[W]hy do we study perfect markets, where firms are price takers? One reason is that they provide a useful approximation to the real world and give us many insights into how a market economy works. [. . .] Another is that perfect markets provide an ideal against which to compare the real world, since in perfect markets we see resources being used and allocated efficiently. (John Sloman, Alison Wride, and Dean Garratt. Economics. 8th Edition, Pearson, 2012. Quote from p.32)
H2 Economics vs General Paper: and why I’m taking the H2 Economics examination in 2018
In plain English, when we say that something — let’s say, the way a society is structured — is “efficient” and “ideal”, we are making a normative statement, or a value judgement. We are saying that the society under discussion makes such a good use of its resources (and hence is efficient) to the extent that we see it as so good and desirable, it might as well be perfect (and hence is ideal). Of course, Sloman et al. are not saying that “perfect markets” are ethically, morally, or aesthetically perfect. They are simply “perfect” in a very limited sense delineated by the field of economics, which includes the idea that firms are “price takers”, meaning that firms do not have the power to set the prices of the goods they sell themselves.
Sloman et al. use the word “efficiently” in the sense that “efficiency is achieved when each good is produced at the minimum cost and where individual people and firms get the maximum benefit from their resources” (p.10). I want to argue that “ideal” here means “existing only in the imagination”, but given their reasoning (“since in perfect markets we see resources being used and allocated efficiently”), I find it difficult to make that argument.
To me, what is most suitable — and therefore, ideal — for the global society is a market system that is regulated to the extent that we bring the full force of our human capabilities to combat the ills of unsustainable human activity (i.e. climate breakdown, over-production/over-consumption, etc.), and to build a society that is inclusive in the most profound sense. Of course, to make that argument, I would have to pivot away from the discipline of economics as it is taught and examined in JCs in Singapore!]
In the hands of the wrong student or teacher, confusions between value judgements and value-free statements (i.e. normative statements and positive statements) can proliferate. Bombarded by words like “maximum satisfaction”, “perfect”, “efficient”, and “ideal”, many students end up thinking that what their economics teachers are talking about is some kind of utopia designed by economists that the real world has failed to live up to. In the hands of a clumsy student, information from the H2 Economics syllabus can appear in a GP essay with disastrous results. Some students end up defending the value of competition, for example, by saying that more competition will result in greater productivity.
(If only I had a dollar for every time…)
When I get new students studying GP and H2 Economics for the first time, I usually have to work to chip away at these types of misunderstandings that crop up with alarming frequency (alarming because I see H2 Economics as one of the propaganda tools of the neoliberal movement). In 2017, I thought to myself: why not tackle these misunderstandings at their root, and teach both H2 Economics and GP?
I started thinking aloud with some of my students, and close to the end of 2017, I ended up making a promise to them: that I would take the H2 Economics examination in 2018. While I feel a slight feeling of regret creeping in (the Sloman textbook is remarkably boring), I’m finding motivation by telling myself that beyond expanding my customer base by expanding my teaching repertoire, I will be uniquely positioned to battle the misconceptions (that just so happen to be helpful to the neoliberals) that so many students end up with — and with the amount of stuff that I post online, perhaps I can be of help to the larger community as well.
So stay tuned, Mr Seah’s H1 and H2 Economics tuition is coming soon!