There is no economics, there are vying economic theories!
About 125 years ago Vilfredo Pareto published the famous article entitled “The New Theories of Economics” (Journal of Political Economy , Sep., 1897, Vol. 5, No. 4 (Sep., 1897), pp. 485-502). There, closer to the end , he argues that “The laws of the distribution of wealth evidently depend on the nature of man and on the economic organization of society. We might derive these laws by deductive reasoning, taking as a starting point the data of the nature of man and the economic organization of society. Will this work sometime be completed ? I cannot say; but at present it is certain that we lack sufficient data for undertaking it”.
Since then many people have contended that our grasp of how people behave in given settings and of what they prefer when confronted with particular choices is adequate to the extent that we may formulate sound economic theories or even laws. This contention was almost shattered in the aftermath of the financial crisis of 2008. It is sufficient to recall here the exchange between late Queen Elizabeth II and the economists form the London School of Economics which has been frequently cited. In November 2008, two months after the Lehman Brothers went down and economies of many countries almost fell flat, the Queen visiting LSE asked the faculty referring to the crisis: “Why did nobody notice it?” The faculty could not reply at once and sent a letter later on saying, in the nutshell: “We did not see it coming” (more precisely, quoting the letter, they said among others: “[It] was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole”).
Nowadays the best way to characterize the situation would be to point out many rival approached in economics trying to compete with each other. Stephanie Kelton has vigorously promoted Modern Monetary Theory. Steve Keen, since the time he published his Debunking Economics, has maintained that the mainstream models do not take into account the level of indebtedness and therefore are misguided. Mariana Mazzucato convincingly claims in her Value of Everything that the time has come when we should revise our discernment of value and discard the one reigning today according to which it is justifiable that chief executives earn 400 times more than the typical worker because the executives contribute more value into the final product or service compared to the workers. There is a new growth theory (see for instance Jati Sengupta’s Theory of Innovation: A New Paradigm of Growth), a new (rather revived) perception of banking operations (Richard Werner – author of the concept of quantitative easing), a new view on how people work (e.g. quite quitting, generational differences, etc.).
Ha-Joon Chang in his latest book entitled “Edible Economics: A Hungry Economist Explains the World” (2023) offers an unorthodox way to appreciate diversity ruling in economics. He talks about food and about disparate approaches people have for cooking. Similarly there are contrasting views that people employ to understand and explain economic affairs. This is not a usual book. Far from it. In fact it is more about food ingredients than about economics. Still it is worth reading in order to realize that the world of economic relations is complex and intertwined with human emotions, anticipations, technological development, prevalent fears, and many other things. Because of this complexity there is no one single model fitting al the observations. Many, sometimes contradicting, views ought to be put together to grasp, hopefully, the essence of some phenomenon (e.g. in business or management) and get a hunch of what has to be done in a given situation. Today we all need such hunches as re-globalization, fragmentation of world economy and new technologies make us reassess many entrenched paradigms in economics.
