Saturday, April 25, 2015

The economy is too serious a thing to be left to the economists (2)

Looking for texts about "the" economy I have written in the past, the first one I found in which I dwell at some length on the concept of "the economy" and the error of economists to reduce society to their ideas and dogmas, is the introductory chapter of a FONDAD book, "Diversity in Development: Reconsidering the Washington Consensus", published in 2004.

In this introductory chapter, titled The Need for Visions on the Economy: By Way of Introduction, I say under the heading Economics Is a Social, Not a Natural Science the following:

"Possibly as a result of economic jargon, mathematical formulae and impressive economic authorities, it is often forgotten that economics is, like psychology, sociology or anthropology, a social science and thus deals with a reality that is shaped by the “subjective” human mind – as opposed to the “objective” physical matter of the natural sciences. As a consequence of this subjective character, everything in economic life is affected by how people think and act and thus by psychological, biological, political, cultural, economic and social factors. Herding behaviour among investors resulting in speculative attacks against a country’s currency is an outstanding and obvious example, but more generally, it can be observed that all economic activities are moved by habits, desires, expectations and ideologies as much as any other“normal” human activity." 

Then I point at "the fundamentally disputable character of economic analyses and policy recommendations":

"It is natural that in formulating their theories and policy suggestions, economists make assumptions about economic “rationalities” of human activities and institutions, and about political “realities”. However, in making such assumptions, it becomes necessary to discuss and make explicit what is taken for granted and recognise the fundamentally disputable character of economic analyses and policy recommendations. Often this recognition is missing in debates among economists, and, what is worse, among politicians who apply the economist’s advice as if it were solidly based on indisputable wisdom of economic science."

So economic ideas and policies should be discussed democratically, and not only by economists:

"Normally, the economist’s prescriptions are discussed by fellow economists. This is a useful discussion. But an even more useful discussion would be to popularise economic ideas and involve all agents and subjects of economic policies: politicians, union and business representatives, and other organised citizens. To use a fashionable term, “civil society” should be involved in economic debates, from the beginning until the end since they are both the subjects and objects of economic policies."

But this is not what happens, "economic policies are seldom discussed by civil society":

"Ideally, democracy serves as a mechanism for discussing proposed economic policies. In practice, however, economic policies are seldom discussed by civil society. And, what is worse, the alternative economic policies suggested by the “non-business” or “non-technocratic” segments of civil society are generally dismissed by the policymakers as “non-feasible” or “wrong”. Usually, this is done by arguing that laymen lack the economic insights of the professionals or simply do not understand basic economic principles."

And a little further in this introductory chapter I say, under the heading The Need for Divergence of Visions and a Truly Democratic Debate About Economic Policies :

"Economists have the challenging task of making existing Visions explicit and of developing new Visions. Only then can there be a truly democratic debate about economic policy alternatives. Therefore, I would welcome that economists at the IMF, World Bank, WTO, UN organisations, central banks, ministries of finance, research institutes, media and other organisations engage themselves more actively, or more visibly, in developing ideas not only about the world they [I meant, the rich] would like to live in, but also about the world that others [I meant, the poor] would like to live in."

Then I raise the question: What is the task of “the laymen”?

"In my view, they should involve themselves more actively in economics. Not only should they discuss what the economists are analysing and prescribing, but they should also envision the economic world in which they would like to live. Paraphrasing the famous French minister of war, Georges Clemenceau: ‘Just as war is far too serious a thing to be left to the generals, the economy is far too serious a thing to be left to the economists.’

Finally, I talk about the role and responsibility of other social scientists in debates about economic policies:

"Among the laymen, psychologists, historians, political scientists, sociologists etc. – the economists’ colleagues in social science – have a special responsibility. Since they, the psychologists et al., are just like economists, trained to think about human behaviour, in both its individual as well as collective forms, their insights are indispensable. Mutual interest in each other’s viewpoints and analyses and more interaction between social scientists would considerably increase the quality of analysis of society and, thus, the quality of economic advice."

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