Economics: The (Not So) Dismal Science

At ANU, the Development major requires little-to-no economics and instead offers a range of anthropology and political science courses. Development is a field that is highly concerned with growing a society and an economy, and yet the nation’s leading policy university only focusses on the former. When future policy makers and students who aim to make a difference in the world ignore the framework of economics, they do both themselves and the world a disservice.

The line of thinking from non-economists is that the problems facing humanity can often be seen through a context of a failing societal moral fabric. When we live in a world where corporations exploit remote communities, nations permit atrocities in the name of self-interest, and billions still live in poverty whilst others enjoy a world class education, it is easy to sympathise with this view.

By contrast, the popular perception of economics is often that it is a field dedicated to the management of stocks and corporate profit maximisation. This is simply a mischaracterisation of the discipline, which more closely resembles an attempt to correct civilizational problems as we undergo persistent change and transformation.

In this respect, economics is uniquely equipped to deal with maximising social ‘good’ under constrained resources, whilst policy makers of other backgrounds often run the risk of empty foot stomping and grandstanding that ignores people’s basic incentives.

Take the great challenges of our generation: environmental conservation, poverty eradication and social justice. In many respects, this trilemma is the focus of ANU’s development major, yet these issues cannot be comprehensively understood without an explicitly economic framework.
For instance, consider the plight of Sub-Saharan African education rates (specifically female education). Under a standard anthropological or political approach, the pressure is for activists to lobby governments to boycott child-labour produce and launch various education campaigns. This is an inherently moralistic approach that either ‘punishes’ those that do bad, or ‘enlightens’ rural families of the error of their ways. To those unequipped with economic knowledge, these policies may seem effective. In reality, supply of child labour is virtually fixed, with the amount of labour supplied held roughly constant. Thus, restricting imports created with child labour achieve little (the amount of labour used barely varies). Moreover, the various education campaigns used to fight child labour fail to address the fundamental truth that families often need their children to produce in the short-term to avoid starvation.

As a result, the policy responses outlined above both fail in their main objective to alleviate child-labour, whilst simultaneously coming across as yet another paternalistic western intervention. This is one of many problems in development studies, and a purely anthropological or political science approach leads to morally admirable but practically disastrous conclusions.

China, Japan and the rest of the Asian tigers are an astounding example of the potential for economics to do good. If one’s goal is create an environment conducive to social justice whilst simultaneously eradicating poverty, then economics has particular and unique relevance. It was through targeted economic manipulation that these nations have managed to exploit global trade and thus fund things like social safety nets and broad based education. Just in the last 20 years, successfully harnessing economic policy in emerging markets has brought 400 million people out of poverty.

Policy without passion is barren, but passion without policy is futile. Economics may not be the most passionate discipline, but it is one of the most policy-oriented ones, and in this respect, activists would do well to leverage it as much as possible.