Dr Peter Bowman, Head of Economics, School of Economic Science

The last year has seen a growing momentum in the student movement that is calling for a re-formulation of the economics taught to them in universities. It is not just the students but also employers who are recognizing that the abstract strongly mathematical approach offered now does not relate to the real world.

The School of Economic Science has been offering courses in economics for over seventy five years during which the content and shape of the courses have adapted and evolved substantially. Our current offering is a three-module programme entitled “Economics with Justice” and is offered as an evening course of three sets of ten weekly sessions. The combination of economic and justice continues to attract members of the public, including economics graduates, who have a sense that there is a better way possible of conducting our economic affairs and more to economics than supply and demand functions.

That sense of dissatisfaction and the desire to find something better now appears to be extending to the university students. The context in which we operate is considerably different from that of an undergraduate course but it is hoped that what we have to offer could serve as an example of a different way of approaching economics which deals with the ethical issues that are crying out to be addressed and which the conventional approach so bluntly ignores.

We are reluctant to define the subject of economics too narrowly but set out its scope as this: the study of the natural laws governing the relations between people in society. The focus on relations makes it a very human science and at the same time consistent with the most recent developments of the natural sciences. In the systems theories that have been developed in this and other fields to deal with complex systems it is the relations that have emerged as the most important basic factors rather that the things that are related.

The approach of economics with justice is that the subject is essentially values-based and that the most important criterion for judging the effectiveness of an economic policy should be whether or not it leads to a just outcome. In establishing a sense of what is just we recognize the traditional direction given by Justinian of “the constant will to render each his due” and as to the question of what is due would state “a fair portion a knowledge, happiness, health, freedom and prosperity for everyone.”

 This economic justice or injustice is found in the relations between people in society – between the buyer and seller, the creditor and debtor, the employer and employee, between the landowner and the tenant.

The first unit of our course deals with the fundamental entities of economics and the relations between them. A key question is the consideration which set of conditions lead to a just outcome and which to injustice. We use a two factor model of production and take the two fundamental contributors to production as firstly: humanity, with our needs and desires and the will and skills to satisfy them and secondly: the natural world with its provision of the material requirements. We would regard it as fundamental to distinguish what nature provides, which is termed “land” in economics from man-made aspects termed “wealth” or “capital” according to its use. We then show that a fundamental issue of economic justice is the question of claims to ownership, and hence to the control of, access to land.

Our analysis of the present economic system that is usually referred to as “capitalism” is that its underlying basis is not about capital itself but private property in land. When there is private property in land this can be used a collateral to borrow against and that this provides the basic mechanism for acquiring capital. Historically a basic function of banks has always been to provide the finance for the purchase of landed property. 

We use the law of rent and wages from classical economics to show the fundamental but far from obvious relationship between the general level of wages and the system of land tenure. This also helps to explain one of the most basic and powerful causes of the disparities between “haves” and “have-nots” which gives rise to the inequality so much in evidence today and that is now becoming recognized itself as the cause of so many social ills.

In a trading economy money plays a fundamental role as a means of exchange and a clear understanding of the creation and role of money is hugely important to economics. We regard money as essentially a social phenomenon representing relations of indebtedness and credit between people in society and recognize that responsibility for a sound monetary system is an essential role of government. We explain how in the present system the creation and directing of the money supply has been taken over by the private banking system, that this has given them great power and the tendency to abuse that power is a significant source of economic injustice.

In the course we explore how what underlies the financial system is credit which is not a tangible thing but an aspect of relationship, it is fundamentally about trust. If trust is not present other devices have to be substituted for it usually with an increase in both complexity and injustice.

In modern developed economies almost half the wealth produced is collected and used by government. It follows that the place of public revenue and expenditure in a valid economics cannot just be that of an-odd but must be intrinsic to the overall system. In our course we treat the issue of public revenue in three stages. Firstly we look at the historic development going right back to Anglo-Saxon times to show how intrinsic it is not just to economic, but also to key social developments. The basic thesis we propose is that having abandoned the natural and just source of public revenue successive governments have continually resorted to expedience resulting in a complex, unjust system of taxation which is unnecessarily burdensome on productive enterprise. Secondly we look as some of the damaging effects of the present system in more detail and thirdly we look at more just alternatives using the proposition that the economic rent of land provides a natural source of public revenue.

Our course concludes by comparing the strong sense of civil freedom which has been established with the lack of economic freedom and considers the basic economic rights and corresponding duties which are necessary to establish economic freedom.

Thus the first term sets out some basic ideas of economics in the context of economic justice. The second term takes a very different approach and looks at the historical development of the subject focusing on the main contributors – Adam Smith, David Ricardo, Carl Marx, Henry George, Alfred Marshal, John Maynard Keynes and Milton Friedman. The emphasis is on the effect of the ideas of these thinkers on our present circumstances and the question of the importance of the idea of private property remains an important theme.

The third term is entitled, “Growth, Sustainability and human development”. It addresses more directly current issues and particularly the question of how we can adjust our economic arrangements so that they serve the people and preserve the environment rather than enslaving people and destroying the surface of the planet.

Recently, to make our approach more available, we published a book, “The Science of Economics” which summarises the contents of the course. A few year’s previously a senior student in the School published a more thorough exposition, that is closer to first year undergraduate level called “A New Model of the Economy” which covers much of the conventional micro and macro topics of a university degree course but includes the economics with justice aspects that are covered in our courses. We feel that our values-based approach to economics could have something to offer to those seeking to reformulate conventional economics.