[greater_noakhali] Some free market lesson for all of us

Some free market lesson for all of us

The following article is being forwarded to those of our past and present policy-makers who thinks free market economy is something that brings welfare automatically. There is a growing evidence and thoughts in support of the idea that free market economy has brought welfare to the people when it was (and when it is) managed (fine-tuned) properly.

Pictures of the past policy-makers like Mr. Saifur Rahman and Dr. Osman Faruq should be hanged upside down in our current policy-makers' offices and houses to remind them that what has been practiced in the name of free market in last couple of years were stupidity. It did not help either the policy makers nor the people in general. Probably Adam Smith wasn't so sure about free economy as was our previous policymakers. It is our hope that current policymakers takes the context of the situation into consideration to make sure that they do not taint a very successful policy (in general terms) by not guiding it properly. With all the hue and cry, US economy is probably still more protected than many other economies of the world, many in the world might aruge. The Indian economy is another example of how to manage an economy while the body language is still in favour of free market.

Policy-making in the real life scenario is not a lab where you do something and expect that some good will happen. Policy making is about making sure (with some reasonable uncertainty) that the target clients are benefited out of the policies.  

This article should act as a guideline for the economists in the current interim government and other govt. agencies to take some bold decisions to ensure peoples welfare - in the short term and as well as medium to long term. Dr. Fakhruddin Ahmed, Dr. Mirza Azizul Haque, Dr. Salehuddin Ahmed - among others - should take note.

 

If you thought some of the ideas are worth of your reading time, please forward it to others. If you have an ear to the columinsts in regular traditional media, please forward it to them. If you have an ear to the journalists and news editors of the electronic media, discuss it with them. Hope they would look at the suggestions and give due diligence.
 
Thanks for your time,
Innovation Line
 
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Note: This is a freelance column, published mainly in different internet based forums. This column is open for contribution by the members of new generation, sometimes referred to as Gen 71. If you identify yourself as someone from that age-group and want to contribute to this column, please feel free to contact. Thanks to the group moderator for publishing the article.
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Economists question dominance of free-market ideas

By Patricia Cohen

Published: July 11, 2007


Source:
http://www.iht. com/articles /2007/07/11/ business/ economics .php

NEW YORK:

For many economists, questioning free-market orthodoxy is akin to expressing a belief in intelligent design at a Darwin convention: Those who doubt the naturally beneficial workings of the market are considered either deluded or crazy.

But in recent months, economists have engaged in an impassioned debate over the way their specialty is taught in universities around the United States, and practiced in Washington. They are questioning the profession's most cherished ideas about not interfering in the economy.

"There is much too much ideology," said Alan Blinder, a professor at Princeton and a former vice chairman of the Federal Reserve Board. Economics, he added, is "often a triumph of theory over fact."

Blinder helped kindle the discussion by publicly warning in speeches and articles this year that as many as 30 million to 40 million Americans could lose their jobs to lower-paid workers abroad.

Just by raising doubts about the unmitigated benefits of free trade, he made headlines and had colleagues rubbing their eyes in astonishment.

"What I've learned is anyone who says anything even obliquely that sounds hostile to free trade is treated as an apostate," Blinder said.

And free trade is not the only sacred subject, Blinder and other like-minded economists say. Most efforts to intervene in the markets - like setting a minimum wage, instituting industrial policy or regulating prices - are viewed askance by mainstream economists, as are analyses that do not rely on mathematical modeling.

That attitude, the critics argue, has seriously harmed the discipline, suppressing original, creative thinking and distorting policy debates.

"You lose your ticket as a certified economist if you don't say any kind of price regulation is bad and free trade is good," said David Card, an economist at the University of California, Berkeley, who has done groundbreaking research on the effect of the minimum wage.

Most economists are still devoted to what is known as the neoclassical model. Philip Reny, chairman of the economics department at the University of Chicago - the temple of free-market economics - said the theory and methods were "taught to avoid personal biases and conclusions that aren't found in the data."

Like any science, he said, the field changes course slowly: "It requires evidence, and if evidence is there, it will accumulate and positions will move." He added, "I personally have a lot of faith in the discipline."

But as issues like income inequality, free trade and protectionism have become part of the presidential candidates' stump speeches, more thinkers have joined the debate.

In addition to Blinder, other eminent economists like Lawrence Summers and the Nobel Prize winner George Akerlof have pointed out what they see as the failings of laissez-faire economics.

"Economists can't pretend that the consensus for free markets and free trade that existed 30 years ago is still here," said Robert Reich, a public policy professor at Berkeley who served in President Bill Clinton's cabinet.

Part of the reason is the growing income inequality and dislocation that global markets and a revolution in communications have helped create. Economists who question the free-market theories "want to speak to the reality of our time," Reich said.

Meanwhile, critics have also pointed out the limits of standard cost-benefit accounting to measure items like the cost of inequality or damage to the ecosystem.

The degree to which economists wander from the mainstream varies widely.

Dani Rodrik, an economist at the Kennedy School of Government at Harvard, for instance, said, "I fall into the methods of the mainstream, but not the faith," which he defines as the belief that more markets and free trade are always good and government regulation is always bad.

Thinkers like these may come up with controversial ideas but are hardly marginalized. Other economists, however, go much further, and try to chip away at the field's underlying theoretical foundations. So while Blinder, Card and Rodrik might be considered mere heretics, this second group has earned the label "heterodox."

Although the meaning of the term is slippery, Frederic Lee, an economist at the University of Missouri-Kansas City who edits the Heterodox Economics Newsletter, says it refers to those who reject the neoclassical model, which Milton Friedman helped create, and which Ronald Reagan championed when he took over the White House.

Reny and others point out that the increasing popularity in the mainstream of behavioral economics, which looks at people's complex psychological reactions to events, has offered a fuller picture of how consumers operate in the marketplace. Still, Lee criticizes neoclassical economics for maintaining that the market, if left alone, would ultimately find a happy balance.

He also takes the discipline to task for relying on abstract theories and mathematical modeling instead of observation and sociological analysis.

In Lee's view, for example, oil companies - not the natural workings of the market - determine gas prices.

According to his estimates, 5 to 10 percent of America's 15,000 economists are heterodox, which includes an array of professors on the right and the left (post-Keynesians, Marxists, feminists and social economists).

Heterodox economists complain that they are almost completely shut out by their more influential neoclassical colleagues who dominate most American university departments and prestigious peer-reviewed journals that are essential to gaining tenure.

There are a few university departments where these iconoclasts are welcome, like Amherst in Massachusetts, the New School in New York and Lee's home base, the University of Missouri-Kansas City, but these are exceptions.

The New York Times

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Deep condolence for the Sadr victims. May Almighty give the family members of victims enough strength to recover from this great loss soon. Let us extend our hand to them the way we can.

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