back a sense of possibility. And once people had imagined their street corner to contain an herb garden, they never looked at it the same way. Oftentimes, they found themselves making it a reality; surprised at the things that had seemed impossible but weren’t.

Of course, the power of local communities remains limited by the overarching powers and structures of the state. Hopkins acknowledges that readily. Therefore, he points out that extractive systems—such as towns that are centered around an Amazon fulfillment center—crush the imagination. Better to keep revenue streams local, allowing people to enjoy the fruits of their own labor, and to shape local economies according to local needs. UBI also gets a mention, for being able to maintain a standard of living. After all, it’s hard to be imaginative if you’re just trying to survive.

Imagination for Economists

So, what does imagination for economists mean for us as new economic thinkers? Hopkins might not even realize. However, if there’s any place where imagination gets crushed, it’s in the economics textbook. Students who are keen to improve the economy for the better are told that it’s not an economist’s job to “save the world”. Instead, it’s economists’ job to develop objective scientific tools that can be used by whoever else wants to save the world. As if we’re doing physics. Which we’re not.

This way, mainstream economics presents a real problem for anyone trying to put this advice to work.

Whatever imagination will be reignited, economists will stand ready to crush as unrealistic, and naive. So, those with vivid imaginations might want to set the ‘objective’ tools aside and follow Hopkins’ lead for some time. However, most economists will declare that if you’re not using their favorite method, it’s not economics, and therefore not worth taking very seriously.

However, as the next generation of economists, we can help each other. We can also nourish our imaginations, and encourage our peers to do the same. We can talk about how it could feel to trust your bank, and what would be required for that to be the case. Moreover, we can picture how we’d like to grow old, and think backward for what that might necessitate. We can draw images of the public infrastructure we’d want, and see what it would require to build. Furthermore, we can reassure each other that by doing all that, we’re doing economics.

So, let’s use not just our data, our mathematics, and our analysis. Let’s also use our imagination. Because once we collectively imagine the economy we want, half our work will be done.

About the Author | Heske van Doornen is Manager of the Young Scholars Initiative and co-founder of this blog. Twitter: @HeskevanDoornen

Buy the Book | From What Is to What If: Unleashing the power of imagination to create the future we want by Rob Hopkins, Chelsea Green Publishing (2020)

YSI’s Holiday Reading List

Looking for a good book for during the holidays? Here are some recommendations from your YSI coordinators!

By Mariana Campos Pastrana | As the year starts wrapping up there’s nothing better than getting comfortable with a great book. We asked our working group coordinators what’s been on their nightstand, and have put together a list!

Of course a lot of the books our coordinators recommend address economic thinking directly, like Yanis Varoufakis’ Talking to My Daughter About the Economy, suggested by Salome Topouria (Political Economy of Europe). But others come from philosophy, sociology, medicine, and more. So take your pick! Dive deeper into the economy, or branch out for inspiration.

This past year also taught us the importance of educating ourselves on important issues surrounding race. Angela Davis’ Women, Race, and Class was recommended by Vanessa Da Lima Avanci, and Toni Morrison’s Beloved and The Bluest Eye were also suggested by Rosie Collington and Fernanda Steiner Perin.

If you’re looking for a lighter read, consider a mystery novel! Agatha Christie’s works are one of Gender and Economics Coordinator Shakatakshi Gupta’s favourite ways to relax, The Devotion of Suspect X is on Economic Development Coordinator’s Surbhi Kesar’s nightstand, and Brothers Karamazov is Nathalie Marins’ pick!

No matter what route you go, you’ll undoubtedly get some enjoyment or learn a thing or two. Let us know what you read, or what your recommendation would have been!

Economic Theory

Essay on the Nature of Trade by Richard Cantillon – Santiago Gahn, Economic Development

Africa: Beyond Recovery by Thandika Mkandawire – Geraldine Sibanda, Africa

Ages of Discord by Peter Turchin – Diego Castañeda Garza, Economic History

Sorting Out the Mixed Economy by Amy C. Offer – Diego Castañeda Garza, Economic History

Postcolonialism Meets Economics by S. Charusheela and Eiman Zein-Elabdin – Surbhi Kesar, Economic Development

Talking to My Daughter About the Economy by Yanis Varoufakis – Salome Topuria, Political Economy of Europe

On Fire: The Burning Case for a Green New Deal by Naomi Klein – Felipe Botelho Tavares, Sustainability

Economic & Political History

Austerity: The History of a Dangerous Idea by Mark Blyth – Sylvio Kappes, Keynesian Economics

The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes by Zachary D. Carter – Aqdas Afzal, South Asia

How Europe Underdeveloped Africa by Walter Rodney – Nicolás Aguila, States and Markets

Caliban and the Witch by Silvia Federici – Fernanda Steiner Perin, Economics of Innovation

Six Days in September: Black Wednesday, Brexit and the Making of Europe by William Keegan, David Marsh, and Richard Roberts – Alain Naef, Economic History

The Death of Democracy: Hitler’s Rise to Power and the Downfall of the Weimar Republic by Benjamin Carter Hett – Gabriel Ferraz Aidar, Latin America

The Imaginary Economy by Mario Fabbri – Leigh Caldwell, Behaviour and Society

The Rise and Fall of Great Powers by Paul Kennedy – Diego Castañeda Garza, Economic History

Behemoth: A History of the Factory and the Making of the Modern World by Joshua B. Freeman – Diego Castañeda Garza, Economic History

The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia by James Scott – Terrence Muzorewa, Cooperatives

Philosophy + Social Sciences

You Kant Make it Up: Strange Ideas from History’s Great Philosophers by Gary Hayden – Nurlan Jahangirli, Economic Development

Women Who Run with the Wolves by Clarissa Pinkola Estes – Natassia Nascimento, Inequality

Natives: Race and Class in the Ruins of the Empire by Akala – Petronella Munhenzva, Africa

Data Feminism by Catherine D’Ignazio and Lauren Klein – Magali Brosio, Gender and Economics

Mistaken Identity: Race and Class in the Age of Trump by Asad Haider – Leigh Caldwell, Behaviour and Society

The Science of Storytelling by Will Storr – Leigh Caldwell, Behaviour and Society

The Globalists by Quinn Slobodian – Diego Castañeda Garza, Economic History

The Birth of Biopolitics by Michel Foucault – Seung Woo Kim, East Asia

14 Thesis of Ethics by Enrique Dussel – Ariel Ibanez, Sustainability

Palaces for the People: How Social Infrastructure Can Help Fight Inequality, Polarization, and the Decline of Civic Life by Eric Klinenberg – Luisa Scarcella, Finance, Law and Economics

Women, Race and Class by Angela Davis – Vanessa de Lima Avanci, Complexity Economics

The School of Life: An Emotional Education by Alain de Botton – Shatakshi Gupta, Gender and Economics

Homo Deus by Yuval Noah Harari – Komal Shakeel, Behaviour and Society

The New Jim Crow: Mass Incarceration in the Age of Colorblindness by Michelle Alexander – Kishorekumar Suryaprakash, Urban and Regional Economics

Sciences

Evolutionary Dynamics: Exploring the Equations of Life by Martin Nowak – Juan Melo, Philosophy of Economics

Born to Run: A Hidden Tribe, Superathletes, and the Greatest Race the World Has Never Seen by Christopher McDougall – Rutuja Uttarwar, Complexity Economics

Weapons of Math Destruction by Cathy O’Neill – Magali Brosio, Gender and Economics and Rosie Collington, Economics of Innovation

Doing Harm: The Truth About How Bad Medicine and Lazy Science Leave Women Dismissed, Misdiagnosed, and Sick by Maya Dusenbery – Iva Parvanova, Behaviour and Society

Consciousness Explained by Daniel Dennett – Stefano Merlo, Political Economy of Europe

Novels

The Devotion of Suspect X by Keigo Higashino – Surbhi Kesar, Economic Development

Arrow of God by Chinua Achebe – Christina Refilwhe Mosalagae, Finance, Law and Economics

The White Tiger by Aravind Adiga – Rutuja Uttarwar, Complexity Economics

The Alexandria Quartet by Lawrence Durrell – Ádám Kerényi, Financial Stability

Agatha Christie’s novels – Shatakshi Gupta, Gender and Economics

Crossbones by Nuruddin Fara – Esra Urgulu, States and Markets

The Bluest Eye by Toni Morrison – Fernanda Steiner Perin, Economics of Innovation

On Earth We’re Briefly Gorgeous by Ocean Vuong – Rosie Collington, Economics of Innovation

Beloved by Toni Morrison – Rosie Collington, Economics of Innovation

The Caves of Steel by Isaac Asimov – Simone Grabner, Urban and Regional Economics

Moby Dick by Herman Melville – Natassia Nascimento, Inequality

Fontamara by Ignazio Silone – Maria Cristina Bariberi Goes, Inequality

The Plague by Albert Camus – Francisco Ardila Suarez, Inequality

The Four-Gated City (Children of Violence) by Doris Lessing – Leigh Caldwell, Behaviour and Society

Brothers Karamazov by Fyodor Dostoiévsky – Nathalie Marins, Financial Stability

Foucault’s Pendulum by Umberto Eco – Salome Topuria, Political Economy of Europe

Don Quixote by Miguel de Cervantes – Ana Bottega, Keynesian Economics

Poetry

Poesía Completa by Alejandra Pizarnik – Barbara Toftum, Financial Stability

Biographies

The Words by Jean Paul Satre – Santiago Gahn, Economic Development

Becoming by Michelle Obama – Christina Refilwhe Mosalagae, Finance, Law and Economics

Homage to Catalonia by George Orwell – Lilian Rolim, Keynesian Economics

Neoliberalism in Action

Book Review: Democracy in Chains: The Deep History of The Radical Right’s Stealth Plan for America

How did a network of libertarian influencers mobilize ideas and resources to restructure American society to reflect their radical “free market” perspectives? In her recent book, Democracy in Chains: The Deep History of The Radical Right’s Stealth Plan for America, historian Nancy MacLean strives to provide an answer to this question.

MacLean views the radical right as a group of “true believers” in freedom, an idea they associate with market freedom, aiming to remove public services and replace them with privatized schools and prisons that respond the market, not voters within a democracy. In doing so, MacLean argues that the radical right will eventually reduce freedom for the majority while privileging the propertied minority. The more power the propertied minority has, the less democratic society becomes. The ultimate target of the radical right, which has gained control of the modern Republican Party, is to change American society to privilege capitalism over democracy even more than it does now.

For libertarian economist James Buchanan, the market mechanism was the most efficient method of allocating resources, which he views as a form of democracy. Educated at the University of Chicago under Frank Knight and Milton Friedman, Buchanan played a significant role in the “stealth plan” of changing the rules of American society, not just people who make the rules. MacLean argues that Buchanan was radicalized at Chicago, where he earned a PhD in economics and learned the “science to support his existing “antigovernment feelings” (p. 36). Buchanan spent most of his teaching and research career in Virginia where he co-authored The Calculus of Consent: The Logical Foundations of Constitutional Democracy with Gordon Tullock.

In extending the market rationality to American politics, Buchanan and Tullock argued that politicians only pursued their own self-interest rather than any broad interests of society. Given that public institutions are led by officials that only pursue their own interests, public governance should be based on the principles of the market. They called this public choice theory, a framework that focused on non-economic decision making and served as a basis for awarding Buchanan the Nobel Prize in Economic Science in 1986. The Cato Institute, a libertarian think tank that was funded by billionaire Charles Koch, viewed The Calculus of Consent as a form of protection for capitalism against government, while MacLean argues that “[i]t might more aptly be depicted as protecting capitalism from democracy” (p. 81).

As a Nobel Laureate, Buchanan created an influential research program at George Mason University, which gained the attention of the Koch Network, which funded and later controlled Buchanan’s program, aiming to leveraged the legitimacy of economic theory to produce a society that was governed by the market, not by democracy. The “stealth plan” of this radical right was to mobilize ideas and resources to change the rules of American society to reflect its free-market perspective, not just who rules. To do so, they had to change the way the rules were rationalized. Buchanan’s public choice theory offered a way to re-conceptualize American law and politics.

On the surface, MacLean’s book offers a critique of libertarianism, although, it could perhaps better be understood as a critique of public choice theory—or neoclassical economics more generally—as a way of thinking and rationalizing society, which became dominant through powerful libertarian social and economic networks. By examining these nuanced power dynamics, MacLean offers a brilliant look at neoliberalism in action. She reveals the real-life experience of neoliberalism by showing us how and why the radical right extended the principles of the market rationality to areas outside conventional limits of the economy.

In her discussion of law and economics, a field of law that draws on the principles of economics, MacLean frames the entire field—rather than elements of it—as an attempt to undermine the broader public interest, while privileging the corporate language of profit, which uses cost-benefit analyses to make decisions. While MacLean makes a very persuasive argument, she overlooks the idea that cost-benefit analyses can be useful, depending on the context and purpose for which they are used.

Beyond this and other minor issues with MacLean’s book, such as her conspiratorial tone, Democracy in Chains offers an excellent look at the American political process and how seemingly marginal ideas, can become powerful enough to radically alter it.

About the Author: Johnny Fulfer received a B.S. in Economics and a B.S. in History from Eastern Oregon University. He is currently pursuing an M.A. in History at the University of South Florida and has an interest in political economy, the history of economic thought, intellectual and cultural history, and the history of the human sciences and their relation to the power in society.

What Money Can’t Buy: The Moral Questions of Market Solutions

Against the backdrop of a society that rarely questions the perceived superiority of “market-based” solutions, Michael Sandel skillfully explores the intersection between markets and morality. In a six-part video series, Sandel teaches viewers a very important lesson: in practice, there is no consensus on what a free market is, and what outcomes are optimal.

The video series “What Money Can’t Buy,” produced by the Institute for New Economic Thinking, takes viewers on a journey which compels them to critically engage with a series of questions that challenge the common perception that untethered markets provide optimal solutions to all problems. While the questions cover a variety of topics, ranging from selling organs to discrimination based on looks, the common thread is to highlight this: in economic terms, what could be seen as an optimal outcome is often not a desirable outcome for society.

By watching the series, one thing becomes evident: there is no clear line that marks where markets should begin or end. Furthermore, each individual has a different understanding of what counts as an optimal outcome. As we come to terms with the lack of clear answers, the perception that unregulated markets always objectively provide a better outcome is shattered.

Economics textbooks teach students that households and firms act as if they are guided by an invisible hand that leads them to desirable market outcomes. As everyone seeks to maximize their own utility, free markets allow individuals and firms to engage in mutually beneficial exchanges, with supply and demand determining ideal price and output levels. Thus, one should simply let markets work their magic — no outside intervention necessary.

However, not even Adam Smith, to whom the “invisible hand” observation is attributed, believed that unregulated markets can lead to the best outcomes for society. As Harvard professor Amartya Sen points out, Smith was aware of the limitation of free markets. He knew resources would be drained and society’s ills would go unaccounted for in the absence of government.

Today, it is largely accepted that governments do need to play some role in setting and enforcing rules that enable markets to operate. For example, it is not controversial that property right and contract enforcement are government actions that enable markets to function, and would not be considered an intervention.

What is less acknowledged by those who oppose regulation under the guise of protecting free markets, is that the boundaries between what is considered a necessary rule and what is labeled as intervention have consistently changed throughout time, along with what our societies have deemed acceptable or not. The idea of what should and should not be sold on the market has constantly evolved.

Cambridge economist Ha-Joon Chang points this out using a simple example: child labor. In our present society, not allowing young children to work is something that seems natural. Yet, in early industrial days, this was a heated debate. Opponents called the ban an intervention in free markets and the infringement on the child’s right to sell its labor.

“What Money Can’t Buy” showcases interviews with a number of prominent academics from across the ideological spectrum, such as Joseph Stiglitz, Larry Summers, Minouche Shafik, and Greg Mankiw, as well as discussions amongst a group of students. Each episode features Sandel asking participants a sequence of questions around a specific theme, leaving it up to each of the respondents draw their own lines on what should or should not be a market good.

The interviews present a variety of responses and arguments both in favor and against allowing markets to operate in various areas of our lives, and whether allowing markets in those areas would lead to better or worse outcomes for society. There is no consensus on what counts as basic regulation, or when a market is no longer “free”.

There are no right or wrong answers to any of the questions. However, this does not mean that the responses offered by participants are not challenged. Sandel consistently asks for further elaboration on the answers, and explanations for the reasoning behind those responses. What makes the series truly thought provoking is the way in which Sandel then asks respondents if they are comfortable applying the same pro-market argument to a somewhat similar, but instinctively more morally questionable situation.

Throughout the series, it becomes clear that often the arguments in favor of having a market for something, such as kidneys, operate in a vacuum which does not take into account the large inequities and power dynamics of our society. For example, Mankiw defends the need to have a market for kidneys by claiming it would lead to more donors, and more lives saved, thus improving outcomes for society overall. Yet, as Stiglitz points out, in our unequal society, would those selling their kidneys do so as a voluntary transaction, or be coerced by their economic despair? Furthermore, selling kidneys in a market would mean the price would be too high for many people to pay, thus effectively letting poorer people die to save those who are wealthy.

What Money Can’t Buy does not provide any concrete answers to the questions discussed, and does not decide for its viewers what is right, or wrong. That is not its goal. Instead, Sandel encourages viewers to engage with the questions and critically think about the role markets play in our lives, how they are structured, and who they inherently favor. As the series makes clear, there is no objective way to define a free market or what counts as intervention, and thus it encourages us to think about morality and what type of society we wish to live in and incorporate those principles in the way markets influence our lives.

Watch the series here.

Rethinking Economic Growth: A Review of “The Growth Delusion” by David Pilling

By Raghunath Nageswaran.

If economic exchange determined by the market forces of demand and supply provided the right incentives for production, how should the exercise of measuring the economy and its performance be undertaken? When did the project of measuring the economy take off and why? Does Gross Domestic Product (GDP), the summary indicator of economic activity, reflect the significant facts of our economic life? And if it doesn’t, what can be done to ensure that it does, going forward?

David Pilling offers some thoughtful and interesting answers to such questions in his book The Growth Delusion: The Wealth and Well-Being of Nations. The book is not a tirade against economic growth; it is not an anti-growth or a de-growth manifesto. Pilling makes his intention to broaden the conversation on growth very clear by including the words “wealth” and “well-being” in the title, concepts that go beyond the narrow definition of economic growth as an expansion in the flow of goods and services measured in monetary terms.

That GDP growth has become a proxy not just for the economic success of a country as measured in material terms, but also for the well-being of its people is a stark reminder about our fixation with an indicator that was devised to measure physical production during the interwar period. The notion of “economy” as an entity to be managed and captured in quantitative/monetary terms by experts came into vogue less than a century ago during the Great Depression years after Simon Kuznets presented his survey of the economic performance of the United States in the report National Income, 1929-32. This effort marked the birth of systematic national income accounting. But Pilling reminds us that:

Kuznets was striving for a measure that would reflect welfare rather than what he considered a crude summation of all activity. He wanted to exclude illegal activities, socially harmful industries, and most government spending. On many of these issues he lost.

This must serve as a useful counterpoint while arguing with uncritical enthusiasts of GDP, who baulk at the idea of using a different set of measures for capturing social welfare in its truest sense—people possessing the agency and capabilities to do things they have reason to value, as Prof. Amartya Sen has persuasively argued in his writings. GDP is not reflective of such a holistic idea of welfare because that would entail an assessment of the distributional impact of growth on various sections of the society, which the GDP isn’t equipped to measure or capture.

One must remember that the measurement of GDP is not a value-free exercise. A whole range of value judgements and assumptions are involved in the demarcation of the production boundary, therefore it shouldn’t be regarded as an innocent measure of economic activity. It is a deeply moral and political affair. The starkest example is the exclusion of household activity undertaken mostly by women, which is considered “unproductive” by conventional national accounting norms. Several scholars have developed and applied tools that measure the amounts of unpaid work done by women using time-use data and by imputing values to an entire gamut of chores, from dish-washing through breast-feeding to child-rearing.

Regarding the efficacy of economic growth as a means of furthering human welfare, there is a view among well-meaning sceptics that developed economies must get over their obsession with unfettered growth enabled by the endless cycle of production and consumption. In the book Doughnut Economics, economist Kate Raworth uses the term “growth agnosticism” to drive home the point that developed countries should ensure that their people continue to thrive irrespective of the trends in economic growth.

While this is the outlook for the developed world, there seems to be a resounding faith in the indispensability of economic growth as a nostrum for developing countries. It rests on the belief that only faster growth can lift people out of poverty and generate more resources for creating a redistributive design. This is a contestable argument, given the inequality enhancing nature of economic growth we have seen in different parts of the world in the last three decades. It would be instructive to go beyond standard narratives to acknowledge the fact that growth doesn’t automatically translate into better living conditions for people, especially when the fruits of growth are mediated by the various fault-lines in the society, not to mention the very framework within which economic growth of a predatory variety takes place.

There are interesting and practicable proposals for ensuring that GDP is reflective of the “trade-offs” involved in our single-minded pursuit of economic growth in part three of the book. It is in this section that Pilling turns the spotlight on “the wealth and well-being of nations.” The chapter titled Wealth is a culmination of Pilling’s effort to indict us for our collective disregard for natural ecosystems from which we draw all our resources and inputs to undertake various economic activities. He draws our attention to the crassness and instrumentalism that characterize our ambition of maximizing current incomes. He says:

Recording today’s national income offers no help whatsoever when making intergenerational decisions. The signal it sends is to maximize growth today no matter what the impact tomorrow. At the extreme, one generation might use up all a nation’s forest cover and all its oil reserves in the interests of double-digit growth and in the expectation that future generations will somehow sort things out. Today a government pushing such policies would point to rapid growth as a justification for its actions.

This short-sighted approach to resource use and management has its origins in the theory that defines efficiency in most primitive terms: make the most of existing resources by allocating those to the profitable areas of production, which is determined by the existing pattern of income distribution. We need to recognize that the humane way of managing natural resources is to augment them and not depleting them for current consumption purposes. That way, both efficiency and equity concerns can be addressed as we allow resources to regenerate themselves and leave behind enough resources for posterity. Pilling’s conversation with the sagacious environmental economist Partha Dasgupta is by far the most illuminating section of this book. After positing that we need to take a balance-sheet view of economic progress to get a big-picture view of the state of our resources, Pilling shares nuggets of wisdom offered by Dasgupta. Dasgupta takes the broadest possible view of wealth/assets and says that:

Contemporary models of economic growth and development regard nature to be fixed, an indestructible factor of production. The problem with that assumption is that it is wrong. Nature is a mosaic of degradable assets. Agricultural land, forests, wetlands, the atmosphere—more generally, ecosystems—are assets that are self-regenerative, but can suffer from deterioration or depletion through human use.

The enduring impact of Jeremy Bentham’s utilitarianism can be evidenced by the fact that individual utility, expressed in terms of market price, is still considered to be the best proxy for the subjective well-being of human beings, and it forms the bedrock of the measurement of social welfare in many theoretical exercises. The utilitarian way of looking at happiness and well-being has been the dominant principle for justifying all kinds of economic decisions and actions. While the standard interpretation of utilitarianism is the maximization of overall welfare, achieved when competing economic individuals are left alone to make “rational” decisions, a more creative and humane interpretation of the principle can focus on cooperation instead of competition and solidarity as against selfishness to maximize welfare.

It is certainly nobody’s argument that alternative measures such as Bhutan’s Gross Happiness Index (GHI) and composite indices such as the Human Development Index (HDI) are necessarily fail-safe. As Pilling says in the opening paragraph of the last chapter, “if the beauty of GDP is aggregation, that is also its biggest flaw. No single number can capture all that is worth knowing in life”. The way forward is to use a dashboard of indicators that will reflect the variegated aspects of human life and the state of resources in the economy.

It is also imperative to seriously rethink the nature, composition, and distribution of economic growth in order to make growth, and its GDP measure, humane. Economic thinkers belonging to the “classical school” of economic thought believed that the question of distribution of surplus couldn’t be separated from production, as the contribution of different economic classes to social production was dictated by the prior distribution of endowments among them. To turn the focus back to ‘distribution’ we can draw inspiration and insights from the classical school.

The Growth Delusion is a highly readable and insightful book. It covers a lot of ground and the examples offered are wide-ranging. Pilling’s journalistic fervour and sharp wit make the narrative engaging. As the old Chinese proverb goes, a thousand mile journey begins with a single step. This book promises to be one such step in a long journey towards our realization that growth is a useful tool but an intolerable tyranny.

Raghunath Nageswaran has an M.A. in Economics from Madras Christian College, Chennai (India). He is a student of Indian democracy and political economy.

PostCapitalism: A Guide to Our Future

By Hannah Temple.

It is difficult to get through a day without encountering the idea that we as a species and a planet are at some kind of a tipping point. Whether for environmental, economic or social factors (or a mix of them all) there is a growing collective of voices claiming that the fundamental ways in which we live our lives, often linked to the structures and incentives of capitalism, must change. And they must change both radically and soon if we are to protect the future of the human race. Paul Mason’s PostCapitalism: A Guide to Our Future adds another compelling voice to this increasingly hard-to-ignore din. However, what makes this book refreshingly different is the tangible picture it paints of our possible path to a “postcapitalist” world. Mason’s belief is that capitalism’s demise is in fact already happening, and it is happening in ways we both know and like.

The book starts by looking at Kondratieff waves– the idea developed by Nokolai Kondratieff in the 1920s that capitalist economies experience waves or cycles of prosperity and growth, followed by a downswing, characterised by regular recessions, and usually ending with a depression. This is then followed by another phase of growth, and so on and so on. Many people, especially those that benefit from the current economic model, argue that what we are experiencing currently is just another of these regular downswings and we all just have to hunker down and ride the wave until the going gets good again. Mason, however says that even a quick glance at whatever form of evidence takes your fancy (global GDP growth, interest rates, government debt to GDP, money in circulation, inequality, financialization, productivity), demonstrates that the 5th wave that we should currently be riding has stalled and is refusing to take off.

The shift from the end of one wave and the start of a new one is always associated with some form of societal adaptation. Usually this is through attacks on skills and wages, pressure on redistribution projects such as the welfare state, business models evolving to grab what profit there is. However, if this de-skilling and wage reduction is successfully resisted then capitalism is forced instead into more fundamental mutation- the development of more radically innovative technologies and business models that can restore dynamism based on higher wages rather than exploitation. The 1980s saw the first adaptation stage in the history of long waves where worker resistance collapsed. This allowed capitalism to find solutions through lower wages, lower-value models of production and increasing financialization and thus rebalance the entire global economy in favour of capital. “Instead of being forced to innovate their way out of the crisis using technology, the 1 per cent simply imposed penury and atomization on the working class.”

This failure to resist the will of capital and the subsequent emergence of an increasingly atomised, poor and vulnerable global population is part of Mason’s explanation for our stalled 5th wave. The other half of the explanation comes from the nature of our recent technological innovations. Mason contends that the technologies of our time are fundamentally different to those of previous eras in that they are based on information. This is significant in that information doesn’t work in the ways that printing presses or telephones or steam engines work. Information throws all the basic tenets of capitalism- supply and demand, ownership, prices, competition- on their heads. Information technology essentially works to produce things that are increasingly cheap or even free. Think of music- from £10 for a CD in 1997 to 95p for an iTunes track in 2007 to completely free via sharing sites like Spotify in 2017. Over time, Mason claims the market mechanism for setting prices for certain information-based goods will gradually drive them down and down until they reach essentially or even actually zero – eroding profits in the process.

Capitalism’s response to this shift has basically been to put up lots of walls and retreat to stagnant rentier activity rather than productivity or genuine innovation. Legal walls such as patents, tariffs and IP property rights are used to try to maintain monopoly status so that profits can continue to be earnt. Politics is following in the same path with some real walls as well as plenty of metaphorical ones in the form of disintegrating international agreements and partnerships, import tariffs, immigration caps and so on. “With info-capitalism a monopoly is not just some clever tactic to maximise profit, it is the only way an industry can run. Today the main contradiction in modern capitalism is between the possibility of free, abundant socially-produced goods and a system of monopolies, banks and governments struggling to maintain control over power and information”.

However, what seems to be part of the problem is, according to Mason, a critical part of the solution. These new sharing, or “information” technologies, have led to what Mason sees as an already emerging postcapitalist sector of the economy. Time banks, peer-to-peer lending, open-source sharing like Linux and Wikipedia and other technologies are not based on a profit-making motive and instead enable individuals to do and share things of value socially, outside of the price system. This peer-to-peer activity represents an indication of the potential of non-market economies and what our future might look like.

Mason argues that we have now reached a juncture at which there are so many internal and external threats facing our existing system- from climate change, migration, overpopulation, ageing population, government debts- that we are in a similar position to that faced by feudalism before it dissolved into capitalism. The only way forward entails a break with business as usual. Mason emphasises that it is important to remember that capitalism is not a “natural” state of being, nor has it gone on for such a long time. We live in a world in which its existence is seen to be unquestionable but we must take time to teach our brains how to imagine something new again. For Mason, in rather sci-fi fashion, this “something new” is called Project Zero.

Project Zero aims to harness to full capabilities of information technologies to:

– Develop a zero-carbon energy system
– Produce machines, services and products with zero marginal costs (profits)
– Reduce labour time as close as possible to zero

“We need to inject into the environment and social justice movements things that have for 25 years seemed the sole property of the right: willpower, confidence and design.”

Mason provides us with a comprehensive and exciting list of activities to be cracking on with to shape our new world. Some of his ideas are excitingly fresh and new such as the development of an open, accurate and comprehensive computer simulation of current economic reality using real time data to enable the planning of major changes. Others are more familiar such as the shifting of the role of the state to be more inventive and supportive of human wellbeing by coordinating infrastructure, reshaping markets to favour sustainable, collaborative and socially just outcomes and reducing global debts. He also supports the introduction of a universal basic income, the expansion of collaborative business models with clear social outcomes and the removal of market forces- particularly in the energy sector in order to act swiftly to counter climate change. He calls for the socialisation of the finance system. This would involve the nationalization of central banks, setting them explicit sustainability targets and an inflation target on the high side of the recent average to stimulate a “socially just form of financial repression”. It would also involve the restructuring of the banking system into a mixture of non-profit local and regional banks, credit unions and peer-to-peer lenders, a state-owned provider of financial services and utilities earning capped profits. Complex, financial activities should still be allowed but should be separate and well-regulated, rewarding innovation and punishing rent-seeking behaviour.

This push towards a system that rewards and encourages genuine innovation underlies most of Mason’s suggestions for our postcapitalist future. He contends that, if we continue down our current path, it will suffocate us and lead to a world of growing division, inequality and war. We already have systems for valuing things without prices. Working on optimising the technologies we have available to expand these systems, allowing us to live more sustainable, equal and happy lives, Mason argues, should be the key focus for us all.

This book review of Paul Mason’s PostCapitalism by Hannah Temple is originally posted at Rethinking Economics. 

Doughnut Economics – Grab a pencil, draw a doughnut!

Many of us know we need to rethink economics, but Kate Raworth actually did it. Envisioning the economy as a doughnut, two boundaries become clear. If we fall into the doughnut’s middle hole, human needs fail to be met. If we drop off of the outer edge, life is unsustainable.

You should be weary of people who seek to get the “first lick” on a young impressionable brain. Paul Samuelson knew that by writing a successful economics textbook, he could influence how students frame the economy, and thus the world. From the 50’s to the 70’s, his textbook was the most widely used in introductory economics courses. Today, that role has been given to Gregory Mankiw’s “Macroeconomics” (see the Open Syllabus Project). Both view the economy in the same narrow way, with the same simple pictures that don’t seem useful today. Raworth’s Doughnut Economics breaches the pattern and envisions a new economics, for a new generation with clearly defined challenges and scant tools to solve them.

For so many years, the principle goal of economics, and thus the economy, has been GDP growth. Growth for whom or through what means wasn’t nearly as important as just ensuring there was in fact growth. Raworth emphasizes the importance of framing, and if you ask an economist what picture they foresee for GDP, they often describe an upward exponential function.

Thankfully, many young students that I’ve met recognize that infinite growth is unsustainable. Hopefully, their generation can popularize a GDP graph in the shape of a sideways S, respecting the upper bound to growth we have to live within. Enter Raworth’s doughnut. In Raworth’s framework, the outside of the doughnut reflects an upper bound we can not pass based on environmental limits of our planet. The inside of the doughnut reflects a social foundation we can not let crack, the necessities for humanity to thrive.

The goal should no longer be growth, but ensuring we take care of our social foundation and respecting our environmental ceiling. Raworth calls this balanced space in the middle the safe and just space for humanity, and that’s the goal we should direct ourselves toward. We can not ignore who growth is leaving behind, or what damage this growth is doing to our planet. These bounds are the crucial factor for Kate’s “doughnut.” They can move us beyond a narrow single measure called GDP, to looking at all the interconnected measures that are so important for our livelihood.

Once we’ve moved beyond the single measure, we have to also abandon the single neoclassical narrative that espouses the godlike nature of “the market”. The market, the household, the state, and the commons all have a place in the big picture, and different challenges have to be faced by different actors. The neoclassical story tells us there is a “tragedy of the commons,” what if that story was actually the tragic one? Kate takes a stab at the characters of the old narrative, and offers us a new script for them.

EARTH, which is life-giving—so respect its boundaries

SOCIETY, which is foundational—so nurture its connections

THE ECONOMY, which is diverse—so support all of its systems

THE HOUSEHOLD, which is core—so value its contribution

THE MARKET, which is powerful—so embed it wisely

THE COMMONS, which are creative—so unleash their potential

THE STATE, which is essential—so make it accountable

FINANCE, which is in service—so make it serve society

BUSINESS, which is innovative—so give it purpose

TRADE, which is double-edged—so make it fair

POWER, which is pervasive—so check its abuse

The big picture story requires the next generation of economists to be savvy with systems thinking. The old economics used mechanical equilibrium thinking, where economies trend towards a static state. A new economics recognizes the flaws of this equilibrium thinking, recognizing like Minsky said that “stability is destabilizing.” A new framework for economics will recognize the different feedback loops that influence the economies stability.

The language of complexity, evolution and systems needs to infiltrate economics. We need to be thinking about how we can design a resilient economy, one that can resist shocks. We need to look at the big picture, understanding the sources and sinks of different resources. We have to know where our food comes from, ensuring it is distributed properly, and we have to know where our plastic is being disposed, ensuring it’s not destroying the planet. We have to get familiar with the language of stocks and flows, the stores of resources and also their movements. These will be our new tools.

Raworth’s story gives hope to the young economists that are bent on saving the dying planet we’ve inherited. Her vision for a new economics, and the new economy, align with the work we’ve been doing here at The Minskys. Even better though, she has produced a frame for which we can better espouse our ideas. We started out thinking about systems – the sources and sinks of money creation. We’ve recognized the physics envy of mainstream economics. We understand the need to nurture human nature, so maybe we should be studying the grants in the economy and not just monetary exchanges. Without this, we’ll fall inside the doughnut’s hole, where there is no paid maternity leave, and austerity all around. We’ve also thought about ways not to breach the doughnut’s bounds, with a Green Job Guarantee, Basic Income, or Community Currencies for example.

Raworth’s doughnut frames the important aspects of the economy, and is simple to use. Observe your local community! Do you see human needs not being nurtured? That means we’ve breached the inside of the doughnut. Do you see irresponsible damage being done to our home, the earth? Then we’ve breached the outside of the doughnut. We have to design solutions to keep us in the doughnut. We’re all economists now, because we have to be. The future is pretty bleak for humanity without a planet to stand on.

If you too wish to start thinking like a 21st century economist, be sure to check out the book in it’s entirety here. There are also a series of animated shorts here. After that, it’s as simple as grabbing a pencil and drawing a doughnut.