Nobel-winning economist Amartya Sen argues, in an article published on The New York Review of Books, that the way out from the crisis passes through a better understanding of the ideas that contributed to build the actual economic system. Adam Smith, John Maynard Keynes, Arthur Cecil Pigou, should be read, not just quoted. And I quote
Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions—including public services such as schools—and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions—e.g., well-devised financial regulations and state assistance to the poor—for preventing instability, inequity, and injustice. If we were to look for a new approach to the organization of economic activity that included a pragmatic choice of a variety of public services and well-considered regulations, we would be following rather than departing from the agenda of reform that Smith outlined as he both defended and criticized capitalism.
We must understand how institutions work and make them work better. But not just aiming at economic growth.
There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion.
A crisis not only presents an immediate challenge that has to be faced. It also provides an opportunity to address long-term problems when people are willing to reconsider established conventions. This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport (…).
Sunday, 22 March 2009