Is the Study of Economics Always Political?

Following the marginalist revolution, the notion of positive economics as a "value free science with no place for value judgements of any kind" (Boumans and Davis 2011, p.169) began to emerge, diverging as a separate study from political economy. Many scholars began to argue that economics was a universal and objective science in which political considerations had no place. Keynes (1891) called economics a study of "what is" rather than "what ought to be". This essay seeks to refute this view and defend the claim of the political economist that the study of economy is always political. This defense has three tenets: I argue that the behaviour of the economy is contingent on political arrangements; I argue that the methodology of the economist is built off normative political assumptions; and I argue that there are political implications behind the very argument that economics is apolitical, particularly considering what is left out of the scope of study.

Gilpin (2001) claims that "markets are embedded in larger sociopolitical systems". This claim serves as the linchpin for my first argument: the behaviour of the economy and the actors within it are contingent on the political context in which they are based, meaning that when the economy is studied, politics is intrinsically implicated. As Gilpin (2001) claims “contrary to the economist’ belief that economic activities are universal in character […] the specific goals of economic activities are in actuality socially determined and differ widely over the face of the earth”. The models in economics themselves are, after all, reliant on political arrangements. Take the example of fiscal multipliers, which determines the impact of government expenditure on GDP rise. If economics were a universal science, then the same cause (government spending) should produce the same effect (type of GDP change) internationally. However, this is not the case: the relationship between the two is observed to be stimulative, neutral or contractionary in different countries depending on different political and legal institutions. Therefore, if the behaviour of the economy is contingent on political arrangements, the study of it cannot be said to exist independently of politics. Gilpin stresses this point, as he emphasises that the homo economicus assumption within the study of economics is largely only appropriate in the United States, and not in many Asian societies which “place a high priority on the welfare of the community and on social cohesion.”

The strand of the argument is concerns the innate nature and history of the study of economics. After the Marginalist revolution, economics began to diverge as a separate practice from political economy, establishing itself as a value-free science. However, given this historical entanglement, I argue that the foundation of economic study remains rooted in normative political judgements, particularly concerning liberal assumptions such as the free market and private property.

This is argued by Heilbroner (1973) who claims that the work of an economist is not purely mathematical: he paints a distinction between the work of an “economic statistician” and an “economist” whose responsibility is to ascribe “meaning to the data and the relationships he has so painstakingly acquired”. He goes on to explain that the moment an economist forms a judgement about their data, normative political values enter the picture. Take the example of Paul Samuelson’s writings on French rent control. He begins with neutral facts: “France had practically no residential construction from 1914 to 1948” when they had little rent control, and they experienced a “vigorous boom in […] residential building” when these controls were removed". He uses this data to conclude that rent controls do “short-run good […] but long-term harm”, given they “protect the poor from being gouged by landlords” but seem to limit construction (Samuelson (1948, p.372). It is easy to see where value judgements have emerged here. Samuelson implicitly adopts the following assumptions in his conclusion: that long-run housing growth is more important than short-run tenant protection; that ‘harm’ should be classed in terms of market outcomes rather than human welfare; and that the market is the proper mechanism for allocating housing rather than the state. These are hardly objective facts: they are political in nature given they concern societal power dynamics. The implication that the state should remain uninvolved with the market is classic liberal view about the role of the government: a question that lies at the heart of political theory. The dismissal of the people in the short term in favour of long-term financial growth for the state is a technocratic, developmental-state ideology.

This example illustrates how the conclusions economists draw from their data is laden with political judgements. This is inevitable, since the moment the labels ‘good’ and ‘harm are assigned to certain phenomena, implicit assumptions will always be made concerning who something is good and bad for. The choice of who to focus on is political, as it concerns questions of power, worth and autonomy in society.

An economist may argue that this does not encapsulate the entire scope of what it means to study economy: the conclusions drawn from data may be political, but the process of gathering the data itself is not. The methods of observation and data collection used in economics are as objective and mathematical as the ones in the study of the natural sciences (Robbins (1945)). Prima facie, this argument appears to be appealing, however, I will argue that even the methods used in economics, down the actors chosen in each model, are political. As Heilbroner (1973) argues, the “essential terms of [the economists] vocabulary- labor, capital, interest […] are […] concepts fraught with sociopolitical implications”.

This is a common critique levied from the political left who view economics “not as a neutral science, but as an ideological justification for a free market […] capitalist economy” (Hart, 2013, (p. 1)). This can be seen in two incumbent assumptions in the study of economy: the boundary it draws between the state and economy as two separate entities and the anti-collectivist ideology behind its methodological individualism.

Possibly following Adam Smith’s infamous metaphor of the ‘invisible hand of the market’ (Smith, ed. 1969), economics treats the state merely as the corrector of or interloper on the affairs of the market (Mazzucato, 2013). This is not an objective fact, especially given that both entities are social constructs, but instead a normative political judgement concerning who should have power and how much. The view of the state as an interventional force is a view that aligns closely with classical liberalism or libertarianism, as opposed to a Marxist view which deems this distinction illusory. Hodgson (2007) further argues that economists maintain a liberal-individual normative commitment through its methodological individualism referring to how individuals are the foundational unit in economics rather than social structures or institutions.

Even the claim that economy is estranged from politics is arguably a political defence of capitalism. By framing a view of the study of economy, which is constructed off political assumptions regarding the free market, private property and individualism, as ‘scientific’ and objective, anti-capitalist critique is effectively excluded. It leaves little room to dispute the nature of economics and its scope. Emerging literature in poststructuralist and IPE fields are increasingly examining the methodology behind economic truth techniques to scrutinise what has been excluded from the field of economics (Goede, 2006). Take the formula for GDP: Y (GDP)= C (consumption) + I (investment) + G (government expenditure) + [X – M] (exports - imports). Poststructuralists ask: what has this equation left out and why? This formula does not reflect informal economic activity, unpaid domestic labour, environmental decline, emotional labour etc. Through this exclusion, significant implications about the nature of wealth and the distribution of power and recognition emerge, thus pushing us into sociopolitical considerations.

In conclusion, this essay has, at its best, holistically evaluated the study of economics: from the nature of what it observes being contingent on political arrangements, to its methods of observation being constructed off normative political assumptions, to the consideration of what it doesn’t study and the political implications behind this exclusion. I conclude that the study of economy is always political, thus aligning with the political economist who admits the normative political character of economy, over the economist who espouses its nature as an objective science. The study of economy is ultimately the study of humans by humans who have a stake in the ‘economy’ which they study and this fact will always fundamentally distinguish it from the objectivity possessed by the study of natural sciences.

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