A Teacher Writes to Students Series (49): Listen to Kolodko-2
Annavajhula J C Bose, PhD
Department of Economics (Retd.), SRCC, DU
I am choosing and reproducing six pragmatic discussions from the experiential perceptions of the great Polish economics Professor Grzegorz W. Kolodko for your perusal and consideration. He had his own political-economic practice as a four-time deputy prime minister and a minister of finance. Undergrad econ students are better off, in gaining good grounded knowledge, reading him than mainstream textbooks, journal articles and newspapers. What follows is, as if Prof. Kolodko is talking to you.
The theme of the second one in this posting is:
Economics is not often a science. What should it be?
“As long as economics, in its essence, explains objective regularities governing the economic processes, it’s a science and it is honest. The problem is that, all too often, it is not a science. It becomes an ideology, enmeshed in political emotions and a doctrinaire approach. It is, at times, an instrument of political strife and social manipulation designed to suit somebody’s self-interest. Recently, more often than not, it is a tool for coaxing people into actions that are, at the end of the day, irrational so, ironically, it becomes its own antithesis. It’s a fashion shaped by waves of popular doctrines and pseudo-scientific views promoted to serve ulterior motives. It happens so often that the economic thought follows fads, either schools that are trendy at a given time or plain dogmas. So many economists, instead of knowing, only believe the thing they are advocating. Honest economics is a matter of knowledge, not belief.
Doctrinaire approach and dogmatism are spreading in macroeconomics above all, although microeconomics is not entirely free of them. Where is this coming from? Well, from convictions, from belief. Doctrines are professed and preached. Dogmas are believed in and promoted. So we are closer to the areas of ideology and religion than to knowledge and science.
Doctrinaires are believers. Some also know a lot but mostly they believe. So much so that they think they know. Consequently, they sink deeper and deeper into the mire of illusions they cannot shed afterwards for emotional and prestige reasons (how do you admit you have been wrong?). Some profess the power of the invisible hand of the market, others the efficiency of central planning. Those who worship private property as a panacea for all ailments are not in short supply, while what is sacred to others is the superiority of state property as a way to overcome conflicts of interest. Some believe in small government and low taxes as a way to boost production efficiency, others are willing to make revolutions and even die in the struggle for a big government and a wide scope of budgetary redistribution through taxes, fiscal transfers and public expenditure as a way to improve the general social situation. And so they all should go to Heaven, although so many end up in Hell…
Dogmatists are believers. With no sufficient scientific proof, they believe in a divinely revealed truth, that is in a fiction they accept. This happens against common sense, despite experience, in contradiction to logic, and at the very least with a little semblance of scientific rigour. This can relate to comparatively minor issues, such as, for example, the alleged superiority of flat over progressive tax, to significant ones such as the imaginary effectiveness of the so-called shock therapy during systemic transitions in post-socialist realities, to huge matters such as the alleged macroeconomic efficiency of a neoliberal capitalism, one based on greed and badly regulated.
In that case perhaps it’s the government economists that serve the interests of the general public and progress? They should. But do they? How should we know? What does it depend on? The problem is complex also in this case. Surely, a lot depends on the moral standards of state activists and bureaucrats. Always a lot depends on ethics, so it’s worth striving for it continually. However, even if official buildings, from the commune office to the UN Headquarters, were filled with angels, this would not solve the problem of many economic decisions being less than optimal. Also, here, as was the case with the free market, business entities often have asymmetric information, which may—and sometimes must—lead to irrational choices. The information noise, inadequate or distorted data are equally misleading to the head of a state-owned company as they are to a private entrepreneur, to a minister and to a banker, to government and to market.
Various threats await economics. There is a risk of specialization going too far and producing narrow fields that investigate third-rate issues brainiacs shouldn’t was their time on. Still, we can also see a tendency for economics to sprawl sideways, followed by attempts to squeeze it into narrow purview of issues, which, as interesting as they are, by no means have to constitute separate branches of economics as such.
Let’s keep a sense of perspective. Economics is the most comprehensive and extensive subject of all social sciences, or perhaps even of all sciences. However, it’s not a science of everything and when you practice it, what it should deal with is every bit as important as what it shouldn’t. By no means should we aim to establish any theory of everything or economics of every aspect, as we can be led astray then. We don’t need an economics of all questions and answers, all-inclusive economics. Let’s leave to other scholars what belongs to them as we don’t know and understand enough anyway. There is no theory of everything that is going on in economy and society, but what we really need is a good theory to explain what actually depends on what in the multi-aspect economic process.
Economics of the future must be heterodox. The days of orthodoxy evidenced by homogenous schools of economics and by explicit propositions are gone forever. Economists that stick stubbornly to their models as the only right ones and, worse yet, as ones applicable to every seemingly similar situation in time and space, are proved wrong more and more often. The matter under examination, the environmental, economic, social, cultural and political as well as technological reality around us, has become more complicated and therefore so have its internal interdependencies that we wish to understand and try to describe. To grasp what is going on we need a complex approach, a departure from traditional mainstream economics or a heterodoxy to replace the worn-out orthodoxy. There are no more old sacrosanct canons as the reality has undergone a qualitative change.
Economics of the future will be to a lesser and lesser degree mathematized and formalized, and, to a relatively growing degree, it will be anchored in a cultural context In academic textbooks of the 21st century the ratios of words to formulas, and narrative arguments to diagrams will shift in favour of the former, unlike in the 20th century. At faculties of economics and in business schools more anthropology and cultural studies should be taught. Not at the expense of mathematics and econometrics, but separately from them.
There are more and more situations where one needs to make no assumptions as to the subject of investigation because an extensive empirical knowledge of facts can be relied upon. There are also things that need to be observed, others that need to be calculated and yet others that just need to be figured out.
Economics of the future must be interdisciplinary. This is because a lot—more and more—is happening at intersections. And that’s where things get more and more exciting. At the intersection of economy and society, researched by sociology, social psychology, anthropology, history; at the intersection of society and politics, examined by political sciences and the sociology of power; at the intersection of economy and natural environment, studied by ecology; at the intersection of culture and economy dealt with by anthropology, among others; in mutual relations between economy and technology, something of special interest to management sciences, which are part of economic sciences, incidentally.
Finally, whether we want it or not, economics is political through and through, by its very nature, as it is embroiled in conflicts of interest and in clashes of ideas. In both its diagnostic (descriptive) and prescriptive (normative) trend. Political economy is the science of identifying and overcoming those conflicts. And a good political economy is one that can, in theory, early identify situations with a conflict potential—that is, ones that put us in danger of a social or political conflict, and, in practice, using an effective economic policy, prevent these from turning into conflict situations. Hence, political economy, by its very nature, is about changes rather than states, about the dynamic rather than the static.”
Reference
Grzegorz W. Kolodko. 2014. Whither the World: The Political Economy of the Future. Palgrave Macmillan.
