How to Use Economics

Ha-Joon Chang, Economics: The User's Guide, Pelican Books (2014).

The Cambridge economist Ha-Joon Chang has contributed to a new series of Pelican Introductions a user’s guide to economics, with the novel objective of creating a class of “active economic citizens.” (PP. 457, 460.) His objective opposes the prevailing attitude that economics is a science that must be left to the experts. Throughout his book he seeks to debunk the presumed scientific status of economics. This then provides the platform for his mission statement: “If there is no one right answer in economics, then we cannot leave it to the experts alone. This means that every responsible citizen needs to learn some economics.” (P. 5.) Without wishing to challenge Chang’s grand ambition for the general citizenry, my concern here is to consider the book from the perspective of a subset of users of economics, lawyers and legal theorists. Incidentally, I shall also refer to a more specialist subset, economists themselves.

The book takes the form of a narrative encyclopaedia, readable but densely informative. One of Chang’s motivating concerns is that economic discussion should be grounded in hard facts, and these are plentifully provided—frequently upsetting cherished orthodoxies that have assumed an almost intuitive appeal. Notably, the facts are brought to bear against the belief that modern economic prosperity has depended upon free trade. Chang convincingly demonstrates that nothing could be further from the truth. (PP. 49, 60-61, 64-65, 71, 82, 94, 400, 402, 408-10, 430-31.) Yet the facts, for Chang, do not lead to an empirical standing for the discipline of economics. It is ineluctably swayed by political and moral considerations. (PP. 112, 164, 176, 438, 451-52.) The market itself is constrained or permitted in accordance with these factors. (PP. 312, 387, 393-96, 437, 452.)

Although the political affiliations of particular economic approaches are often identified by Chang, he does not adopt the position that economics is merely political, that economic analysis is an alternative way of writing a political manifesto. His book provides full access to the technicalities of economics, the subject matter it assesses, and the expertise it provides. If Chang is insistent on debunking the scientific status of economics, he is equally convinced of the exceptional value and importance of economics, favouring a pluralist approach to ensure that different techniques are available to address a variety of economic problems that are faced by individual countries and the world collectively.

Chang’s pluralism is illustrated most clearly by his survey of the nine schools of economics (Austrian, Behaviouralist, Classical, Developmentalist, Institutionalist, Keynesian, Marxist, Neoclassical, Schumpeterian), which culminates in a table setting out their assumptions and favoured policies. (PP. 166-69.) He advocates intellectual diversity and a cross-fertilization of ideas in employing this wealth of resources. (PP. 161-64, 453.)

One obvious value of this book for lawyers and legal theorists inclined (or otherwise) to draw upon economic insight in furthering their understanding of law is to ensure a broader appreciation of which economic insight attracts them and which economic insights they might be neglecting. To suggest the book as required reading would not overstate its value. Beyond this elementary value, the book serves to stimulate greater reflection on the basic relationship between law and economics. Having established the fundamental point that it is not a single relationship between law and economics, but rather a possible relationship between law and developmental economics or an alternative between law and neoclassical economics (to take only two possibilities from a variety that could be increased greatly if Chang’s pluralism is embraced, but is still numerous if confined to discrete schools), the further question poses itself as to what basis can be found for making (or evaluating) the choice.

One response to this quandary is to suggest that the competing economic approaches are to be tested by a common standard of increasing overall wealth: conflicts between them amount to a miscalculation on one side or the other. But anyone who has digested the contents of Chang’s book would find it difficult to make such a proposal and keep a straight face. However, if we follow Chang’s conviction that political and moral forces are at work in positing any particular conception of wealth (what counts as wealth, how it is to be pursued, and how it is to be distributed—PP. 91, 126-27, 215-16, 235-36, 274, 307, 318-19, 338-39, 446-47, 451-52, 459), this raises a deeper problem in looking at the relationship between law and economics, or, indeed, politics (and morality) and economics. The deeper issue is which way round the relationship should be understood.

If society’s values (political or moral) influence what counts as the overall wealth of that society, and hence determine which economic approach will advance that conception of wealth, then those values will hold a dominant position in their relationship with economics. And if law is regarded as a means of conveying and implementing those values, then the same point can be made about law’s relationship with economics.

The significance of contested values affecting an individual society’s determination of its own economic path is magnified when the wealth of nations is brought into view. One nation’s path to economic progress may be the means to another nation’s economic downfall. Chang illustrates this vividly in recounting the impact of the British industrial revolution on India. In the words of the Governor-General of the East India Company: “the bones of the cotton weavers are bleaching the plains of India.” (P. 56.)

One lingering apprehension from the uses of economics as portrayed by Chang is that, in the absence of a scientific status, economics is left with an instrumental role implementing, not merely essentially contested, but, essentially divisive agendas. However optimistic we may be about overcoming social and global divisions, it follows from Chang’s portrayal of their discipline that the primary users of economics, economists, require guidance from elsewhere.

Cite as: Andrew Halpin, How to Use Economics, JOTWELL (February 20, 2015) (reviewing Ha-Joon Chang, Economics: The User's Guide, Pelican Books (2014)),