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Reasons economists cannot manage economies well

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economy
Economists claim to be concerned with promoting rapid growth, full employment and stable prices. Have they been successful in their attempts to achieve their claimed objectives? No! Economists and economics-based institutions cannot manage our economies well, because of the inherent debilities of the discipline of economics. What are the inherent debilities of economics? This article presents some of the inherent debilities of economics and suggests what must be done so that African nations, including Nigeria can make the desired progress.

The first inherent debility of economics as an area of knowledge is its methodology. Economics like other social sciences adopted the scientific method developed for the physical and biological sciences, believing that the application of the scientific method to social science would transform economics into social physics that would provide for students of society, the excitement which natural sciences were providing for the students of the physical sciences (DeFleur, et al., 1977). By conceiving social sciences as social physics instead of social biology, social scientists, especially economists, made a fundamental error from the onset. The consequences of the methodological error are many and fundamental too. They should, therefore, be considered as the fundamental debilities of economists.

The second defect of economics is that it is a historical and mechanistic. That is, economists’ understanding of the economy lacks a sense of history and appropriate logic. The equations (laws) of physics and mechanics adopted by economists are about time-independent responses of solids like metallic rods, springs, wires, etc. By adopting such laws, economists claim that economies behave like iron wires, spring and rods subjected to small strains. Economists find it hard incorporating historical evidence into their analyses. Economists do not understand that nations grow and become transformed. They think that the development process is like a once-for-all game such as a football march. They pretend not to be aware that European and American cultures were not counted as the Great Medieval Civilisations (GMCs). The Chinese, Indian and Islamic cultures were the GMCs. Economists do not understand the industrialisation process.

The third debility of economics is that it is unable to distinguish between trivial growth and Competence-Building Growth (CBG). Economists measure growth as change in the Gross Domestic Product (GDP) of a nation; that is, the change in the goods and services produced in a nation in a year. Mere computation of GDP and the change in it does not describe the true economic situation in a nation. Nigeria now has OPEC-quota of about 2.5 million barrels per day of crude petroleum. The exploration and production are done by multi-national companies. Increase in the number of barrels produced and increase in the international price of crude petroleum swell the earnings from sales of crude petroleum and the Nigerian GDP. The increase in GDP this way cannot be a true reflection of the state of Nigeria, because it has nothing to do with Nigerians. This explains why economists measure growth which has no impact on the people – growth without development. Nigerians lack the competence to explore and produce oil and gas. It is through learning that man acquires all competences. So, it is CBG that Nigeria and other African nations should promote and measure, not GDP growth.

The fourth defect in economics is that it does not know the primary source of CBG and industrialisation. Economists who advocate that African nations should provide favourable environment for inflow of foreign investment into their nations to promote growth do not understand what national economic growth entails. Hence they believe that nations get transformed through mere capital investment. However, Douglas (1948), Abramovitz (1956), Solow (1957), Gerschenkron (1966) and Ogbimi (2003), all demonstrated that capital investment is not the primary source of CBG and industrialisation. Economists who claim that capital investment is the most important factor of production do not know that in the Middle Ages (450-1450) land was the most important resource in England. The lord of the manor owned the land and all those who did not own land were slaves (serfs) who worked for the lord. The claim about the special role of capital in promoting economic growth came during the industrial age, following the claim by Karl Marx (1867) that the capitalist does not begin to produce till he has accumulated enough capital.

The fifth debility of economics is that it is based on equilibrium or static analysis. This defect is a very serious one. Real growth is a transformation. Our research activities in Obafemi Awolowo University, Ile-Ife, Nigeria, showed clearly that learning is the primary source of CBG. One who has learnt something new is transformed from an undesirable status into a desirable status. One who cannot read and write may learn to read and write and be transformed. So, true growth is a transformational process, not an equilibrium one as economists assume. It was through learning that agricultural/artisan European, American and Asian nations increased their knowledge, skills and competences over 2000-3000 years, achieved industrialisation and became transformed.

The sixth weakness of economics is that it does not understand the relationships among the fundamental variables of an economy, so economists’ reports on growth and inflation rates are always incorrect. The fundamental variables in an economy are employment, productivity and inflation. The values of the three variables must be reported together to understand the true state of an economy.

The seventh weakness of economics and economists is that they do not understand the production or supply side. So, they are unable to promote production. The eighth debility of economists is that they see employment only as a cost-item. They never consider the benefits those employed bring to the organisation or nation. Our research results show that employment is the” blood” of an economy. Unemployment is a national loss. It is clear that economics cannot serve as the intellectual basis for proper management of any economy. African nations should now adopt more robust planning teams composed of technology management experts, scientists, engineers, psychologists and others who are ready to learn.

Professor Ogbimi teaches at the Obafemi Awolowo University, Ile Ife.


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