Main trends of research in the social and human ... - unesdoc - Unesco

Economics 3 I I
tation with reality. Conversely, a theory which in principle gives the correct
explanation but is wrongly employed in actual practice (e.g. no account is taken
of some modification of the explanatory variables or in the value of parameters)
may produce an erroneous forecast (especially if the forecast seems to be borne
out by past experience)? This happened, for example, in the post-war years,
when Marxist economists expected a repetition of the great depression of the
thirties. Leibenstein is on the whole correct in saying that an accurate forecast is
no guarantee of the accuracy of a theory unless the theory is satisfactory in its
explanatory part. On the other hand, the fact that a forecast fails to materialize
points to inadequacy in the theory, or at least to faulty application.
The depression dispelled many illusions that were still held about the merits
of free-market mechanisms, and brought to the fore the macro-economic prob-
lems of directing a national economy and of its functioning under various
regimes and according to different models. The importance of these problems
was accentuated by the founding of the Soviet Union and the appearance of the
socialist countries, and later, when the developing countries, with their mainly
mixed econ0mies4~, achieved independence. Different socio-political systems
must accordingly be considered and compared, and a choice made of a particu-
lar model within a given system, since the mechanisms by which an economy
functions are by no means determined only by the political system under which
it operates; this multiplicity of possible models as regards both functioning and
management is most distinctly evident in socialist economies.
A discussion of great practical importance for the socialist countries which
has been going on for many years shows that, between the extremes of complete
centralization and complete decentralization, many patterns of functioning are
theoretically possible in a socialist economy. They include various combinations
of self-regulating and consciously regulated sub-systems, with different types of
transmission links between them. Once again, the question of macro-micro rela-
tions arises, and the scope of self-regulating systems. In a decentralized system,
the r6le of the central authority might be confined to setting the servo mecha-
nisms, and feeding in certain parameters (accounting prices to be used in the
calculations).
Once we move from the market economy to planned and socialist economies,
the scope of the theory of the functioning of the economy becomes much broad-
er, the market being then only one of many mechanisms to be taken into consid-
eration. The emphasis shifts to all sorts of incentives,49 their problems, and
responses to them. The wide range of methods that can be used to examine these
incentives can be grouped in three categories:
a. Historical and descriptive. These throw light on specific forms of economic
behaviour in different socio-historical contexts (e.g. the response of producers
to an increase in selling prices in a market economy, and in a predominantly
subsistence economy).
b. Observation andfield research. This can be carried out in co-operation (or
on similar lines with research on other behavioural disciplines in making em-
pirical studies of human society. The theory of the functioning of the economy
is the branch of economics in which the essential subject - matter of political