Tuesday, June 19, 2012

Reinert's Critique on Modern Economics (2)

"The equality assumption [in international trade theory]: Assuming away all differences -between human beings, between economic activities, among nations - [...] all factors qualitatively differentiating a twelve-year-old and his shoeshine 'firm' based in a Lima slum from Microsoft as a firm have been eliminated. The two of them have been averaged out as 'the representative firm'."
"The core assumption of 'perfect information' in reality implies that humankind must consist of individuals that are all alike [...] ."
"The conclusion so proudly reached by standard international trade theory, that a world trade will provide 'factor-price equalization' is in fact already built into the basic assumptions of the theory itself; a theory in which all the elements are equal and identical cannot produce anything but equality of outcome."
-- "How Rich Countries Got Rich" by Erik S. Reinert p. 35 - 36

"However, I am not arguing against quantification and mathematics, I am arguing against this being the only recognized form of doing economics and am asking for room to bring qualitative analysis back to academic economics. Quantitative and qualitative understandings of the world are complementary.
The problem is that most factors creating a world polarized in wealth and poverty are of a nature requiring an understanding of qualitative differences. Economists have created the same type of handicap for themselves as someone writing a thesis on various types of snow would have if she or he chose to write in Swahili."
-- "How Rich Countries Got Rich" by Erik S. Reinert p. 46


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