Page 43 - Ekonomija i Biznis_juli-avgust 2016.indd
P. 43
ECONOMY
Why do the people The world would be a happier place
choose drastic demo- with female economists
cratic solutions? If
you point the finger The new classical economics is a mac-
towards some of the roeconomic extension of the neoclassical
contemptuous politicians, most prob- (micro) economics, which is actually the
ably you would have to direct the view foundation of every introductory text-
towards some economist who is peeking book in the world of economy. The new
behind his back. classical economics derived the macro-
economic aggregates (for the GDP, for
“It is a huge issue whether the British employment, etc.) from the general mar-
would vote like this, if there were seven ket balance in an economy and it is based
good years, instead of seven very bad on three basic assumptions, whereby its
economic years behind them”, said one followers consider them axioms same as
of the investigators of the public opinion the mathematical axioms, whose accu-
trying to respond to the earthquake that racy is not called into question. The first
just happened in Europe. The attitude axiom is that the markets are always
that the migrants will take their job po- balanced i.e. the prices and the quali-
sitions, the bitterness from the vast gap ties vary in a way which equalized the
between the rich and the poor, which, as demand and the offer. The second axiom
Fukuyama says in his essay “American is that both the individuals (and the com-
Political Decay or Renewal”, deepens for panies) possess imperfect information.
two generations, however now it starts And the third, most important one is
to dominate in politics, led to the slightly that the expectations of individuals (and
expected Brexit, to quite a possible tri- companies) form in accordance with
umph of Donald Trump in America, or if the theory of rational expectations. The
we see the past, to the twice confirmed theory of rational expectations says that
triumph of Syriza in the Greek elections the individuals rationally predict the fu-
and the transformation of Podemos into ture, that is, on the basis of all available
a serious political group. information they give the best possible
prognosis.
Since 2008, when the financial crisis
emerged as a bolt from the blue to most In the world of new classical econom-
people, including the economists, the ics, the country is usually an usurper
profession was in the core of shame. of the natural courses of the economy,
What is a science if it cannot predict it disrupts the balance, and the market
such a devastating event was the ques- actors react by looking for a new equi-
tion of the queen addressed to the Nobel librium. In the world of NCE, unemploy-
Prize winner Robert Lucas, which could ment is always voluntary, because the
soon lose a significant part of the Em- non-employed can always become em-
pire. Lucas, who is actually one of the ployed, however for a lower earning. To-
fathers of the new classical economics, day, when non-employment is the great-
said that “such an event could not be pre- est problem of the developed economies,
dicted because the economic theory says it seems that things are not resolved in
that such events cannot be predicted.” such a curtly way.
After such an answer, a columnist of the
“Economist” indicated that every smart The NCE recognizes the existence of
ruler would turn to another sources in business cycles, however its theory of
order to give a reasonable answer. Thom- real business cycles, which was devel-
as Surgent, an economist and a person oped by the Nobel Prize winners Finn
who respects Lucas a lot, answered that Kydland and Edward Prescott, finds the
only evil people or people who have no reason for the economic fluctuations in
understanding of modern (new classical) the external shocks that the economy
economics can take the liberty of asking experiences, rather than in the internal
question as the queen dared to ask. imbalances of the very economy.
The theory of rational expectations
July-August 2016 43
