The principal reason for the failure of economics in the modern world is that economists don't understand the nature of the subject they are dealing with. As I've written here before, the human being is a social being who necessarily regulates his/her environment and his/her behaviour. As the war-cry of economists since the 1980's has been for deregulation of all economic activity as far as possible, they have been pursuing anti-social and socially destructive policies that finally came to fruition. Economics is a social science and cannot be understood if treated as a standalone activity. Economics is, by its very nature, an interdependent discipline that cannot be understood without reference to the political and social environment within which it operates. Modern economics does not recognise this. All economic activity impacts on the wider social and political world and is in return affected by social and political factors and that is why all the early classical analysts of such behaviour, such as David Hume and Adam Smith referred to this study as political economy.
But most importantly, economics is a product of human nature, economic behaviour is human behaviour and can never be anything else. The human being is a labourer, a producer who engages in production, trade, exchange and barter and the study of economics is the study of that behaviour. If you wish to talk about markets, then you are talking about a human artefact, not something that exists outside of the scope of human behaviour. An economic market is simply a description of the process of exchange, trade and barter of human production.
It is correct to note that human beings are largely motivated by self-interest, the active pursuit of personal gain and property. However, David Hume showed us in the 18th century that such a motivation in people is a real threat to social order and stability noting how our desire for “goods and possessions for ourselves and our nearest friends is insatiable, perpetual, universal and directly destructive of society.” Because of this inherent danger to social order posed by our self-interested desire for gain, we must, paradoxically, recognise that it is also in our own self-interest to constrain such desire. He warns us that this is necessary for the preservation of society telling us that “’tis evident, that the passion is much better satisfy’d by its restraint, than by its liberty.” As a result, Hume is concerned that unregulated greed will effectively destroy social order and society itself if it is not controlled and shackled. How interesting that an 18th century philosopher can accurately predict the financial crisis of the 21st century and pinpoint its causes and yet our political class and our so-called economic experts cannot. We find exactly the same type of warnings in the writings of Adam Smith which should alert us to the fact that there is something seriously wrong with the understanding of economics in modern Britain. Hume warns us that for humans “tis impossible to live in society without restraining themselves by certain rules.” As a result, we are back to the truism that the human being is a regulatory being and large scale policies of deregulation are anti-social and ultimately destructive of society itself. We erect socially preserving rules of conduct because we recognise the need for them as we are by nature social beings and, as Hume notes, “we receive a pleasure from the view of such actions as tend to the peace of society, and an uneasiness from such as are contrary to it.”
I leave you with this thought, if David Hume and Adam Smith are truly the founders of free market economics, what on earth are they teaching in our universities? That is why it is quite correct to say that our government, and particularly our Prime Minister and his Chancellor simply don't know what they are talking about.
Your Servant
Doktor Kommirat
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