Warning: This is me letting off some steam having had to deal with ‘real economics’ after a year.
By using terms of scientific precision like ‘allocate’, ‘maximize’ and ‘efficiency’, economists live in a pretend paradise of diminishing marginal utilities and increasing returns to scale where everything from the satisfaction of consuming a fruit to the pain of your pinky toe hitting the edge of the door can be quantified and plotted on a graph.
Not only that, a certain isolated incident can be expanded upon, theorized and later, made into law. Economics, since the first world war, is being made into a science when it is not.
One can only gawk at the numerous articles, essays and books offering explanations to recessions and inflation. The manipulation of data is downright cringeworthy!
It’s emulated by students everywhere. I’ve spent the last six years trying to understand the different aspects and dynamics of this subject. Then again, it’s not really Economics that is at fault, is it? It’s the ‘Economists’. The ones who made it a ‘dismal science’ or a ‘pig science’.
Here’s a cartoon on the logic of an economist:
Now, what about those economists who end up being our Finance Ministers? This one accurately captures what I feel when Chidambaram talks about budgets responding to the stock markets.
How many times have you thought to yourself, ‘I could have told you that’, after listening to these Economic Advisors and Consultants to the Finance Ministry, Planning Boards and Central Banks blab on ‘expert speaks’ in news channels?
I swear, the number of times I’ve heard Kaushik Basu or Raghuram Rajan or Montek Singh Ahluwalia say that we expect inflation to come down or growth to pick up the next quarter is mind boggling!
I am of the belief that the future of Economics lies among the Nassem Talebs, the Malcolm Gladwells and the Kahnemans. I cannot give an empirical proof of this statement. It’s a logical conclusion from my limited reading. The sooner the mainstream embraces this fact, the better because Economics has strayed from its path. It is trying to become something that it is not, it’s not a science.
There are no iron-clad laws for society. It changes with time. This is where Hayek and Mises got it right. Economics is praxeology, that is the study of human action which is incidently also the title of Ludwig von Mises’ classic treatise on Economics. We cannot study people as part of society like we study molecules as part of a compound. Atoms and molecules have characteristics and properties that change with the medium which can be predicted using laws of Physics and Chemistry. People on the other hand are led by something more dynamic and unpredictable. The microfoundations of behavioural economics is picking up pace in lots of social science research institutes. I hope it continues. Meanwhile, I hope people try and think beyond the age old forumulae on Cournot and Duopoly models in understanding the economy.