Economic reasoning

By: Amar Bhidé

If economic reasoning and analysis is to serve as a useful guide to individuals and society, some consideration of what constitutes a good life and good economy would seem essential.

It’s when “you don’t know where you are going, any road will take you there”, as the Cheshire cat told Alice. The narrowing of economics in the last several decades seems indisputable; but the claim that this has allowed for “great progress” raises a question: from whose point of view? Curiously, the economic approach to decision-making is deeply ingrained in our lives as never before.

We routinely analyse incentives, worry about unintended consequences, think about comparative advantage and try to ignore sunk costs. But these are classical, foundational ideas, not the product of the recent economics research.

Perhaps the world is telling us something about the utility of the hi-tech way. Moreover, the classical ideas are applied not by professional economists but by people with diverse backgrounds who have picked up economic thinking, but not to the exclusion of other modes.

Sensible executives and salespeople think about incentives and also about group norms, confirmation biases and social proofs. The world is already rather quite interdisciplinary. Multidisciplinary approaches are common in many fields.

From “The Indeterminate Goodness of the Economy (and Life)”