Uncommon Wisdom: Conversations With Remarkable People by Fritjof Capra

Author:Fritjof Capra [Capra, Fritjof]
Language: eng
Format: epub
ISBN: 9780671473228
Amazon: 0671473220
Publisher: Simon & Schuster
Published: 1988-01-01T18:30:00+00:00

252 UNCOMMON WISDOM taurant. Neither of us was in the mood to talk much, but after we had returned to Henderson's home and had settled down in her living room with a cup of tea, our conversation returned once more to economics. Thinking back to the basic concepts of classical economics—scientific objectivity, the automatic balancing effects of supply and demand, Adam Smith's metaphor of the Invisible Hand, etc.—I wondered how these could be compatible with the active intervention of our government economists into the national economy. "They are not," Henderson was quick to assert. "The ideal of the objective observer was thrown overboard after the Great Depression by John Maynard Keynes, who was undoubtedly the most important economist of our century." She explained that Keynes bent the so-called value-free methods of neoclassical economists to allow for purposeful government interventions. He argued that economic equilibrium states were special cases, exceptions rather than the rule in the real world. Fluctuating business cycles are the most striking characteristic of national economies, according to Keynes. "This must have been a very radical step," I conjectured. "It was indeed," Henderson affirmed, "and Keynesian economic theory had the most decisive influence on contemporary economic thought." To determine the nature of government interventions, she explained, Keynes shifted his focus from the micro level to the macro level—to economic variables like the national income, the total volume of employment, and so on. By establishing simplified relations between these variables he was able to show that they were susceptible to short-term changes that could be influenced by appropriate policies. "And this is what government economists try to do?" "Yes. The Keynesian model has become thoroughly assimilated into the mainstream of economic thought. Most economists today attempt to 'fine-tune' the economy by applying the Keynesian remedies of printing money, raising or lowering interest rates, cutting or increasing taxes, and so on." "So the classical economic theory has been abandoned?" "No, it hasn't. You see, that's the funny thing. Economic thinking is highly schizophrenic today. The classical theory has almost been turned on its head. Economists themselves, of whatever persuasion, create business cycles by their policies and

ALTERNATIVE FUTURES 253 forecasts, consumers are forced to become involuntary investors, and the market is managed by corporate and government actions, while neoclassical theorists still invoke the Invisible Hand." I found all that quite confusing, and it seemed to me that economists themselves were very confused. Their Keynesian methods did not seem to work very well. "No, they don't," Henderson asserted, "because these methods ignore the detailed structure of the economy and the qualitative nature of its problems. The Keynesian model has become inappropriate because it ignores so many factors that are crucial to understanding the economic situation." When I asked Henderson to be more specific, she explained that the Keynesian model concentrates on the domestic economy, dissociating it from the global economic network and disregarding international agreements. It neglects the overwhelming political power of multinational corporations, pays no attention to political conditions, and ignores the social and environmental costs of economic activities.

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