Interesting reads

Interesting reads

Misadventures of Dismal scientist ? - The origin, evolution and politics of the Economics Nobel Prize.  - Siddharth Singh

Book review of The Nobel Factor The Prize in Economics, Social Democracy, and the Market Turn- Avner Offer and Gabriel Soderberg

 The Nobel Factor: The Prize in Economics, Social Democracy, and the Market Turn, authors argue the Nobel Memorial Prize in Economics has disproportionately been awarded to proponents of the neoclassical school. According to the book's thesis, the Nobel Prize provides a halo of scientific authority but its committee has underrepresented social democracy as a school of economical thought.

Points that i have gathered reading book reviews and few content.

1. There's an old saying  - Keep Economist on tap but never on top. More simply always keep them for counsel but never let them decide what you want.

My take - Economic theories are constantly being proven disproven and revised. The problem is that when these theories are wrong millions of lives can get affected.

I feel this line resonates with me - I will have to go back and forth in history to make sense of it.

Lets go to 1798 : In this era you had Thomas Malthus an English economist who proposed that population growth would outpace food production. In short Mankind will starve and die. Retrospectively at that point in time his theory was right and the odds would favour him. Culling of humans would be the only way to survive. This point he makes has made it way in Ron Howards Inferno movie which i liked. Inferno is revolving around overpopulation and mankind at stake. This point makes sense when the antagonist generates a logical explanation. He likens man as  bacteria and uses bacterial culture to make his point - my take. Man will find it difficult to live and the odds favour him just as Thomas Malthus. The one thing the antagonist in the movie and Thomas Malthus have in common that they haven't given prospective thoughts to take space in their brain. Science and technology has paved the way for mankind to reach up to 7 billion from over a billion in 1798. So true that no one can really predict the future. Hence counsel given by an Economist should be taken with a hint of salt.

Economics generally reflects different attitudes of human nature which will gradually change over time.  It was in 1776 that Adam Smith came  up with Wealth of Nations which involves distribution, production and market theory. The whole world i feel is currently revolving around points made by this Scottish economist. His take was following self interest is for the common good. Then comes David Ricardo with comparative advantage. Comparative advantage focuses on a individual to focus at in what they are best and then trade with others in which every one benefits. Field of economics grew which then later resulted in man having private property and participation in free markets. Market based economics contributed till the end of 19 th century and was called Classical economics. Alfred Marshall then comes up with his theory of supply and demand, margins which led to capitalism spreading its wings. It wasn't until the Great Depression in 1933 that shook the concept of Classical Economics. What exactly went wrong is something that i never looked into as i find it difficult to comprehend it. Ben Bernanke, former Federal Reserves  Chairman has spent a great deal of time understanding it. There are few out there who know what went wrong in Capitalistic free market society. But still what i infer is that economics as a science is not an exact science. It aims to draw conclusions without labs or control groups. Different attitudes of human nature change over time which is otherwise economics. Economics as a subject is evolving in nature. Theories provided by Smith and Marshall was not able to fix the financial crisis. Then comes in Keynes with a different attitude to solve the financial crisis . He knew that markets don't correct automatically. Prices and wages takes time to adjust. During recession it is necessary for the government to get involved using monetary and fiscal policy to increase output and decrease unemployment. United States largest economy on earth leans on the foundation of Keynesian economics. Keynes challenged the notion of Government intervention is harmful for the country unlike the true concept of pure capitalism. Government bailing out banks is commonly heard of in modern world. There is another school of thought that is austerity. Economics is a  fascinating science and has always baffled me. If i get my basics strong i know that i will definitely be able to make a head start but the matter of the fact is that this thing confuses me. Economics is not abstract science that involves data. It has been so far i guess trial and error. I would find it hard to imagine if  sodium vapour lamp when used gives different intensity of light each time i use it. Ideas shape the course of history is all that Keynes has come up  with as his defense on Economics.

Hence i understand the statement keep and economist for council but never let them decide what you want. The same goes with a Wealth advisor/Investment advisor who you hire to manage your money in order for it to grow. Economics and Economist has always made me sick. It makes me sick because i cannot understand economics enough to choose wisely and make wise financial decisions and otherwise the country in itself screwing my health with its economic policies. 1800  schools in New Delhi had to shut its doors because of thick pollution congesting the whole city. Pollution in the city is twelve times over the limit. This is certainly not natures wrath but the economic policies taken by economic advisors to keep the engines of Indian growth running. This is the same scenario in many developing countries. I guess it is just not me in the middle of not understanding real economics.

Other points :  Now i go on with other points made by the author that talks about few men who rule the world (Economists) with wise talk and their banal discussions which is being repeated over and over again.

Points the author makes are -   Economist have far too much voice in the policy making and decision for the good of the world. World has plenty of problems but too few of solutions. Solutions if wrong have made the situation worse from recurring economic and financial crisis to poverty and in equality. Economist advocate a hands off approach Their common refrain that government intervention in an  economy creates more problem has few takers these days. These statements are loosely passed of with credibility. If economist fail political and intellectual comeuppance is at our hands as well. Take for example the Global and financial crisis of 2008. There has been plenty of commentary and analysis how and why especially the elite of Nobel prize winners have gotten so many things wrong. Although after these assumptions economic theories are dubbed as partisan by well known voices Paul Krugman and Joseph Stiglitz.  Authors have plugged this gap to understand the partisanship.

Avner Offer and Gabriel Soderbergh talks about the process of declaration of Nobel prize in Economics briefly. - Interesting to know how.

 1.Bank of Sweden declares the candidate who deserves the Nobel prize for Economics.

 2. Swedish Central Bank took independence from the government in 1957. Ones who   have           established the prize select the winners.

3.Winners themselves and the entire intellectual climate have moved in a steady  conservative         direction.

4. Drifts towards market instead of social democracy has accelerated since early 1990s .               Chairman Lindbeck had a pro market bent that accelerated the cause.

5. Nobel prize selection committee for economics is based on the Arrow index. Arrow index is      named after the Mr Arrow winner of the nobel prize of economics.

 6. Selection committee consist of mix of conservatives and liberal winners. Balance over time         favours the conservative economist.

7. Milton Friedman, George Becker - University of Chicago's Alma Mater - Highest ranked ones in   the deciding  process.

8.Those who blame much that is wrong with Economics rank pretty low at the Arrow Index for the selection committee. Thomas Schelling, John Nash Robert Aumann etc .....

9. At the bottom is Maurice Allais French economist who received the prize in 1988. Allais is             instrumental in puncturing many of the claim in microeconomics.

10. Careful collection of members, correlation of data of winners with broader political and                 intellectual trends decide the winner.

11. It is usually the conservative theoreticians that have called the shots. They are the ones who have   been to have gone wrong.

This explains the partisanship between the elite Nobel prize winners of economics. Author have tried to plug the gap and reason the concept of Partisanship between the winners. Apart from that authors have explained unlike exemplary disciplines such as physics. Theories laid in physics are laid to verification by data unlike theories without data such as in Economics. Economic theories do not find support in data.

Richard Rorty coined the term Socio-Biology - Biological basis for social behaviour. Biology as a discipline on the path of intellectual respectability. In a way ones who decide the Nobel Prize share the same intellectual frequency. Ones who don't it is unanimous vote to agree to disagree. I guess what the author is trying to convey is herd mentality that decides the outcome of a mans work.  I guess if you are a member of the club you are in it.

At the end this is what the author is trying to convey.

The wretched condition of the poor, growing inequality between the rich and poor and the perilous existence of Western middle class is there for every one to see. If only economist were to theorize keeping in mind these facts then may the world will be a better place. The trouble is that this kind of thinking will only replace intellectual backing for unsavoury developments alleges the Washington Consensus and the market turn for a certain kind of socialism.  At best it will push for an egalitarian political climate. What more likely is an exchange of intellectual resectability of Economic prize for political respectability.