When I first studied some economics I remember being confused and frustrated that we were trying to understand the world by simplifying it in nonsensical ways.

The lectures started like this:

‘Let’s assume all human beings always act to maximize profits — of course they don’t, but it’s the best way to understand the concepts’. Well, if that’s true, shouldn’t we change the concepts? If they only work in a make believe world, what’s the point of learning them at all?

Economics is the ur-social science, a discipline that dominates the world politics and international relations. Its greatest thinkers have influenced generations of politicians to look at problems in a particular way. What is the first thing people learn about when they study economics? Supply and demand.

“As if to say ‘the economy is essentially the market, and the market is in equilibrium’ — that’s two untruths in one sentence.”

Academic, economist and humanitarian Kate Raworth sat down with Warren this week to outline how the fundamental design of what we understand about economics — because of the orthodox beliefs presented in Econ 101 classes all over the world — has shaped many of the problems we see in the world today.

Michael Bloomberg’s famous dictum is “if you can’t measure it, you can’t manage it”. This is the shape of the world that we live in, in which available data is just the most valuable asset around. It applies to businesses and financial information just as it does to city management, as Bloomberg has proven throughout his career. It has even begun to apply to politics and political messaging.

In the case of economics, we have settled on the obsession with GDP — meaning a world where growth is everything and ‘winners’ prey on ‘losers’. This is a world populated by Homo Economicus — the Rational Economic Man. Kate Raworth outlines his worldview perfectly,

“I drew a little portrait of Rational Economic Man — a man (like on a toilet door saying “MEN”), standing alone, money in his hand, ego in his heart, a calculator in his head, and nature at his feet. The more we learn about Rational Economic Man, the more we’re told he’s like us, the more we become like him… the more we value traits like self-interest and competition, as opposed to altruism and collaboration.”

Our basic, shared understanding of how we measure economic prosperity has led us to a landscape where young people are being squeezed out, the world is trundling towards environmental disaster and more and more voters have begun to turn to radical new options in the desperate hope to change things. We know that people are looking for new approaches not just because people keep voting for outsider candidates, but because of the reaction we’ve had for this episode.

We spent the first month or so of this year on a series of episodes about the history of neoliberalism, the idea that has dominated major democracies for the last 40 years. It is a scheme born from a particular understanding of the economy, one obsessed with GDP and built on the presumption that growth is always not just good but better than any other economic goals. Growth can be pursued at almost any cost, social or environmental, because those other metrics aren’t part of the Introduction to Econ classes most people study.

Kate Raworth’s book on this topic is Doughnut Economics. It is a vision of economics that includes those other costs as opposing constraints on what policies we should employ. Focus too much on solving the problems of society and we risk damaging the ecosystem irreparably; only look at maintaining the health of the planet and you ignore the suffering of billions of human beings. The right path for economics has to be a balance between the two.

Right now, of course, we’re failing on both sides simultaneously. And most economists are extremely cognizant of that. Those early lectures gave way to the work done to more seriously understand human motivations (known as behavioural economics, which we have discussed in a policy setting in a past episode) and the pioneering empirical studies that highlighted the failings of markets in various different settings (side note: Elinor Ostrom was a badass). It does get more nuanced.

The really interesting thing about Kate Raworth’s approach is that the things discussed in advanced economics courses and by economics theorists are not about the same thing as most public discussions about ‘economics’. Those discussions are grounded in shared understandings, those introductory concepts and diagrams that get trotted out over and over. The need to shift the conception of economics as a whole is massive, and I think it’s what we’re seeing in the polls.

You don’t need to have studied economics for years to see that the system we have right now isn’t working for many people. That embedded understanding of what an economy is, when you get right down to it, compounds the problem because it limits the options people get at the ballot box. Lack of options leads to frustrations and those turn ugly the minute you put them in a crowd.

You know the drill:

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