Decision Tools for Public Policy: Can We Do without Economics?

Article excerpt

An important issue in the analysis of economic systems is that of policy intervention to improve, in some sense, how such systems function. The issue has taken on increasing urgency in recent years as economic, social, and environmental pressures impinge on their overall sustainability, although the associated problem set is a generic one that may well require new thought as economic systems become more complex and therefore more difficult to monitor and control in a sensible way. This paper argues that while neoclassical economics works reasonably well as one tool (among others) for analyzing the broad behavior of simple economic systems - i.e, systems that do not evolve very fast - when it comes to the analysis of structural economic change over long periods, we probably need something different. In particular, the paper argues that greater attention needs to be paid to the notion of "structure" - how it may be defined and how it may serve as the basis of interventions in economic systems that are evolving at ever increasing rates.

A related argument is the need to demystify such interventions and to provide scope for those most immediately affected to play a greater role in the policy process as a whole. These people have the most knowledge of how their part of the economic system actually works, and their "enfranchisement" is likely to make such a process better informed than it would otherwise be. One means to helping them do this is to devise decision tools that reflect the underlying realities of economic evolution. However, it turns out that in order to do this effectively, policy analysts will probably need to be emancipated from many of the epistemological assumptions that inform both the theory and practice of conventional economic analysis. This does not mean the redundancy of economics as a discipline. It does mean, however, that the discipline will need to expand its scope considerably if it is to play a significant role in the analysis of long-term structural change.

This paper is written very much as a personal odyssey, taking such a form in order to highlight why the overall argument is more radical than normally expressed in debates of this kind. Hence, it describes my own personal experiences when I was taught economics as an undergraduate, stressing in particular the epistemological foundations of the discipline that appeared then to play an important intellectual role in how economics was taught. At that time, fairly close attention was paid to the social context within which economic relationships expressed themselves. It now seems to many critics that the subject has become progressively removed from reality to such an extent that some of its modern pronouncements, at least at a theoretical level, have all the hallmarks of the scholastic disputes common in the latter stages of the medieval period. A form of "political correctness" has now taken over this specific part of the academic sphere. I then articulate this problem within my own professional concerns, viz the analysis of problems and policy for development in the Third World. Here the need is for a viable theory of long-term structural change, something the economics discipline by itself seems singularly unable to provide whatever may be its uses in the "short period."

The argument moves on to suggest the need for an interdisciplinary approach to the analysis of structural change in economic systems, an approach that takes dynamical general systems theory as its starting point. By considering the whole system, rather than any specific aspect of it, the paper tries to show that policy analysis has greater verisimilitude than is conventionally expressed by the nostrums of individual disciplines such as neoclassical economics. This is a position taken also by some modern heterodox critics such as Lawson [e.g. Lawson 1995]. However, since interdisciplinary analysis also needs focus, the paper proceeds to stress the need for appropriate decision tools with which to manage long-term change in the public interest. …