Opinions Column: Regrets, Lies and Truths

By Dr. Annavajhula J.C. Bose
Department of Economics, SRCC (University of Delhi)

Suppose you are serious about understanding the economy and changing its functioning towards greater social well-being. And so, you have made up your mind to pursue economics after completing your school education.

You might regret later that you had innocently wasted your precious time doing economics as nothing but mathematics of maximization. Peter Radford sums up this regret thus: “Too many people are wasting far too much time talking about economists as if they study the economy. They don’t. They really and truly don’t…economists had been steadfastly denying fact, ignoring reality, and living in a wonderland of their own creation. Economists study economics. And economics is not the economy. It is a self-contained set of ideas, models, theories, mathematical intricacies, and axioms, that are designed to provide exciting intellectual sport for those so inclined to busy themselves with such activity…Another attribute of economists is their portrayal of the dispassionate observer of society gravely describing the ‘deep laws’ humans are foolish to push back against. They project the air of sober analysis. They attempt to inject a discipline and rigor into the messy pool of human interaction. They want us to believe that what they describe is inevitable. So they take upon themselves to act as caretakers of what ought to be…So: my advice is to study the economy by taking classes in politics, sociology, philosophy, business or organizational theory. Get steeped in information theory. Build those agent based models. Go and talk to workers, shopkeepers, and all the other people in the real world. But stay away from economics. Especially if you’re serious about the economy.”

How to find out who is speaking truth in economics is another vexing problem for students who want to understand the economy. There is so much of bogus research and false arguments that can take us for a ride. For example, standard economics tells us that there is a downward sloping demand curve for labour. In other words, if you peg minimum wages above equilibrium wages, there will be unemployment. There is no robust empirical backing for this. Similarly, there is no truth behind famous economists arguing against social security (and all types of social welfare programs) that it badly affects the saving behavior of people and that more investment and economic growth would have taken place had there not been a social security system. Michael Yates, the demystifying economics teacher, puts forward the difficulty of finding truths in economics thus: “Not only are there technical difficulties. It takes skill to make useful assumptions and to trace out the logic of these assumptions to generate predictions. It is not easy to devise adequate tests of predictions. The definition of variables and the conversion of definitions into data present their own problems. But in addition to these formidable difficulties, the student also has to contend with the reality that in a capitalist economy, those who have the gold make the rules. They may obstruct the pursuit of truth, refusing to allow research that contradicts their interests to see the light of day or giving wide publicity to research that coincides with their needs. Economists, in turn, may either pander directly to the desires of the wealthy or they may become so enamoured with the elegance of their theory that they stop seeing the need to test hypotheses. Instead, they may come to accept the predictions themselves as the truth, acting in essentially the same way as a religious zealot…Readers then are advised to study economics with care. Be aware that not all research is what it claims to be. Be mindful that in economics the truth does not always win out. Understand that in matters economic, powerful private interests come into play. Above all, be skeptical. Your own beliefs, the predictions of economists, and every statement in my book must be put to the test.”

Finally take the question of whether India is a middle-class society. This question has the power of opening up your eyes to the lies and truths about thoroughly understanding the Indian economy and society. On the one hand, there are economists and research firms and politicians as well with the claims that India has a giant middle class, or projections that India’s population will become predominantly middle class—i.e. India’s population is not a pyramid but a “fat lady, with a smaller bottom of destitutes and aspirants, a bulge in the middle formed of climbers and consuming classes, and a big head of the rich.” This testifies to the fact that India’s neoliberal economic policies of the last two decades have created widespread prosperity, and that we therefore need no longer worry about inequality and poverty, but can instead focus on continuing even more aggressively with the neoliberal economic policies. On the other hand, the Research Unit for Political Economy, Mumbai, has rigorously debunked these claims. There is only a small class in India with consumption levels higher than the poverty lines in the developed countries. There is no doubt that there is a rapidly growing section with plenty to spend which is sizeable in absolute numbers but it is very small as a proportion of India’s population. At the same time, incomes and assets are concentrated in a small elite. This is not all. The structure of employment does not support the claim of a middle class India. The “overwhelming majority of the country’s working people are employed in insecure, sweated work. India’s labour market differs starkly from that of the advanced capitalist countries. Labour here is largely engaged in petty production in the unorganized sector (self-employment and other subsistence employment), where productivity levels are stagnant or falling. Even within the organized sector, there is actually a rise in informalization of labour in recent years. There is not a clear dividing line between employment and unemployment for most of the workforce, with much of the workforce under-employed, and poverty afflicting even those officially classified as employed. There is fairly rigid duality between sectors and within sectors, in terms of productivity and wages.”


Radford, Peter. 2017. Economics is a Waste of Time. Real-World Economics Review Blog.
February 15.

Research Unit for Political Economy. 2014. A Middle Class India?, in Aspects of India’s
Economy, No.58.

Yates, Michael D. 2003. Naming the System: Inequality and Work in the Global Economy.
Monthly Review Press. New York.

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