What is economics?

from James Galbraith and current issue of RWER

Introduction

Economics is a policy discipline. It is engaged with the problems, large and small, of social organization and the general good. As such it co-evolves with circumstances. It is historically contingent. The application of economic ideas to specific problems under specific circumstances may succeed or fail, and in the latter case, people with different ideas normally rise to prominence.

Capitalism is an economic system whose characteristics and problems have preoccupied economists since the 18^th century. It is not the only such system; there were economists before capitalism going back to Aristotle. And there have been economists under competing systems: socialism and communism had economists of their own. Today it is common to speak of “varieties of capitalism” (Hall and Soskice, 2001) these too foster economists of differing views and perspectives. Economists and economic theories are a byproduct of the social order that spawns them.

The world to which economic policies are ultimately addressed is a complex system. Yet economists seeking to develop appropriate policies are necessarily guided by simplifications and heuristics. The question before the discipline – and the challenge of this volume – is to decide what sort of simplification is best suited to the task. In the spirit of C.S. Peirce and of modern science, this paper argues that appropriate generalizations, simplifications, heuristics and principles are to be derived from a study of the actual world. While these may deploy mathematical tools and draw on insights from the behavior of mathematical systems, the latter by themselves are inadequate, especially where they start from the dead dogmas of the neoclassical mainstream: ex nihilo nihil fit. Later in this paper, we will sketch out elements of research strategies that seem suited to a complex economic world. Before reaching that point, we must first draw the critical distinction between the practice of economics in the sense meant here, and the academic discipline that presently describes itself as economics. 

Neoclassical dogma    read more