I was reading an article which states that leading economists are now tilting towards left centric economic practices. Just to give you a perspective – There was a time when governments tried to reduced its control on many fronts such as reduced taxes, regulations and privatization et al. This resulted in perceived Free-Market and growth. At times I wonder growth for what? And growth towards where?
Flashback to 2005-2008 – When these activities went berserk we saw financial crisis one after the other, we can blame that some were more created than “systemic risk” as the “experts” call it. Recession of last decade was an example of the same. Until things were going great everyone was saying it works, suddenly something went wrong and everything crumbled. Alan Greenspan who was at the center of last decades recession stated this – “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.” He further said – “I really didn’t get it until very late”.
Fast forward to 2012 onwards – we are seeing economists are talking about left centric economic practices.
The problem with economic analysis is – it is always dependent on me Vs you or internal vs external. Would we be able to see a view where the analysis is done on a single monolith?
If we do the same mistake (of leaning too much towards the left) which was done in 80’s (leaning too much towards the right) when more laissez-faire capitalism was proposed, these activities of leaning far right to far left will end up being into a pendulum kind of moment. We would see more recession or other social challenges.
My opinion of Economics is – learning about the sentiments, action and effects of individuals (micro-economics) and groups (macro-economics) to create theories. These theories will replicate how the world is likely to behave. In proposing some theories we state – “everything being equal”, “rest of the things being constant” etc. However as we move on the irrationality of human / group activities take place. These irrationalities will always be there when economic theories of complete left or complete right are applied. The irrationalities will be more troublesome (as the case we saw in last few decades) if one sided approach of economics are utilized. The irrationalities can be reduced (managed) by approaching the economics in more centralist way – The middle path.
Should there be a way to reduce the causes of irrationality?