The Modern Economy and its Operations: A Critique of Todays Practices - Essay Example

?The Modern Economy and its Operations: A Critique of Today’s Practices Economics has evolved out of the needs to address the scar of resources against the increasing number of people that had to compete for what remains of these limited resources (Dow, 2002). However, certain assumptions in the study of economics may seem as illogical as well as unrealistic, which makes it hard to be reconciled with other fields of thought such as the sciences, and this factor makes the sciences seem much more rewarding than the field of economics (Dow, 2002; Stephan, 1996). This is expected to happen due to the circumstances when the principles that were initially used to form the foundations of economics were built, and that many changes have already happened during the course of modernisation in the next two hundred years or so (Smelser & Swedberg, 2010). Also, the major rearrangement of economic ideas in the late 1930’s which was considered to be a “revolution” was not at all one in its entirety, and that it was only due to the proliferation of numerous competing schools of thought that eventually created the need to cull and select only those which are easily synthesized and revamped and can be used into the succeeding years, essentially recycling some ideas to suit the needs of modernity (Laidler, 1999). This kind of treatment to the field of economics created some unforeseen problems such as the difficulty of handling the rapidly-changing market trends, shifts and fluctuations between expected and actual economic growth, and the mismanagement of policies that were supposed to control fast price inflations, among others (England, 2000). The previously predictable thought patterns of most people have been replaced by the notion that due to the vast influx of ideas, various people might be thinking of different things and interests at any given time, which in turn counts for a greater variability in terms of anything that is beyond the basic necessities of everyday life (Roberts, Finnegan, & Gallie, 1985). As a result, market analyses today are much harder to handle not only due to the failure of the traditional rational choices that were initially able to predict consumer patterns, but also the changes that happen in the market trends that do not seem to repeat itself even after several decades (Smelser & Swedberg, 2010). These kinds of unpredictable results rose from the idea that economics can be treated in the same way as how most sciences are handled, and as a result forced economists to think like scientists in a field that is more often than not as predictable as simple scientific inquiry, which in turn entails the need to change the way how economics must be tackled in the modern era (Keita, 1992). Many thinkers and philosophers were able to introduce new methods of thinking, as well as stating their own ideas and criticisms with regards to the validity and credibility of most scientific inquiry methods. However, some techniques of teaching and studying economics may not coincide with the scientific method, such as from deductive to inductive reasoning or the inverse of it, and problems could definitely arise if a field that mostly uses deductive reasoning such as economics is being dealt with in an inductive way, and this would not make any sense of the results, thus the standards of reliability become endlessly challenged, bringing about even more unexpected results (Blaug, 1980; Pheby, 1988). For example, if market trends were looked at in the same way as how the scientific methods work, then it is expected that consumers are highly predictable in terms of what they would prefer to do with their money, and even after ten years of observation things would still remain the same. While in the early days of the industrial revolution it may seem as though it is indeed easy to predict as to what items would be sellable within the season since there are only a few mass-produced items that the population could buy, nowadays due to various trends that seemingly change from a day to a month, this kind of market trend makes it seem that how consumers think in one month or one year could become very changed in the next (Stephan, 1996). This kind of unpredictability is to be expected especially when the rational way of thinking of people had already diversified due to the rapid globalisation process that covered the globe, but because the minds of most people were used to tried-and-tested formulas borne out of the scientific inquiry, it would be hard to change, and even expect easy to obtain data. Thus, one of the major hurdles for these people is the need to overcome the lack of experimentation as well as the passive forecasts that are usually present when studying economic trends based on extrapolated data (Hendry, 1980). In relation to the need to change some underlying ways of though in economics and marketing, several philosophers and some schools of thought are available for the discerning thinker should some traditional methods of tackling some problems prove to be unsuccessful. For example, the employment of empirical methods of research in some aspects of the implementation of economics is one of the most well-known ways of finding out some trends in just about anything, from human behaviour patterns to the proper dosage of medicine for each age group (Becker & Lazaric, 2009). However, as with all things that are prone to randomization, it is much easier to predict the lethal dosage of some type of drug against bacterial infection than predicting whether the new products out on sale would keep on selling for a month or not. The fact that the human nature is highly capable of being irrational despite being labelled as a rational being makes it much more difficult to predict human behaviour, whether this is done on an individual basis or not (Milberg & Eichner, 1992). This universal idea of human unpredictability makes it hard to use empirical research methods to create assumptions that would prove any kind of theory each and every time, with regards to how people would think, and this is one of the points used by Karl Popper in formulating his theory of critical rationalism and falsificationalism. The kind of incalculability that Karl Popper describes in his falsificationalism is one of the main points that he stresses to be one of the weak points of using empirical methods of studying things (Popper, 1935). In accordance with the rational way of dealing with problems, what seems to be logical only seems to be so because of the observed repeatability of the methods in producing similar results. For example, because rational thinking is believed to have a progressive quality, it is also expected that the theories being produced by scientific inquiry are able to explain the logical nature of how things come to being, as well as offering explanations to certain changes being observed in localised or experimental units (Schrader, 2007). However, with regards to other things which may have various results, such as national surveys of political parties or candidates, aside from the changing running candidates, the tastes of the voters, or simply the voters themselves are also constantly changing, hence the possibility of the continually changing trends that can be observed with people. This kind of inapplicability of using predictability and certainty to the problem of treating economics much like the other sciences which includes studies of probabilities is one of the issues that must be addressed when integrating the concept of repeatability with economics (Schrader, 2007). While not all basic economic principles are expected to be irrational, it also helps to gain a wider approach, not just empirical approaches with regards to the applicability of such principles to certain situations as needed. Human rationality has also been challenged by Imre Lakatos in his paper about the flaws of the methods of scientific programmes. While the whole idea can be compared to Popper’s theory of falsificationism in terms of how scientific inquiry has come to being, Lakatos is able to use identification of identified knowledge or justificationism in identifying the ideas that were able to persist through the ages as well as in various cultures, thus proving that traditions such as the occult, irrationalism or mysticism have deeper roots that persists despite the growing presence of rational ideas (Lakatos, 1968). While the persistence of irrational ideas across the human timeline may be unexplainable through rational approaches, it can be possible that the irrational nature of humans may have been able to give meaning to these ideas and phenomena (Keita, 1992). Thus, for Lakatos it is highly acceptable that there is more than one way of approaching and dealing with problems, and that as long as the end results are the same, the methods may not be as significant as how these problems were solved (Lakatos, 1968). This is much similar to ideas of creating new methods and deviating from tried-and-tested ways, as well as entertaining new concepts and ideas with an open mind. However, in exacting fields such as the sciences, and even more so with economics, such methods may be harder to swallow and chew, especially when large numbers and a whole country is at stake. While it is possible to do an experiment in small-scale to test the validity of some unorthodox methods, it would be harder to implement these methods in a larger scale since the depleting resources are seen by most policy-makers, economists and corporations to be very limited, and must be used in other things that would surely return large gains (Metcalfe, 2003). Thus, until the definition of economics has been changed and allowed the entry of irrationality, it would be hard to employ both Popper and Lakatos’s methods of disproving established rational ideas. Anarchist or seemingly unorthodox ideas may also permeate the workings in some irrational thinkers however this kind of thinking may not be welcome in the fields of science and economics. Nevertheless, Paul Feyerabend and his theory of epistemological anarchism is able to support the two previous theories that results may come from more than one possible reason or explanation, and this is highly plausible in the vastness of the universe (Feyerabend, 2002). The fact that the field of science itself did not evolve purely from other scientific pursuits as well does not justify the full validity of all theories borne out of researches using the scientific method. However, in addition to the belief that true science is not stiff and limited to singular approaches, Feyerabend also believes that science and rationality itself is not a means to an end, but just one of the options, as well as not the true measures of excellence and perfection in the universe (Feyerabend, 2002). Such ideas imply that for Feyerabend, all forms of knowledge may not have been truly formed mainly through scientific inquiry alone, but may have also come from unfounded and irrational thoughts. With regards to the applicability of this idea to economics, it may not be possible for most to accept new ideas, especially with high-risk investments and unproven marketing methods. For most, in order to prevent risks, fool-proof ideas are still better than newer but untested methods, and this kind of thinking has been the result of the effects of applying rational thinking in most aspects of economics and management (England, 2000). Rationality may have been able to explain some phenomenon during the scientific revolution however this same kind of rationality is limited as to what is accepted by most number of people, as well as to the available reasons during certain times, prior to discovering other rationalisation. This kind of thinking is explained by Thomas Kuhn in his publication about the structure of scientific revolutions, wherein through the processes of intellectual circumstances and the development or changes that the available knowledge were transformed into gave rise to new theories that better explain ideas that were previously explained by older facts or theories (Kuhn, 2012). However this is not explainable by straightforward rationality because as previously mentioned, rationality is formed through the compilation of all available facts and data to come up with new and improved ways of looking at things without necessarily throwing away the old ones. For example, while rational thinking could explain why people chose to store money in banks over stock market portfolios, the irregular fluctuations of monetary policies and efficiencies of market mechanisms may not be able to do the same with regards to the predictability of what investment trends would arise since these can be affected mainly by whatever technical innovation is available for the time being (Laidler, 1999). Also, over-reliance to pre-existing methods of assessing economics such as statistical methods could cause devastating results, such as misrepresentation or equating statistical significance with economic significance and churning out results that might seen as true when in fact the statistics were only applicable in one area at one time only, and could spell the losses of jobs and closure of companies, among others (Bergh & Ketchen, 2009). It is suggested that using Kuhn’s approach of correlating the applicability of available scientific theories with the current situation prevents misuse of old and outdated theories, and at the same time could also help guide people such as economists on what steps to take to improve certain situations, although the rapidly-changing trends could only render this method functional for a short-time only. In pursuit of the advancement of economics, a rational approach of analysis called neoclassical research is being used to science as rational and predictable as possible, such as the use of mathematical models for predicting and viewing economics objectively and scientifically (Keita, 1992). Similar to testing hypothesis, the validity of theories developed under this kind of thinking would be able to assess whether the theory is acceptable and supported by evidences, or if it is rejected due to lack of data or experience that backs it up. Milton Friedman however believes that in his essays on positive economics there must be simplicity of the theories being used, as well as the ability of said theories to yield meaningful predictions about unobservable phenomena (Friedman, 1953). Some of the examples mentioned in his book are the concept of the idea of “supply” and “demand”, the importance of making economic policies that would not merely speak of employment but of an added quality of life as an employed person. Systematic and organised methods of thinking is one of the primary goals of positive science and economics, in addition to the creation of a definitive system of headings and subheadings that could delineate and define empirical material as well as knowing what actions could create “right” or “wrong” results for the people concerned (Friedman, 1953). This way of thinking might have made some lives better theoretically, however many people would simply choose to address their own needs over others, and this fact has been proven many times over by the presence of numerous unscrupulous business owners, selfish policy-makers, powerful elites and the continuing struggle of the middle and lower-class amidst the inflation of prices in the market (Bowles & Gintis, 1988). Economists could try opting for this kind of governance and see if it produces better results among people and within a country, but for some theorists this may not be done as easily as it can be said. Post-Keynesian theorist Alfred Eichner describes how he contests neoclassical research approaches of explaining economic theories, and relies mostly on Post-Keynesian ideas in clearing up the negative aspects of the mega-corporations and oligopolistic entrepreneurs in his concept of why economics has not yet risen as a field in science (Milberg & Eichner, 1992). In a simple statement, because people of science have strong tendencies of letting go of old theories and embracing new ones while economists have much greater tendencies to just repair or renovate old theories to suit the times created a backlog in the latter, while the former continually advances (Veblen, 1898). This is the kind of belief in the need of not upgrading any economic principles that enabled Eichner to think of ways by which some aspects of managing the economy of a nation could be changed. For instance, he believed that supply and demand are always tied up together, not independent as many would have realised, and that as one moves either up or down, so would the other. Thus in order to bridge the gap between supply and demand automatic adjustments of either side must be made, so as to address the importance of the equilibrium between the two (Milberg & Eichner, 1992). Also, Eichner believes that the concept of keeping unemployment at a high rate so as to keep the prices high is very much the symbol of the lack of employing social justice in the process of managing the economy, and at any rate whether unemployment is high or low would not be significant enough to be justified since there are other factors that could affect the prices of supplies, such as uncontrollable increases in oil prices, among others (Dunn, 2008; Milberg & Eichner, 1992). However, because it is easier to just raise prices and let people remain unemployed, it is highly unlikely that the field of economics would become a humanitarian field as much as the sciences seem to most people, and at this point this is the only thing which is easy to predict and project in the next decades to come. In the past centuries that economics existed side-by-side with science, it has continued to lag in terms of the development of new ideas and concepts. Rather than forming revolutionary ideas, old principles in economics just become restated or revised to suit modern definitions, as opposed to the sciences which rarely cling on to old or outdated theories. While retaining major concepts in economics may have been a neutral move during its first 100 years, rapid industrialisation and globalisation had rendered some ideas obsolete, especially in methods that gauge or predict consumer behavioural patterns, marketability of products, trends in competing companies, among others. Such unpredictable results were the causes of over-reliance to inductive approaches in economics, as well as overusing empirical and neoclassical methods of research and analysis. And yet, many economists and other people in similar industries are rather adamant in employing new strategies or approaches in businesses or policy-making that are expected to be much more humanitarian and not taking risks to make any changes so as not to create trouble in the status quo. Such a backward way of thinking not only causes the field of economics to remain stagnant, but also makes it difficult for some people to realise that many of the unfortunate events in the economy could have been the result of looking too much through narrow fields of vision and archaic points of view. Bibliography Becker, M. & Lazaric, N., 2009. Organizational Routines: Advancing Empirical Research. Cheltenham: Edward Elgar. Bergh, D. & Ketchen, D. J., 2009. Research Methodology in Strategy and Management. Bingley: Emerald Group Publishing. Blaug, M., 1980. The Methodology of Economics or How Economists Explain. Cambridge: Cambridge University Press. Bowles, S. & Gintis, H., 1988. 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