J. M. Keynes, an economist, made a revolution to the ideas and teaching of economics in the 1930s. Because of him, we now know “macro-economics”, which has been taught everywhere in the world, including Indonesia. It is a must for everybody who learns economics, including a very short introduction to economics.
Economic paradigms have always changed following the world crises. That is what Keynes did in 1930s. The main-stream economics until 1930s was that of no government intervention. Government intervention was a taboo. Yet, the great depression had shown that the government had to intervene, to boost aggregate demand through increased government spending. This is what is currently famous as “stimulus package”, the main message in his famous book General Theory of Employment, Interest, and Money, published in 1936, that the government must intervene to bring the economy out of thendepression. Since then, there had been an increasing number of Keynesian economists.
In the last two decades, pioneered by Margaret Thatcher and Ronald Reagan, the mainstream economists have again been dominated by those who saw government intervention as a taboo. The spirit of pre-great depression had overwhelmed everybody everywhere in the world.
However, Keynes seems to have emerged from the grave during the recent world recession, along with his so many disciples and new converts. Almost all countries are now engaged in economic stimulus packages. Even, some countries have felt the pressure to increase their stimulus package, otherwise they may be seen as odd or weird countries.
Keynes has revolutionized economics theory and reformed world economic policies. However, today world architecture is very different from that of Keynes. This time, the issue does not deal with economics alone. It has political, social, and business aspects. Inter-disciplinary groups of scholars need to work toward a new development paradigm. Even, within the Faculty of Economics, there should be close interaction among those in the department of economics, department of management, and department of accountancy. Are there courses which integrate “micro” and “macro” views on economic development? Are there courses which see economic development from a wider perspective, by considering the traditionally called “non-economic factors”?
One urgent need is to re-examine the growth orientation in the teaching of macro-economics. The main dependent variable in the established macro-economics is income—how to increase national income. Keynes’ ideas are also in the tradition of how to increase income or stimulate growth.
An alternative to the growth model is the one which does not put economic growth as the most important indicator of development. In this model, economic growth (and income per capita) is only one of many other important inputs in development. Economic growth is not the objective of development. Economic growth (and increase in income) should not be the main dependent variable in macro-economic analysis.
Sen (1999), for example, argued that development should not be measured with narrow indicators such as rising gross national product, industrialization, technological progress, and social modernization. All of these are important, but they are simply means of achieving broader, and more important, goals of development. Sen saw development as a process of the expansion of the real freedom enjoyed by the people. With Sen’s approach, the conventional macro economic variables are simply means of development. In other words, most text books on macro-economics do not actually talk about development, but only deal with some important means of development.
Therefore, during the recent crisis, each country should also try to find its own solution, to first help its own economy, rather than relying on and blaming external factors. This is the time to re-examine conventional ideas and to re-create revolutionary ideas, as Keynes did in 1930s.
However, the world has been experiencing an unprecedented global crisis that never happened after the great depression. This time, we need more than one Keynes. We need a group of people from various disciplines to come up with a revolutionary development paradigm.
Are we, economists, prepared to relearn economics, particularly macro-economics? Are we willing to consider “non-economic” variables such as health and education in our main stream economic analysis?
A colleague mocked me that I wanted to be a noble prize winner with this endeavour. I replied that, at my age and my capacity, a nobel prize winner is of course not in my reach. However, we should contribute something, whatever little it may be. I really hope I can mletik (“spark”) you to join the world wide effort to create a new development paradigm. Unlike in 1930s, we need more then one economist and, of course, we need non-economists.
13 September 2009