View: A policy edifice for the 21st century | Economic Times

The ruling paradigm of global economic governance has been founded on three principles: free markets from government controls; open national borders; and trust experts at the top of international organisations and national governments to find solutions for complex problems, among whom economists are the high priests.The Covid-19 virus has compelled governments to step in. Borders have been closed to stop its spread. Clearly, countries cannot be governed the way they were. Economists are debating each other within their own narrow box of economic science for new solutions. More deficit, less deficit. Higher interest, lower interest. More trade, or less. They must get out of their box now to examine the design of their economic science.The battle between vaccines and viruses is a battle between different paradigms for large-scale impact. Vaccines are new scientific formulae invented in laboratories and patented and owned by their inventors. They are produced on a large scale in large factories. Their distribution is coordinated centrally for efficiency. That is how scientific management works.The virus operates differently. Billions of micro-organisms are swarming around the world. Some adapt when they encounter opposition; their new ‘knowledge’ spreads through the swarm. There are no large ‘factories’ producing new variants for distribution, or any central ‘controller’ directing and coordinating the organisms.Einstein said it is madness to try to solve complex problems with the same ideas that have caused those problems. New insights changed the science of physics. Economists want models, like those that physicists have for modelling natural phenomena, to predict the behaviour of complex socioeconomic systems.They must realise that economies and societies are not perfectible machines in which you can pull a sharp lever to make the machine do what you want it to do — fix the interest rate; fix the carbon price.… Economic models are muddled up within subjective human societies. Economists cannot be objective experts sitting outside what they are studying. With humility, they must adapt their ideas faster to the rapidly changing realities around them.Complex global socioeconomic and environmental problems, enumerated in the Sustainable Development Goals (SDGs), must be addressed simultaneously. The Covid-19 crisis is yet another global problem, adding to and confounding the others. Such problems cannot be solved separately by domain experts in silos. Policy frameworks that have ruled in the 20th century need a paradigm change.A 2012 Institute of Public Policy Research paper, ‘Complex New World: Translating New Economic Thinking Into Public Policy’ states, ‘At heart, from this [dominant economic policy] perspective the world is seen as a machine, admittedly a complicated one, but one that can be controlled with the right pressure on this button, just the right amount of pull on that lever. It is a world in which everything can be quantified, and targets can not only be set, they can be achieved thanks to the cleverness of experts. But the world is simply not like this. It is a much more complex, much less controllable place than ‘rational’ planners believe.’A paradigm change in economics has become imperative. The economy must serve the people and society, rather than see people as bits of data serving the economy as mere producers and consumers. Along with economics, the paradigm for producing large-scale impact must change. Because the world urgently needs more local systems solutions cooperatively implemented by communities to solve global systemic problems.