Covid-19 has brought out the faultlines in Economics - will economists get this shift?

"The weaknesses of the field of economics have long been known, but the Covid-19 pandemic has laid them bare. Of particular concern in the wake of this pandemic is the discipline’s understanding of economies as markets separated from the rest of the societies in which they are embedded and heavy reliance on methodological individualism and quantitative modelling. We argue that society’s unpreparedness and inadequate response expose weaknesses in the very foundations of the dominant economic paradigm." 

As I explore various critiques of current mainstream Economics, here is an excellent paper by Carolina Alves and Ingrid Harvold Kvangraven (Changing the Narrative: Economics after Covid-19, RAS Volume 10 No 1 January-June 2020). A must read for all students and researchers, the paper is a trove of references as it sets out the path that the discipline has taken, as it has aimed at becoming a hard science, removing the social and historical contexts. Now the faultlines in understanding and analysis have been exposed with the pandemic, as the authors show how the emphasis on markets and efficiency has impacted public policy, making for reduced welfare. The authors make a clear case in favour of heterodox economics, rather than the current mainstream principles, to look at alternative views of human behaviour, and not the narrow world of rational optimising agents and the methodological individualism. Such an approach will allow for analysis of inequalities based on gender, class, and race. 

"If we thought of structuring our society along the lines of resilience and robustness rather than efficiency, our societies’ preparedness for a pandemic would be much greater (Trosper 2009; Derissen, Quaas, and Baumgärtner 2011). In such a case, we would be more likely to have had adequate equipment and structures in place to respond effectively."

The authors call for more diversity in the responses of governments to this virus - decisions should allow for varied evidence and expertise and evaluated by advisory groups that are also more diverse.  Germany for instance also included philosophers and historians in the advisory group. By broadening the discourse, all societal aspects of policy decisions can be accounted for, with full public scrutiny.  

The central point of the paper is that it is important to change the narrative of economics and place distributional conflicts at the centre of analysis. I feel that even "regular" economists will get this point clearly when they look at a) the inequalities in the global value chains now - the disruptions caused by the pandemic as countries closed borders showed that emphasis on efficiency has led to chains being, what the authors call "hierarchical and imbalanced with core hubs that exert disproportionate influence" and b) the unequal impact of the disruption caused by the lockdown on migrants and small businesses - in India, it feels like the bottom has fallen out of our economy, as we knew it. Ignoring such conflicts will only lead to social and political tensions, something our country can ill afford.

The authors concluding note rings true for us in India too, we need to adapt our analysis and policy responses appropriately: 

"In the coming months and years, there will be a battle to define the narrative of the pandemic. We need an explanation of the crisis that is capable of seeing the economy as more than just markets and, rather, as embedded in society. It should be capable of linking the causes and consequences of the pandemic to our systems of production and distribution. A fundamental change in the prevailing economic narrative is necessary for a more just, robust, and democratic society."