A Nobel Laureate Speaks About Issues In Economics That Are Also A Topic At INET

This interview of Nobel Laureate Amarta Sen, provides an interesting perspective on economics as a discipline. Some of the themes in his interview have been reflected in several presentations at the INET conference in Berlin.

One of the discussions at INET has been around the goals of economics. Some have raised concerns about the focus on the efficient use of resources. Others have raised objections about the goal of building mathematical models of an imaginary economy which assumes perfect competition, and other a host of other factors that are important in the real economy. Sen favors a broader goal for economics. He argues that the goal should be to have a decent society. People should be able to lead lives that would allow them to be proud and happy. He also expands the concept of freedom beyond the notion of being free from government. Real freedom enables people to have a decent life.

Another of the issues raised at INET, and in this article by Sen, is the absence of economic history in the teaching of economics. He responded to student demand at Harvard by teaching a course on the real Adam Smith. (He believes that US students should have a good understanding of economic history in their own country.) Conservatives have ignored most of what Smith was really concerned about, and focus only on his concept of the invisible hand, which they have used to make the case for free markets. Smith was very concerned about poverty and the need for government to provide public goods. He was an early advocate for public education. Sen and some presenters at INET believe that history provides many insights into how we might deal with economic problems, and that these lessons are not found in our mathematical models which assume perfect competition. Some of these models preclude a role for government intervention in the business cycle. Mathematics is useful in economics but there are some things that cannot easily be understood with mathematical reasoning.

Sen, and several presenters at INET, have also raised concerns about the dominance of finance in our economies. Central banks play a major role in determining economic outcomes but they have been intentionally insulated from political influence, and they have been instrumental in enabling the banking system to play a dominant role in the economy. Several countries in the eurozone have even lost their sovereignty. They are being forced by rating agencies, bankers and others to take actions which are not in their best interest. It is easier to deal with excessive debt by growing an economy. These countries have been directed to take actions that will reduce economic growth and make it more difficult for them to deal with their debt burden.

Sen was not asked about his concerns about global warming in this interview. He, and many of the presenters at INET, are very concerned about global warming and they have raised concerns about the difficulty that we face in dealing with a global economy that does not have effective global governance structures. This is confounded by the inability of many national governments to take unpopular leadership positions . Leadership should be a more important role of government in democratic societies. Many take the easy way out by leaving the hard decisions for those that will succeed them.