Economics and the Economic Crisis: Who is to blame?

At my university, a generous alumnus, Stephen Bruce, has funded an initiative on “Rethinking Capitalism.” As the fallout of the financial crash of 2008 drags on, now with the banking crisis in Spain, the topic seems inordinately relevant. Even in India, the crisis has given critics of economic reform ammunition against that direction of policy, aside from the direct impacts on India of the weakening global economy.

In April, the Bruce Initiative took its efforts from the redwoods of Santa Cruz to the closest academic precincts of the centre of capitalism, with a conference at New York University, a stone’s throw from Wall Street. And the opening remarks were delivered by NYU’s Goddard Professor of Media, Culture and Communication, who happens to be a very famous expatriate Indian, Arjun Appadurai. Professor Appadurai began as follows, “Why does there appear to be no one to blame for the ongoing destruction of the economy, society and environment? The government, banks, experts, and regulators have all claimed innocence, while taxpayers have had to speculate on their futures. It is time to point the finger: it is the discipline of economics that has brought about this state of affairs. From business to the media to academia, economists now run the world.” I have heard this sentiment in different forms from several colleagues across the other social sciences and the humanities, along with complaints that economists should now show more humility, since we got things so wrong.

Are economists to blame for where we are now? My first thoughts on reading Appadurai’s remarks were that he was tarring the whole profession with the misguided optimism of a part of it—Alan Greenspan musing on the taming of the business cycle, for example—and that he was confusing economists with business people and politicians, who indeed did much to bring about the current mess. Towards the end of his brief talk, however, Appadurai states, “We can move toward a new form of social inquiry that looks at the relationship between quantity, quality and personhood. This is a different theory of social action that moves away from rational choice.” So clearly he has a problem with the core methodology of economics.

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