Wednesday, December 13, 2006

The Unreality of Economics

Most academic writing by economists strikes me as further and further away from the realities of life.

I wonder if one reason why our discipline's understanding of real-world economics is so poor is that we are still stuck at looking at "national economics". Even our so-called "macroeconomics" stops at the national dimension.

Our ruling paradigms are "country competitiveness" and other such non-realities

In the real world, however, there are awkward facts such as the following:

- "national" currencies may be largely held by countries other than those which originated them

- "national debt" may not be to the nation, principally

- companies are registered for legal reasons in Country "A" but have as employees, and are owned by (and therefore distribute their profits to), people from many countries - in many cases, the *majority* of owners and employees may not be from the country in which the company is registered

- similarly, people within Country "A" are usually employees of companies "belonging" to many other countries

- investors from Country "A" rarely have all their investments in that country; indeed, the richer they are, the more likely they are to have their investments in several countries

- Central Banks are constantly making "their own" judgements regarding interest rates and money supply, but these judgements tend to be in the "light" of the judgements that other such entities are making

- the perceptions and actions of currency traders in "other" countries can raise or depress the exchange value of "the" currency more than the judgemetns and actions of the Central Bank in question, or indeed more than the judgements and actions of all the most important Central Banks in the world.

I will find it helpful to have my attention drawn to what body of our literature takes as its *starting* point the fact that global economics and global business is all there is, now - though these are of course complicated by inconvenient legal realities such as "countries". Sphere: Related Content

1 comment:

Mark Stewart said...

My question may not be directly related to your blog, but I would like to hear if you know of "Second Life" ( so what do you think about it. I thought of it because, you write "real-world". IBM is investing large sums of money into it.