Science and economics need a reset, and new conversations

Since the 20th century, economics has become the dominant ‘science’ for guiding public policy.. Photo: iStock
Since the 20th century, economics has become the dominant ‘science’ for guiding public policy.. Photo: iStock


  • These disciplines don’t capture reality accurately but have assumed an authority to dictate policies.

The 2022 Nobel Prize in physics was awarded to Alain Aspect, John Clauser, and Anton Zeilinger. They settled a century-old debate between Albert Einstein and Niels Bohr. In experiments conducted over the last 50 years, they confirmed the reality of an effect that Einstein had disdained as “spooky action at a distance." Measuring one of a widely separated pair of particles could instantaneously change the results of measuring the other particle, even if it was light-years away. Their conclusions have fundamental implications for macro-economic policy. Let me explain why.

Rethinking science: The speed of light is the only constant in Einstein’s general theory of relativity. Measurements of everything else are relative. They depend on relationships between observers and the phenomena they observe. Moreover, nothing can travel faster than the speed of light. Since the two particles in the spooky phenomena of “quantum entanglement" are so far apart that even a light signal from one cannot reach the other, the simultaneity of the changes in them cannot be explained in Einstein’s model. Changes in the two particles seem to “mutually arise" without any physical or digital communication between them. Einstein’s elegant mathematics of General Relativity could not explain quantum entanglement. Moreover, its own descriptions of reality defied common sense. According to the mathematics of general relativity, space is curved, and time can travel backwards.

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The Noble Prize Committee says quantum theory has opened doors to another world, and it has also shaken the very foundation of how we interpret measurements. Bohr said, “Anyone who didn’t think quantum mechanics was outrageous hadn’t understood what was being said." What quantum physicists had discovered was that some aspects of reality cannot be explained by ‘rational’ science. They seem to require mystical or spiritual explanations. Einstein could not accept such ‘irrational’ theories. “God does not play dice," he said: there must a mathematical explanation for everything.

Kurt Gödel’s ‘Incompleteness Theorem’ proved that no purely mathematical model can reveal how the world outside it actually works. Gödel, perhaps the greatest mathematician of the 20th century, explained that all mathematical systems are founded on basic axioms and some acceptable rules of computation. Axioms are statements or propositions which are regarded as being established or self-evidently true. The model itself cannot prove these axioms. Gödel revealed how, in their attempt to achieve internal consistency, mathematical models become disconnected from external reality, and therefore externally invalid. They become inaccurate abstractions able, at best, to explain only some parts of complex reality, not the whole. Thus, they are always inherently ‘incomplete’.

Incompleteness of economics: Macro-economic modellers consider the economy as a closed system, tending always towards some general equilibrium. Like Newtonian physicists, they imagine the world as a machine, whose design an external controller (an engineer or economist) can change. Mathematical models compel economists to leave unquantifiable social and political forces outside their models. Therefore, their models are inherently inaccurate representations of reality.

Scientists wish to understand causal relationships between events. A world in which events are somehow connected with each other, without any causal connection between them, is not understandable to them. ‘Big data’ and regression analysis can only reveal correlations among variables, not causal relationships. Random control trials in micro- economics also try to reveal causal relationships between variables in complex systems. They too are epistemically incomplete tools.

Since the 20th century, economics has become the dominant ‘science’ for guiding public policy. Debates continue to rage between ‘Keynesian economists’, and ‘Friedman economists’—between welfarists who see the need for a “government hand" in the economy and monetarists who want government out of the way to let private entrepreneurs loose and leave it to an “invisible hand" to produce good outcomes for all. Both agree that growth in gross domestic product (GDP or the size of the economy measured in money terms and value of transactions in money) is essential.

The debate between welfarists and monetarists is a debate within the present paradigm of economics. Their model of the economy is founded on an incorrect assumption that human beings are ‘rational’ decision-makers and self-interested in the decisions they make. This makes mathematical modelling easier, but, as Gödel proved, predictions from their computations will not map reality.

Ethics in technology and economics: Science sits between philosophy and technology. On one side, it must grapple with philosophical questions, as quantum physicists were compelled to. On that side lie ethical questions too, about the purpose of their science. On the other side is the translation of science into technology designed to have material effects in the world. Thus, scientists got suborned into producing nuclear bombs, which Einstein, then at Princeton University, regretted.

All powerful technologies are ‘dual use’. They can be used for human well-being, and also to increase the power of their owners who prevent others from using them. A few countries control the development and use of nuclear technology. Vincent Cerf, an inventor of the internet, regrets how it has become the private property of wealthy corporations and how social media is harming human well-being while making its corporate owners very rich.

Changes in paradigms cannot come about from within the establishment. It will defend its power and ideas. Who controls ‘the rules of the economic game’ determines how economies develop. The purpose of economics science should be to improve the well-being of all people in all countries, not make powerful people and powerful nations even more powerful.

A new economics requires new conversations about the purpose of economic growth. Also, new ideas about how growth can be more equitable and sustainable. ‘Out of the box’ thinking is essential. Scientists must step out of their models and listen to each other to comprehend complex realities together. Human beings have become numbers in economists’ models. Economists must step out and listen to common people for whom economies must change. And who understand, in practical terms, the realities that economists try to model.

Arun Maira is former member, Planning Commission.

Elsewhere in Mint

In Opinion, Rahul Jacob says forget the Bollywoodesque fantasy that India can decouple. Stuart Trow says a toolkit to fix Bernanke’s fixes may qualify for a future Nobel. Long Story answers questions about toxic cough syrups.

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