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Ha-Joon Chang on why we all need to learn (some) economics

In his first article for Economy, renowned economist Ha-Joon Chang explains why he thinks it's really important that everybody should learn a little economics...

If economics isn't really your thing, but you're curious and want to know little bit more about how it all works, try checking out the work of Ha-Joon Chang. He's written some really readable books on economics. Here he explains why he thinks we should all learn a bit more about it.

Ha-Joon Chang
Ha-Joon Chang

There‘s been a widespread perception since the 2008 global financial crisis that many economists have miserably failed in their job of managing the economy. Unfortunately, the world has been too forgiving, for despite the fact that they've completely bungled their jobs, the same economists are still telling the world what to do!

However, this state of affairs may not last for long. Student movements like Rethinking Economics have been calling for greater openness and plurality in the teaching of economics. Employers have become more vocal in complaining about the quality of the 'products' (graduates) that they get from economics degree programmes – highly trained in mathematics and statistics, but ignorant of real world economies.

More importantly, it's increasingly recognised that:

a) Ordinary citizens need to get involved in economic debates
b) It's not as hard as you think
c) It's not a science like biology's a science
d) There are lots of different ways to think about it

In a democracy, you'll never get a decent policy in any area unless the voting public is interested and knowledgeable enough about it - and the economy is no exception.

It's doesn't have to be boring...

Despite this recognition, most people are reluctant to learn economics because there's a widespread perception that it’s a very technical subject that's beyond the reach of non-specialists (and even a bit boring). This fear of economics has reduced the ability of citizens to influence economic policy-making, making them increasingly feel powerless and thus disinterested in democratic politics.

Teaching economics really doesn't need to be like this!!

This need not be the case: most of economics can be understood by anyone with a secondary education if it's explained in an accessible way, as I argue in my book, Economics: The User's Guide.

It's not a science like biology's a science...

Many economists believe themselves, and tell other people, that economics is a 'value-free' science, like physics or chemistry. However, my book emphasises that economics is a fundamentally political and moral subject. Whereas the particles and compounds studied by scientists do not hold political and moral views, human beings who populate the economy do, and so we cannot fully understand the economy without understanding politics and ethics.

More to the point, even the boundary of the economy – and thus the scope of economics – is determined by ethical and political judgments. Think of child labour, which used to be a perfectly legitimate object of market transaction until the early 20th century, even in the richest countries. This means that the market itself is a political construct, rather than a natural order that should not be tampered with by 'political' intervention. Once we realise this, we begin to see how no economic argument can be free from politics.

There are lots of different ways to think about it...

All of this means that there cannot be one correct way of 'doing' economics. And indeed, there are nine schools of economics (and that’s only counting the major ones), including three varieties for free-market economics alone (classical, neoclassical, and Austrian). They all make different political and ethical assumptions, focus on different things, and have different theories about how economies operate and change.

It's important to learn about different types of economic theories and their respective strengths and weaknesses, because the reality is complex and therefore we can understand it in its full complexity only when we have a range of theories at our disposal. To deal with today's economic problems we need different economic approaches for different issues.

The dominant neoclassical economics can be very powerful when we analyse well-specified problems in a setting in which technologies and politics are stable, but we need the Austrian and the Keynesian approaches in order to better deal with situations characterised by uncertainty and instability. We should use Institutionalist and behaviouralist approaches more, if we’re to come up with robust solutions about systemic reforms – be they about finance or the welfare state. To think about reviving economic dynamism in the long run, we have to learn more from the Schumpeterian, the developmentalist, the Classical, and the Marxist schools.

It's time to get 'active'...

It's not necessary – or even possible – for citizens who aren’t economists to learn economics at a professional level. However, I believe it is possible – and necessary – that they acquaint themselves with the main economic theories and their respective strengths and weaknesses. When combined with some knowledge of real world economies, such knowledge will enable them to make informed judgments on economic issues and exercise what I call 'active economic citizenship'. It's time that we demystify economics for good.

Ha-Joon Chang teaches economics at the University of Cambridge. This article is based on his 2014 book, Economics: The User's Guide. He is also the author of 23 Things They Don’t Tell You About Capitalism, Bad Samaritans, and Kicking Away the Ladder.

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Reader Comments

  • roberto martorana

    OK ! I am not “accademic” and i wrote about this in my page about a new theory macroeconomic conception monetary system between Keynes and Von Hayek ….https://www.facebook.com/notes/528952320466883/ , #macroeconomicsustainable ,and any reply are well accepted …. :I suppose a new rule for Central Bank: when one of the central bank have a new emission of money whith each rate the same bank print corrispective quantity of money of the rate ,out of budget,and give for free this quantity ,to compense the monetary mass ,at a pubblic commission that use for pubblic necessity etc etc…we resolve three problem :pubblic necessity,pubblic budget,and market crisis,;for example : the C. B. have a emission of hundred billion unit and fix a rate of 3% and give this money to commercial bank,at the same moment print 3 billion and give these to pubblic commission(ONU?) that spend for pubblic problem #quantitativefree……at the end the commercial bank retourns 103 billions and the C.B .budget is ok ..whithout problem of failure of monetary mass….) http://www.facebook.com/pages/Teoria-della-compensazione-della-massa-monetaria/137335536277534

  • Magda

    I happen to be in the middle of reading Economics: The User’s Guide and I am very grateful for picking this book for brushing up my previously taught knowledge of Economics. Today I happened to read two articles that made me think about the future, one about the movement of Rethinking Economics that brought me in this website and the other about the very real possibility of having automation taking up almost all jobs in the future. So, I realised the following: Economics is a man-made construct of better organising the dispersion of goods and services for the satisfaction of humans’ needs. So, it is just a more evolved and complicated way of hunting or producing your own food, getting shelter and protection since humans realised that by sharing and organising in numbers can accomplish more. When we managed to satisfy the basic needs we grew more (that are called higher needs) which funnily enough are in a great effect a byproduct of living together in an organised community. As this man-made construct evolved and became more complicated we had to set up systems, institutions and laws in order to regulate the economic relations among us and all these have led to more artificial subconstructs, such as inflation, economic growth, etc. In the end, all that it matters, when we do have robots doing our manufacturing, is that the population is fed, having shelter and protection in a manner that is not degrading and still wants to survive and maybe evolve (so we would need to satisfy some of the higher needs as well probably)