A pluralistic approach to economics

Urvashi Nangia

The textbook, Macroeconomics: An Introduction, by Alex. M. Thomas makes me hopeful. Hopeful for the coming generations of students who will study economics in their lifetime.

Ever since the Great Recession in 2007, people have increasingly become aware of the shortfalls of mainstream economics. This textbook adds to the non-dominant, heterodox approach of studying macroeconomics. It critically views the mainstream economics approach and presents an alternate inspired by the classical political economists Sraffa, Keynes, Marx, Ricardo and Smith.

The book has nine chapters. Chapters 1, 2, 6 and 9 touch upon the philosophy and history of economics. They include the selected definition and theoretical approach of economics, importance of economic theory and elaborate on what is good economics. Chapters 3, 4 and 5 deal with core economic theory of monetary and financial systems, output and employment levels and economic growth models. Chapters 7 and 8 talk about how theory can inform policy in the Indian context, when the objectives are taken to be full employment and low inflation.

The book refreshingly starts by tracing the history of economic thought and sketches out the different theories right up front. It also states and emphasizes the goal of political economy, which is “to provide plentiful revenue or subsistence for the people, or more properly to enable them to provide such revenue or subsistence for themselves”. The book assumes a competitive economy, but a monetary production economy instead of a competitive exchange economy. So, interestingly it looks at economics in terms of a study of surplus than a study of scarcity. The surplus approach focuses on production, distribution and consumption of surplus and is informed by the work of classical economists. The author shows that the dominant, marginalist conceptual models are inappropriate and inadequate to understand the economy and elaborates on why he prefers ‘the classicalist’ and the Keynesian approach instead.

While the author stresses the differences and importance of theories, he also makes the readers aware of their limitations. First one being due to the nature of theorizing itself. He cites a very interesting observation on the limitations of various assumptions made in both marginalist and classical economics by M.G. Ranade from his 1983 article titled, ‘Indian Political Economy’.

Macroeconomics: An Introduction
Author: Alex. M. Thomas
Publisher: Cambridge University Press
Year of publication: 2021
Number of pages: 234
Price: INR 495

“As these assumptions do not absolutely hold good of even the most advanced Societies, it is obvious that in Societies like ours, they are chiefly conspicuous by their absence. With us an Individual man is, to a large extent, the very antipodes of the Economical Man. The Family and the Caste are more powerful than the Individual in determining his position in life…. There is neither the desire not the aptitude for free and unlimited Competition except within certain predetermined grooves or groups. Custom and State Regulation are far more powerful than Competition and Status more decisive in its influence than Contract… In a Society so constituted, the tendencies assumed as axiomatic are not only inoperative, but are actually deflected from their proper direction.”

Even though the author acknowledges this, he doesn’t give any drawbacks and limitations of the Keynesian and the classical approach. I feel some discussion on the same would have added.

The second limitation arises when the theory is applied. The author warns the students against their uncritical application, highlighting the importance of context while theorizing. The book takes time to explain how the Indian context is defined by its huge informal economy and the large agrarian sector and how that changes the way economists must look at the application of theoretical models that are taught in schools. Further, concrete examples of the problem of unemployment and high inflation in the Indian context are discussed in great detail and policy suggestions are also offered that can help manage these issues.

The author treats economics as a social, political and historical science. He embeds the economy firmly in the society which is further embedded in the environment. Math and econometrics are also given importance although he is careful to point out that the methods and data come from the theory or the concept and “these methods have also originated and are used within a social context”.

Additionally, the author uses varied sources for data and excerpts from Indian literature to open up and elaborate on the specific nuances of the Indian economy. There are multiple and repeated references to the deep-seated presence of caste, gender, ecology, land and other social structures in India. It’s very interesting how the author uses literature written originally in Tamil, Telugu, Urdu, Marathi, Hindi and other Indian languages to evoke a flavour of the land. The text is thus, not treated as an island of theory. In fact, there is a lot of effort by the author to connect it to existing reality.

This book consciously steps away from the “textbook culture”. It emphasizes supplementing the textbook by reading a lot of other material like the classics, government and RBI reports, news articles as well as other approaches on macroeconomics to further one’s understanding of the subject. Even though the journey of discovery maybe full of contentions, it holds the view that the learning is richer and fuller with a pluralistic approach.

The book also includes illustrations, summaries, explorative in-text questions and recommendations for further reading. This enhances the textbook’s readability and gives students several options to supplement their understanding. The author works with a ‘problem posing’ text vs. ‘problem solving’ text and treats the discipline as an ever evolving one, which is a good change from other textbooks available.

I pursued my masters in economics from 2006-08 at the London School of Economics and Political Sciences. Back then economics was treated, and is still treated, as a ‘science’. There was hardly any interdisciplinary study of allied subjects like philosophy or politics as part of the course (even though the school has political sciences in its name!). How do you study economics without an understanding of philosophy, politics or history? Maybe, things have changed since then. Or maybe not. I really missed out on the social sciences while studying economics at LSE.

But it’s not just the universities abroad. In most places within the country as well, the study of economics is extremely disconnected from our past or present realities. If I look back at the courses on macroeconomics at Hansraj College in Delhi University, I don’t recall being introduced to any Indian theorists or alternate ways of looking at macroeconomics. We referred to texts by Mankiw, Dornbusch, Fischer and Blanchard, but none of them wrote about the Indian context. Did the Indian economy fit into these well-known and widely taught models? How were they to be adapted to fit our context? Where were the specific characteristics of the Indian economy that I was so deeply interested to know about?

Unfortunately, two years of economics in XI and XII, three years of undergraduation and two years of masters in economics didn’t help me understand an alternate approach to macroeconomics. We were all students of the widely accepted, neo-classical, dominant view of economics. How I wish that that wasn’t the case!

This textbook is a great step forward and a much-needed addition to the already available textbooks. It makes me hopeful that the coming generations of students who will study economics, will be able to use the discipline to further their understanding of the economy and the world in a much more meaningful way.

Note: The book is available for sale on leading e-retail sites like Flipkart and Amazon. It can also be bought at www.meripustak.com.

The author holds a Masters in Economics from the London School of Economics and Political Sciences and an M.Phil in Education from the Tata Institute of Social Sciences. She has been working in the Development Sector for the last decade. Her educational initiative, Kashti, aims to inspire critical awareness and conscious action for a better world. She can be reached at [email protected] or visit her @kashtiofficial.

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