After living through the Economic Crisis of 2008, as well as the subsequent shocks we have received, my underlying belief about economics is that its powers are utilized for the wrong idea of good. I mean that our current economic beliefs dictate that the dollar is the most essential and desired product of our time. Even leisure is seen as merely the value of hours spent not working more valuable than those spent working. While this view does help explain some behaviors within our capitalistic economy, I fear it is too shallow to truly understand (and manage) the full power of our economy. From this underlying belief, I have developed my economic philosophy.
Keynesian~ish
To subscribe to a school of economics is to put a label on your beliefs. This clouds your view towards any economic theory presented to you, in that you then must evaluate it under your pre-determined lens. Because of this, I hesitate to label myself, though if I have to, I would say I am Keynesian…. Ish.
You see, based on my everyday observations, I cannot inherently agree with classical theorists or those that tote a Laisse-Faires economy. While their belief in utility maximization does help to explain how people act in a capitalist economy, it lacks the depth needed to understand WHY these people are working this way. Because of this, it leaves holes that lead to issues such as 40% of United States citizens being unable to cover a $400 unexpected bill. Why, if people are determined to maximize their income (as neo-classical economists assume), would anyone let themselves fall into financial peril?
Because of this belief, as well as my understanding of how “free markets” created the 2008 crisis, I began to read more about Keynesian economics. I found myself agreeing with many of their takeaways. For instance, as many notable Keynesian economists have written, Aggregate Demand Theory helps explain many of the market effects we see during recessions much more efficiently than the notion that lower wages lead to more employment. As well, the belief that an economy will always work towards optimization of labor (full employment) is frankly ignorant to real life.
However, I can’t entirely agree with every aspect of this philosophy. For instance, the belief that we can manipulate Aggregate (or Consumer) Demand is, in my mind, foolish. There are many reasons for people consuming products, and many have nothing to do with finances. Instead of focusing on this aspect, I see the real manipulator being our investment in hard goods and services. Products that will not only benefit life in the short term but continue to persevere for years to come. When you look around at the technologies that have most shaped our current society (the internet, GPS, telecommunications), you see how by developing an economy based on improving life quality, you can achieve a much more significant impact than just trying to put money into their hands.
Environmental Economics – How It Changed My Life
While environmental economics is far from a political philosophy, the way it teaches you to perceive the living world is, I think, invaluable towards the way we conduct ourselves as people. From the teachings of externalities as a focus in a business decision making to the understanding of resources value vs. utility, the school allows you to make more informed decisions that benefit not only yourself, but those you do with business with as well.
When I enrolled in my first undergraduate level EE course, I was unsure of what to expect. Reading the course description, I figured I would be learning about how businesses evaluate the value of natural resource stocks (such as oil supply and when to drill or forest management strategies). Because of this, I was blown away when I began to read more about what the field does.
To give an understanding of the work, as well as the significance that it holds, I want to talk about the first Professor I had on the subject, Jeff Felardo. Still, at Eckerd College, Professor Felardo was the first to demonstrate how his work not only influenced how business is done but also the real impact that it can have on humanity. Focusing mainly on Asian countries, I was enthralled as he would tell me about visiting Thailand to help local tribes determine the financial value of their forests (local tribes retained rights on how best to manage their land). What I thought would be a subject on timber costs wound up evolving into a discussion on how to value environmental tourism and use this valuation to contrast the one-time value distribution of harvesting. This outlook on life, not just short-term profits but long-term utility governing our life choices, is the underpinning to many of my beliefs. While oftentimes real life can be very different from projections, I still believe that the only way to create a sustainable economy is to have a mission or goal in mind.
Those That Influence Me – Economic Hero’s of the 21’st Century
To help me better understand how to adapt this economic philosophy, or even if it was feasible, I began to read more from the new wave of European Economists that have surged in the past decade. While few are household names, I truly believe that they will all have a significant influence over how our world progresses, and because of this I make an effort to digest as much of their work as possible.
Mariana Mazzucato – Probably number #1 on my list is Mariana Mazzucato. A Professor in the Economics of Innovation and Public Value at University College London and founding director of the UCL Institute for Innovation & Public Purpose. Her work on books such as Mission Economy, The Value of Everything, and The Entrepreneurial State has redefined how I look at Government spending. Her argument that while producing value is and what should be important to our economy, it is the type of value we are creating that we should be critical of helps to define much of my policy beliefs.
Kazimierz Laski and Michal Kalecki – These two are slightly less modern though still hold great importance in modern economic thought. While most of my teaching in economics has been done by myself, I have challenged myself to not only read non-fiction or autobiographies. To better round out my understanding of economic policies, I purchased a textbook by Kazimierz Laski, adapting the work of Michal Kalecki’s Aggregate Demand Theory. While I have never been strong in math, I found Kazimierz’s style to be easy to digest, and the teachings from this book shape a lot of the more critical and mathematical aspects of my philosophy. However, I can not inherently agree with models based on falsifiable assumptions, though I do believe understanding models allows us to understand real-life systems and outcomes better; therefore, I do think we must start from some mathematical basis.
Rutger Bregman – While economics is often referred to as the dismal science. It is essential to remind ourselves about the very real and human outcomes that this broad school influences. Rutger Bregman’s work is perfect for this. I have read two of his books, both of which have had a profound impact on how I look at the world around me. Humankind helps to highlight the beautiful aspects of humanity, focusing on the parts of us that have created a homogenous, global society, and his book Utopia for Realists that highlights which of these areas that we are currently falling behind in and what we can do to fix it. His work holds a vast amount of importance, especially in a day and age when the human experience is becoming more of a statistics equation rather than a fulfilling life.
Stephany Kelton – I’m sure you’ve all read about Modern Monetary Theory in some form or another. In a world that hovers at the zero lower bound, it is hard to avoid the subject. The problem, at least for me, is that because the school is new, there is little consolidated thought/literature to help guide those looking to learn more about it. Stephany Kelton helped to fill this hole with her book The Deficit Myth. Not only does this book help to highlight the importance of debt in our society, but it also helps to define what this debt is. Especially for someone whose coming of age story comes during a couple of decade period of mind-bending economic events, this book helps explain the problems that Classical Theory (and even Keynesian) fail to clarify.
Richard Wolff – Probably the largest pessimist on this list, Professor Wolff is forever the critic of my wildest daydreams. Through his show Ask Prof Wolff he helps to analyze much of the real-time data that too often gets overlooked. A self-proclaimed socialist, Professor Wolff brings to the table an economic philosophy critical of both business and government, offering viewpoints that are often missed in everyday discussion. I recommend his shows to anyone looking to challenge the way they perceive economics.
And Many More – While the above mentioned are the core of my economic readings. There are numerous financial podcasts, newsletters, and email services that I think are irreplaceable in current society. The amount of information on this subject can not be processed, let alone read, by one individual. It is imperative to listen to as many economists as possible, intending to cover diverse beliefs. In my mind, this is the only way that we can start to come to an understanding of how our world really works.
My Maine Musings 