BECAUSE economics is a complex science with almost infinite variables, both tangible and intangible, affecting people from all walks of life, there is an urgent need to understand it with an open mind to shun biases, prejudices and fallacies.
What also comes to mind is what Oscar Wilde, the famous Irish writer-philosopher, described as: “…a man who knows the price of everything and the value of nothing.”
For example, the late George Stigler, one of the respected neoclassical or classical economists, and the 1982 Nobel laureate in economics for his research on deregulation and government control policies, called economics an “imperial science.”
Another economist of the neoclassical variety, Francis Fukuyama, author of the best-selling book Trust, may have offended the sensibility of some pragmatic Americans and Filipinos who do not usually side with any doctrinaire political positions on economic issues.
“We can think,” Fukuyama said, “of neoclassical economics as being, say, 80 percent correct: it has uncovered important truths about the nature of money and markets because its fundamental model of rational, self-interested human behavior is correct about 80 percent of the time.”
“But there is a missing 20 percent of human behavior about which neoclassical economics can give only a poor account,” Fukuyama added, obviously referring to some mercantilists as the missing 20 percent in human behavior.
According to Fukuyama, believers of mercantilism (protectionism) like James Fallows, Chalmers Johnson, Clyde Prestowitz, John Zysman, Karl van Wolfersen, Alice Amsden and Laura Tyson, then-President Clinton’s economic adviser, “have strongly argued that the dynamic and fast-growing economies of East Asia have succeeded not by following but by violating the rules of neoclassical economics.”
The implication of his carefully crafted fallacy and prejudice, disguised as an objective analysis of cultural human behavior in economics, is that both the Mercantilists and the Classicists have the same economic rules, and that the East Asian countries have become dynamic and fast-growing economies because they had violated these rules.
If we also follow Fukuyama’s 80-20 percent ratio on economic human behavior in money and markets in favor of the classicists, the fast-growing mercantilist countries in East Asia, particularly Japan, South Korea, Taiwan, Hong Kong and Singapore would have remained today the world’s economic laggards and retardates.
Besides, these classicists and mercantilists, although both capitalists, have different set of economic rules, lifestyles, work ethics, business policies and frame of mind, just to cite a few, in the production, distribution and consumption of their limited resources.
Unlike the classicists, the mercantilists believed in government intervention on the behavior of money, market, inflation and taxes; have pursued a manufacturing and export-oriented economy; have put premium on research and technology; have ignored the free-trade economic policies of the IMF-World Bank; and are highly nationalistic.
By calling economics an imperial science, Stigler may not have realized it that he unnecessarily added another line to the leftist popular slogan “American Imperialism” and, thus, created his own bias against some of the far-right libertarians.
Stigler should have known better that history is replete with people from both extremes of the left and the right who have used pompous slogans to advance their ideological cause.
He was a bit luckier though because the Cold War had already ended and many people from the radical left may no longer have any use of his jargon.
Prof. Paul A. Samuelson, another brilliant economist and the first American to receive the Nobel Prize in economics in 1970, described economics not an exact science but more of an art.
This writer, while teaching undergraduate and postgraduate economic studies for almost a decade at the International Academy of Management and Economics, mentioned him because his creativity and unbiased approach to the teaching of the discipline in his best-selling book Economics, particularly the 15th International Edition with Prof. William D. Nordhaus, his coauthor, contrasted Stigler’s and Fukuyama’s line of thinking.
For instance, Samuelson’s and Nordhaus’s excellent work was probably one of the few economic books that used the term market without the word free appended to it as an adjective or a qualifier to denote that the “free-market,” “free-enterprise” and “free-trade” economic concepts are indeed those of the dogmatic Neoclassicists.
As Bill Lowe said in his Education for Life (Phoenix Books,1984): “Freedom is one of the qualities of life that is most valued, but nobody knows better than the money-conscious citizens of free economies that ‘free’ is something of a misnomer; everything has to be paid for, including the freedom. It is usually paid for by an absence of security and by the deprivation of those whose labor creates affluence for others. It is for the insecure majority that the affluence of their society is but an illusion.”
To reach the writer, e-mail cecilio.arillo@gmail.com.