Having been a columnist for nearly 44 years now, I can say one thing with complete confidence. There is nothing worse than having your column fall due on a public holiday, like today. It’s happened to me a dozen or so times.

India has many such days but the three to be avoided the most are January 1, December 25 and Holi. No one opens a newspaper on these mornings.

And if it’s a business paper you write for, as I have done for all but seven years in the 1980s, there’s no chance at all that anyone will bother. Nevertheless, one must soldier on.

Of the three worst days mentioned above it’s best to have to write on December 25 because you can do the usual review of the previous 358 days. It’s a lazy approach.

However, there is a problem. Every columnist, the world over, who is in the same plight, is also doing the same thing. So you have to be quite clever, while knowing that no one will notice even if you aren’t. That’s the irony.

So it occurred to me that, to be really clever, it might be a good idea to see what economics is all about now, as compared to half a century ago. Is it about the labour markets? Or the product markets? Or is it the financial markets? Or the technology market?

Finance and technology

Well, no surprises there. Overwhelmingly, it’s the financial and technology markets that economics is focusing on now. It’s Wall Street and the City of London, the famous Square Mile, which now dominate economic thought. The real economy no longer engages the minds of economists very much.

That’s where perhaps the money is for the economists. Even within that subject, the emphasis seems to be on regulation. Academic economists who like free markets are now less important than the ones who interfere with the markets.

The technology market falls in-between. It’s both finance and product oriented. Indeed, it’s a substitute for labour. And its product is money! Central banks and governments don’t stand a chance. The tail now wags the dog.

In my view, this is largely because America is the epicentre of economics and the American economy is now very heavily financialised and technology dependent. So the American economy makes money from money now, via technology, not goods.

Goods come from China and American labour markets are now so flexible that they no longer need much study. All that old stuff about wages, employment inflation and Phillips curves, etc., is now passé.

So while China slaves away, the finance and technology sectors give America its economic power. That’s what makes it worthy of constant study. The best minds are to be found there.

Also, economics has reverted to the study of market behaviour of firms, dominance and monopolies. That’s why there’s so much emphasis on regulation. However, there’s an old disjunction here.

Economics has always been about efficiency. Regulation, however, is about equity, which means it is largely political.

So the discipline is getting into intellectual contortions — efficiency and equity don’t go together well — which could well stymie its future influence. You can’t, as they say, run with the hares and hunt with the hounds, even if you call it ‘development economics’.

What will happen as a result is that politicians will simply ignore economists. In fact, they are already doing that. Welfarism is exactly that.

Behave yourself

The other thing that’s now in high fashion is behavioural economics. Until two decades ago economics was founded on rationality. Now that’s no longer the case.

It’s a complete overturning of received wisdom, on par with Galileo saying the earth went around the sun and not the sun around the earth. You have to rethink everything.

Amos Tversky and Daniel Kahnemann who came up with this irrationality thing suggested that people don’t behave rationally, not always anyway. This gave economics a new breath of life. A whole new field of inquiry has opened up.

Tversky and Kahnemann had corrected a wrong belief but the way economics has adopted the new truth has left it asking all the wrong questions, namely, what will this nut do and how will his or her actions affect outcomes?

If you follow economics research as closely as I do — half a dozen of my family members including my two sons are into it — you will easily see the signs of intellectual distress. There are a million tonnes of new data being generated daily but no theoretical framework to fit it all into. The reason, I think, is that economics now worries too much about optimising social outcomes rather than maximising commercial ones. In the process it’s lost its way.