Thursday, December 2, 2010

Economics and Culture?

Economic theory concerns itself with the analysis of means taking ends as given. This is, and should, remain the dominant paradigm within Economics. The problem with this comes when economists want to talk about economic development. Economic development is not an end that any individual pursues. Economic development comes about as an unintended consequence of individuals pursuing ends which enable others to more effectively pursue their own ends. That is why culture, and the selection of ends of individuals is important in economic development. By selecting economic development as an end, the economist is usurping the ends of individuals with his own. Since the individual is no longer weighing his selected ends against one another in making rational choices, rational choice framework is no longer sufficient to understand the process of economic change and development.

It that true? Or is economic development only brought about as unintended consequences of the means individuals select to pursue commonly held ends held by people in developing and non-developing countries?

Take money, the most commonly cited spontaneous order. If we have one society that uses money and another that does not, what methods of analysis can economists use to analyze that situation? Either they can use economic theory and explain why one society has a money economy and another doesn’t, or he can approach the question as a problem: how to get the economy that does not use money to use money. On some fundamental level, that’s bad economics, just as “how do we make poor nations rich” is, on some level, bad economics. We are positing an end which people don’t pursue, and we can’t use rational choice and economic theory in the selection of ends; we must take them as given.

The exception is when a group of people, usually a dictatorial group, actually pursues economic development as an end.

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