Is it possible to transform the subject of economics, making it into a subject that depicts economic behavior much more realistically? And, if so, is it possible to write an introductory text for this subject that would be both interesting and understandable for young college students as well as being a text that could motivate these undergraduates to go further in their economic studies? John Komlos believes this is possible. Komlos' book, Foundations of Real-World Economics: What Every Economics Student Needs to Know (second edition, Routledge) is the result of his effort to show that it can be done.
It should be pointed out that John Komlos has proved himself to be an extremely competent scholar who has had a long distinguished career as an economist and social scientist. Komlos was born in Budapest in 1944 and came to Chicago in 1956. He did his graduate work at the University of Chicago where he received PhDs in both history and economics. Among his important accomplishments is founding the field of economics and human biology. Komlos' scholarship has defied disciplinary boundaries. Notably, he has published in major journals in five different disciplines: economics, history, statistics, statistical methodology, and mathematical population studies. In the years since the financial meltdown of 2008, a good part of Komlos' research and writing has focused on understanding the causes of the financial crisis and what it means for the economics discipline.
Unlike most contemporary writing in economics, Komlos' economics writings are explicitly based on his progressive, democratic, and humanitarian values, and his text is not based on the methods of neoclassical economics. The focus of his economics is on increasing people's life satisfaction (or well-being) as opposed to the typical economic focus of economists on growth of output and income. In essence, Komlos is concerned with the relationship of economics to the flourishing of people's lives. In Komlos view, economics needs to be based on moral values as was true to a great extent in the writings of economic thinkers in the 18th and 19th centuries. As was true with Herbert Simon, Komlos aspires to develop an economics that is entirely integrated with all the other social sciences (Augier and March 2002: 3).
There is no doubt that Komlos has written a very high quality book, but I do have doubts that his book can be successful as an introductory economic text. Let's examine this issue carefully. What is the goal of this book? Komlos' intention seems to be to write a textbook that is essentially an introduction to economics (or sociology, psychology). It should, however, be noted that in the book's current state, much of the writing is sophisticated; it draws on advanced research. It is loaded with noneconomic insights. Because of the latter, his text does not resemble closely an introduction to economics. Or is Komlos' aspiration to write a textbook that differs from an introductory one in that it has two main parts, the first part being an introduction to the discipline of economics. The second is a synthesis of the introductory material with research findings containing insights that are more advanced than the type of material usually included in an introductory text. These two parts would enable the reader to gain a full-fledged appreciation of what it is possible to understand about the U.S. economy. Organized in this fashion, the book includes many insights that are generally more advanced than the type of material usually found in introductory texts. This combination would no doubt enable the reader to truly gain a full-fledged appreciation of the U.S. economy. This approach, for example, certainly involves integrating behavioral economics understandings with introductory material. It also involves integrating insightful research about how well U.S. and world markets are functioning with introductory material.
Consider another possible way of organizing Komlos' text. This alternative would involve writing a book that leaves out much of the more advanced material. Presumably such an alternative introductory economic text could provide the young college student enough interdisciplinary insight and alternative values to make the book valuable to the undergraduate who wants an alternative first book in economics, but wants one that makes it possible for student readers to understand more advanced economic texts in more specialized areas in subsequent course work.
Parts of Komlos' book emphasizes his socio-economic insights, ones that he has gained over a long distinguished career as an economist and social scientist. I suspect the typical young undergraduate reader will not be able to appreciate these author insights to a great extent, unless they are more fully explained and explained in a way that makes them accessible to an undergraduate who has not had many years to allow him/her to both satisfactorily read these advanced writings or appreciate significant socio-economic occurrences. Note that the traditional Econ 101 text generally attempts to make basic economic logic the essence of the text and does little to load the book up with noneconomic aspects that would be difficult for young undergraduates to learn in a semester or two.
The book as it stands is, of course, a very valuable text. The problem as suggested above is that the typical young undergraduate will not be able to appreciate and master the nonbasic insights of the author. Relatedly, the typical undergraduate will not have lived long enough to have done much in the way of contemplating his/her philosophy of life or to have given much thought to how the philosophy and methods of the economics discipline have significant flaws and need to be changed.
Here is the essence of my critique of Komlos' book. This book or something like it could conceivably be very useful for advanced economic undergraduate or graduate students who are old enough to be able to reflect on their economic studies and begin to take a critical look at their socio-economy/society. This book might then serve to help such advanced students see the potential of a better economics in the sense of both content and values. Such a book would not be a starting text (Econ 101) nor necessarily a book used in a course. It could be a book that helps advanced students gain perspective on economics and helps them shape their economic career paths.
Note that a good part of Komlos' book involves providing information/data that is pertinent to understanding the performance of the U.S. economy, particularly its poor performance in some respects. While valuable, that may not help the young reader understand how economies generally function or should function. While examining economic performance is no doubt important, it does not necessarily contribute to essential understanding about an alternative view of economics and how economies function.
“According to conventional wisdom, free markets are practically flawless, acquiring an almost divine aura. However, we ought to resist the temptation to ascribe supernatural powers to them for markets are created by human beings and not by a deity. They are not natural and do not emerge spontaneously out of disorder. Rather they are man-made institutions and are only as good as the rules (moral and legal) that govern the behavior of market participants and the oversight of a higher authority that enforces the rules without which markets generally implode. […] They are not infallible and should not be idolized. They are a means to an end and not an end in themselves” (Komlos 2019: 19).
Komlos further points out that “the common wisdom is that market capitalism ‘has been an enormous success’” (2019, p. 19). What Komlos adds is that U.S. market oriented capitalism has in some ways been successful, but in many other respects it is not doing very well. He provides explanations and data indicating how, contrary to much popular opinion, the socio-economic performance of the U.S. economy has often been inferior to that of quite a few other economies. Consider a few examples:
- In 2014, the homicide rate in the U.S. was three to eight times higher than in Western and Northern Europe.
- Per capita drug use in the U.S. is more than three times as high as in Western Europe.
- The U.S. in 2015 had the highest incarceration rate in the world.
- The rate of U.S. bankruptcies varied from year to year depending on the economic cycles but was generally quite high.
- The U.S. had the second highest poverty rate of children in advanced industrial nations during the decade starting in 2010.
- Compared to a group of relatively rich countries, U.S. life expectancy was significantly below the median and only at the level of Cuba, Uruguay, and Costa Rica.
- From around 1980, the growth in real wages in the U.S. has fallen very significantly below the growth in productivity for those years in contrast to what has occurred in other comparable countries (Komlos 2019).
As indicated earlier, Komlos mentions that his text is based on his personal values which he characterizes as progressive, democratic, and humanitarian. It is, however, important to note that there are other values and world views that could be the foundations of his book. A number of authors, not just Buddhist ones, have in recent decades proposed that the functioning of market oriented capitalist economies could be substantially improved if a different world view and values were adopted as the basis for the functioning of their economies instead of the values associated with capitalist market economies and mainstream economics.
The following related to Buddhist economics provides an example of my thinking. It is not, however, a recommendation to include Buddhist economics in Komlos' text. Let us consider the nature of Buddhist economics and how its adoption could lead to important improvements in an economy's functioning. Buddhist economics embodies a world view that is very different from the world view associated with Western economies. The world views of the latter are largely based on the tenets of mainstream economics. Every society has a particular world view that reflects their people's values, especially their values concerning how their economies should function. The functioning of all economies needs to be built on an explicit set of values related to the society's economic goals. The world views associated with Western or modern capitalist economies are typically narrowly oriented and emphasize growth of output. The world view of Buddhist economics, on the other hand, emphasizes a very broad view of what contributes to well-being. They emphasize the ideal relationships that humans can develop with each other and with nature. There are good reasons to believe that a society adopting Buddhist economics can be expected to experience much less socio-economic and biophysical dysfunction than conventionally oriented capitalist societies. Relatedly, note that in contrast to Western economies, Buddhism teaches that economic activity should be a means to a good and noble life, not an end.
Human activities are increasingly having massive negative consequences for both the biosphere and socio-economic relationships. Climate change is a prominent example of biophysical dysfunction, and obesity is an important example of socio-economic dysfunction. The world view and orientation of mainstream economics does little to help us understand the causes of these large dysfunctions, nor to understand what is necessary to resolve them. Mainstream economics does not provide key insights into the socio-economic causes of the market failures involved. For example, it provides little appreciation of the tendency of businesses to be excessively self-interested, opportunistic, and exploitive in its relationships with consumers and others. The idea that businesses might embrace social responsibility and attempt to serve people's true preferences rather their actual preferences is foreign to mainstream economics. Mainstream economics also does not help us understand the excessive growth of the Earth's economic activity and the excessive use of fossil fuel energy. Further, it does not mention that consumers' ignorance and inability to find satisfaction with their consumption are principal factors in contemporary biophysical dysfunction.
Because important, large scale dysfunctions such as climate change and obesity have been largely outside the scope of mainstream economics, the types of analysis most suitable for understanding them have not been developed. It follows that mainstream economists are unlikely to propose viable solutions for these dysfunctions. It turns out that many of the answers can be found by turning to the wisdom embodied in Buddhism. Arguably we could gain by drawing on Buddhist teachings such as the Four Noble Truths and the Noble Eightfold Path. These teachings could help us understand why dishonest businesses that are not concerned with the true well-being of its customers are part of the problem. It can also help us understand that ignorant, compulsive consumer behavior is an integral part of the dysfunctions. Ideally, people ought to consume mindfully and moderately, using intelligent reflection on their choices in order that their consumption contributes to their true well-being. If a society were to adopt Buddhist economics, and if people and businesses were to behave in accord with the ideals articulated in Buddhist teachings, there is good reason to believe that the result would be sustainable use of the Earth's resources and that both biophysical and socio-economic dysfunctions will be avoided or resolved. Note that this analysis is not meant to imply that Buddhist values are the only values that can produce favorable effects on a society's economic performance. The upshot of the above is that it would have been good if Komlos had given more attention to the role of values in determining how well economies function and had done more to include this factor in his analysis. I am, however not clear on how this aspect could be included in Komlos' current text.
John Komlos' Foundations of Real-World Economics explains a tremendous amount of how economies like the U.S. function in recent years. In doing so, it integrates conventional economic analysis with wide ranging socio-economic analyses and the thoughtful insights of the author on many topics related to how economies function or do not function well. At the very least, he has gone a long way in showing how economies can become a more important and different discipline than it has been. I highly recommend his text for many students of economics but somewhat less so for young college students.
Augier, M. – March, J. G. (2002): A Model Scholar: Herbert A. Simon (1916-2001). Journal of Economic Behavior and Organization 49: 1–17.