Economics was originally known as Political Economy, which originated in Moral Philosophy - the study of right and wrong - but it became separated from morality in the late 19th century with publications by WS Jevons (Jevons 1871) and Alfred Marshall (Marshall 1890).[50] Their aim was to make economics an objective scientific discipline in its own right, and thereby deliberately distance it from morality and politics (Mills 2002 p109). In the view of many economists much more has been lost than has been gained by this separation. If economics is an objective science, like physics, then all human activities and behaviours can only occur if economic laws allow them, we are unable to change or influence them. Hence the common belief that the economy is an unfeeling and inhuman machine that drives humanity ever onwards, where the best we can hope for is to understand it so as to align its workings with benefit to ourselves as far as is possible. We can never hope to take control of it. In fact it has come to feel exactly like that. In truth it needn't be like that at all. Economics is the study of human behaviour, and human behaviour is not subject to external laws. We are in control and are free to apply economics for moral purposes, we only need to recognise the fact and choose to do so.
Economics must be tailored to the kind of society we want and increasingly need. It will hopefully soon become very clear that the society we have is a direct result of the prevailing economic system. That is why economics should be understood by everyone, because the lives we lead are directed by it. The current system, neoliberalism, strongly promotes 'laissez-faire' - let people do as they wish. This favours the unscrupulous wealthy over everyone else, because the more wealth a person has the more freedom of choice they have, so they are able to use that freedom to constrain others' freedom; to pay for the best legal representation; to engage in intense government lobbying; to promise lucrative jobs to people in positions of authority who can help them; to form monopolies or cartels to increase prices; to drop prices temporarily in order to squeeze other suppliers out of the market; and so on. We like to think we live in a democracy with one person one vote, but neoliberalism promotes the politics of one pound one vote, and it has been extremely successful in delivering more and more power to the unscrupulous at the expense of everyone else.
We are free to choose whether economics is our master or our servant. We either take control of it for the benefit of everyone, or continue to stand by as others take control of it for the benefit of themselves.
Economics is not a hard science in the sense that physics is a hard science, where the interactions it deals with are outside human control, though many economists treat it as though it is. Instead it is a soft or social science, where the interactions it deals with are human interactions, which are within the sphere of human control. It consists of a collection of ideas about the production, use and transfer of wealth. Some ideas are derived from observation of human behaviour, some from reasoning, and some from intuition. It is awash with assumptions, many of which fly in the face of common sense, and deductions that follow from those assumptions. Given all that it embodies it is no wonder that it contains many and deep contradictions. Whether we like it or not we are all subject to the laws of physics, but we aren't subject to the laws of economics because there are no such laws. There are only ideas about human behaviour, some of which seem more consistent with real-world events at certain times than others. Human behaviour isn't fixed. It changes according to social acceptability, local and national custom and practice, legal requirements and restrictions, and prevailing conditions, and all these factors evolve continuously with time and circumstances. It is ironic that in claiming fixed laws hard-science economics itself testifies to the adaptability of human economic behaviour. Before the 'greed is good' and 'money is everything' attitudes became fashionable after 1980 it was socially unacceptable for professional people - senior managers, bankers, lawyers etc. - to earn more than about twenty to thirty times the average wage. Nowadays it is acceptable for that multiple to be hundreds of times, though it is at last being increasingly challenged.
Recognition that economics is a soft science prompts us to focus on the objectives that we seek to achieve, and apply our ideas about human economic behaviour in ways that seem most likely to bring them about. We are ever watchful for the failure of current ideas and willing to try different ideas that might be more successful. Our approach is pragmatic, we do what works, we judge the legitimacy of ideas by whether or not they achieve what is wanted, and we recognise that we are master of all ideas and slaves to none. The soft-science approach is one of humility - we are only too conscious of the limitations of our knowledge and therefore tread cautiously, ready to make large or small adjustments as appropriate when events indicate that our initial approach is wrong. With this approach if the medicine isn't working we try a different medicine.
Treating economics as a hard science prompts us to focus on how it works. We look at the events of the past and how they were managed at the time, and develop theories about why those events occurred and why the way they were managed delivered the results that it did. The more we can explain by those theories then the stronger our belief in them. If in addition those theories have internal consistency and can be expressed with mathematical elegance then our faith in them is strengthened all the more. If the application of those theories in the real world doesn't produce the results that we expected, then it can only be because the theories weren't applied properly. The hard-science approach is one of arrogance. We know how economics works and if real-world events indicate otherwise then the real world has done something wrong. This is the 'There Is No Alternative' approach. It is particularly dangerous and limiting because it becomes a self-fulfilling belief. It isn't true, but if widely believed people give up on any attempt to find a better way because they are convinced that there can be no better way. With this approach if the medicine isn't working we increase the dose.
We can split economic schools of thought into those (neoliberals and others) that treat economics as a hard science, where practitioners require as complete a separation as possible between economics and politics or ethics, and those (Keynesian and others) that treat economics as a soft science, where practitioners acknowledge the links between economics, politics and ethics, and therefore wish to integrate society and its governance into the economic sphere.
The hard-science schools regard all tradable items as basically similar, differentiated only by their exchange value. They also regard the value of an item as completely defined by its exchange value. If two people want a glass of water, the first having money but no great need for it and willing to pay £1, and the second having no money but dying of thirst, then the water is worth £1 and goes to the first person. In this way these schools equate degree of need with willingness to pay - known as 'demand', which works well when all are similarly prosperous, but fails tragically when there are major disparities. If a person has nothing to trade for a product, then in economic terms there is no demand for it, even if to that person the product represents life itself.
Indeed this is exactly what happens - this is a quotation from the WaterAid UK website:
A lack of safe water and toilets can be deadly for children. Babies and young kids are most vulnerable to the diseases that result from dirty water and poor sanitation. In developing countries, each child has an average of ten attacks of diarrhoea before the age of five. 315,000 children under five die every year from diarrhoeal diseases caused by dirty water and poor sanitation - one every two minutes.[51]
Those children and their families can't afford to buy or to make available clean water and adequate sanitation - which to hard-science schools means there is no demand - so the market doesn't provide them. As a result the only help they get is from charity, which does its best with very limited resources and as a result is hopelessly inadequate. Is that the best we can do? It's what we are doing - shame on us all.
Hard-science schools claim that (their view of) economics allocates resources in the most efficient manner, but what is efficient about allowing so much suffering and death? Even in purely economic terms it is thoroughly wasteful. All those people and their children are capable of creating great wealth both now and in the future, but they are prevented from doing so because for these schools economics demands the best and fastest returns on investments, and there are better opportunities elsewhere.
Apart from humanitarian considerations this kind of situation is very dangerous. It is what leads to revolutions and wars when people feel, often quite rightly, that they are being treated cruelly. It is essential to remember that the real values that things have to people are their use values, not their exchange values, and that when the most valuable things are threatened then people have little or nothing to lose by taking desperate action. Hard-science economics recognises only exchange values, and that blindness represents a fatal flaw.
Hard-science economic schools such as neoliberalism claim to give us the tools to provide for our wellbeing, but nothing threatens wellbeing more than dispossessed people driven by hatred for those who have what they and their families so desperately need but won't share. We need a world economic system that provides everyone with enough to ensure that they have too much to lose by threatening others.
Hard-science schools regard humanitarian activities as outside the realm of economics, being the preserve of charities and philanthropic aid programmes. Although these do the best they can in difficult circumstances, not only are donations very variable and mostly inadequate even at the best of times, the fact that they comprise many separate organisations means that they inevitably attack problems in uncoordinated, overlapping, and inconsistent ways.
Instead of ignoring humanitarian activities a much more wholesome purpose for economics would be to focus on them by providing everything that human wellbeing depends on - for every human being on the planet.
Soft-science schools regard catering for humanitarian requirements to be the economic responsibility of society as a whole, implemented by the actions of governments. Although in basic economic terms the above glass of water is still worth £1, the person who needs it most but can't pay for it still gets it because society redistributes wealth from those who can afford it to those who can't. Society ensures that an adequately funded welfare state is in place to look after those who need help.
The hard-science principle is: 'if you can afford it you can have it, if you can't afford it you don't deserve it, regardless of how much you need it'. The soft-science principle is: 'if you need it you can have it, if you don't need it you can have it if you can afford it'.