New challenges and old responses in economics

| December 16, 2023

The present political-economic system is unsustainable in important respects and in large parts of the world. Climate change, biodiversity loss and pollution of air, land and water are examples of this situation and trend. A second challenge to large parts of the global society is a weakening of democracy. Each of the two threats can be approached in many ways.

I will here discuss the two challenges in relation to how I perceive the situation in economics research and education. Is research and education at university departments of economics or departments of management carried out in ways that are helpful in dealing with any of the two challenges or perhaps both?

My subjective view, based upon many observations over the years is as follows:

1. There is a close to monopoly position for one specific paradigm (theoretical perspective) at university departments of economics, so called neoclassical theory. This paradigm plays an important role in making the present political-economic system legitimate.

2. The neoclassical paradigm is assumed to be neutral in value and ideological terms. Democracy and ideology are not regarded as an issue in relation to relevant paradigms in economics. The present close to monopoly position for neoclassical theory and method can be compared to dictatorship in the larger society.

At issue is now if it is possible to socially construct a complementary or alternative paradigm (conceptual framework and method) in economics that represent steps in the right direction of dealing with the two global challenges.

Economics is not a neutral science. Mainstream neoclassical economics is specific in value or ideological terms. The same is true of the version of ecological economics that is here suggested as complement or alternative. The reason why some economists prefer an ecological version is not exclusively scientific, they are ideological as well. Economics is here discussed as part of a pluralist perspective and not the “paradigm-shift” idea connected with the writings of Thomas Kuhn (1970).

In neoclassical theory, the individual is exclusively related to markets (for commodities, labour and capital). This means that the role as citizen is neglected. But we live in societies that claim to be democracies. This suggests that democracy can be made part of a definition of economics, different from that of neoclassical theory.

Actually, a weakening of democracy is a challenge in some parts of the world and as economists we can do something about it. Individuals can be understood in political terms as political economic persons and organizations as political organizations guided by their ideological orientation or mission. This implies that individuals (organizations) can actively contribute to development issues in ways other than through market relationships.

In neoclassical economics the monetary dimension plays a central role. Growth in GDP-terms, profits in business and neoclassical Cost-Benefit analysis (CBA) are examples. But some challenges these days, such as “sustainable development” are multidimensional in kind. This suggests that a strategy of “monetary reductionism” has its limitations.

In a democracy, many ideological orientations should be respected. No less than 17 fields for “sustainable development goals” are identified in a United Nations document (2015). A far-reaching belief in markets connected with neoclassical economics and neoliberalism certainly represents one among ideological orientations. But the important issue is to open the door in economics for new thinking with respect to alternative or complementary ideological orientations.

In conclusion then, economics can be defined as “multidimensional management of resources in a democratic society”. New conceptual frameworks and languages should be considered that respond better to the proposed definition, where ecological economics is just one example.

Prof Peter Söderbaum’s latest article, ‘Conceptual framework and language for sustainability politics’, was published in the Journal of Behavioural Economics and Social Systems (BESS), volume 5, number 1-2