A Discourse on the Limitations of Economics
by Adrian Tamayo
University of Mindanao
Introduction
For many years, economists were happy with the state of economic affairs in almost all of the economies of the world. Having said so, the economic fundamentals and the market dynamics are all in their proper places after surviving the perils of the 1930’s. The basis of theory, the economic thinkers thought of having ably addressed the problems. According to Blanchard, “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.”
This was also supported by Robert Lucas who confirmed that “central problem of depression-prevention has been solved,” thus the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making. The confidence on economic theories was so high that governments and monetary funds allow policy prescriptions in the context of the assumptions of economic principles.
But with the recurrence of the crisis, the current crisis that had wrecked havoc on the economies of the world is of course an economic concern. With the collapse of the business districts an big investments houses, why economics wasn’t able to see the signs? This lead into debate whether economics is a science that has the coherence and explanatory power to explain(Wilber and Jameson) the historical evolution of growth paths of the countries.
This discourse paper will shed light on how economics address the development and societal evolutions over time. Discourses are funneled towards understanding the concept of development and in the context of economic theories.
The Evolution of Development Thought in Economics
Economic freedom is an essential requisite for political freedom, hence development. In every society the pursuit of freedom to choose and determinism become the core of government concerns. On the one hand, determinism cannot be dissociated with the ability to acquire the more fundamental and basic requirement of providing what the people in the society needs.
Development scientists were anxious of the use of the orthodox policy tools in acquiring the so called fundamental needs towards the objective growth. The orthodoxy of economics occur when the growth equation is simply a matter of adding of development indicator figures in the context of laissez faire. On the one hand, the new economists were more concerned on the equity issue on the distribution of the benefits of growth. While political economists are more concerned with nature of the process by which the economic growth is achieved.
More on comparing, the classical economists view the people’s values as means. That is, if the values of people become stumbling block to achieve development, people must change their values. It is a necessity that the old values must be abandoned if the set of values come as a contribution to the slow growth of the economy. This implicitly means allowing the dynamics of the players of the economy to operate on their own. That is, the market will achieve its full potential when it is left on its own. In the words of Krugman, he said, ” During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right”, that a problem will be addressed if the economy will acquire surplus.
Surplus occurs when the gains of trade are greater than the cost of trade, that is, if I sell two cows and receive the money, the money should be much so as to ensure to purchase an mpre than equivalent amount when it is used to purchase a commodity. The economic surplus is viewed as an external factor by political economist. Who determines the surplus will provide a description of the kind of development that is to occur in the economy, if the rich aristocrat will control the economic surplus, then the nature of development is skewed to the few. If the middle class will gain control of the surplus, the kind of development will benefit a comparably greater in number, but if the surplus in the economy is controlled by foreign country, then development stagnates.
In the conduct of affairs of an individual in the economy, the only interest that is bearing to the players will be on the gains of their trade. This simply means that the state of affair is undoubtedly be reflective of the real event when there is the economic freedom. As stated vividly by Stuart Mill, he said,” the sole end for which mankind is warranted, individually or collectively, in interfering with the liberty of action of any of their number, is self-protection. The only purpose, for which power can be rightfully exercised over any member of civilized community against his will, is to prevent harm to others. His own good, either physical or moral, is not sufficient warrant,… the only part of the conduct of any one, for which he is amenable to society is that which concern others. On that part that which merely concerns himself, his independence, his right , is absolute. Over himself, over his body and mind, the individual is sovereign”.
Meanwhile, political economist’s goal is to enhance what people value (Wilber and Jameson) as a measure of development. Fajardo exacts that development is not only with the material wealth accumulation, it also comes with giving importance to what the people believe in as a society. Thus in simple term, it is liberation. It means the people are liberated from oppressive and exploitative relationship that beset the persons’ ability to meet his requirement for a modest living. Development is a process of allowing people to be free from the bondage and control of other people.
