A prize for admittance

February 24, 1995

After 1989, the year we were quick enough to call the annus mirabilis of European history, the fall of communism produced a paradox: we all became Marxists, sharing the belief that it would suffice to realise the transition to a market economy in the East in order to create the one world, a Western world, the world at the end of history to quote Francis Fukuyama's ominous paper.

We have learned, in the meantime, that one can neither sell the spirit of capitalism overnight to a population as a whole (nor buy it for that matter) nor indeed to create a democratic spirit and a sense for social justice in countries that have neither known a market economy nor have lived with legal structures that are at least remotely comparable to those in the West.

We had forgotten that societies are cultures too, and that human actions follow value-orientations that can, more often than not, be guided by rather irrational motives. We had forgotten that mentalities and mental structures are of major importance for the course of human history. We know by now how much a politics for the future will have to be, in this sense, a politics of mentalities but we do not know how to implement it.

What I have said so far refers to the social sciences-at-large. It refers above all, though, to the discipline of economics. Still today, mainstream economists are convinced that their discipline already is, or at least is inevitably becoming, a science, that is a field of study where knowledge that is generated in a culture-free context can be applied everywhere and at each moment in time. Good economics is mathematics, and if reality does not follow the equations of the economists, it is reality's fault, not theirs.

All this should not have caused too much concern, had not economics been able to secure for itself such a prominent place in academe and in public life in general. (How this could happen and why this public image could be sustained over such a long period of time is another story).

If economists failed, and indeed they failed only too often, there was always the magic formula - ceteris paribus - that transformed a wrong prognosis into the perfectly acceptable subset of a larger and correct assumption. But ceteris paribus thereby began more and more to sound like hocus-pocus. (Since everything I have said so far refers not least to the problems of transformation we are encountering in the East, I particularly like the archaic definition of hocus-pocus that is given by the Oxford English Dictionary: "to transform as if by jugglery").

Applying the methods and procedures of the discipline of economics and its predictions and provisions to developing countries has, with a few notable exceptions such as that given by Albert Hirschman, failed badly - as had, in the social sciences-at-large, all versions of the theory of modernisation.

But this could hardly cause any serious concern in a situation in which so-called underdeveloped countries, above all Africa, seemingly disappeared from the western political agenda altogether. South East Asia, however, mattered, at least after a while, and since the developing capitalists of the region were only too glad to imitate a western rhetoric, economics could believe to have explained and foreseen an incredible take-off that came as a surprise to it, too - whereas anthropologists had seen much further without giving their informed guesses the proud label of "prediction".

The limits of economics have become obvious after the fall of communism. The transition to market economy has been painful, if not a disaster almost everywhere. The reasons for this are manifold, not least an economic fundamentalism (as Amit Bhaduri has called it) - an attitude unable to offer a variety of possible solutions for a given problem, but insisting that there is the right solution and that it must be implemented at all costs.

What I have said so far does not do justice to a field where admirable scholars have produced magnificent insights into a social reality in which we all live.

Yet I wanted to add emphasis to a concern that might be summarised in the following way: economics so far has operated in a (socially accepted) state of self-delusion, seeing itself as a kind of mathematics of the social world. Economics, however, without giving up a most noble attempt to be as precise as possible, must today move much closer to anthropology, legal studies and history in order to become a meaningful tool for understanding human behaviour.

I am no expert. But I have heard arguments of the kind I have sketched so far both from practitioners in business and finance as well as some economists themselves. I do know that many first-rate economists worry about the current state of the art of their discipline, complaining that a strong institutional inertia makes it almost impossible to change its career patterns - the most important and effective strategy to alter the course of a discipline. What we are desperately looking for are, using a term coined by the Indian economist Ashok Desai, "competent rebels", scholars with fresh and new ideas who are respectable enough to change the course of their discipline.

Changing the policy in awarding the Nobel Prize in economics could perhaps be another effective tool in changing the field. So far, and with only a few exceptions, the prize has rather fortified the orthodoxy than opened the doors for new and promising approaches.

If there was a consensus that economics as a discipline should draw some conclusions from its recent failures and that the prize should reflect a change of emphasis that would move the discipline much closer to anthropology and history, two things could be done.

First, either the prize should not just be given to economists but to social scientists in general - Robert K. Merton, the first non-scientist to receive the medal of science, being the obvious choice.

Second, the prize should, in the next rounds, conspicuously be awarded to scholars who represent another, more "realistic" approach to the study of economic structures and economic behaviour. Amartya Sen and Albert Hirschman would be, in my view, two outstanding candidates for such a prize - a prize that does not just reward those who behave well in mainstream economics but those who analyse economic behaviour well.

Wolf Lepenies is rector of the Wissenschaftskolleg zu Berlin.

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