Economics are a simple matter, at least at first glance. A pleasant topic, with great newspapers and pseudo-economical widespread magazines. Winners and losers, dollars in or bankruptcy out. For a long time, economics resembled alchemy or a technical equilibrium. To revive consumption, to devaluate the currency, to limit inflation, to lower interest rates: for the common run of people, regular spectators, manoeuvres in economics seem easy. They are logical things to do. For a long time, most people would believe that the situation was ‘under control’ by the government (really governing the economics). Big computers and an army of statistics nerds. As a general practitioner would do, challenged by the duty of being understood by all the Dopeys around, economists from the Ministery have been regularly issueing clear cut diagnosis and prescribing the relevant treatment. Until the case would end up cold and forgotten.
NOSTALGIA OF THE GREAT POST WAR BOOM
Modern economics were born together with the industrial revolution, so let’s forgive them for being so mechanistic. « Mechanistic Economics for the Dummies », could have been written by Smith, Say or Ricardo! Do international trades slow down? Let’s add some grease into the wheels, tighten a few nuts, and the quick machinery should soon recover… In case, a few incantations, chasing a few snags (protectionism, regulation, administrative burdens) and everything will be alright, economically. Some economies, scared further to 2008 events, may try to avoid globalization side effects, and oppose dogmatic laisser-faire. Don’t be surprized then if growth takes the french leave! François Lenglet did warn us last year with his well documented book « La fin de la mondialisation » [the end of globalization]. As for fanatics of « business as usual », wishing for a come back to normal (prior to 2008), there is no alternative to growth. Barely recovering from the end of the post war boom, does the growth of emerging countries show signs of stress? Bygone the time of certainties, of economic innocence. As technology accelerates our lives, and productivity gains flourish, the last bits of growth from the rest of the world may last less than the one we enjoyed post war…
Hard to swallow for some economists, still. What to do now? Time has come for a new Marshall Plan or another New Deal. Large investments as proposed by EC’s Mister Juncker! A clear refusal to stagnation or, worse, collapse. Every country is so scared about being downgraded. Such a shameful perspective. An unbearable horizon!
Anyone dealing with economics knows the importance of scale. At the basic scale of elementary economic agents, at micro level, we focus on the behavior of companies, households, suppliers and customers. So far, any Dosey could follow… Then things turn tougher as we move higher, towards macroeconomics. Here are the impressive models built by maths nerds. Beware, Doseys, of your wandering kind of imagination. Keep off the place for classic thinkers. Neoclassic economics, supported by heavy calculations, is like private hunting! The Nobel Prize of Economics, in fact « Sweden’s central bank Prize in Economic Sciences in Memory of Alfred Nobel » is grateful to intellectual orthodoxy that keeps the economical myth alive. It allows a very restricted access to dissident mindsets, given the profile of this pseudo Nobel Prize laureates…
As the economic growth has been spreading all over the world, macroeconomics couldn’t any longer hide the externalities (economical positive or negative side effects on third parties) driven by trade. This is a matter of scientific credibility! James Meade did spot a positive externality, about sixty years ago. It was between a bee keeper and a fruit grower (despite no economic exchange between both parties). Ironically, that maybe occurred before spraying some harmful chemicals. Regarding the negative externality, which obviously means a loss for third parties, it nowadays leads to « polluter-payer » principle and, generally speaking, to societal responsibility and the so famous « sustainable development » utopia. Carbon tax, emission rights, green subsidies and other schemes are envisioned by the public authorities in order to lead the change. Indeed, a private company causing a negative externality, like it or not, cannot be both judge and jury. Law makers have a specific role, although opponents (especially neocons) would rather keep the State strictly within Security and Educational areas. However, despite the myth of the invisible hand, individuals’ good will cannot suffice.
Micro and macroeconomics finally converge on one challenge: to remain credible for all stake holders (shareholders, clients, suppliers, employees in microeconomics) and eventually for all the society (in macroeconomics). Confidence is at stakes. All economists should relearn to count in total cost (TCO), as serious purchasers do. No matter if that changes much of our past accounting habits, inherited from simpletons, Doseys economics. There is no more place for old school naiveté.
The academic world has been trapped by its own narrow-mindedness. Economics in the real world face issues well beyond the economical spectrum. So shall we offer economics scholars training sessions in « something else » (than economics), away from any supercomputer and maths? And come back to the small but real world of microeconomics. Thousands of economic agents – true innovators – aren’t totally unhappy with legal changes. They’re not always judging regulations as troublemakers or public poisons, provided the target is right, such as protecting people’s health and our environment. Entrepreneurs and citizens altogether are able to understand the narrative. No simpletons! They innovate on a daily basis, unafraid of transitions. Sure the largest contributors of negative externalities won’t applaud, and rather play for time. But as the Internet develops and spreads the buzz, beware of transparency’s spotlight. Another age of advertising and customer relationship has come!
Recently international trade and, well above, financial flows inflated well ahead of the ‘real economy’. While the latter was shaken and challenged, economic sciences could survive provided they would open up to other areas. Combined with sociology, psychology and even philosophy, economics tries to reach the formerly wide gap with ecology. Hybridization is fashionable, giving way to new horizons for all those would dare thinking out of the box. The homo œconomicus, our Simpleton, will try to stop the savage fight against nature. Savagery, predation and rivalry have been part of the economic game for ages. We either misunderstood or exaggerated Darwin’s conflicting views, between class conflicts and business conflicts. It’s high time we learned about growing up and leaving more inclusively than exclusively!