Hi Raf,

“I think the frustration expressed by Suzuki is that economists seem to have been identified with the neo-liberal dogma that markets work best and markets are the only way to organise our society”

Markets are the name for the interaction between individuals we can’t “organise our society” in any way that doesn’t involve them – they are a descriptive device.  A belief in any type of institutional or market failure needs to come from understanding markets – not from saying that we need to find a way to control society more explicitly.

“There is also a feeling that economics is fracturing under the weight of a debt based monetary system that hasn’t quite been understood or explained properly. This is changing as many people are working on trying to understand why market are constantly failing and why policy makers make decisions which are hard to justify. “

The economic method has stayed completely relevant – a lot of people just haven’t wanted to use it.  We can only talk about market and policy failure by discussing the incentives involved – that is economics.

“Suzuki’s reaction to his economics lecturer may have been the way in which “externalities” were dismissed as a minor concern”

This wouldn’t happen.  Externalities are a core part of economics teaching from very very early on.  I’ve tutored 1st and 2nd year economics and I know how much of a big deal we make about this issue – and how the default example is ALWAYS pollution.

“That shouldn’t take away from the fact that economics is a very important discipline. How we manage our households is a fundamental concern. However, i think it has lost its way, becoming bogged down in the political contest and being overtaken and directed by vested interests to the detriment of all.”

Economics isn’t about household management – it is about describing trade-offs so that we can understand the allocation of scarce resources.  It is the perfect method for discussing environmentalism.

“There should be no delineation between economists and environmentalists. This just causes separation. After all if economics is about allocation of resources, then the environment should be a core focus and not something to be added on or treated as a different discipline. I think Suzuki’s actions probably stem from this.”

Which is why the economic discipline DOES NOT differ from this – at all.  It is why there are so many economists discussing environmental issues.  It is why the push for an ETS, or a carbon tax, has had such a long history in economics – and the idea of regulating and/or creating property rights in the face of pollution has a much much longer history.

Suzuki has decided to attack one of the closest allies of the environmental movement on the basis that he doesn’t understand them – the very policy conclusions he has now reached COME FROM economics, but he likes to pretend they are from scientists.

There is also a feeling that economics is fracturing under the weight of a debt based monetary system that hasn’t quite been understood or explained properly. This is changing as many people are working on trying to understand why market are constantly failing and why policy makers make decisions which are hard to justify. 

Suzuki’s reaction to his economics lecturer may have been the way in which “externalities” were dismissed as a minor concern, something relevant but not entirely of importance. Recent studies would show that to be a mistake with ecosystem goods and services being well in excess of traditional measures of economic activity.

That shouldn’t take away from the fact that economics is a very important discipline. How we manage our households is a fundamental concern. However, i think it has lost its way, becoming bogged down in the political contest and being overtaken and directed by vested interests to the detriment of all.

There should be no delineation between economists and environmentalists. This just causes separation. After all if economics is about allocation of resources, then the environment should be a core focus and not something to be added on or treated as a different discipline. I think Suzuki’s actions probably stem from this.

A couple of interesting readings which add to this debate are Diane Coyle’s “The Economics of Enough” and also Adam Kessler’s paper on Cognitive Dissonance and the GFC.  

When I was a young boy externalities were about the third class.

Class 1 was “economics is the study of scarcity”, “every choice has an opportunity cost”.

Class 2 was “what is supply and demand” and “what do they represent”

Once you have those you could start to discuss the idea of “market failure” – which involves externalities for sure.

It looks like the class Suzuki went to started with macro – not wonder he wanted to leave 😉

Externalities, and how they are integral to the field of economics.

Thanks.

I think that impression comes from the fact that the economics framework can be used to understand what is going on in very obvious markets – such as the stock market.  However, its a framework – and it can be used to understand all issues of allocation, that is the point of it.

Profit maximisation is extremely essential in all this – as its a behavioural relationship.  If firms really are profit maximising, or maximising over some set of objectives, we need to assume that in order to accurately describe their behaviour – we aren’t saying this leads to the “best outcomes” we are just describing what is going on.

With that in mind, we can then discuss what this implies for outcomes – the idea of an “externality” captures the fact that the objectives private agents are working to meet might differ from what is in the interest of everyone, due to their actions having an impact “outside their market”.  In turn it acts as a justification for policy.

Which is why I found these quotes from Suzuki both ill informed and insulting – not to mention the fact that some of the most environmentalist people I know are economists.

I know people how would support a literal version of that.

I promise I don’t make conclusions – don’t shoot me 😀

In a fair world, they would just blame the people who use manipulated data to support contrived conclusions. I think it would be called shooting the massager.