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Argument: India’s Economic Troubles Are Rooted in Politics India’s Economic Troubles Are Rooted in Po...
Since the Great Recession that began in late 2007, there is a growing feeling that economics is not serving us well. There is truth to this hunch, but the reasons are more complex than most people realize.
Academic disciplines are built on assumptions; the most tried and tested of these are often enshrined as axioms. When economic policies go wrong, the standard practice is to rush to examine those axioms. Are some of them incorrect? Economists collate statistics, create new data using randomized trials, collect impressionistic information, and often come out with the conclusion that some of the established axioms are not quite right. Correct them, and one will get better predictions and better policy. Such an approach can work under normal circumstances, but when economic outcomes go deeply wrong, the problem may be more foundational: not in the axioms of the discipline but in the unstated assumptions—the “assumptions in the woodwork,” which all disciplines have and which we are usually unaware of.
The most striking example comes from geometry. Euclid’s Elements contained an assumption that was never stated explicitly, and it is not even clear that Euclid was aware of it: the presumption that his experiments were conducted on a flat, two-dimensional surface. But if Euclid’s work was premised on a curved surface, such as that of the Earth, Euclidean geometry would be flawed. This was realized in the early 18th century by the Swiss mathematical genius Leonhard Euler, and through his work and that of several other mathematicians, such as Germany’s Carl Friedrich Gauss, non-Euclidean geometry was born.
Euclid’s error, if we can call it that, did not matter much when human beings did not travel and trade over great distances—at least not over short durations of time. This is because over short spaces, a flat surface is a good approximation of a gently curving one. When, from the 15th century onward, it became common to travel long distances for trade and conquests, initially by ship and then by plane, it became critical not to base calculations on Euclidean geometry. The curvature of the Earth mattered.We need to step beyond economics to understand the 21st century’s troubled economies.
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