Should Politics Be Distinguished From Economics?
In the modern world, I have seen many existing and emerging economists who have a politically motivated agenda: whether this was positive or negative is dependent on both opinions and consequences. Economics and Politics are both perceived to be ‘social’ sciences- ones which aim to be objective and reliable in their studies, but fail to be due to the idea they are studying a society they are a part of. This is fitting when looking at law making in particular, which is assumed to need a political standpoint in order to make the ‘policies’ passed relevant. This is otherwise known as value relevance, and it fits into most aspects of society; and essentially sparring the debate as to whether you believe opinions should be a part of decision making. Many will say it depends on the context and what the decision involves, for example some say opinions are important in a job interview, but not so much so that personal prejudices come into play. The flaw here is preposterous: how do we distinguish these values, opinions and prejudices from each other?
A particularly prevalent example is the use of industrial policy. Some economists may say that it would be foolish not to implement industrial policy in less developed areas; as alone these regions are incapable of reaching the levels of their more successful counterparts. For example, the Northern Powerhouse initiative implemented by UK government specifically targets areas of decline by providing grants to sustainable projects undertaken there, such as funding the largest ever robotics and AI project in Manchester1. Projects similar to these have created positive multiplier effects in the past, so are beneficial to the UK economy. But this is because those passing the policy supported state intervention into free markets. Therefore, opinion played a part in this label of a ‘tried and tested’ ‘successful policy’. Some may even go so far to say that industrial policy is unsustainable, as it is not organic growth and it will create reliance: this is why we need experts in the field so there is not an information failure and a misallocation of resources towards a goal that will only slump once help is withdrawn. Again, this raises the question as to who is an expert? Many will be equally ‘qualified’ to become an economic advisor for the government- but as we know it is largely up to your connections and favourite political party, rather than how creative one may be with curating economic solutions. It would be ill-advised to suggest that one does not have to be creative in order to be a successful economist, as by using ‘tried and tested methods’, one is not an economist, only a devotee to economics. Politics is seen as providing value relevance in economics, as it is providing one with a problem to solve. But again, what is a problem? Calabresi and Bobbitt in their book ‘Tragic Choices’ detail how ‘the pure market’s principal shortcoming is that it depends on the prevailing distribution of wealth’, but yet most neoliberals continue to back the free-market approach and disregard economic inequality, which some humanitarians argue is the reason for total inequality in the world.
Looking at the neoliberal perspective, it is important to ask whether aligning Economics with Politics hinders economic freedom and liberalist principles. This crossover has been seen in the New Right, which is a sociopolitical perspective that favours little government intervention in order to prevent the creation of an underclass (this perspective was particularly prevalent in the time of Margaret Thatcher who used Charles Murray as a sociological advisor). If one were to be aligned with this perspective, when asked to solve an economic problem such as rising cyclical unemployment, they are likely to avoid and disregard policies which would involve government intervention, even if they were best suited to the macroeconomic environment, whether this be a conscious action or not. Surely, this would hinder the trend rate of economic growth? Even when looking at individual markets rather than the macroeconomy as a whole, it is important to recognise what Politics is and where it can be found. The internet defines Politics as ‘the activities associated with the governance of a country or area, especially the debate between parties having power’2 . To say true Politics is only found in government would be ignorant of other high-profile organisations and leaders who have control over people and places (which is essentially re wording the definition presented above).
Recently, I have heard people claiming decisions in football are ‘about Politics, 'and the same can be said for every other industry, business and organisation in the world. The proposal of a European Super League was on the surface, an economic one, as it assisted clubs such as FC Barcelona in their debt, but in actuality, if we are saying Politics is wanting control so one can continue to exercise their own beliefs, then it would be a political one. Writing this, and using this example, it is difficult to argue that most ‘economic’ decisions are not political ones, but then again, looking at the definitions presented, is Politics not human nature? If so, how can we possibly escape it?
Coming back to economics, and reworking a previous argument, the influence of Politics on economics is also seen on the opposite side of the spectrum. If one were to believe that economic inequality was the most pressing issue facing the world today, then they may advise increasing taxes on the wealthy in order to fund an unrelated project, such as military defence, as it tackles both the issue of funding and inequality at the same time. This one example shows the warp we face in trying to answer this question- it is evident that Politics cannot be distinguished from economics- but it is up to values, opinion and Politics as to whether it should be.