Sunday, 27 January 2013

Ronald Coase: Saving Economics from the Economists

Here is Professor Ronald Coase going to battle against main stream economists in the December 2012 issue of the HBR in his article "Saving Economics from the Economists". He explains,
Economics as currently presented in textbooks and taught in the classroom does not have much to do with business management, and still less with entrepreneurship. The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate.

In the 20th century, economics consolidated as a profession; economists could afford to write exclusively for one another. At the same time, the field experienced a paradigm shift, gradually identifying itself as a theoretical approach of economization and giving up the real-world economy as its subject matter. 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.       
and then he nails it
This separation of economics from the working economy has severely damaged both the business community and the academic discipline.
Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates.
Solution: sit down and study some of the insights from Austrian Economics. The answers are there and have been for many decades, even a century or more.

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