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Salient. Victoria University Student Newspaper. Volume 39, Number 16, July 12, 1976.



K. Dariku (Salient June 14) springs to the defence of economics. His argument basically is that economics is a positive science and as such only provides policy alternatives and cannot therefore be blamed for the problems arising from such policies that are non-economic. There are certain points in K Darika's letter which need to be looked at more closely.

Firstly he attacks Tony Ward's desert island analogy on the grounds that the problem was one for the physicist not the economist. The economist he says is concerned with the allocation of scarce resources. Accepting this viewpoint let us look at the allocation of resources in the real world, we find a world in which some of the worlds people need cures for indigestion while others starve. One gets the impression that economists are being very successful in their allocation of resources i.e. they are falling down on their specific task.

K. Sarika defends unrealistic models on the grounds that they:
a)make it simpler to learn
b)provide a foundation for later knowledge

The first assumption may be correct although I find it hard to believe that an abstract model is a better tool to learning than a concrete reality. As regards the second point to attempt to base an understanding of a world economy dominated by large firms upon a foundation of a perfectly competitive model is a little like building the new Cotton building on Cardboard piles.

Thirdly, he states that the economist does not decide what should be done but instead places economic facts before decision makers who decide policy. On these grounds the economist is not to blame for bad decisions. However the quality of any decision is affected by the quality of the facts put before the policy makers. An example would be during the depression when many economists continued to advise Governments to balance their budgets thus exacerbating the problem of unemployment. Would K. Sarika absolve the economists of the time of all responsibility for that situation?

Finally, k. Sarika maintains that it is up to the people to choose Communism, Capitalism or Socialism. I would like to hear him expound that theory to the people of Chile, He may find that the directors of ITT have a bit more to say than the average Chilean voter.

In many ways K. Sarika, a student of Economics, proves Tony Ward's point about assuming you have a can opener. He 'assumes' that unrealistic abstraction helps you understand reality, he 'assumes' that the facts put before decision-makers not affect the decisions and he 'assumes' that in a world of inequality the opinion of the people is paramount. It would seem that he has learnt his economic lessons well!

Yours sincerely

Yet another Economics Student.