Economics should look eastward

Other items related to this theme, published in the Newsletter, include:
Teaching evidence-based economics (October 2013)
The rediscovery of Classical economics (July 2013)
Teaching economics after the crisis (April 2013)
What’s the use of economics (October 2012)
ESRC international benchmarking review (April 2008)
Evidence on the future of economics (July 2007)
Jochen Runde replies ( October 2006)

Sir,

The Economic Journal (no. 512, June 2006) deserves our appreciation for the feature ‘Where Economics and Philosophy Meet’, based upon the publication of the Elgar Companion in Economics and Philosophy (eds. Davis, Marciano and Runde, 2004). Seven contributors, including these three authors and four reviewers (Boettke, Coyne, Schabas and Guala) introduce the feature with the remark that economics came of age only after the Second World War. This may be true only of the Western view of economics, and that only on the basis of some three limited angles of vision.

Firstly, at the end of the nineteenth century, Alfred Nobel did not include economic science in his will as a prize-winning discipline. It was only in 1968 that the Bank of Sweden made a subsidiary endowment for the same, so that Ragnar Frisch and Jan Tinbergen were the first (joint) winners of the Nobel Prize in Economics for 1969. Some legal problems later emerged and Amartya Sen’s Nobel Prize of 1998 was challenged in a writ which, of course, was summarily dismissed by the Calcutta High Court.

Secondly, after 1945, many developing countries looked upon the IMF-World Bank lobby, including the ‘nationalised’ and ‘internationalised’ economists with the same, as incarnations of ‘Kuber’ (the God of Wealth).

Thirdly, a lot of prestige came to attach to econometricians, mathematical economists and managers of operations research. Thus, several of the recent Nobel awards in economics went, de facto, to mathematics (which also, in spite of its age, failed to find a place in Alfred Nobel’s will) now thriving on game theory and its sister concepts. Here I should refer to my own The Commercial Society (New Delhi: Westvill Publishing House, 1994). ‘India has been the home of the science of mathematics, though not many even in this country are sufficiently conscious of it’. (p.35).

Somehow, the learned contributors to the EJ feature have failed to look eastward, where economics has had its origin in Rigveda, the oldest book of original knowledge, supplemented by many other established scriptures of ancient India. They refer to such basic concepts as population, rent, wages, interest, profit, taxes, exchange, production consumption and universal welfare. Their distinctive focus was on ‘abundance’ and not on ‘economics of scarcity’ as propounded by Lionel Robbins of the London School of Economics and others in the Western world. Kautilya’s Arthasastra (Economics), a very comprehensive treatise, was written in India’s Mauryan regime, well before the dawn of the Christian era, some two thousand years before the publication of Adam Smith’s Wealth of Nations (1776).

The contributors have rightly refused to accept Smith as the father of economics, a common myth in many textbooks. But that is not enough. Kautilya needs to be given his due as the forefather of economics. The innovative distinction between consumption, investment and welfare expenditure (along with the critical need to maintain appropriate balance between these three dimensions of public expenditure) was his unique contribution to macroeconomics. Kautilya laid down not only rules of the game but also the strategies of implementation. The Lohadhyaksa of his time could be compared to present-day Steel Authority of India (SAIL) or even with the instant Arcelor-Mittal deal (June 2006). Kautilya’s prescription that ‘three’ is an ideal number of members for a Public Board was adopted (even if accidentally) with great success by USA’s TVA established in 1933. Reference may be made to my DLitt thesis, Theory and Working of State Corporations with Special Reference to India (London: Allen and Unwin, 1962, p.51).

Even though published in London, A Philosophical Interpretation of Economics (London: Allen and Unwin, 1962) by Prof. J K Mehta of the University of Allahabad appears to have escaped the attention of the seven contributors. Prof G L S Shackle, whose name does appear in the review feature, described Mehta’s book as ‘...a beautiful, moving and most deeply interesting book’.

Others with an inclination to pursue contributions from the subcontinent might also like to read my The Economic Sins of Nations: A Monologue on Economic Discipline (Kolkata: Progressive Publishers). The last chapter on ‘Political Economics’ (p.452) reads: ‘The term political economy, which was in vogue for long, and which is still used sometimes, is indicative of a paternal bond between politics and the science of economics... For a while, it appeared that economic science had grown into adulthood so that it could get away from the apron strings of the mother. But the developments of half a century ... seem to suggest that economics is very nearly back in the mother’s lap.’ So, while getting away from politics is impractical, divorcing philosophy, on the part of economics, would mean wholesale erosion in intellectual and moral values of the society. In recent years, a legion of unethical practices in global business have shocked the world, such as the case of Enron Corporation which, after a quantum jump over three years, filed its bankruptcy petition in New York during December 2001. According to Simon Jenkins, while the nineteenth century was the scene of capitalism, and the twentieth century witnessed socialism, the twenty-first century might be an era of charity. (The Hindu — India’s national newspaper — 29th June 2006).

Bill Gates, (the world’s richest) is talking of withdrawing at 50, while Warren Buffet (world’s second richest), at 75, has offered to donate $37bn (over 80 per cent of his fortune). Azim Hasham Premji (India’s richest) wants to build a charitable foundation with about Rs 300 crore ($67mn), roughly half of his tax-free dividend income during 2005-06. So, for the overall benefit of common citizens, let there be a long-lasting partnership between economics and philosophy.

Prof. Om Prakash
Former Vice-Chancellor and Emeritus Fellow,
University of Rajasthan, Jaipur, India

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