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Economics is disappearing up its own differential equation

Once upon a time, economists spoke English and wrote books that provided real-world advice for business owners. Nowadays, they speak gobbledigook to one another while everyone else ignores them.

That, at least, is one person’s lament. Writing in the Harvard Business Review, Ronald Coase argues that it is time for economists to come back in from the cold.

It is time to reengage the severely impoverished field of economics with the economy. Market economies springing up in China, India, Africa, and elsewhere herald a new era of entrepreneurship, and with it unprecedented opportunities for economists to study how the market economy gains its resilience in societies with cultural, institutional, and organizational diversities. But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.

Coase claims that Adam Smith was widely read by “businessmen” of the day, by which he presumably means that today’s businessmen cannot understand today’s economists.

I’m not sure I buy any of that. It seems to me that economics is more accessible than ever before. From books like Freakonomics through to blogs and podcasts and award-winning documentaries… there’s no shortage of material offering real-world insights to entrepreneurs and businessmen.

However, this is clearly not the mainstream of economics. Most of the jobs available to professional economists require a theoretical approach — they sit in an office and look at numbers.

Today, production is marginalized in economics, and the paradigmatic question is a rather static one of resource allocation. The tools used by economists to analyze business firms are too abstract and speculative to offer any guidance to entrepreneurs and managers in their constant struggle to bring novel products to consumers at low cost.

Anyway, it’s worth a read…

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  1. November 21 2012 at 10.36 am

    I agree with Coase on this. As the Treasurer of Queen Mary, University of London’s Economics Society, I often find it hard to recruit people to join the society who are not econ students. They simply do not know what the subject is about. Yes, a lot of non econ students have read Freakonomics and the like, but after doing so accuse us of studying something which they perceive to be “common sense”. But perhaps that what mainstream economics needs now, a descriptions of phenomena that can be understood by the common man.

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