Economics, an Uncertain Glory

In What Is Wrong with the West’s Economies, Edmund Phelps adds to the growing self-criticism of economics. He argues that Western economies no longer support “good life” as they are neither inclusive, nor innovative. The “suppression of innovation by vested [corporate] interests” and “repression of potential innovators by families and schools” are responsible for the sorry state of Western economies. He adds that the “failing in the West’s economies is also a failing of [West’s] economics” and calls for “a modern economics that places imagination and creativity at the center of economic life”. I argue that Phelps misdiagnoses the problem. The lack of encouragement to innovation is not the main shortcoming of economics; rather it is a manifestation of deeper problems. Economics can be rejuvenated only when both teachers-cum-researchers and students alike drop their statistical-mathematical glasses and step back into real space and historical time.