Transitioning, modelling and change

The centrepiece of the New Economics Foundation’s work on The Great Transition is the development of a new economic model.

This is the way the Foundation describes its ambition for this work:

“What we’re doing
From 2009, we will be working with other economists on a radical new approach to economic modelling. Standard models take no account of resource use and environmental constraints, and are blind to social outcomes in terms of equity and, of course, human well being. They are open-ended by nature, with growth being the primary output of interest. Inputs feed in, interact with each other, achieve balance (or equilibrium) and outcomes result.

Our approach turns this on its head. We will start with the hard outcomes we need – environmental sustainability; equitable economic justice; and high levels of human well-being – link these to relevant economic determinants within the model (aggregate output, income distribution and working hours, respectively, for example) and to ‘reverse engineer’ what this would imply for the levels and types of differing inputs.”

Although it is not clear what ‘standard models’ are – it is common knowledge in the economics field that systems dynamic modelling was used to described natural resource limits in Limits to Growth in 1972 and that accounts of social outcomes have been derived from input-output models and have been popularised in the form of carbon and ecological footprinting (related to equity and well-being) for some years now – the aspiration to create a new modelling paradigm is very exciting.

The fact that this is linked to movement building and campaign work that, with the new modelling, is put at the centre of the New Economic Foundations work is promising.  The aspiration to turn existing modelling work ‘on its head’ is consonant with the provocative and imaginative thinking that the Foundation has put into its document The Great Transition.  Also the way this is connected to the development of a popular economics promises new access and participation by people in thinking about economic and social processes.

That modelling, based on working backwards from where the desired change may take us, can act as a guide on the pathway to that change represents a departure from the positivism that dogs economic thinking.

The Foundation is the first to point out that this work entails collaboration and that there are not any immediately easy answers.

It is not completely clear what ‘reverse engineering’ means in this context but the idea of ‘back-casting’ is a commonplace in sustainability work.  How economic modelling work can be used for back-casting rather than fore-casting is a good question but it does present difficulties. One of the problems is that models rely on the robustness of the data that is fed through them as well as the accuracy of the representation of the interconnectedness of the processes that are modelled.

It is difficult to envisage a model of a future social configuration that doesn’t have a similar algorithmic structure to a model of the current one.  Also we obviously do not have data for the future.  We only have projections and scenarios.

In some respects modelling may create mentalities that appertain to ‘sympathetic magic’ rather social change.  The illusion (powerful though it may be) that if I stick a pin in this doll (or image) of this person that it will do them actual harm is a magical use of model-making.  It goes without saying that creating a model of an economy is not creating an economy even though one can contest that the model is true because it all adds up and even if a model of a future economy adds up better than a model of the current economy, even if it is morally better and even if its more desirable and, by all accounts, will make people happier!

Another way in which model-making can be thought about is the way models are used in architecture.  This is different from sympathetic magic but may be as wishful!  It is different from economic models because it is representational in a different way.  But it reminds us that models can be used to test out whether real construction are viable or desirable!

Is work on making models of the economy helpful to social change?  What is the relationship between making a model and making an economy?  If the economy or (if this is the same thing) economic relations are ’embedded’ in social, political and geographical processes and not a separate abstract systemic sphere, as is asserted in the work of Karl Polanyi, how useful can a mathematical model of it be in working for, or imagining or guiding, social change?  How do you input decisive unquantifiable variables?

In the description of their ambitions for the new model nef envisage a macro-economic model that is ‘not geared towards growth’.  In modelling work all social processes are expressed as quantities or ratios.  Is it axiomatic that a process that consists of quantification must express development as increase? Maybe.

But I have changed the words deliberately.  I want to steal back the word growth! I think people are understandably attracted to the idea of ‘growth’ but not necessarily to the idea of ‘increase’.  We want our children to grow, for plants to grow, for our understanding to grow, for ourselves to grow, but we don’t necessarily want them to increase!!

By the way, it is interesting, in this respect, that Paulo Freire uses the analogy of banking to describe the accumulation of knowledge as information and draws a preferential distinction with  active knowledge.

When we hear that our society may not grow we are worried because intuitively we know that societies must develop and change.  So there is a semantic clash.

I think there are many people who dislike and distrust ‘bigness’. The question of scale is crucial and economists and ecologists are aware of the extraordinary thinking of Schumacher who it shouldn’t be forgotten worked for the National Coal Borad as well as for the Soil Association.  I would recommend looking at his moral treatise, A Guide for the Perplexed as well as his more famous ‘Small is Beautiful, a study of economics as if people mattered’ (which is, of course, where nef gets its strapline from: ‘economics as if people and the planet mattered’).

It is always interesting when economists abandon the strict framework of their discipline and talk about moral questions.  It is a wonderful corrective to the way we normally view the work of Adam Smith to read his Theories of Moral Sentiments.  Equally, in Amartya Sen’s Idea of Justice he pursues the wonderful work he accomplished as an economist to criticise, with paradigm-shifting movements similar to his ‘replacement’ of utility by capability in Development as Freedom, the abstractions of John Rawl’s work.

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