I think basing anything purely on economics is a macaronic idea, coming from someone who did study it a fair bit at university. The homo economicus model has several flaws, none of which are adequately addressed by economists themselves. Economics presumes that we are always self-interested, utility-maximising, rational actors, who are fully informed of the benefits and risks of every action we take. Considering that we're dealing with human beings, not abstract perfect theoretical models, these are pretty big (and untrue) assumptions to make. Economic anthropologists have effectively proven that traditional societies were based on kinship-based reciprocity, i.e where things are done with no immediate reward because of the inherent trust placed in a fellow member of a traditional society based on his kinship to the actor. This flies in the face of the self-interested man implicit in modern economic evolutionary models. Similarly, presuming a man to always be informed of his choices and courses of action is just wrong, considering that most people do not understand the intricacies of macro-economics or economic decision making while carrying out their daily activities, and a level of uncertainty and risk is inherent in the decision-making of normal people that economics fails to adequately explain. Using the same logic, sometimes even people possessed of sound economic knowledge and of knowledge of the consequences of their actions still stick to uneconomic behaviour due to a number of things: laziness, obedience, habit, following the crowd. This is also a puzzling development, as is the growing irrationality of people's choices based on wildly differing psychological traits: valuing short-term gain over long-term gain (or vice versa) even if the latter is superior to the former, or letting anger, fear, depression or emotion decide what should be purely economic considerations.
Overall, humans are complex beings, driven by a lot more than just self-interest and rationality. We're by turns stupid, caring, greedy, lazy, irrational, emotional, smart, and cooperative, and to an extent dealing with all these facets of human nature is a problem that the old homo economicus model has yet to overcome, which casts considerable doubt over the discipline itself.
There is a place for economics in politics, but it should never, ever be the overarching consideration. Neither should ideology. Politics should be about making the greatest number happy at the least cost, and whatever policy achieves that end effectively should be considered 'right' to pursue. Personally, I find the onset of modern liberalism inevitable: the 'free market' has shown its failings time and again to developed societies. Don't get me wrong, free market capitalism is a great thing for societies emerging in the third or second worlds: despite all the inequality it fosters, unhindered capitalism has admittedly lifted hundreds of millions out of poverty, an achievement that should not be undervalued. But in developed societies, the unrestrained free market too often fosters inequality, social damage and ultimately the irrelevance of the nation state itself as money moves offshore to tax havens, global markets capriciously play around with national currencies and multi-national corporations supersede entire local economies. Modern liberalism offers us a solution out of the selfish 'every man for himself' dogma that free markets pursue at all costs: an idea of a fairer, more equal world, with certain rights and guarantees afforded to all. And like it or not, that is what is appealing to more and more people nowadays, as the recent flurry of polling disasters hitting the Republican Party in the wake of their failed attempt to take on Obamacare shows. A government that guarantees healthcare, pensions, social security, equal opportunity, workplace safety, affordable housing, parental protection.....this is what the world now aspires to in one form or another. And this renaissance of modern liberalism will only grow as more and more people find themselves working lower hours and for lower wages as jobs (and indeed, the world's lower-end industrial focus) shift to India and China. The more unemployment you have, the more frequent your recessions, the more unrestrained your banks, 'flexible' labour markets and wealthy segments of society become, the more social unrest grows as people see that what was guaranteed to them by modern liberalism is not being provided for by the 'free market', and they begin hankering for the old ideals again, which they see as guaranteed to them because of their supposedly 'first-world' status. Why should the workers of the UK have to be as flexible as those from India or China? they grew accustomed to having cars, housing and healthcare a long time ago, in keeping with the world economic balance. Now, while a family in India or China may be delighted with their first car or their first home, telling a worker in the UK that they have to give up everything they had before if they want to compete with these new hotspots (As the globalized free market demands, with its constantly shifting production bases) is ludicrous and entirely unachievable. Once you give people a taste of something better, fairer,more equal, they won't go back to the old ways without a fight.
So, modern liberalism is here to stay. And if you assume it's a 'disease', then it's a Western pandemic that affects nearly everyone to some degree, including you oh-so-righteous people on the right who use the NHS, or the social security service, or are protected by the many ,many laws passed to protect you from the worst excesses of unfettered capitalism (workplace safety, consumer protection, the list goes on). And the more primary and secondary industry jobs are lost to China and India, the more people hanker for some form of security from the ravages of unemployment, disease and an old age without savings or a home. The only question is how to pay for it: one thing you right-wingers are right about is that it costs a lot of money to maintain a modern liberal state. A welfare state provided purely by the government is a route to disaster (Western populations are having less kids and growing older, which will inevitably overload the system at some point), but there is no reason a social market economy organized along the lines of Germany's model cannot work. Equal contributions from employer, employee and the government towards social security, healthcare, pensions, etcetera would cost a lot less than the government alone funding everything. But crucially, this relies on employees and employers trusting each other, and everyone in society having the good of society as a whole in their minds as equally important as the good of their own situations individually. It requires a new way of thinking for everyone involved in the current Western economic system. Germany didn't have to face this problem because they essentially started from scratch and could build consensus easily: the UK, on the other hand, suffered from first over-powerful employees and then over-powerful companies, making both sides bitterly distrustful of each other and making it very, very difficult to have the sort of systems a social market model needs (strong unions, strong vocational training options, strong company-employee relations, strong labor laws, strong market regulation, etcetera). Thus, it requires a complete do-over.
For ideas on what that would look like, see above (my previous long-**** post). For what we need to carry it out regardless, see resolve.
Sorry dude, didn't read (waaaaaaay too long).
Suffice it to say that I think economics can solve everything. Economics is the science of human behaviour - it may not be perfect and neither are its models, but it's a science and I'll take that over feelings and 'wouldn't it be nice if we could all hold hands and sing John Lennon songs's every day of the week.
