Unimaginative Economics

In 2008 Queen Elizabeth asked of a group of eminent economists at the LSE why they had not foreseen the global financial crisis. The response, to all intents and purposes, was that economists had not thought such a thing might happen. A similar response was offered to her majesty when she toured the Bank of England in 2012. Although Her Majesty and the Duke of Edinburgh were assured that, with hindsight, it has been supposed a lack of appropriate regulation had caused the crisis (or rather, that existing regulation had not prevented the crisis), perhaps we might consider whether it was rather a lack of imagination which was the underlying cause.

As Shelley wrote in A Defence of Poetry, (1821):

Whilst the mechanist abridges, and the political economist combines labour, let them beware that their speculations, for want of correspondence with those first principles which belong to the imagination, do not tend, as they have in modern England, to exasperate at once the extremes of luxury and want. … The rich have become richer, and the poor have become poorer; and the vessel of the State is driven between the Scylla and Charybdis of anarchy and despotism.

The imagination to which Shelley refers is the ability to recognise that the most important aspects of life do not exist solely in the material world.

That there is a truth which lies beyond physical reality – a truth which no amount of analysis of physical or scientific data can describe – is highlighted in the subject of philosophy; for example, by Plato and Kant. In essence, the argument is that experiences, events and objects might be divided into phenomena, which are amenable to observation – the objective, the quantifiable, the scientific –, and noumena which are of an ultimate reality. These noumenal objects, to the extent to which they can be known, can only be approached subjectively through the mind, the imagination, the qualitative and the idealistic. That the idealistic might not be entirely knowable does not make it less true.

It is the subjective which gives context to the phenomena we observe, and which allow us to begin to approach the underlying reality of the noumenal world. In other words, it is the subjective which provides us with the capability to assign meaning to the objective.

As a society, we are often tempted to suppose that the subjective is not reliable, simply because it cannot be measured; however, this is a limiting argument. Consider Shakespeare’s Romeo and Juliet, for example: Fully to engage with the ending of the play, we must, for the moment, set aside the self-satisfaction of “seeing through” the drama. Yes, they are actors: Despite this, the empathic response we enjoy may still be as real subjectively as the objective facts that “Romeo’s” cup contains only water and “Juliet’s” dagger has no blade.

Similarly consider a CD: objectively a chunk of plastic with a series of 0’s and 1’s encoded on it by a computer. By way of electronic equipment, this coding produces sound-waves of predetermined pitch and frequency capable of being detected by the human ear and subsequently of stimulating particular neurons in the human brain. All these components, if represented objectively in formulae and data, cannot replace or describe the nature of music; neither can objective facts replace or describe the listener’s subjective response to music. This does not mean that the subjective response to music is illusory.

Likewise, our subjective response to a digital picture requires we overlook the fact that, insofar as the phenomenal world is concerned, what we “see” is merely a series of electrical impulses and fluctuations in the electro-magnetic spectrum.


A subjective experience

In our modern materialistic world we tend to ignore the subjective as having no ground in scientific “reality”; similarly we suppose sympathy, idealism or morality to be self-interest, suitably disguised (though why we should consider self-interest to be any less subjective than virtue is never quite explained). However, to be solely “realistic” is to make ourselves less than fully human. As behavioural evidence shows, the human mind comprised of reasoning and intuitive aspects; for example Daniel Kahneman’s “System 1” and “System 2” or Jonathan Haidt’s “Elephant” and “Rider”. Further, insofar as the individual’s subjective needs occupy the higher levels of Maslow’s Hierarchy – social needs, esteem needs and self-actualisation – to ignore the subjective is to sell ourselves, our human potential and our society short. In a material world, whither friendship – whither love?

In their 2005 book, Freakonomics, Levitt and Dubner divide similarly the idealistic from the realistic: “Morality … represents the way that people would like the world to work – whereas economics represents how it actually does work”. It follows that economics should be utilised so as to promote morality, i.e. “the way that people would like the world to work”. This may seem unusual, in the sense that economics purports to be about efficiency – however there is no reason why we might not pursue a truly progressive society (for example) efficiently. Indeed, if we are to pursue it at all, to do so efficiently seems only reasonable.

In practice, there is neither morality nor immorality inherent in objective science. A physicist might build, for example, a nuclear reactor or a nuclear bomb. However, the discipline of physics cannot indicate which of those is better. Neither is there anything wrong with economics – as a part of the story. However, materialism cannot inform ethics – rather the reverse.

The LSE appears to be of the opinion that no economist should have predicted the global financial crisis. However, if Shelley is right – and recent history supports his analysis – the lack of moral imagination we observe in neo-classical economics inevitably leads to such crises. As Philip Wicksteed has it in The Common Sense of Political Economy:

The prophet and the poet may regenerate the world without the economist, but the economist cannot regenerate it without them.

While we are waiting for the government to pick up its poetry books, perhaps we might all want to get a bit more imaginative.


Please note that blog posts do not necessarily represent the views of other authors on the blog or of the Manchester Metropolitan University

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