Nobel Prize in Economics was introduced 67 years after the original Noble Prize. The subject was not included at the will of Alfred Nobel. 'The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel' was introduced by the Swedish central bank in 1968 to commemorate its 300th anniversary. Later it becomes popular as Nobel Prize in Economics. The original name of the prize also indicates that it is intended to promote economics as a physical and applied science, not social science. That's why Nobel Prize in Economics is most controversial. In its 50 years of history, 84 economists have been awarded for the contribution to economics and some of them only for theoretical works based on flawed or hypothetical assumptions. Nevertheless, their works are substantiated by rigorous mathematical exercise and help to show that 'economics is very closer to pure science'. Around 13 per cent of Nobel laureates in economics had their PhD degrees in mathematics and it reflects how important the use of mathematics is for being a 'good and mainstream economist!'
It is to be noted that classical school of thoughts in economics, popularly known as classical economics and sometimes as classical political economy, is initiated and developed by Adam Smith, David Ricardo and John Stuart Mill along with Jean-Baptiste Say and Thomas Robert Malthus. Flourishing during the late 18th and mid-19th centuries mainly in Britain, this school developed a theory that calls market economy 'largely self-regulating systems' and 'governed by natural laws of production and exchange.' Adam Smith's famous metaphor of 'the invisible hand' is believed to be the inspiring source in this regard. Thus classical economists are generally acknowledged as pioneers of economics or modern economics while Adam Smith is mostly recognised as founding father of the subject.
But the limitations of classical economists encourage new thoughts and open the path of neo-classical economics as well as neo-classical economists. Emerged around 1870 in what is known as the marginal revolution, neo-classical economists introduced and developed the theory of supply and demand, marginal utility and also cost of production. Alfred Marshall is acknowledged as the father of neoclassical thoughts in economics. William Stanley Jevons, Karl Menger and Leon Walras contributed very significantly to mainstreaming the neo-classical thoughts. These economists and their fellows started to use mathematics in economics frequently and their followers make it rigorous and extensive.
As a result, text books on economics become full of jargons, diagrams and mathematical signs. The more advanced the books are, the more rigorous the use of higher mathematics and statistics is. These are not always to make the theories and concepts clearer, but more to establish economics as a science. Though trying to make economics as a pure science like physics is largely a failed effort, neo-classical economists and their disciples never give up. They have been tirelessly trying to do so for decade after decade and also succeeded to a large extent by making the subject more complex and difficult to decode. Their priority is to establish theories with mathematical proves, not necessarily with real world situation.
DICTATING THE WRONGS: This rigid stance to label economics as a science, however, doesn't go unchallenged. 'A Guide to What's Wrong with Economics,' edited by Edward Fullbrook is such a work. Contributed by a number of economics teachers and researchers, the book lucidly and logically pointed out the shortcomings of neoclassical economics. Neoclassical economics is the most dominant school of economics and turns into mainstream focusing on rigorous use of mathematics in economics. A 'conscious effort was emerged' in the middle of 20th century 'to imitate mechanical physics' and thus neoclassical economics started to embrace 'a purely mathematical notion of rigor as embodied by the axiomatic method.'
Fullbrook and his fellows bust some fundamental assumptions like rational behaviour of human being. Neo-classical economists argued that human being is rational and they are always guided by logics while taking any economic decision. Being fully rational means he or she is a selfish and self-centred person who is insensitive to others. In reality, it is not true. The book shows that human being is not always rational and many times in their real lives they go beyond logics.
Fullbrook and his fellow writers have showed that the way mainstream economists choose their model is in many counts contradict human behaviour. They argue that 'mathematics of microeconomics is persuasive but flawed' and so it is either improbable or incorrect or impossible to draw any realistic explanation. In an essay, Steve Keen says: "The most distinctive feature of economics as a social science is its use of mathematics. Ever since Walras began the programme of recasting economics as a mathematical discipline, attitudes to mathematics have defined both its proponents and its detractors. Detractors dispute the feasibility of expressing economic processes in the mathematical form, while proponents are dismissive of those whom they believe do not practise mathematics because they do not understand it."
Fullbrook has summarised their work briefly as follows: "From the 1960s onward, neoclassical economists have increasingly managed to block the employment of non-neoclassical economists, narrow the economics curriculum offered by universities to students and make their theories increasingly irrelevant to understanding economic reality. Now they are even banishing economic history and the history of economic thought from the curriculum. Why has this tragedy happened? At a time of accelerating momentum for radical change in the study of economics, 'A Guide to What's Wrong with Economics' comprehensively re-examines the shortcomings of neoclassical economics and considers a number of alternative formulations. In it, a distinguished list of non-neoclassical economists provide a study of some of the many worldly and logical gaps in neoclassical economics, its hidden ideological agendas, disregard for the environment, habitual misuse of mathematics and statistics, inability to address the major issues of economic globalisation, its ethical cynicism concerning poverty, racism and sexism, and its misrepresentation of economic history. In clear and engaging prose, 'A Guide to What's Wrong with Economics' shows how interesting, relevant and exciting economics can be when it is pursued not as a defence of an antiquated and close-minded system of belief, but as a no-holds-barred inquiry looking for real-world truths. This book is a must-read for all economists and advanced students of economics, as well as for the general reader."
ECONOMICS IS INTERESTING: The assertion that economics is 'interesting, relevant and exciting' echoes thoughts of many other non-neoclassical economists and some of them also believe that it is possible to learn and teach economics without complex diagrams and rigorous mathematics. Charles Wheelan, an American correspondent of London's Economist and a lecturer at Northwestern University, at the beginning of this century strongly believed this. Thus he writes 'Naked Economics: Undressing the Dismal Science.' In this book, the author tries to decode the fundamental concept of economics with real world examples avoiding imaginary or abstract cases. He explains powerful economic concepts in layman terms, assisting to understand the fundamentals of the economy at work. Going through the book, one will find that how interesting and practical economics could be. The book links economic theories with real life activities. That's why many termed it a 'non-technical introduction of economics' or 'algebra-free explanation of economics'.
The book starts with a lucid explanation on 'how markets work,' the first chapter. The writer then explains the role of incentives and disincentives in human life and argues that the 'right incentives align the interests of various parties so they act towards a common desired outcome.' Challenging the neo-classical fundamental assumption that human beings always behave rationally, he writes: "One of the fiercest assaults on the notion of 'strict rationality' comes from a seemingly silly observation. Economist Richard Thaler hosted a dinner party years ago at which he served a bowl of cashews before the meal. He noticed that his guests were wolfing down the nuts at such a pace that they would likely spoil their appetite for dinner. So Thaler took the bowl of nuts away at which point his guests thanked him." (p-25) Thaler was awarded the Nobel prize in economics in 2017 for his observation that human behaviour is not always rational and his theory of nudge. Wheelan's shows that the field of behavioural economics has 'evolved as marriage between psychology and economics that offer sophisticated insight into how humans really make decision.'
Wheelan's discussion on the roles and inefficiencies of government is provocative to some extent. He shows that government intervention is helpful to enhance productive capacity of economy. He also mentions the negative side of such intervention. The author also argues that 'a market economy is to economics what democracy is to governments, a decent, if flawed, choice among many bad alternatives.'
Other major topics covered by the book include: economics of information, human capital, financial markets (including financial instruments and investment principles) and finally politics, economic indicators and globalisation.
During a visit to the University of Kansas in Lawrence, Kansas in United States of America in 2011, this scribe purchased the book from students' bookstore. It was sold as a 'used book' from the 2010 edition. In later years, a number of revised or updated editions have arrived to make the original content more interesting with real life examples and anecdotes.
PLAIN EXPLANATION: C T Kurien, an Indian economist, writes a book titled 'Economics of Real-Life: A New Exposition.' Relying on the history of evolution of human communities from rudimentary state to the latest economic activities, the author briefly but lucidly exposes the economics and its basic concepts avoiding so-called mainstream textbook method. He doesn't go for any mathematical notations showing that it is possible to present economics without complex algebra and diagrams.
Kurien starts with isolated economy and then advances to interacting economy linking historical and anthropological facts in brief. The author shows that isolated human community transformed into interacting economy for their survival and material progresses. He argues that economic activity or production is essentially human interaction with nature and also social interactions for survival and provides the material basis for survival and going beyond.
The book uses real-life material of past and present and substantive arguments to deal with the growing complexity of the economy. It avoids concentrating on logics based on untried premises and relies on the history of human evolution. The transformation of human communities from the rudimentary stage to the modern phase is nicely captured in Kurien's work. He depends on 'capsule history' and 'thought experiments' to elaborate his arguments.
Kurien strongly believes that "economics is not merely a mental exercise of logical and mathematical derivations, but one so closely related to the lives of human being, so that it is unavoidably a policy-oriented discipline." (P-17) He also argues that mathematics is not required to understand the basic issues in economics. Though his objective is not to critique the shortcomings of neo-classical theories, his attempt to assist the 'understanding of the working of economics that are becoming increasingly complex' becomes a rational criticism of mainstream thoughts. For example, he identifies a number of units of economy instead of two divisions -households and firms- as recognised in mainstream economic thoughts. "What we are attempting, therefore, is to present the economy as the variety of interactions of overlapping, interacting and heterogeneous primary units, each with an agenda of its own. It is the 'micro-global' profile we have already referred to." (P-116)
Kurien shows that interaction of trio -- money, merchant and markets - in real life keeps an economy functional. He analyses the market structure with its changing profile over time and ruled out the mainstream proposition that market responds to the needs or desires of customers. According to him: "The market includes, in fact welcomes, those who have resource power; but excludes those who don't have it. The market as a social institution is not one of free entry. Those who don't have something to sell cannot buy. It means that in the market economy those who produce too respond more to resource power than anything else." (P-71)
The book has special focus on Indian economy. It describes the evolution of the Indian economy during pre-independence period very briefly and then outlined the trend since independence. Kurein also analyses the economic policies of India fiscal and monetary policies to be precise. He argued that three areas need more policy attention in India. These are: environment, inequalities and development. Same is true for Bangladesh.
Kurien concludes the book examining possibility 'beyond capitalism' and argued that this is not impossible. He, however, doesn't suggest any new kind of socialist model but mentioned that change in role of state, organisation of production and preference in economic policy is essential.
One unique thing of the book is it integrated microeconomics and macroeconomics along with economic history and political economy in brief. Those who don't have any professional training in economics will find that understanding economics is easier than thought. Those who have degrees in economics will probably be puzzled to learn that presenting and explaining economics lucidly is so easy.
Reading a review of the book in Indian fortnightly Frontline, this scribe collected a copy through one of his friends from Kolkata.
FUN ON ECONOMIC THOUGHTS: Lives and works of economists can present both the historical advancement and different important theories of economics without any mathematical elaboration. Sylvia Nasar's book titled 'Grand Pursuit: The Story of Economic Genius' is such a remarkable work. She virtually visits the past 170 years of economic history introducing readers to a number of most important figures of economics.
It should be noted that Nasar became famous for her biography of John Nash who awarded Nobel in Economics in 1994 for the game theory. Titled "A Beautiful Mind," the book was also adapted for the widescreen starring Russell Crowe and Jennifer Connelly.
A professor at Columbia Journalism School and a former economics correspondent for The New York Times, Nasar narrates the development of economic thought from its 'dismal science' to the modern prosperity, social justice and individual liberty in her magnum opus 'Grand Pursuit'. She doesn't try to write history of intellectuals who shaped the thought of economics but tries to make her readers feel the time where they live. This is a difficult task, no doubt. That's why, The Washington Post, on reviewing the book, said: "Nasar's aim, however, is not to write intellectual history but to put the reader into the lives of the characters of a sweeping historical drama that extends from Victorian England to modern-day India. That she largely succeeds reflects the depth and breadth of her research but also the elegance of her prose."
The book is divided in three parts and titles are good enough to reflect some dramatisation- 'Hope', 'Fear' and 'Confidence.' She starts her book in a semi-dramatic way by presenting the period of the fast industrialisation of London during 1840s and brings Charles Dickens and Thomas Carlyle in her story. She also mentions Jane Austin. More dramatisation is visible when she presents Friedrich Engels and Karl Marx. She is quite critical of Marx. For instance, she mentions that Marx, the German intellect, wrote his masterpiece 'Das Kapital' over a period of 20 years staying in London but never visited a factory here and for that matter the working conditions of the workers. Nasar also presents Alfred Marshal, the father of neo-classical economics, in a fascinating way. She tells her readers that Marshal used to visit factories and talked with working class poor people. Thus she makes a contrast to Marx who is the champion of working class.
Nasar spends a few pages on Henry Mayhew, a journalist and social reformer. His book titled 'London Labour and the London Poor,' published in 1851, is considered as a 'groundbreaking and influential' survey of the city's poor. She, however, writes a full chapter on Beatrice Webb, a British economist and her husband Sidney James Webb. They jointly write 'The History of Trade Unionism' (1894) and 'Industrial Democracy' (1897). Through these books they 'introduced the economists and social historians of Britain.'
Nasar presents Joseph Schumpeter who developed the theory of 'creative destruction' but mostly focus on his private and public life. He briefly served as a finance minister for Austria in 1919 and finally settled in Harvard. Austrian-British economist Friedrich Hayek who is famed for the business cycle theory is also included in the book. Focus on Irving Fisher is also reasonable as the American economist develops the quantity theory of money, also a critical base for monetarism. He is also considered as a pioneer of econometrics. Overall he is famed for his theory describing the relationship between inflation and both real and nominal interest rates.
Joan Robinson is also brought on the scene for being the 'first woman to make a significant contribution to an economic theory in her own right'. She developed a theory of 'imperfect competition.' Nasar presents Robinson with care.
Nasar puts a wide focus on John Maynard Keynes considering him the greatest economist of the twentieth century manly due to his The General Theory of Employment, Interest, and Money. Through this work, Keynes made a break on classical theory of recession and prescribed that recovery required monetary and fiscal stimulus. Nasar describes Keynes role at the Treaty of Versaille, his influence at Bretton Woods and his advocacy of government spending during the Depression. Readers will find it interesting to know a few anecdotes of Keynes personal life and his marriage to Russian ballerina Lydia Lopokova.
Milton Friedman, the father of monetarism, gets comparatively small place in Naser work. But she gives wide treatment to Paul Samuelson. Her journey ends with in-depth review of the life and works of Amartya Sen.
Grand Pursuit is a big book of around 600 pages, but with a number of shortcomings as pointed out by many economists and reviewers. Nevertheless, it is a book of history of economic thoughts mixed with some fun.
ENDING: The above mentioned four books are not only alluring but also knowledge spreading on economics. Budding economists and undergraduate students of economics need to go through these books to understand the real strength and limitation of economics. Non-economists or those who have no basic training on economics need to read these to find how interesting and realistic economics could be.
Asjadul Kibria is with The Financial Express. firstname.lastname@example.org [A number of articles and book reviews have been consulted to develop the write-up. ]
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