“If we want to know the truth, if we want to order our economic and social lives justly, if we want to help people rather than merely feel like we are helping people, we have to learn economic terrain.”
-Jay Richards
For centuries, the subject matter of economics has been dominated by the Neoclassical school. This school of thought describes Economics as the ‘subject that focuses on production, consumption, and income generation in markets through interactions of demand and supply. According to this theory, human beings are perceived as a classic “Economic Man”, who always make rational decisions to maximize his satisfaction and satisfy his self-interests. But recent literature on economics takes the subject matter of the discipline beyond its traditional approach and proved that limiting the scope of economics like pure science by the neoclassical school of thought will make economics irrelevant to the needs of the modern world.
In 2017, the Nobel prize in economics was awarded to American economist Richard H. Thaler for his contributions in behavioural economics. He opines that people usually face decision-making environments that often lead them to make decisions they end up regretting and emphasize that the classic “Economic Man” ceases to exist. Economics is now a study of both rational and irrational choices. Economics delves into everything that can be calculated and inquired. The tendency of applying economics to everything got its momentum recently through books like Freakonomics, where the author talks about many issues like abortion laws, drug gangs, naming of children, teachers hyping their student’s marks in assessments, Ku Klux Klan which many perceive that these issues have nothing to do within economics. Critics call this likelihood of applying economics to ostensibly non-economic aspects like cheating, prostitution, legal laws, tastes as ‘economic imperialism’. But it is not imperialism but the emergence of pluralistic and heterodox perspectives in economics.
The need for pluralism emerges due to the following reasons: First and foremost, it is very clear that the onset of pluralism is rejecting conventional wisdom of orthodox or mainstream economics. In general, Mainstream economics has one important characteristic feature: It always set assumptions and defines economic models based on those assumptions. While developing any models, it set assumptions like compulsory rational behaviour, flexible wages, full utilisation of given resources, perfect knowledge, and competition. Unfortunately, this type of methodological approach is not viable in addressing the economic problem.
For instance, take the case of financial stability. It is one of the most discussed issues in the economic arena. Mainstream economists emphasize that if everyone in the market has perfect knowledge, rational behaviour and if transactions were cost less, then financial stability is unavoidable. But are these conditions possible in a monumentally dynamic world? No. Even if financial stability is attained, then the resulting stable returns will act as incentives for investors to take more risks and this will again lead to financial instability. So, while developing an economic model for reaching financial stability, it is important to take into consideration various other problems like liberalisation policies, society’s diverse reactions to speculations in markets, and everchanging exchange rates.
Because of setting up of assumptions, the field of inquiry also gets limited. So, it is crucial to break the boundaries and dump the fictitious assumptions to come up with models that can suit the real-world mechanics. This is possible only with the development of a pluralistic outlook in approaching economic problems.
As the old saying goes, ‘He who has a hammer sees everything as a nail’. So, if we approach issues keeping certain staunch assumptions and points of view, then we will end up with developing unfeasible models that can’t be useful for finding solutions to problems. We shouldn’t stick to using the same tools. Sometimes, it is good to discover new tools also.
How to develop pluralistic perspectives in Economics? This could be done by redefining theoretical and methodological approaches in economics.
Theoretically, emphasis should be given to broadening the fields of inquiry and developing the new schools of thought. Economics should be studied in a wider cultural and intellectual ambiance. It must be understood that economics should not be studied in a vacuum. So, an interdisciplinary approach should be encouraged and economists should engage themselves in studying other social sciences while developing perspectives.
Methodologically, it is important to increase the range of tools economists use to find answers to questions they encounter. Statistics and mathematics were always being crucial stakeholders in the study of economics. Economists always give importance to quantitative tools for formulating theories. But there are a few aspects that cannot be understood exclusively using quantitative methods. So, it is important for constructing reliable qualitative tools for addressing issues. Sound economic inquiry requires a combination of both qualitative and quantitative methods tools of inquiry for understanding subjects. With these changes in approaches, pluralism can be developed in economic study.
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