Welcome to Economics 2.0

Too bad Adam Smith is nolonger alive. He would be so shocked to discover that his world of economics has been turned upside down. In The Theory of Moral Sentiments, Smith critically examined the moral thinking of the time and suggested that conscience arises from social relationships. His aim in the work is to explain the source of mankind's ability to form moral judgments, in spite of man's natural inclinations toward self-interest. Smith proposes a theory of sympathy in which the act of observing others makes people aware of themselves and the morality of their own behavior.

Ah!!! and then comes Facebook, Myspace, Twitter, and all those faceless enablers. What would Adam Smith say about our relationships in the cyberspace? Would these relationships still produce positive moral judgment in the manner and fashion that Adam Smith imagined?

Then comes Karl Marx. Marx argued for a systemic understanding of socio-economic change. He argued that the structural contradictions within capitalism necessitate its end, giving way to socialism. He believed that socio-economic change occurred through organized revolutionary action. He argued that capitalism will end through the organized actions of an international working class. He writes "Communism is for us not a state of affairs which is to be established, an ideal to which reality will have to adjust itself. We call communism the real movement which abolishes the present state of things".

Ah!!! Another painful experience. Poor Karl Marx. He never imagined that the working class of today would have no bosses to speak of, no factories to work at, no offices to go to, and no unions to join. He did not dream of stay-home moms making millions on the internet, sixteen-year-old kids creating billion-dollar companies and employing sixteen thousand programmers from sixteen different countries. Karl Marx did not imagine Economics 2.0.

And they keep coming. My favorite one is John Maynard Keynes, the proponent of the famous Keynesian Economics. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector (read Government) including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.

Ah!! and then comes online stores with no governments to control them. Today I can buy my cereal online from a store in Kentucky (USA), Lancaster (UK), Sidney (Australia) or Tokyo (Japan). And I can do this with the almighty credit card with no exchange rates to speak of. Where is Keynesian genius?

Welcome to Economics 2.0



Some Excerpts from Wikipedia