It was at one of the marriage functions where most of the economists were present. I did venture Guy Fox type suggestion. If you would recall that he was the guy that plotted to blow up the British Parliament. The suggestion did not go well with the economists that had come from as far away as Washington (WB and IMF type); each one of them strutting about as if he had conquered the world. It was a cold and sultry night and I was looking for an economist that could debate with me and decide on alternates for the fiscal and monetary policies.
All of them had one excuse or another. They did not want to get into any mess and wanted to stay away from any change and controversy lest someone would be annoyed with them. Their heart was not in its right place is all that I can say. Let us examine some of their assumptions because if all had been done well this country would have been on a right footing. Yet that is not the case or is someone going to challenge me on that thought. These advisors to the PMs and FMs and the advice that they give can hardly be called forthright.
They have always assumed functions that are incorrect-or are these mild words for their misdemeanours. The assumptions and their nature need to be examined. Go through any economic survey. It is full of opinions and rationalisations. They are great at graphs, bar charts and what have you. It is immaterial whether these are relevant to the situation at hand and if there is an econometrist around - boy you have had it.
An equation or two thrown in to show how humans cover human issues. The analyses are from esoteric mathematical formulae, finding correlations and calling them as cause and effect. These are individuals generally trying to tell everyone that they know what they are doing. If that were the case then the US today and the rest of the world would not be in turmoil.
Common sense applied to their actions would question what has happened where the population has been excluded from the development process. Have these economists not made the life of the people and the state miserable. Correlating statistics are hardly to be believed in the case of developing countries and in any case, the thought comes that when these statistics do appear they seem to be irrelevant as the arrival of difficult times indicate. Quantification applied without thoughtful considerations does not mean that theory has come to be there.
Why then are economists helpless - be it USA's top notch or be it anyone from the developed world they seem to run out of steam? Sixty-four years and this is what they have brought us to. The cyclical order is not there for very frequently they just push you over the cliff. Neo-liberalism may not have been practiced for as many years as it was done in the West but the sad state of the developing economies is tantamount to what has not been managed even fairly well.
There have been unconventional economists, but they have been from the lesser-developed countries and they have not been so religiously examined as the US and other European economists. The US has a whip hand on the knowledge creation aspect and the propaganda machine that they can unleash.
The answer by the economists is that the theory part is only for predicting the future - known as instrumentalism. This is superficially appealing and sufficiently persuasive to silence critics. The upside is that this kind of assertion tries to show that the economist is really a detached person and is only busy with the work of science. Alan Musgrave a philosopher (here we go again) argued that there were many classes of assumptions.
These were negligibility assumptions and domain assumptions. A negligibility assumption indicates that the impact of theory has no impact on facts as they exist. The ides furthered was that even if a theory does not impact on real life it should be considered till a new and better theory comes along. It further transpired - the more relevant the impact the more irrelevant the theory.
The more important is Musgrave's criticism that is in the domain sector. A domain assumption specifies the conditions under which the theory works and if those conditions are not met, the theory is unworkable. Thus economists do not differentiate between risk and uncertainty. Musgrave states that risk is possible to cover in the future as the risk of the past can be taken care of. It is the uncertainty that is not covered by past events. Vast majority of economists have a difficulty in grasping the concepts of uncertainty. In uncertain conditions each event is unique.
The third is the substitution aspect. That it may be possible with some future direction to change the economics by simply changing the supply side in such a manner that the economy makes up for some of the faults that we make in decision-making. That requires that the economist has to have intimate knowledge of the substitution affect for if it gets botched then the criticism on the economist would mean that the entire sector suffers.
The third world abounds in the practice of agriculture. That means that the economist should be constantly worried about input use in such a manner that the inflationary aspect is covered. The risk (negligibility aspect) can be covered by the use of knowledge culled from elsewhere (organic farming versus inorganic or chemical farming). Will this affect food security? The economists cannot answer these questions as life in the subjects has been put in to separate boxes. It is impossible to resolve these issues because of the interest groups that survive in the sector.
How are these assumptions to be judged? Can there be an intelligent taxonomy of assumptions? A theory may well gain strength from false and unrealistic premises (heuristic assumptions). The experiments on substitution effect indicate that it is possible to change the major interventions in agriculture and that the West has used its resources in an uncanny manner to further the heuristic methodology. This is where the MNCs and their powerful and aggressive marketing have affected the economics of the developing world. In that sense the world is unfair to the developing world as it kept on using the international agencies to side step the developing countries and to be dependent on the west. The wisdom of the East was never marginalized in to the theory and the suppositions that had an impact on the economies of the lesser world.
In years of dealing with agriculture, the irresistible fact is that the developed world is selfish and despite its overtures it remains a parasite that feeds on the developing world. Theory makes life more miserable for the poor of these countries. The cure is more application that is relevant to the developing world. The West has now gone further than the theory part and are actually using their corporate sector and devising policies that are contradictory to everyone barring them. There is enough evidence available to prove this point. Any one?