Have economists lost an influence on public policies and issues important to everyday life of people? This question is being posed across the world, especially in the post-Brexit scenario and after the victory of Donald Trump in the US presidential elections. Almost every leading economist in the US and UK warned against the proposed policies of Donald Trump and Brexit advocates on the campaign trails respectively. But the public paid little attention to such warnings.
These economists may not be held responsible for the outcome in the both cases, but the phenomenon does provide insights about the relevance of economists in today’s world. Here in Pakistan, economic governance is decaying over the time. Leading economists and self-proclaimed public intellectuals (in economic policy) have been presenting reform proposals for quite some time. Neither policy makers, nor common people pay any attention to what is being propagated by such economists.
There is a myth that self-interest dominates intellectual ideas. However, Dani Rodrik has emphasised that interests are also based on some ideas and political economy models should incorporate the role of ideas. Similarly, ideas are also considered value and ideology-oriented
One of the potential explanations of this phenomenon is that economists lack sufficient capacity to understand complex interactions in a society and then they are also unable to convey their ideas and thoughts in the narrative style. Economists should stand for some ideas, narratives and perspectives which are understandable for common people. Obviously, academic economists have to engage themselves in scholarly research to add to the body of knowledge. But, as social scientists they also have a greater responsibility to influence positive changes in the society.
Some of these issues are being discussed under the rubrics of ‘Economics of Ideas’ and ‘Narrative Economics’. Robert Schiller, the Nobel prize winner and past President of American Economic Association (AEA), gave a Presidential address on ‘Narrative Economics’ at the 2017 annual meeting of AEA. It is published in American Economic Review of April 2017. Schiller highlights that narratives have been playing a powerful role since ancient time in bringing both positive and annoying changes in the societies. Many fields in the social sciences and humanities have relied on narratives to communicate the messages and ideas but economists are lagging.
He gave numerous examples how narratives have been influencing economic outcomes in the world and spelled out directions for further research on this aspect. He considers narratives as a “simple story or easily expressed explanation of events that many people want to bring up in conversation or on news or social media because it can be used to stimulate the concerns or emotions of others, and/ or because it appears to advance self-interest… It is not generally a researched story, and may have glaring holes, as in urban legends.”
One such endeavour has been made through a recent book by Dr Nadeemul Haque, Looking Back: How Pakistan Became Asian Tiger by 2050. The book is useful for economists, policy makers and other readers. The semi-fiction-style book propagates bottom up ideas and dialogue to introduce reforms in politics, social fabric, and economic governance. It presents an idea of Research For Pakistan (RFP) which hosts domestic thinkers and intellectuals to deliberate and to advise the government on key policy issues.
An idea of networks for research and reforms has also been discussed in the book. However, many in Pakistan legitimately question; Why did Dr Haque not implement these proposals when he was heading the Planning Commission? Dr Haque still idealises his contribution to develop Framework for Economic Growth which was approved by the National Economic Council but could never get implemented due to reluctance of the then Finance Minister.
There are a few myths associated with ideas. Some consider that ideas are different than so-called empirical or theoretical research. But they do not understand that ideas, indeed, emanate from research. Ideas drive research and inquiry. Ideas change the mode of research and experimentation. And, ideas may challenge the existing social and economic structures to shape a new reality. It is important to consider that ideas also need a competitive market. The kind of competition in the market of ideas is certainly different due to partial excludability, as an idea can be used by many and may be put together with another arrangement of ideas. Thus, we can expect increasing returns to scale from exchange of ideas.
There is another myth that self-interest dominates intellectual ideas. However, Dani Rodrik has addressed this myth in a paper, When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations. He has emphasised that interests are also based on some ideas and political economy models should incorporate role of ideas. Similarly, ideas are also considered value and ideology oriented.
It is widely believed that the language and perspectives of many economists cannot be understood by the common people. Some give examples of physicists, biologists and chemists that they are also not understandable for the common people. But this argument is simply flawed. Scientists have to deal with physical objects while social scientists are mainly concerned with individual and societal behaviours. The social world is far different than rocks and cosmos.
Most of the economists spuriously correlate their ideas with the policy outcomes. Actually, more often than not, they just legitimise actions of politicians and international agencies. Some economists must pick up those ideas and take them to the people at large. Moreover, economists really need to open their minds, especially for ideas from other branches of social sciences and humanities. This change can only be triggered by transforming curriculum and mode of learning in the economics departments of universities.
The writer is a public policy practitioner and researcher. He tweets @navift
Published in Daily Times, September 18th 2017.