Rethinking economics? What is the economy for?

As much interest has been provoked by the recent effort to make economics less of a belief system and more of a servant to society I thought it worth revisiting a post from much earlier in the year to help us fathom rethinking this thing called economics.

It is said there is no such thing as society, only the economy.

It sounds very much like a Thatcher quote. It isn’t, but is quite probably a silent Thatcher thought. Unsurprisingly it is wrong in all particulars.

First, even if we wished to return to being hunter gatherers we would still be a society – the Latin root socius just means companion. So unless we are all going to live as human ‘islands’ – which all the evidence suggests we never have –  then society is just living and cooperating with others. It is intrinsic to human life.

The economy was not a feature of hunter gathering societies. It arrives only with the specialisation implicit in a plant-based food production system. We still had society, but the economy describes things that refined and improved our cooperation. The economy arrives because we cannot otherwise acquire all the things that we need for a reasonable existence, when that existence has become better than hunter gathering.

The OED says the word ‘economy’ comes from Economos, the manager or steward of a household, so the household comparison runs deep, but lest we be encouraged to treat the economy itself as a household I prefer to look at the make up of the Greek word itself: Oikos (οἶκος)- which means family, family property or the family house Nomos (νόμος)- which means law, order or justice. There we have the property rights inherent in any functioning economy.

This still does not give us a purpose, though. Sure, if we want an economy we’ve got to have the rule of law but the rule of law might be quite desirable for general well being in any case. Still, society remains integral to life and an economy is now an essential for maintaining society’s more complex structure.

Inherently the economy doesn’t seem to be for anything other than this. It facilitates specialisation and is otherwise just descriptive of the situation in a society where its members are not factotums but specialists.

And yet in modern times the economy is treated as though it were the ecosystem under which society has to operate. It seems to be like the weather – just that economists, not meteorologists, will give you the forecast. Neither have control but both can issue amber or red warnings.

It was not always thus. John Stuart Mill discussed the “political economy”. Yet today the two hardly meet: there is politics and there is the economy – seldom do we seem to acknowledge the political economy. In fact, the term political economy is  a much more accurate and honest representation  because it recognises that the economy is Politicos – civic. As we have seen that the rule of law is essential for a functioning economy, the actual working of the economy was and is about politics.

In more recent times politics might be discussed but the ‘economy’ was barely mentioned in polite society until after the World War 2 and the first political manifesto to mention it was that of the Liberal Party in 1945 when it was referred to as the ‘national economy’, which still implies servitude to the nation. The Conservative and Labour manifestos never mentioned the economy at all untill 1950.

How did we come to think of the economy as having the overbearing importance that it has today? It took hold, I think, with ‘trickle down economics’, which deliberately implies the economy starts somewhere and so becomes its fount and foundation. That somewhere is those with more resources than the rest of us. The rich. The economy starts with them and they are its lifeblood (nobody thought to ask where they got their wealth) and thus we all become dependant on them.

Now we have had the 2008 financial crisis, which should have been economists’ Michael Fish moment. Yet few economists recognise their faulty forecasting and even fewer politicians. People in general are still sceptical of both weather forecasts and economic forecasts. The economy is, like the weather, something we just have to live with. The weather, like the economy, has laws but not ones humans have much control over. But in this muddled thinking the fact that the economy is a human social construct, which would collapse without the man made laws surrounding it, appears to have been almost entirely forgotten.

By thinking of the economy as a force on a par with the weather the economy has acquired a subsidiary purpose. It has become the preserver of vested interests. Economics is seen as a science that only advanced mathematics can explain rather than the social endeavour that it is. If it is so scientific you would think that the biggest computer in Britain might be in the City of London or a university economics department somewhere, but it isn’t, it’s in the Met Office.

Which brings us back to the weather. Surely a much more apposite analogy for the economy is an air conditioning system trying to keep a reasonable temperature in the light of changing conditions – and under human control.

By sketching the economy as an ecosystem separate from society the economy has acquired an additional use – we are encouraged to think that we are helpless to control it. There is no way of altering the way things are – such as wresting some wealth from those who have it – It’s the economy, stupid.

The economy becomes a useful adjunct to conservatism with both a large and a small C. By changing the metaphor, we would all know that the air conditioning has a thermostat. As long as we stick with the weather we cede all political control and when we allow that it means the economy becomes a version of Stockholm syndrome for the people.


  1. Tom Leonard -

    “It is said there is no such thing as society, only the economy”

    Who has said that? I have economics training to Masters level and I’ve never heard that said before and it doesn’t even seem to make sense.

    When Mrs Thatcher said that there was no such thing as society, she meant that there was no entity called ‘society’ that was independent of people – individually or collectively. It’s pretty clear what she said, you should read the interview where she said it.

    1. Peter May -

      I have read what Mrs Thatcher said and as you suggest it is not entirely clear cut. I’ve read similar ideas to the thought I suggested but that is why I haven’t quoted directly “there is no such thing as society, only the economy.” It is however, definitely the sentiment of some who presume that without the economy society would not exist. If it came to it we could, of course, do without the economy but not society.

  2. Tom Leonard -

    I’m not sure who you are reading from the right to suggest that society and the economy can exist separately. I’ve never read anyone remotely suggesting it. It would be helpful if you could name writers, with links or quotes.

    Read some Milton Friedman. He saw economic activity and society as interdependent. This is a nice little talk he gave about the collaborative social interactions required between strangers to make a pencil.

    Can’t have one without the other. Mrs Thatcher had similar views.

  3. Peter May -

    Well, I suppose it comes down to what you think an economy is (part of the point of the piece). I think that hunter- gathererers had no economy. So no need for pencils.
    If you take my simple definition that the economy arrives only with the specialisation implicit in a plant-based food production system, then it arrives by definition only after any society.

    1. Andrew (Andy) Crow -

      Is it right to say that hunter gatherers have no economy?

      Surely there’s an internal economy – exchange between the hunters and the gatherers for a start.

      Beyond that there is the division of hunting spoils, and indeed gathering spoils. Isn’t that an economy? Albeit very basic

      1. Peter May -

        An interesting question! I thought about that and then wondered if chimpanzees have an economy. I concluded that they didn’t. But I reckoned that mutual grooming and the fact that they are in a troupe means that they have a society. As man evolved from primates then an economy might be considered to result from gradual, improved co-operation. So you could well have a point, though I don’t know if there was exchange amoung hunter gatherers outside their families? I’d surmise not. But I doubt we can know for sure. Perhaps an economy starts only when there is cooperation outside the family – perhaps the start of the economy might be linked with language which would also have to be based on cooperation?
        I still think that what we would understand today by an economy is really a result of specialisation and a more static life.

  4. Ms Christine Bergin -

    An article in The Guardian today told how one of their Consumer affairs reporters went for a year without spending anything on non-essentials. Made me realise how vulnerable our ‘economy’ would be if those of us with disposable income decided not to dispose of it. Not sure who would implode first, the banks or the treasury.

  5. Mo Stewart -

    The difficulty is that people’s perceptions are influenced and manipulated by the often extreme comments in the press.
    Most people don’t have access to or interest in academic research, but they do tend to be aware of the latest manufactured banner headlines in the Tory dominated press.
    Cast your mind back to the endless banner headlines of the coalition government. How many tabloids ran the story that 75% of all claimants of Incapacity Benefit were ‘faking’? This enabled the DWP
    to blame sick and disabled people for the crisis in the ‘economy’, claiming the UK could no longer justify funding people not to work. The rest is history I think. The book of the month will tell you a lot more.

    1. Peter May -

      Agreed. The press is scandalously manipulative without proper regard to facts. The trouble is the BBC is influenced far too much by the same press outlook.

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