Mathematization of economics propelled the discipline of political economy to the pedestal of pure science making it a complex discipline. The fact that economic theories can never be proved by scientific experiments is enough to show that it cannot be categorized as a ‘science’ subject. The entry of a large number of mathematicians encroaching upon the domains of economics led to an adage: “bad mathematicians make good economists.” While many of the Classical and Neo-Classical economists had been mathematicians, none of them tried to mathematics economics and only used graphical and geometrical figures to explain things.
It is only after the publication in 1958 of the book, Linear Programming and Economic Analysis authored by Dorfman, Samuelson and Solow (DOSSO) that many mathematical techniques and models developed during the wartime like linear programming, input output analysis, game theories etc. invaded economics in a big way making economics almost a part of mathematical science (mathematics is considered as the “purest” science). Among Indian economists, US-returned scholars like Sukhamoy Chakravarty started teaching DOSSO at Presidency College and later in the Delhi School of Economics but students like me could hardly understand anything except his dancing teaching style.
Today, the world boasts of thousands of good economists all over the world and millions of students study economics in sch – ools, colleges, universities and academic institutions making it the most popular and sought after discipline. More students take economics as the mainstream subject than any other discipline making it one of the most important, if not the most important, subject of study. Greater job opportunities beckon students doing post-graduate and PhD in economics. In many democratic countries like India there are economic advisory councils to the prime ministers and the presidents, economic advisors to the government and an organized economic service in the bureaucracy.
The Central banks, the co – mmercial banks and corporates appoint teams of economists to play the role of advisors. It may sound almost blasphemous to say that economists have, more often than not, done more harm than good to society and the world at large. No doubt economists have made significant contributions in creating awareness about the need to improve material life and showing the possible road maps for human progress, human welfare and economic development of the global community. But history has also been a saga of failed economic experiments. Conflicting economic theories, models and ideological bias have created considerable confusion at the macroeconomic level.
At the microeconomic level too, concepts and theories which are mostly abstract models have had indirect adverse psychological effects on humanity. From the philosophical point of view, concepts like ‘insatiable human desire,’ ‘maximization of consumer utility’, ‘maximization of production’ maximization of profits’, ‘maximization of sales’, ‘no limits of economic development’ and popular economic jargon have given rise to crass consumerism, materialism, greed, unethical competition, unethical production, unethical advertising and sales completely ignoring the social cost and the environmental damage. Economic failures are never attributed to economists who take the high moral ground of invincibility of their theories and easily shift the burden to politicians who fail to understand the inherent flaws in the economic models.
Development models like the Harrod-Domar model, the Solow-Swan model, the Lewis model, Rostow’s stages of economic growth and endogenous growth models for economic development for the under-developed countries have hardly made any good and met with failures not because of the politicians but because of the basic flaws in the models which were abstract mathematical formulations. There is perhaps no instance where the prescriptions given by the top economists of the IMF for structural adjustments in the developing countries have succeeded in reviving their economies.
This is obvious because there are too many variables in society and economic models built with restricted variables are bound to be abstract and impracticable ignoring the social, political and cultural factors. A monumental failure of the economic community was observed in 2007-2008 when the world was passing through its worst economic crisis in history. At that time, at least one hundred top economists including dozens of Nobel laureates in economics were living in the USA but except for an indication from one economist, Joseph Stiglitz, none of the top economists could predict the coming disaster. Over confident (or arrogant!) economists working in the IMF, the World Bank, the Reserve Banks and in the go – v ernments exude a belief that they have solutions for every eco – no mic ill. But their macroeconomic predictions about national income, growth rates, inflation, foreign trade, FDI and the nation’s economic health have, more often than not, gone wrong. By what name should we call them ~ economic astrologers? According to many experts, the discipline of economics cannot be regarded as an exact and integrated ‘science’ because of the multiplicity of theories and models on the same economic phenomena. The theories are also based on assumptions rath – er than on reality making their validity controversial. Since economics deals with human activity and behaviour which cannot be exactly predicted, economic theories are at best an indicator of what may actually happen.
Economics as a discipline is also fragmented into multiple disciplines and the economists are sharply divided among themselves being worshippers of different political ideologies and therefore, are not able to reach unanimity on any matter. It appears no economist is free from political bias and their political convictions have coloured their economic ideas, theories and models. Economics has branched out into different disciplines cultivated by various schools of thought ~ the Cambridge School, the London School, the Lausanne School, the Austrian School, the Chicago School, the Harvard MIT School, the historical school, the Marxist School etc. Accordingly, the economists are branded as capitalistic or free-market economists, Marxist economists, Socialist economists, mixed economists and Islamic economists depending on their political ideology. Economists are vertically divided into two major camps ~ the capitalist camp and socialist camp.
The capitalist or the free market democratic economists do not consider socialist economics as part of mainstream economics while socialist or left economists consider the capitalist economists as reactionary. Economic theories, ideas and models, often conflicting and contradictory, developed by the opposing schools of thought, especially by the Marxist and Socialist Schools, have created more confusion and disaster than providing real time solutions to economic problems, which the economists are supposed to do. It will be seen that the discipline of economics cannot be divorced from politics and political bias and that is why the classical and neo-classical economists had named the subject as Political Economy and they were all known as political economists. Application and validity of economic theories are dependent on the political and economic system a country has adopted. Success of Macroeconomic theories and models concerning Money, Capital, Taxation, Trade, Inflation, Growth, Public Finance and Economic Development etc. will depend on the political system, the governance system and basically the political will. The manner in which the largest economy of the world, the United States, is functioning today, can there be any distinction between politics and economics?
Increasing math ematization of economics has made it an abstract science which has little utility in the world in providing practical solutions to economic problems. Therefore, there is a need to rev isit the core issues of economics and its utility to society and whether economists should be-mathematize economics to make it a practical and useful discipline of political economy for the welfare of the people. A word needs to be said about the so-called Nobel Prize in Economics and the Nobel Laureates in Economics. The Nobel Prize in Economic Sciences officially known as Sveriges Riksbank Prize for Economic Sciences in Memory of Alfred Nobel was instituted in 1968 by an endowment from Sweden’s central bank Sveriges Riksbank to commemorate the 300th anniversary of the bank and the Royal Swedish Academy of Sciences was assigned the task of selecting the winner/winners of the prize. This prize is commonly known as the Nobel Prize in Economics. The first prize awarded in 1969 went to the Dutch economist Jan Tinbergen and the Norwegian economist Ragnar Frisch “for having developed and applied dynamic models for the ana – lysis of economic processes.”
As of 2024, 56 prizes in economic sciences have been given to 96 individuals. The University of Chi c ago has produced the maximum number of laureates in economics (17) followed by Harvard (13) and MIT (15). The award of the prize has been mired in controversy from its very inception. The Riksbank prize has nothing to do with the will and endowment of Alfred Nobel for award of prizes in five areas only ~ physics, chemistry, medicine, literature and peace. Therefore, to designate the Riksbank prize as a Nobel Prize would be unfair and a misnomer not with standing the fact that the same process of selection of Nobel laureates by the Swedish Academy of Sciences had been adopted. Because of this reason, three of Alfred Nobel’s inheritors distanced themselves from this prize. Moreover, awarding the Prize to non-economists and controversial reactionary economists has invited further criticism. A number of economists like Gunnar Myrdal suggested abolishing the Prize.
Since the question of misusing Nobel’s name had surfaced, suggestions for an alter native name have come from many quarters. One suggestion has been to name it as the Riksbank International Prize in Economics or simply International Prize for Economic Sciences on the same pattern as the International Prize for Statistics, which is also popularly known as the Statistics Nobel.
The International Prize in Statistics modelled after Nobel Prizes is awarded every two years at the Wo r ld Statistical Congress for outstanding scientific work in the field of Statistics, the last recipient being the famous Indian Statistician, C R Rao. Statistics as a scientific tool with wider applications in all disciplines and activities and great contributions to humanity makes it a more deserving candidate for being called a ‘Nobel Prize’ than economics.
(The writer is a former Dy. Comptroller & Auditor General of India and a former Ombudsman of Reserve Bank of India. He is also a writer of several books and can be reached at brahmas@gmail.com)