By Prof SK Mishra
The essential nature and purpose of economics from the very beginning till today continues to be an intellectual involvement in understanding the relationships, both among the man and his fellow beings and the man and his environment, emerging out of and revolving around the material aspects of life and livelihood. These relationships shape and in turn are shaped by the rules and conventions, availability of natural endowments, methods of converting them into resources, development of technology and the entire gamut of subsystems that is comprehensively called an economy. Economics also endeavors to detect and diagnose any mal-functioning of the said relationships and accordingly suggest measures to correct it. But this is what economics ought to be.
In the beginning economics was indeed closely connected to its nature and purpose. But very soon it started becoming dogmatic, a set of arguments that rationalizes a particular type of relationships, generally known to be the capitalistic system founded on the pillars of social conventions, beliefs and laws that protect individualism and sees no vices in any of its logical conclusions. The socialist thinkers opposed this monolithic tendency, nay, ailment, of economics. The criticism was so strong and the empirical realities so stark that newer economists had no sound arguments to justify the said retrograde tendency. They, however, found a bizarre way out. If economic analysis could be distanced from reality and made a gymnastic in logical or mathematical pursuits, any intelligent mind would be captured by the logical beauty of it and tend to forget the realities. Thus was formulated the entire edifice of the neoclassical economics.
Following this enchanting discovery, economics, henceforth, continued to become increasingly mathematical and decreasingly real. It became an artful propaganda. It became progressively reactionary and anti-progressive. It lost its social purpose for which it was designed by the great thinkers from the antiquity until the middle of the nineteenth century. Economics became more and more logically esthetical and less and less socially meaningful. Its logical beauty captured the minds of its students so much that they turned a blind eye to its inefficacies in explaining the real world phenomena. Doing mathematical economics became a matter of pride, not shame, and doing real world economics became a pursuit of the ‘third rate’ minds. However, the latent motive of such an economics is to justify the free market based economy, not spelt out clearly though. This sort of economics is taught here there and everywhere.
It will be an eye-opening detour if we glance over what the doyens of economics – of the rank of Nobel laureates – think about their own subject. For example, Milton Friedman says, “. . . economics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems.” Joseph Stiglitz observes, “[Economics as taught] in America’s graduate schools… bears testimony to a triumph of ideology over science.” Ronald Coase laments, “Existing economics is a theoretical [meaning mathematical] system which floats in the air and which bears little relation to what happens in the real world”. Douglass North is of the view: “We live in an uncertain and ever-changing world that is continually evolving in new and novel ways. Standard theories are of little help in this context. Attempting to understand economic, political and social change requires a fundamental recasting of the way we think”. Wassily Leontief mourns; “Page after page of professional economic journals are filled with mathematical formulas […] Year after year economic theorists continue to produce scores of mathematical models and to explore in great detail their formal properties; and the econometricians fit algebraic functions of all possible shapes to essentially the same sets of data”. Robert Solow observes: “Today if you ask a mainstream economist a question about almost any aspect of economic life, the response will be: suppose we model that situation and see what happens … modern mainstream economics consists of little else but examples of this process”. Axel Leijonhufvud in his article “Life Among the Econ” caricatures economists and depicts them as a laughing stock or the self-unconscious buffoons. Note that all the economists whose comments on the art and science of economics are presented here are great economists by any measure.
For such a monumental piece of futile intellectual gymnastic that we call economics today, we also hold the view that it is a science. But we must note that a science is not merely a systematic knowledge; it is a systematic knowledge that has a power to explain the empirical reality intensively and extensively. A systematic and self-consistent system of dogma is never a science. Nor an unrealistic and useless aping through mathematical formalization makes a subject a science.
Against such an economics, dissident voices have been raised, earlier (since the end of the nineteenth century) as well as in the recent times. We learn from the post-autistic economics newsletter that, in the year 2000, economics students at the École Normale Supérieure, France’s premier institution of higher learning, circulated with great success a petition protesting against an excessive mathematical formalization, calling for an end to the hegemony of neoclassical theory and approaches derived from it, in favour of an approaches that would permit the consideration of “concrete realities”. The French economists of renown, including Michel Vernières, Jean-Paul Fitoussi and Daniel Cohen, spoke out in support of the students. Fitoussi said that “the students are right to denounce the way economics is generally taught” and that the over-use of mathematics “leads to a disembodiment of economic discourse”. Daniel Cohen, economics professor at the École Normale Supérieure, spoke of “the pathological role” played by mathematics in economics. The protest ignited by the French students soon spread to other Continental countries and the US. In due course, the syllabi were changed substantially, especially in Europe.
Of late, on the 3rd November 2011, the under-graduate students of Harvard University revolted against the ‘economic theory’ being taught there and walked out of their class (read it at http://rwer.wordpress.com/2011/11/03/an-open-letter-to-greg-mankiw/#more-6486). The students argued: “As Harvard undergraduates, we [hoped] to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific – and limited – view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society to-day. A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models..”. A commentator economist observed: “Congratulations to Harvard students for calling out the obvious truth that the neo-classical paradigm doesn’t hold up to reality. If there is a single alternative system or text out there to replace it, I am not aware of it, but there are several new thinkers, and new books, that have begun to chart a new and more adequate course. …”. Another commentator economist observed: “There has been a growing acknowledgement of the inadequacy of what passes for economics in many universities. The earliest that came to my attention was Paul Ormerod’s … statement that: ‘Good economists know, from work carried out within their discipline, that the foundations of their subject are virtually non-existent. The challenge of constructing an alternative, scientific approach to the analysis of economic behavior is one to which increasing attention is being paid. The obstacles facing academic economists are formidable for tenure and professional advancement still depend to a large extent on a willingness to comply with and to work within the tenets of orthodox theory.’ Now, let us see how Harvard meets the protest of its students.
In India the matters are worse, if not much different, than spelt out above as to the teaching and research in economics. An overwhelmingly larger part of our syllabi is neoclassical, pseudo-mathematical and insensitive to the real world economic situations. A supposedly real economics, the Indian Economics, was purported to cater to the explanation of the real world situation. It was relevant before we won freedom. But afterwards it was reduced to be an apologia for the govt. policies or, at its best, an appreciation of the same. It lost all its charm.
If this is the state of affairs, we must conclude that economics has lost its social purpose. Should we turn a blind eye and a deaf ear to this wantonness and social wastage in the name of education?
(The author is Professor, Dept of Economics, North Eastern Hill University)