Ha-Joon Chang - Economics - The User's Guide

P. BAIROCH

Economics and World History: Myths and Paradoxes (New York and London: Harvester Wheatsheaf, 1993).

H.-J. CHANG

Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem, 2002).

B. EICHENGREEN

The European Economy since 1945: Coordinated Capitalism and Beyond (Princeton, NJ: Princeton University Press, 2007).

A. GLYN

Capitalism Unleashed (Oxford: Oxford University Press, 2007).

D. LANDES

The Unbound Prometheus (Cambridge: Cambridge University Press, 2003).

A. MADDISON

Contours of the World Economy, 1-2030 AD (Oxford: Oxford University Press, 2007).

S. MARGLIN AND J. SCHOR (EDS.)

The Golden Age of Capitalism (Oxford: Clarendon, 1990).

D. NAYYAR

Catch Up: Developing Countries in the World Economy (Oxford: Oxford University Press, 2013).

‘Any customer can have a car painted any colour that he wants so long as it is black.’

HENRY FORD

‘Let a hundred flowers bloom, let a hundred schools of thought contend.’

MAO ZEDONG

Contrary to what most economists would have you believe, there isn’t just one kind of economics – Neoclassical economics. In this chapter, I introduce no less than nine different kinds, or schools, as they are often known. [66] There are even more, if we include smaller schools (e.g., the Neo-Ricardian school, the Latin American Structuralist school, feminist economics, ecological economics). The number would be increased if we made sub-schools of some of the schools independent (e.g., different strands listed under the Developmentalist tradition).

These schools are not irreconcilable enemies, however; the boundaries between schools are actually fuzzy. [67] Carl Menger is considered to be the founding father of the Austrian school, but some would rightly say that he was, together with Leon Walras and William Jevons, one of the founding fathers of the Neoclassical school. An even more complicated example is Frank Knight, the early twentieth-century economist, who taught at the University of Chicago. He is often thought of as an Austrian economist (no, not by his nationality – he was an American), but he had a lot of Institutionalist influences, and some of his ideas overlap with the Keynesian and the Behaviouralist ones. But it is important to recognize that there are distinctive ways of conceptualizing and explaining the economy, or ‘doing’ economics, if you like. And none of these schools can claim superiority over others and still less a monopoly over truth.

One reason is the nature of theory itself. All theories, including natural sciences like physics, necessarily involve abstraction and thus cannot capture every aspect of the complexity of the real world. [68] Physicists have tried, and failed, to construct what they call the ‘theory of everything’. This means that no theory is good at explaining everything. Each theory possesses particular strengths and weaknesses, depending on what it highlights and ignores, how it conceptualizes things and how it analyses relationships between them. There is no such thing as one theory that can explain everything better than others – or ‘the one ring to rule them all’, [69] . ‘... and in their darkness bind them all’, goes the rest of the sentence. if you are a fan of The Lord of the Rings .

Added to this is the fact that, unlike things that are studied by natural scientists, human beings have their own free will and imagination. They do not simply respond to external conditions. They try – and often succeed – to change those very conditions by imagining a utopia, persuading others and organizing society differently; as Karl Marx once eloquently put it, ‘[m]en make their own history’. [70] He then immediately added that ‘they do not make it under circumstances chosen by themselves’, emphasizing that we change our environment but are also its products. Any subject studying human beings, including economics, has to be humble about its predictive power.

Moreover, unlike the natural sciences, economics involves value judgements, even though many Neoclassical economists would tell you that what they do is value-free science. As I will show in the following chapters, behind technical concepts and dry numbers lie all sorts of value judgements: what is the good life; how minority views should be treated; how social improvements should be defined; and what are morally acceptable ways of achieving the ‘greater good’, however it is defined. [71] Joseph Schumpeter emphasized that all analysis in economics is preceded by a pre-analytical cognitive act, called vision, in which the analyst ‘visualise[s] a distinct set of coherent phenomena as a worth-while object of [his] analytic efforts’. He pointed out that ‘this vision is ideological almost by definition’, as ‘the way in which we see things can hardly be distinguished from the way in which we wish to see them’. The quote is from J. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), pp. 41–2. I thank William Milberg for pointing me to this quote. Even if one theory is more ‘correct’ from some political or ethical points of view, it may not be so from another.

Cocktails or the Whole Drinks Cabinet?: How to Read This Chapter

While there is a good reason for the reader to learn about different schools of economics, I accept that being suddenly asked to taste nine different flavours of ice cream when you had thought that there is only plain vanilla can be quite overwhelming.

Even though I simplify things a lot, readers may still find the discussion too complicated. In order to help them, I preface my presentation of each school with a one-sentence summary. These summaries are, of course, far too simplistic, but at least they will help you overcome the initial fear that you are about to walk into a new city without a map, or, rather, a smart phone.

Now, even those who are willing to learn about more than one school may feel that nine schools is six or seven too many. I agree. For them, I offer in the box below a number of ‘cocktails’ made up of two to four different schools, each of which covers particular issues well. Some of these cocktails, such as CMSI or CK, will be like Bloody Mary with a lot of Tabasco sauce, given the disagreements present. Some others, such as MDKI or CMDS, may taste like a Planter’s Punch, with different flavours complementing each other.

My hope is that tasting one or two of those cocktails may even make you want to taste the whole drinks cabinet. Even if you don’t want to go the whole length, tasting one or two of them will still have shown you that there is more than one way to ‘do’ economics.

ECONOMICS COCKTAILS

Ingredients : A, B, C, D, I, K, M, N and S or

Austrian, Behaviouralist, Classical, Developmentalist, Institutionalist, Keynesian, Marxist, Neoclassical and Schumpeterian.

On diverging views of the vitality and the viability of capitalism, take CMSI.

To discover different ways of conceptualizing the individual, take NAB.

If you want to see how groups, especially classes, are theorized, take CMKI.