Sen here wrote a perspective on economic issues and economic theory much more eloquently and scholarly and more authoritatively than I ever could have done - although I am delighted to discover in this piece that he has taken a comprehensive overview of the field of economics study with respect to the economic problems of the world today which I have been trying desperately to do in this blog.
Sen has taken a philosophical perspective to economics which is probably very Cambridge - talking about the limitations of mainstream economic theory which ignores the poor and the disdvantaged, including the limitations of Keynes - which I have been trying to do so in my series of the Irrelevance of Keynes.
For students of economics who have left school a bit too early and have not kept up with their reading on the subject, Sen's article is a very good summary of the broader field which all rounded students should acquaint themselves. His article shows very clearly the unacceptable nature of Econ 101 and how it can be dangerous when used as a basis for policy.
- Ideas about changing the organization of society in the long run are clearly needed, quite apart from strategies for dealing with an immediate crisis.
- How do we assess what is taught and championed among academic economists as a guide to economic policy—including the revival of Keynesian thought in recent months as the crisis has grown fierce?
- The most immediate failure of the market mechanism lies in the things that the market leaves undone.
- Smith viewed markets and capital as doing good work within their own sphere, but first, they required support from other institutions—including public services such as schools—and values other than pure profit seeking, and second, they needed restraint and correction by still other institutions—e.g., well-devised financial regulations and state assistance to the poor—for preventing instability, inequity, and injustice.
- The moral and legal obligations and responsibilities associated with transactions have in recent years become much harder to trace, thanks to the rapid development of secondary markets involving derivatives and other financial instruments.
- While Keynes was very involved with the question of how to increase aggregate income, he was relatively less engaged in analyzing problems of unequal distribution of wealth and of social welfare.
- There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion.
- That the market economy can be particularly bad in delivering public goods (such as education and health care) has been discussed by some of the leading economists of our time, including Paul Samuelson and Kenneth Arrow.
- A crisis not only presents an immediate challenge that has to be faced. It also provides an opportunity to address long-term problems when people are willing to reconsider established conventions. This is why the present crisis also makes it important to face the neglected long-term issues like conservation of the environment and national health care, as well as the need for public transport, which has been very badly neglected in the last few decades and is also so far sidelined—as I write this article—even in the initial policies announced by the Obama administration.