MIKE SCRAFTON. Mnuchin, Thunberg, Economics and Science

The comments of US Secretary of Treasury Steve Mnuchin concerning Greta Thunberg were meant to be droll. However, they reveal a serious and dangerous cognitive dissonance affecting much of the world’s political elite.

When Mnuchin asked of Greta, “Is she the chief economist” and suggested that ‘[A]fter she goes and studies economics in college, she can come back and explain that to us’ he reveals the frightening depth of his misunderstanding. Economics, in any of its schools, is not a description of physical reality. It is a social science.

As Keynes said, ‘[economics] is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions’. Economics ‘is not a “normative” inquiry but a “positive” science’ he wrote, ‘it can give no information about what ought to be, only about what is.’It is ‘abstract and deductive.’ Although the ignorance that Mnuchin displays is now commonplace among politicians, no political philosophy can claim justifiably that there is a correlation its political beliefs and economic orthodoxy. Economics is strictly positive; politics are inescapably normative.

There are strong differences among the many schools of economic thought—for example classical, neoclassical, Keynesian, post-Keynesian, Austrian, and Chicago—and also among the many research programssuch as public choice, law and economics, feminist, experimental, and so on. It is probably only, and not uniformly, on the basic assumptions that economics is a positive, value-free science and that all social phenomena are caused by the purposeful actions of rational individuals on which they might agree.

Greta is drawing attention to a hypothesis that is strongly supported by physical science; the world is warming to dangerous levels as a result of anthropogenic introduction of certain gases into the atmosphere. An issue that does demand politicians take a normative stance. The future under 3.0 to 4.0oC warming is not one in which our children and their children ought to have to live because of our inaction. Claiming, as Mnuchin seems to, that economics is the sole determinant of policy action is not simply uninformed, it is a mind-set that will bring about disaster.

The world that we face now is not the ineluctable result of laws of economics. It has indubitably been shaped by politicians who have claimed the respectable authority of economic theories as cover for their political programs of small government, outsourcing, low taxation, and minimal regulation. The world they have created is not one that must be, not the inevitable outcome of disinterested economic forces, but one the political and corporate classes have chosen.

One consequence of adherence of people like Mnuchin the belief that global warming is an economic problem, and that only people with training in economics can sensibly discuss it, is that the indisputable facts from the hard sciences get set aside or down played. Hiding behind the façade of economics, government’s, including that of Australia, have been derelict in not comprehending the climate science and informing their policy on the basis of the results and predictions of the findings of the scientists. Instead, they pay obeisance to an abstract entity in the ‘market’, and worship at the shrine of macroeconomic indicators.

There is an even more insidious aspect to the misapplication of economics by governments around the world. It pertains to the use of macroeconomic and aggregate indicators like fiscal balances, national debt, productivity indexes, share market performance, average incomes, and unemployment as the primary way to describe success. This emphasis hides the lived reality of large portions of the world’s citizens. It also places one of the more insurmountable obstacles in the way of effective mitigation of and adaptation to global warming, as well as placing a brake on efforts by citizens to adopt sustainable living practises. That is the wealth gap that the contemporary political philosophy dressed up as economics has created.

The Credit Suisse Research Institute’s Global wealth report 2019 makes for disturbing reading. It found the top 1% alone owned 45%, and the richest 10% owned 82%, of global wealth in mid-2019. While the overall global picture is complex, the reports shows that between and with states wealth inequality is stark, and while in relative terms there has been progress—for example in 2000 the bottom 90% of wealth holders only had 11% of global wealth and today that figure is 18%—the difference between the richest ten percent and the rest remains massive.

Oxfam’s 2020 Time to Care report exclaims ‘Economic inequality is out of control. In 2019, the world’s billionaires, only 2,153 people, had more wealth than 4.6 billion people’. After a while we become somewhat inured to these types of comparison and shrug our shoulders. But Oxfam’s focus is somewhat different and in a way its message is far more disturbing. ‘This broken economic model has accumulated vast wealth and power into the hands of a rich few, in part by exploiting the labour of women and girls, and systematically violating their rights’.

Over and above the basic injustice and denial of basic human rights that results from this intellectually corrupted system, there is another issue. Finding the resources to mitigate emissions and to adapt to locked-in global warming will require a radical redistribution of wealth.

On one hand governments will be required to step in and force changes through regulation and investment in a way that transforms industry, energy production, agricultural practises, human settlements patterns, land and water management and other factors. Small government won’t do it. On the other, individuals will need greater personal resources to make the changes in their lives that will be necessary for them to pursue mitigation and adaptation.

Taxation will require a fundamental overhaul to fund government efforts and redistribute wealth.

Greta’s comeback to Mnuchin should have been ‘go to college and study the science’!

Mike Scrafton was a Deputy Secretary in the Victorian Department of Sustainability and Environment, senior Defence executive, CEO of a state statutory body, and chief of staff and ministerial adviser to the minister for defence.

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8 Responses to MIKE SCRAFTON. Mnuchin, Thunberg, Economics and Science

  1. Kien Choong says:

    Economics does have something to say about how we ought to address climate change. After all, the authors of two public inquiries into how best to address climate change were economists, Ross Garnaut and Nick Stern. Perhaps it might be sufficient for Thunberg to say (with good reason) that economists are in general agreement that the world is not currently doing enough to mitigate carbon emission, and the best way to do this is through a global carbon price.

    That said, I agree that one does not need to have a background in economics to have a say on the need to address climate change. It is undemocratic of the US Treasury Secretary to suggest that only people with a background in economics have a voice in this matter.

  2. R. N. England says:

    The distinction between positive (factual) and normative (moral) arguments was stated most clearly by Hume, who observed that there was always a logical break between arguments used at his time, that began with “is” and ended with “ought”. He was correct, but that was before Darwin. When Darwinism spread from the morphological and behavioural aspects of living things to the cultural life of homo sapiens, it became possible to translate statements involving “ought” into statements using “is”. “Ought” statements then take the form of “is” statements about things people do or don’t do that make the survival of their culture (which has a life of its own) more probable. The gap has been bridged. Keynes never appreciated (as most still have not) the fact that his kinsman had discovered the meaning of life, including every aspect of human life.

    Economics describes what individual locusts would do, if they could make use of money, during some brief stage of a locust plague. Science describes how and why the whole process unfolds, from beginning to end. Playing games with money and property is an inessential part of the big picture. The main role of economics seems to be to blind people to the big picture, which is a most alarming one.

    Thunberg is talking science. Mnuchin is talking the way locusts would talk about each other, if they could talk.

    • Mike Scrafton says:

      I think I generally agree, except for the cultural determinism.

      The comparison of Mnuchin to a locust appeals.

      However, governments are faced with choices. Politics and economics are not ephemeral in this and their appropriate social roles need to be understood. Those choices are inevitably based on a judgement about the ‘ought’. What they don’t acknowledge at present is that choice!

      • Charles Lowe says:

        Mike – as I’m sure you know, they’re locked in.

        Their only strategic focus is to consistently and coherently do all they can to best ensure their re-election.

        That is absolutely what I see them as doing.

  3. Scott MacWilliam says:

    Re this claim `Economics is strictly positive; politics are inescapably normative’.
    Keynes also said that `the class war will find me on the side of the educated bourgeoisie’.
    So much for economics as `strictly positive’. At least Keynes was intellectually honest enough to recognise, as has Warren Buffett, that there is a class war and he knew what side his economics served.
    I notice that in Mr Scrafton’s list of `schools of economic thought’ one is conspicuously absent. I also notice that Mr Scrafton subscribes to the myth that there is only one rationality. A reading of Alasdair Macintyre Whose Justice? Which Rationality? might be useful.

    • Mike Scrafton says:

      I think you are making my point for me. The class war is separate from the tools and methods of economics that can support the ambitions of all protagonists. This is exactly what Mnuchin doesn’t understand. Keynes chose his side not because of his economics but because of his belief about what ‘ought’ to be the future of the working class.

  4. Sue Caldwell says:

    This Open Letter addresses this issue too, in a unique way. It was released t the time of the recent Davos gab-fest.
    http://millionairesagainstpitchforks.com

    The billionaire Nick Hanauer made the same warning 5 years ago.

  5. Tim Shaw says:

    Another excellent article by Mike Scrafton.

    One could also (rather cynically) suggest that Mnuchin’s line was simply a way to dismiss Thunberg without any basis on her argument – he might have well said “she can come back and discuss this when she has made her first billion”. Which is really not about economics at all.

    But the points made are excellent and apply to much beyond Mnuchin-Thunberg.

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