Editorial: Call for a Revolution in Economics
The discipline of Economics is at a cross-roads. Either it undertakes a comprehensive reevaluation of its fundamental postulates and a critical reassessment of their utility to solve real world problems or it risks sliding further into irrelevance. It is time for a renaissance of thinking in Economics. The position of Economics today is akin to that of Physics during the 19th century. It has many significant isolated achievements to its credit, but the picture it presents of the way the world actually functions is fragmented, incomplete and grossly imperfect. As is our knowledge, so is our power for accomplishment. Inadequate thought leads to failed policies. The problems plaguing the world economy testify to the inherent insufficiency of prevailing economic theory.
The challenge for economics is compounded in several ways. Unlike the universal laws of Physics, the principles relevant to governing economic systems have changed as the nature of those systems has evolved from the agrarian and commercial economy of Adam Smith’s time to the Industrial economy of the 19th century and the knowledge-based service economy that has emerged in recent decades.
However valid and useful it may have been in the past, existing economic theory is blatantly inadequate to address the realities of 21st century society, in which human capital has become the most precious resource, industrialization has exceeded the earth’s carrying capacity, economic value is increasingly tied to risk and uncertainty and utilization of service systems over time, public sector is nearly as large as the private sector in many developed nations, social organization has acquired enormous productive power and complexity, the non-monetarized sector represents an essential contribution to human welfare, transport and communication systems are becoming globally integrated, the transformative power of information systems is radically altering the way products and services are delivered and human needs are met, the revolution of rising expectations has become global, and people everywhere clamor for greater freedom and social equality. New realities necessitate new thinking and the starting point is a human-centered theory of value that recognizes human welfare as the central objective and the creativity of human capital as the ultimate resource and source of all others.
The challenge of building a true science of Economy is even more daunting than that faced by the physical sciences, because it must encompass and integrate not merely principles of the material plane, but social and psychological principles as well. The growing power and effectiveness of physical science have been achieved by an increasing unification of previously disparate and apparently unconnected phenomena into a comprehensive and cohesive model of the universe. Newton unified motion and rest, heaven and earth. Maxwell unified electricity and magnetism, and optics. Einstein unified acceleration and gravity, space and time. Integration of disparate fields of knowledge has multiplied the effective power of physical science. So too, the various disciplines of social science represent facets of a single, integral reality called society. Unless or until the study of economics is integrated with the study of political science, ecology, education, technology, sociology, psychology and culture, social science will not possess the knowledge and effective power to address the problems facing humanity today.
Economies operate at the interface between individual human beings, national and international markets, political systems, and the earth’s ecosphere. Yet, as the most recent award of the Nobel Prize in Economics illustrates, it is today a highly fragmented field consisting of myriad sub-divisions, in which financial markets are increasingly divorced from the real economy, technological and industrial strategies are divorced from employment generation, income generation is divorced from income distribution, economic growth is divorced from social welfare, and human activity is in conflict with the physical environment in which it occurs. Today, there is an urgent need to reconnect disparate fields of thought in the social sciences to constitute an integrated science of society.
A simple paradox makes evident the inability of prevailing economic thought to meet the needs of humanity. We live in a world where unprecedented scientific knowledge, technological capabilities, organizational capacities and underutilized productive infrastructures co-exist side by side with a plethora of unmet human needs for food, housing, clothing, education, medical care, transport, communication and every other major and minor element that contribute to overall human welfare. In spite of tremendous advances in agricultural technology, one in every eight human beings still suffers from severe malnutrition. More than a third of the world’s population still lives in dire poverty. How can economic theory make claims of market efficiency when the overall system is so blatantly inefficient in harnessing the enormous productive potentials of human beings to meet the essential needs of all members of the society? Does it mean there simply are no remedies to poverty and unemployment? After two centuries of remarkable progress, must the bulk of humanity resign itself to a future of stagnation, mediocrity or decline? Have we truly exhausted the capacity of human consciousness and creativity to support the further development of global society?
The World Academy of Art and Science and the Club of Rome can lead the way in calling for a comprehensive reassessment and reevaluation of social science theory with the aim of laying the foundations for an integrated science of society and humanity founded on universal values and imbued with the effective power to fulfill our highest aspirations.