Full text: Expansion, Stagnation und Demokratie - 1982 Heft 2 (2)

The poverty of Micro-Economics
An essay on the relationship of
theory and policy
Alec Nove
In his memoirs, Teddy Prager kindly remembered how, as a fellow-
student, I expressed scepticism as to the evidence given at the Moscow
trials of 1937. Our paths diverged widely, geographically and ideologi-
cally, but I think we both share a concern for economics of socialism,
and therefore also an interest in public enterprise in its many forms. Of
course, activities do not become socialist merely by being public. Was it
not Engels who remarked that, were it so, the first socialist institution
was the regimental tailor. Some socialists are apt to dismiss the
experience of nationalized industries in capitalist countries as irrele¬
vant. However, they are wrong on two counts. Firstly, most of the
Problems encountered in administering and evaluating the Perform¬
ance of nationalized industries occur also in countries calling them-
selves socialist. Secondly, inadequacies in the Operations of
nationalized industries can help to discredit the socialist idea among the
victims of these inadequacies, i. e. the general public.
It is my contention that Western "mainstream" micro-economics has
not been helpful, indeed has on occasion been positively misleading, in
the search for operational criteria. Furthermore, the teaching of
economics has become less relevant, in these (and perhaps in some
other) respects since the days when Teddy and I were at the London
School of Economics. It so happened that I was out of academic life,
first in the army and then in the civil Service, for twenty years.
When I returned, I soon became aware how far out of touch I was with
modern economics. But equally there arose a strong impression that
modern economics was far out of touch with reality, indeed further out
of touch than had been the case in my Student days. True, there had
been an interest in growth, a word which never seemed to have been
mentioned in courses I had attended at LSE. True also that there had
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