Posted by: Ravi Saraogi | May 18, 2010

Institute for New Economic Thinking

I came across an excellent article by Sanjaya Baru in the 17th May 2010 edition of Business Standard, titled ‘Renewing Economics’, in which he talks about the Institute for New Economic Thinking, established by the legendary investor George Soros to rethink economics. You can visit the homepage of the institute at http://www.ineteconomics.org for more details on this. Going forward, it would be really interesting to see what perspectives the institute comes up with. I was very happy to know that YV Reddy, the previous Governor to the Reserve Bank of India, is part of the institute’s advisory board.

There was an excellent quote by Soros in the same article, which I would like to reproduce here…

“Economic theory has modelled itself on theoretical physics…… It has sought to establish timelessly valid laws that govern economic behaviour and can be used reversibly both to explain and predict events. But instead of seeking laws capable of being falsified through testing, economics has increasingly turned itself into an axiomatic discipline consisting of assumptions and mathematical deductions – similar to Euclidean geometry.” (emphasis mine)

Couldn’t agree more I think.

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Responses

  1. Hi Ravi,

    I went through the article and also the website that u mentioned. It was quite intriguing.

    The past one year or two has seen a lot of individuals talk about the failure of economics in predicting crisis. Classical economics and Keynesian philosophy are being revisited. Debates and discussions are generated and economists who couldn’t predict the crisis are criticized while those who did predict the fall have suddenly climbed up the fame meter.

    To some extent, the crisis has helped the discipline of economics to evolve. Constant questioning and criticism of any discipline provides an impetus to the discipline and not a deterrent to its progress. It is in fact a proud moment for us to witness the creation of the Institute for New Economic Thinking.

    However, such developments in no way mean that economics or economists will predict crisis with 100% accuracy. Crises are inevitable and many a crisis might have been averted but yet, many will still occur.

    Coming back to Soros, mathematics and assumptions are the very essence of economics. However undue reliance on either the theory or practise is definitely detrimental to the discipline. There has to be a fine balance.

    An excellent article by Sanjaya Baru indeed. It makes one think.


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