We’re all economists now. Let’s rescue economics from Brexit mudslinging

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  • Economics and Finance

Brexit has marked a new low in the abuse of economics in political debate. From politicians playing fast and loose with statistics to policymakers peddling opinions as ‘facts’ we are not just confused; we are disillusioned. More than ever, we need to explore new ways to engage the public in meaningful debate about the economy.

In politics, the economy matters. Ever since Bill Clinton’s campaign chief coined the phrase ‘The economy, stupid’, politicians have been ever more keen to assert their economic competence.

No surprise that the Brexit camps have chosen to fight much of their battles on the grounds of the economy. But in doing so they have managed to generate much heat whilst putting us further in the dark.

Only one in five of us feel well informed about the referendum, and perhaps even more damaging we simply do not trust our senior political figures to tell the truth about the EU. Even the Bank of England’s reputation has been diminished, with only 35% trusting Governor Mark Carney against 38% saying they did not.

In a scathing 83 page report on the Brexit debate, the Treasury Selected Committee concluded that the “arms race of ever more lurid claims and counter-claims” on the economy was impoverishing political debate.

Nowhere is this more evident than in the use of the ridiculous phrase ‘economically illiterate’ levelled against political opponents. Mastering a huge and diverse academic discipline, with at least nine different schools of thought, can hardly be equated with the ability to read. More importantly, who says you have to be a trained economist to have a valid view on the economy?

Economists generally behave better than politicians, but still project confusing and conflicting certainty. While Paul Johnson of the Institute for Fiscal studies argues that economists are almost unanimous in their view that Brexit would shrink the economy, former senior IMF economist Ashoka Mody attacks this apparent consensus as crossing the line into groupthink. In reality, economic predictions depend heavily on the assumptions made by their authors but these are rarely discussed or made transparent to the reader.

So when you hear a statement such as:

“Leaving the EU will make every household £4300 worse off”

You should interpret it as follows:

“To be honest we cannot tell what will happen in the future, but we have tried really hard to have a good guess. To make this guess we have made some assumptions that you may or may not agree with, and you should know that if we made different assumptions we might get a completely different result. We have also relied on some theories about the way the economy works that are contestable, and if you applied different theories you might also get different results. Good luck with all of that.”

You can see the appeal of the former.

At least Paul Johnson, a speaker at our forthcoming launch event for the Citizens Economic Council, injects a rare moment of humility into the debate when he recognises that ultimately this is a political decision. A smaller economy might be a trade-off some people are willing to make for more sovereignty and, as an economist, he says “I can’t tell you how to trade these things off, how to make this choice.”

In other words, if Brexit is the question, economics cannot give you the answer.

So what?

You might reasonably wish a plague on everyone’s economic statistics and just ignore arguments about the economy.

We claim the opposite. We should aim to demystify economics, make economic debate more meaningful and accessible, and find ways to engage more people in active deliberations on economic decisions.

And this is an urgent task. The need for greater democratic engagement on economic issues has become more pressing over time for at least three reasons

1. Erosion of public trust

Recent economic crises - banking, sovereign debt, Eurozone, scandals about tax havens, corporate asset stripping and persistent poverty even in rich nations, have damaged public trust in economic and political institutions. Doing better economic policy to citizens might help, but how about doing economic policy better with citizens

2. The rise of pluralism in economics

Apparent economic stability during the period of the Great Moderation was taken as proof of the validity of a package of policies to liberalise markets, trade and finance, reduce taxation and increase labour market flexibility while controlling inflation. These ‘unquestionable’ policies were themselves supported by an equally strong orthodoxy within academic economics.

However, the crisis challenged the idea of a singular, certain and infallible body of economic theory and many have now called for a more pluralistic approach to economic research and policymaking. Recognising this lack of certainty in economic theory magnifies the importance of being open and transparent about the methods and assumptions that have been used to make economic policy choices.

3. Coping with rapid economic transformation in the 21st Century

Even where economic theory and evidence is well established, the future is highly uncertain.

Disruptive new technologies such as genomics, data analytics, robotics and artificial intelligence may change the world of work and the nature of production and consumption in dramatic ways. Degradation of eco-systems and climate change may create increasingly severe and unpredictable impacts. A growing population may see rising migration resulting from conflict, climate change and the search for a better life.

To maintain social stability and allow communities to flourish in the face of such uncertainty and rapid change will require broad based support for economic decision making that has no guarantee of successful results. It will also arguably require more creative and innovative ideas about how to successfully organise and manage market economies.

The key to achieving this is to explore how deliberation and participatory methods can help bring clarity to our collective economic goals, generate better policies to achieve them, and bring more cohesion to our societal choices about the economy.

Too often we feel disempowered to express strong views about how to run the economy because we are not economists.  But if we define economics in its broadest sense it is about how society allocates its collective resources to fulfil our needs and aspirations.

Surely everyone can have a legitimate view about that. What we lack are good processes for negotiating the sometimes difficult trade-offs involved – or in politician-speak the ‘hard choices’.

Well it does not seem that the referendum is providing a good process for this, so we will be exploring through the Citizens Economic Council, and a series of coming blog posts, how we can create better processes for economic debate and decisionmaking.

It is time for everyone to be an economist.


Book your free ticket for the launch event of the Citizens Economic Council on Wednesday 29 June from 6pm.

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  • Tony, I read your post when it came out and re-read again this morning in the aftermath of last week's vote - a disaster, in my view, but hopefully I will be proved wrong.  I am following the CEC with great interest and have already been in touch with Reema about making some sort of contribution within my own area of expertise.  

    However I also want to suggest a couple of other aspects you may wish to consider incorporating/exploring into the CEC's work. 

    The main one is the need for much better inter-temporal economic thinking; an area where the UK is particularly weak.  We seem to have a natural suspicion of anything resembling French "dirigisme" (those experts again!) and a preference for ad-hoc policy making.  There is a desperate need for some sort of National Economic Council (akin to those mooted for infrastructure, pensions, etc which have been consistently strangled at birth by successive Chancellors and/or HM Treasury).  Such a Council - perhaps in partnership with something like the CEC - could set policy goals beyond the electoral cycle.  Just as importantly, it could also monitor the effects of policy over time and make gradual adjustments both to the desired goals and the chosen policy implements, as required by circumstances. 

    The other aspect I would suggest is to remember to incorporate micro-economics into all the high-flying macro thinking.  You will be very familiar, I know, with developments in behavioural economics and nudge theory, etc. This is not my area of expertise but I suspect that the best macro-economic policies in the world won't get far if incentives are pushing individual citizens and firms in the opposite direction.

    • Andrew,  I endorse what you are saying.  Inter-temporal economic thinking requires the models whose results are demanded by political policy makers to be constructed such that the micro-macro loops, which you rightly identify as being a key component of any realistic view of economic activity, can be followed along a time-line.  This cannot be done done under any form of equilibrium modelling which by its nature takes a temporally static view.... and which because of the NP-hard issues requires the gross and invalidating simplifications to make them computable, and then hide from public view behind its acronym CGE.

      Your recommendation requires the mainstream of economics to move from the neoclassical/neoliberal to the methods and principles of Evolutionary Economics and the building of simulation models able to run the multi-agent models needed to be validly inclusive of micro and macro considerations.  This is also the only path that we currently know of which is capable of handling a move from the over simplistic and totally unrealistic model of 'the rational economic man' (which lies at the root of the mainstream preference for equilibrium modelling)  to the biologically validated and totally realistic model of beings, us humans in this case, which employs Cause-Decision Transactional behaviours (CD-transforms in the literature).

      It would be wonderful if the National Economic Council you speak of could be the engine which gets the politicians and tame advisers to take this much needed first step towards the full paradigm shift which we so desperately need.  Even more so if the CEC were to be the launch pad for that initiative!

  •  There seems to me a fundamental confusion embedded in a great deal of the talk around the CEC and what it hopes to achieve.  Is this semantic? 

    When we consider "how society allocates its collective resources" we are studying Economics  - asking "How do we provide and obtain the stuff that makes life possible and more or less pleasant, and who makes it and who gets it?". That is objective study...we observe and try to find patterns, causes and effects.

    When we consider "how society should allocate its collective resources" we are engaging in the study of Philosophy - mostly of Morality and Ethics.  Here there is almost no limit to the questions that it may be asked of us.  But it is a study in which every answer that it provides has a direct bearing upon our interpretation and evaluation of every observation, and upon every inference of Economics.

    We can ask what we mean by 'society'. Is this in the bounded or unbounded sense?
    We can ask what we mean by 'collective'. Is this meaning what we jointly have dominion over as a species, or is it what we claim to own jointly - where 'ownership' is a social institution needing definition in its use above, or is it the sum of what we each own individually?
    We can ask what we mean by 'resources'. Is this those naturally occurring attributes of the planet, and does it include or exclude all those attributes of which each individual human being is possessed? 
    And are these all 'owned' in some way? Either 'collectively' or individually? 
    And should they be, or not, and if so on what basis can that ownership, or access, or lien, be exercised by one individual over another? 
    And by what authority do we make those moral judgements between what is right and what is wrong?
    And who are 'we' anyway?  Do 'we' speak for all mankind, or need to consider them beyond our shores, or those of them who have recently arrived within our shores, or those of us who have recently left our shores?

    In considering those other resources which have undergone transformation of form and state by our labours, tools and social institutions we would need to ask many more questions and understand how we objectively arrive at just what are our 'needs and aspirations'.

    Of these transformed resources (products?) and these 'needs and aspirations' (wants?) which of them are themselves institutional artefacts of the institutions which have entered into our society as a result of the discredited economic philosophy, theories, models and policies of the past two hundred years, in the first instance, and those which have evolved with us through deep time in the second? Of these which can be adapted? Which must be abandoned? And replaced with what?
    And on what basis will we tell the difference?

    When it comes to change.. How far may we change what parts of present society - in the UK? Only? Other societies with whom we share resources (collectively?) and have close and complex economic relations?  By whose judgement? Upon what authority?  Legal?  Or Moral?

    I think the CEC is a tremendous idea!  To be more than a talk shop, it need tremendous vision.  Vision that will generate the passion and conviction necessary to elicit in our Fellows the courage and the tenacity that will be needed over what will be a long journey.  A journey which, by the nature of our own social evolution and that of our technologies, will be never ending.  If that is what is meant by sustainable, resilient and durable economic and political change.

    Let us not short-change ourselves by allowing the discomfiture of a dysfunctional status quo to dissuade us from embracing the full scope of what we are contemplating in the process of moving away from it!

  • This sounds like a great idea and I will keep an eye on the project as it progresses.

    The lack of economic literacy was raised by my wife and she has decided to do something about it by signing up for Understanding Economic Policymaking, a offered by Coursera. If anyone is interested in learning more about economic policymaking, this course would be a good place to start: https://www.coursera.org/learn/economic-policy

    • Thanks Martin for this link. We will aim to curate great learning materials from the RSA and beyond to assist people to build their knowledge and understanding of economics.

  • Not so much Economists but even Statisticians would help. I've lost count of the number of people I've come across who have complained bitterly about the spin placed on stats by both sides and have longed for a reliable source of objective data. 

    • Indeed Douglas, and it is not only the way that statistics are shown but also the context within which they are presented. Media soundbites, and now social media soundbites, can rarely provide this contextual information.

  • I thoroughly agree that economics should be understood by everyone. However it is totally biased to attribute the 'mudslinging' to one side in the EU debate. Socio-economic mudslinging has become the new norm for the EU debate. The "debate" thus far is merely a manifestation of what social psychologists describe as 'In group/Out group psychology'. It is, in essence, a Civil War, played out with words in place of weapons. It is the kind of aggressive conflict - played out with passion on both sides - which splits families, neighbourhoods, friendships, political parties and even, surprisingly, the Trade Union movement. 

    I am appalled at the level of debate generally - in whatever medium - and the degree of hatred expressed on either side. After 23rd June we shall all have to pull together to make the best of whatever result is determined at the ballot boxes. For my part I have been posting a series of comments on social media hopefully injecting some humour into the debate.  

    • I agree entirely with what you say - I was not singling out one side over the other. The disappointment is that the whole level of debate has been so divisive and the tone and manner in which both sides conducted it is to be regretted. What is even more regrettable is how divisive the vote itself has been.

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