18 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1 Aleksandr Nekipelov New pragmatism by G.W. Kolodko: an alternative of or a supplement to pure economic ?

Scientific and technological pro- cesses. It is obvious that this fundamental gress has radically changed and con- problem, as well as its derivatives, has a tinues changing the life of human special economic dimension. community. Some thirty-forty years In the sphere of mutual relations be- ago people could not even imagine tween man and nature the conflict be- how their life would be modified as a tween growth and development manifests result of digital revolution, explosive itself in a sustained escalation of the prob- development of information and com- lem of environmental degradation result- munication technologies. Mesmerizing ing from human productive activity. It is prospects have opened due to accelerat- known that efforts to intensify productive ing penetration of mankind into the se- activity have had a mixed impact on the crets of microbiological and cognitive dynamics of human well-being. Immedi- processes, of the laws of matter at the ate result consists in the growing quan- nanoscale. Because of permanent pro- tity of , which meet the demands gress in basic and applied research peo- of the members of the society, and this ple are getting at their disposal more very effect stimulates people to scale up and more perfect technologies, which production. The growth of the human provide them with possibilities to meet population acts in the same direction. their material and spiritual needs on an The deterioration of the environment is a increasing scale. more remote and gradually accumulating effect of expanding exploitation of natu- But it is also well known that grow- ral resources, which negatively influences ing intellectual might does not save the people’s welfare. mankind from new challenges – both from the surrounding material world, and Growth vs development problem has its own organization as a society. Perhaps, numerous manifestations within the soci- in the most general way these challenges ety itself. Social – including economic – can be seen as a manifestation of a single institutes do not ensure that cultural val- big problem – non-identity of growth (in ues of different groups of people are fully the sense of permanent, though uneven, taken into account in the process of their increase of material and spiritual goods, interaction. This side of the case deserves knowledge and technologies at the dis- special attention in the period of globali- posal of mankind) and development pro- zation. In more general terms we can talk Praktyczna teoria 19 about constant failures in the process of ent currents within these disciplines their harmonization of interests, belonging to very existence testifies to the fact that eco- different interacting actors – both indi- nomic relations have by no means a casual viduals and their groups. The end result of character. The main task of micro- and the imperfection of institutes are conflicts is the same as the task – sometimes quite acute, and unfavorable of any other theory – to build the “intel- development of socio-economic processes. lectual layout” of the studied object. This As an example of such phenomena of con- model, reflecting main interconnections cern we can refer to deep differentiation of between different elements of economic incomes among separate people, regions, system, is designed to reveal the features countries and their radically different op- of its functioning and evolution under portunities of access to the achievement the influence of internal and external im- of modern civilization. pulses. Along with micro- and macroeconom- Numerous problems arise as a result of ics there exists another type of theoretical imperfect organization of economic life in disciplines. Their function is to develop modern society – both on a national and tools, which help those who study specific global level. The functioning of market economic processes to collect and process economy, which has become a universal data. Economic statistics and economet- form of economic order, is accompanied rics are precisely these disciplines. by deep crises. It is indicative that the In turn, applied economic research is main source of global perturbations is lo- designed to reveal and estimate processes, calized now rather in the financial than which occur in specific economic systems real sector of the economy. – global and national economies, regions, The problem is further aggravated by branches etc. On the one hand, applied the existence of a complicated system of research is based on conclusions of eco- feedback between different challenges nomic theory (in this sense the latter is facing the mankind. The tension growing its methodological foundation) and take along the line of man – nature is projected advantage of research tools developed by on the system of social institutions; the theoreticians, but, on the other hand, it latter has a strong impact on the character allows to confirm or to reject general con- of human productive activity and, there- clusions of economic theory. fore, on his mutual relations with nature. How to unravel this extremely com- An opinion that economic science or- plex tangle of problems? Can modern eco- ganized in such a manner does not allow nomic science be useful in this? – here are to formulate clear answers to challenges question, which attract more and more at- faced by humanity in its economic activ- tention of social scientists and politicians. ity has become quite widespread nowa- days. Obvious failures in forecasting The heterodox answer important economic events, on the one Historically economic science embrac- hand, and multiple cases of inefficiency es a wide range of disciplines both of basic of practical recommendations made on its and applied character. From this point of behalf, on the other hand, are considered view, it does not differ much from natural as the most convincing evidences of the sciences. crisis of modern economic science. The General economic theory () most vivid example of the first kind is the is represented by two sciences – micro- huge world financial and economic crisis and macroeconomics. Despite the differ- of 2007-2009, which, ironically, erupted 20 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1

soon after mainstream economists be- Back in 1998 V. Polterovich (1998) came confident that they had resolved the came to conclusion that the crisis of eco- problem of depression prevention (Lucas, nomic science is linked to impracticabil- 2003). The examples of the second kind ity of the task to transform it in a precise are numerous. I will limit myself to men- science such as theoretical mechanics or tioning now generally accepted inefficien- chemistry. The position of G.W. Kolod- cy of measures, known under the name of ko is quite close to this point of view: Washington consensus, which were heav- he argues that in the system of sciences ily imposed on post-socialist countries. economic theory occupies the place be- Such failures of modern economic tween hard precise mathematics and soft science can be considered as obvious ex- abstract philosophy. amples of its crisis. However, the task The rejection of exclusive reliance on of researchers is not to state the existing logical structures and the intention to problems. The next, more difficult step is bring economic science closer to solving to reveal the nature of the crisis, its deep practical problems led to the spread of foundations. G.W. Kolodko’s concept of the point of view, according to which this new pragmatism is an example of the so- science should absorb results of different called heterodox approach in economic spheres of knowledge, i.e. to have multi- science, whose methodological founda- disciplinary and heterogeneous character. tions are analyzed in this section. Prof. V. Polterovich brings this thesis to its logical conclusion, advocating for the The representatives of this approach replacement of economic theory by gen- are questioning the validity of the at- eral social analysis. His idea is that … all tempt to construct economic theory in attempts to determine the area of economic the image and likeness of natural sciences, phenomena proper lead to the insolvabil- i.e. basing on a set of axioms and logical ity of the main economic problems (Pol- inferences and with wide application of terovich, 2013, p. 181). The functioning mathematical technique (Pigou, 1932). and development of social institutes as a Consequently, an obvious simplicity of whole should become the subject of gen- hypotheses (axioms) referring to specific eral social analysis. Studies, which are features of human behavior, on which carried out within general social analysis, economics is based, becomes an object of should be supported by a single database criticism. Among them are the theoreti- and their common analytical apparatus cal constructs used by modern economic should consist of statistical processing of theory to characterize both individual be- data (econometrics) and game theory, the havior, and social goal-setting. latter being treated as an abstract disci- Attention is attracted to the fact that pline explaining the formation of norms agents with consciousness and their own of behavior (Polterovich, 2013, p.184). interests act in society and their ideas The author himself emphasizes an eclec- about reality can directly influence it. tic character of this construct: Modern One of the consequences of such a state institutional analysis with its methodologi- of affairs is a fluidity of economic envi- cal eclecticism could become a convenient ronment, which leads to the rapid obso- platform for synthesis (Polterovich, 2013, lescence of any models that claim com- p. 185). pleteness. At last, the fallacy of ignoring The concept of new pragmatism by non-economic factors of economic devel- G.W. Kolodko is also based on the fact opment is emphasized, especially of cul- that economic theory should be primar- tural and political character. ily focused on the achievement of prac- New pragmatism by G.W. Kolodko: an alternative of or a supplement to pure economic theory? 21 tical goals and rely on multidisciplinary studied with the use of diverse research approach. Special role is attributed to the tools. Economic theory as a two-stage area of human values. From this angle of design consisting of general theory and view the task of economic theory con- its applications (or, in other words, basic sists not only in description of economic and applied sciences) goes into oblivion; reality and establishment of cause – and in its place comes science, devoid of fun- – effect relationships between observed damental components. It should be men- economic phenomena and processes (de- tioned also that a drastic increase of costs scriptive function), but also in making related to the necessity to allocate human value judgments (normative function) and material resources to research from and on their basis – formulating recom- scratch countless specific problems facing mendations aimed at solving the problems the society would be one of the results of facing the society. the transition to such a science. Through these methodological prin- ciples G.W. Kolodko develops the coin- The above-presented vision of differ- cidence theory of development. Its essence ence between social sciences as a whole lies in the fact that any economic situa- (and economic science in particular), on tion is always characterized by a unique the one hand, and natural sciences, on combination of properties. Any of these the other, also cannot be accepted by the properties can appear in other conditions representatives of traditional economic as well, but their consequences will not be science. the same because of the different context. It is by no means possible to neglect According to the author of this concep- the fact that the main specific feature of tion, the uniqueness of each situation society as an object of study consists in requires the rejection of dogmatism and that human beings, interacting within it, associated desire to construct a universal are conscious and guided by interests in theory of development. Similarly, the re- their actions. Social, including economic, searcher should be ready to apply those institutes are the product of their activ- analytical tools, which best fit the nature ity. But the conclusion that we cannot as- of the studied object and pay no attention sume the existence in economic system of to the question, which school of econom- consistent patterns amenable to scientific ic thought developed the respective tool. generalization is not convincing. And last, G.W. Kolodko attaches special The complexity of modern economic importance to the application of compar- system riddled with countless interde- ative methods of economic analysis. pendences between economic agents, which act separately from each other, is The crisis of economic theory: well known. The more important is the an orthodox view fact that market economy, despite this Strictly speaking, unorthodox (hetero- feature, does not disintegrate, but rather dox) attitude to economic theory logically demonstrates the ability to ensure more leads to the complete abandonment of it. or less orderly development. This in itself The study of behavior of a specific object gives a good reason for the assumption of in specific circumstances is substituted the presence of objectively acting forces for generalized description of behavior of that guide the energy of autonomous a certain class of objects. With this ap- economic agents. One can assume that proach, the theory cannot but break up the existence of regularities in economic into countless special cases (case studies) sphere is related to the fact that differ- relating to different areas of society and ent people have homogeneous aspirations 22 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1

implementation of which is faced with rather to deficiencies in applied studies similar restrictions. Whatever it might than in basic research. But, according to be, general economic theory has at least a my mind, the analysis of the current state four-hundred-year history in the course of of economic theory makes us conclude which numerous researchers managed to that its crisis is obvious. get a lot of useful and confirmed by prac- Heterogeneous character of modern tice information about how the market economic science is itself a very important economy works. evidence of this crisis. The thing is that along with mainstream economics and its The above thesis, according to which a sections – spatial economics, industrial separate economic theory has no right to economics, labor economics, internation- exist because economic decisions by na- al economics, informational economics ture should take into account value and, – within modern economic theory there in many cases, political aspects, also is not have formed a number of currents, which convincing. There is no doubt that society treat differently basic problems and prac- is a complex object with political, eco- tice different methodological principles. nomic and cultural dimensions. But the Among them: new institutional econom- subject of pure economic theory is rather ics, development economics, evolutionary the society as a whole viewed from eco- economics, ecological economics, physi- nomic perspective than a separate sphere cal economics. There is no doubt, the fact of society. that economic theory goes far beyond its However, if economic theory deals mainstream is itself a consequence of in- with the society as a whole, but from a ability of the latter to suggest approaches special angle of view, then it cannot be to solving many of the questions posed abstracted from the phenomena, which by life. But whatever the reasons are, the constitute main object of research of other result consists in disintegration of a sin- disciplines. It should include them either gle economic theory into many “pieces” axiomatically or even to make investiga- badly connected with each other. tion of some of them its immediate task. Hypotheses relating to human preferenc- The very fact of the split of economic es corresponding to A. Smith’s concept theory into two sciences – micro- and of economic man constitute an example macroeconomics – needs interpretation. of axiomatic introduction of certain val- It can appear that they have just divided ues in economic analysis. Later we will between themselves the field of economic dwell upon the problem of social choice research – deals with that relates directly to the study of politi- relations of separate economic agents cal mechanisms and at the same time is whereas macroeconomics – with the extremely important for economic theory. functioning of the economy as a whole. But here we will note that in this case the If the problem were in a different perspec- subject of economic theory and political tive of the study, then we would have to science in fact coincides. consider micro- and macroeconomics – as it is usually done – as two sections of a Orthodox vision that economic theory single economic theory. But it is crucial is a methodological base for specific re- that micro- and macro- in their classical search can, certainly, be used – and some- form have different methodological foun- times is used in a direct or indirect form dations and should, therefore, be treated – to neglect its crisis. After all the chal- as two different sciences (Arrow, 1967; lenges the mankind faces can be related Katzner, 2006; Samuelson, 1980). New pragmatism by G.W. Kolodko: an alternative of or a supplement to pure economic theory? 23

Microeconomic theory excludes the an axiomatic basis and logical deduction possibility of interpersonal comparisons and in this sense meets the requirements of utilities, and therefore treats as sense- of any general theory. However, macro- less the summation of individual incomes economic models developed according to in order to characterize the welfare of a these rules cannot be directly applied in group. At the same time according to practice without additional assumptions. macroeconomics the gross domestic prod- In some cases, these assumptions relate to uct (income) is a key indicator of eco- the response of economic agents to change nomic development of a country. Such in some parameters of the system (i.e. sen- a macroeconomic indicator as the price sibility of the volume of investments to index is also senseless from microeco- changes in interest rate), in other cases – nomics point of view because it cannot be to the peculiarities of the agents’ expecta- unambiguously defined: its value depends tions with regard to future developments. on the structure of production taken as a Respective hypotheses are usually formu- base. Similarly, from the microeconomics lated on the basis of the analysis of sta- point of view there are no grounds for in- tistical data and that is why econometric troduction in the analysis of a production research has become an integral part of function of the economy as a whole that modern macroeconomics. But the prob- would summarize all production func- lem is that quite often in different time tions characterizing technically efficient periods econometric analysis of the same technologies in specific areas of produc- relationships gives different results. To my tion. However, it is this aggregated pro- understanding, this may be related to the duction function that underlies modern fact that social sphere includes a zone of of economic growth. uncertainty, which existence is rooted in The first and the most important pe- the peculiarity already mentioned – peo- culiarity of classical macroeconomic the- ple adopting themselves to environment ory is that it reduces the complex vector change it (Galbraith, 2014). reality to a simple scalar representation. In Whatever it might be, macroeco- recent decades a lot of work has been done nomics has occupied intermediate place to set up the microeconomic basis for between realistic and pure sciences. So, macroeconomic science (Romer, 2001). in this respect two economic theories – It seems, however, that until economic micro- and macroeconomics – have also growth remains one of its most important turned out to be different. themes methodological incompatibility of these two economic theories is inevitable. Complex problems of conceptual In case the subject matter of economic type, which have appeared in the course growth of one single aggregated indicator of a thorough analysis of the process of is replaced by the problems of economic decision-making by collective economic development based on a vector perception agents, are another manifestation of the of economic progress, the advantage of crisis of economic theory that is also rel- classical macroeconomics consisting in its evant to the subject matter of micro- and adaptability to practical application will macroeconomics. For quite a long time disappear. economists believed that social choice The second peculiarity of classical does not differ much from individual macroeconomic theory consists in that choice, because, as it seemed, in both it includes elements from both pure and cases the task is to maximize utility func- realistic science. In fact, up to a certain tion of the agent in conditions of resource moment scalar macroeconomics is built on constraints faced by him. But, K. Arrow 24 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1

demonstrated in a well-known possibility tent the notion of pure economic science, theorem that there was no rule of social are by no means limited by difficulties choice, except that based on a decision with the deduction of a household de- by a dictator, which could provide for the mand function of. V. Polterovich attracts transition from individual preferences of attention to the Sonnenschein – Mantel – the group members to the preferences of Debreu; from which it follows, according the group as a whole. Thus it became clear to his theorem, that the model of general that a group cannot be regarded as an equilibrium can say, without special ad- agent with its own set of (group) prefer- ditional conditions, nearly nothing about ences. real world (Polterovich, 2013). This conclusion made uncertain the But, to my understanding, the most very notion of socio-economic progress serious manifestation of the crisis of mi- and at the same time deprived of the con- croeconomic theory consists in that it pays tents some notions, which accompany attention exclusively to the institutions of it, such as collective (group) interest and modern economic system completely ig- social priorities (Nekipelov, 2006). It is noring the mechanisms of their formation not difficult to imagine how unfavorable and development. Non-historical charac- the consequences of such a development ter makes economic theory in its current of events are for the formation of the so- form practically inapplicable to the analy- called scientifically-based reaction by the sis of institutionally different systems. But society to challenges facing it. what is even more important it precludes Understanding the incorrectness of the perception of the market economy it- the solution of the problem of social self as a developing system. Should we be choice, which (solution) seemed obvious surprised then that there are experts who for a long time, delivered a powerful blow are sure that theoretical ideas are doomed upon microeconomic theory as well. The to lag behind the rapidly developing eco- blow fell on such a fundamental micro- nomic institutions? economic concept as the theory of con- Serious problems of methodological sumer demand (Nekipelov, 2006). As is character arise because of the concentra- well known, the function of consumer tion of microeconomics exclusively on the demand is deduced on the basis of a mod- analysis of functional dependences and el of consumer choice, within which an a related opinion that economic theory individual with a system of preferences is just a descriptive science. It turns out meeting axiomatically specified proper- that this approach inevitably leads a re- ties is an agent that takes decisions. In searcher into vicious circles of tautological fact, as is also known, such decisions are reasonings when he has to explain some taken not only by individuals, but by spe- unknown phenomena with the use of cific human groups – households. If this other unknown phenomena. In fact, the collective economic agent does not pos- presentation of microeconomic theory sess its own system of preferences then the usually begins with the investigation of question of the origin of its demand func- the model of consumer choice. As is well tion hangs in the air and, consequently, known he aim of the latter is to formu- the concept of equilibrium on commod- late an answer to the following question: ity markets, built with such elegance, col- what is the composition of the commod- lapses. ity bundle, which ensures – individual The situation is further aggravated by preferences, market prices of goods and the fact that the problems of microeco- nominal income of the consumer being nomic theory, which fits to the most ex- given – the maximization of his welfare? New pragmatism by G.W. Kolodko: an alternative of or a supplement to pure economic theory? 25

But the fact is completely ignored that the In order this conclusion not to be un- nature of prices and money income are founded I venture to propose a number not yet known. The same story is repeated of considerations with regard to a possi- with the theory of the firm. The task is ble approach meant to contribute to over- to determine the scale of output, which coming the crisis experienced by modern maximizes economic profit. Here again, economy theory. being within the paradigm of modern microeconomics, we have to define costs Systemic vision of the economic system using previously unexplained prices and, presupposes the necessity to introduce an thus, fall into an obvious tautology. The order in its already known structural el- notion of opportunity costs of the use of ements, to detect their interconnections capital, which is important for solution and subordination to each other. Because of the problem, in fact introduces in the of the complexity of the object this task analysis in a smuggling manner the no- can be solved only on the basis of the tion of interest rate, which has never been abstraction method, the movement of mentioned before. thought from simple to complex. In other words, it would be totally unrealistic to Possible approach set the task of immediately embracing the to the formation of a new paradigm whole object with its diverse structural el- The crisis of economic theory is more ements and interdependences. a manifestation of its development than a A perspective to build economic theo- decline. Any science is to give a holistic, ry on the basis of deduction method start- internally non-contradictory presenta- ing from an extremely simplified model tion of its subject matter. From time to and certain initial hypotheses (axioms) time due to research carried out perma- seems very attractive. Theoretically nently by numerous scientists such a state such a theory would reflect both func- of affairs can be achieved. The research tional relationships manifested on the does not stop then. Up to a certain mo- surface and logical subordination of the ment it is underway within the new para- structural elements of the economic sys- digm, enriching and consolidating it. But tem. At the same time an opportunity to sooner or later scientists come across such better understand the logical history of features of the object, which they cannot the economic system formation and pos- explain, staying within the framework sible directions of its further development of existing scientific ideas. New facts re- would open up. quire explanations (sometimes – actions) and researchers have nothing to do but With this approach the issue of the to propose some, which often go beyond starting point of research becomes im- the existing outlook. As a result, the sci- portant. The author made an attempt entific pattern becomes motely, heteroge- (Nekipelov, 2006, 2017) to use for these neous and loses integrity. The further this purposes the simplest model describing an process goes, the more urgent the task of isolated individual who has to take a de- updating the paradigm becomes, i.e. the cision with regard to production and lei- task of restoring integrity of the theory sure. In economic science this model has taking into account the new set of factors. a long history and its own name – Crusoe At the same time former scientific knowl- model. It is often used for the analysis edge is not dismissed; it should rather be of certain problems in the most abstract included in a new set of scientific ideas in manner. But I am not aware of cases when the processed form. a detailed investigation of this model is re- 26 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1

garded as the first step in the construction exchange is transformed into the market of a coherent economic theory. capitalist economy. Going, on this stage of analysis, be- Consistent application of this ap- yond the exchange economy model allows proach allows you to create, in the long us to take a look on the interaction of costs run, a coherent vision relating to the and utility in an economic context free of emergence and functioning of basic ele- money forms. On this basis it becomes ments of the modern economic system. possible to identify forces, which push Besides, it becomes clear that the market individual producers to establishment of itself is an instrument of social choice. The exchange relations with each other and choice that is based not on the presence of to development of the social division of the system of preferences in society, but labor. Huge transaction costs associated on the coordination of the interests of all with in kind exchange provide a founda- actors operating within the economic sys- tion for the explanation of the emergence tem organized in an appropriate manner of the institute of money, which serves as (Arrow, 1963). Harmonization of inter- a means of their radical reduction. And ests within the market economy finds its only then the transition to the model of manifestation in the achievement of gen- simple commodity exchange, which was eral equilibrium. As is well known this regarded by K. Marx as the starting point state is Pareto-efficient: it is not possible of analysis, is made. to move from it to another state without Investigation of money functions and deteriorating the welfare of at least a sin- microeconomic peculiarities of the model gle member of the society. of simple commodity exchange makes it Thus, under this approach the idea possible to introduce in analysis the most that a group is able to range independent- important notions of the market economy ly different “states of the world” and on – money costs, price, income, interest rate, this basis to make the optimal choice is natural rent – and to determine the func- replaced by the view that the latter is just tions of demand for consumer goods and a result of the intersection of individual production resources, the supply function interests. It is important that the recon- of an individual producer, the conditions ciliation of individual interests can take for general and partial equilibrium. place only within a certain institutional environment. In the market economy Within this approach the emergence such an environment is created by the rec- of such an institute as the firm becomes a ognition by the members of the society of logical result of the fact that on a certain private property rights and of their obli- technological stage significant increase gation to respect the concluded contracts. in economic efficiency becomes possible only on the basis of large production sys- From a logical point of view, we have tems, which involve the use of joint work here a very interesting situation. It turns of many individuals. The formation of an out that the model of interest coordina- aggregate worker within the firm is real- tion is based, essentially, on tautology: the ized by means of turning the workforce members of the group in order to have a into commodity and emergence of the possibility to reconcile their individual in- institute of hired labor. Involvement in terests should in advance agree upon how economic turnover of the last factor of they are going to make this coordination. production – the workforce – means that It is natural, then, that the very point the market economy becomes universal of optimal social choice should not be whereas the system of simple commodity unique: the result can be different under New pragmatism by G.W. Kolodko: an alternative of or a supplement to pure economic theory? 27 different algorithms of decision-making, individual interests means only one thing: that is in different social environment. the mechanism of market coordination of It would seem that all this is enough to interests should be supplemented by other embarrass the advocates of such an inter- instruments. pretation of the problem of social choice. The very existence of individual pref- But it turns out, that tautological charac- erences, which cannot be discovered by ter of the logical construct can be not only the market, means that the coordinated its disadvantage, but a merit as well. From view of the citizens of any country of the a practical point of view, this assertion is social optimum will not coincide gener- supported by the fact that the establish- ally with the market optimum, the scale ment of any formal organization begins of discrepancy being a function of the with the approval of its charter, which role of value, non-market components in determines the way joint decisions are to the systems of preferences of the members be taken. From a theoretical point of view of the society. Anyway, this discrepancy the following is important. The ambiguity is closed by the activity of the state (after of the point of coordination of individual all it is nowhere reduced to the protection interests makes it possible to logically ex- of property rights and the enforcement of plain the reasons for which corrections to contracts) and numerous civil society in- the rules of joint decision-making are of- stitutions. That is why it is not correct to ten introduced by the members of groups. treat measures of aimed Fragility of elements, on which the con- at the correction of the functioning of the cept of coordination of interests is based, market mechanism as the interference of can be treated as a manifestation of that the state in (objective) market processes very “zone of uncertainty” in economic because of political (that is subjective) theory, which was analyzed above with considerations (Arrow, 1963). reference to classical macroeconomics. At the same time this fragility makes it possi- The outlined approach to the defini- ble to better understand the causes under- tion of social optimum makes it possible lying both emergence and disintegration to treat in a different manner the func- of different groups. tioning and development of the economy as a whole. It is not about giving up the It is important to keep in mind that use of aggregated monetary values within the market is able to discover and coor- the pure economic science – aggregate dinate only part of human preferences, supply, demand, income. It is about some- that is those preferences, which are char- thing else: all these notions should not be acteristic to the famous economic man of viewed in isolation from the underlying A. Smith. But the social DNA of a man vectors of produced and consumed goods, does not terminate where the sphere of of incomes, which all together determine interests of economic man ends. The sys- the structure of the economy both in tem of preferences of any man includes statics and dynamics. In other words, it his attitude to many characteristics of the seems that within the pure economic sci- state of the world that are not related to ence (and only within it!) the scalar mac- his own welfare treated in a narrow sense roeconomics should be replaced by the of the word. To this or that degree each vector macroeconomics, which has the of us is interested in welfare of other peo- task to show the anatomy of financial flows ple, in the harmony of social relations, in within the economy (formation of the main the state of natural environment. The fact elements of aggregate demand and supply) that the market does not see this part of in relationship with the vectors of gross and 28 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1

final product, vector of incomes of the mem- and further improvements of the software bers of the society, price vector and the level of complex, which would integrate qualita- interest rate” (Nekipelov, 2006). In doing tive relations between different elements so the vector macroeconomics will treat as of the economic system, discovered on the optimal such a state of the economy (or its basis of its meaningful analysis, could be sequential states in dynamic perspective), the next step after the coherent economic which provides for the harmonization of theory is constructed. In fact, it’s about a the interests of the members of the society creating a kind of a virtual economic ro- in the existing institutional environment. bot, which would make it possible to test The classical macroeconomics’ emphasis this or that hypothesis, to assess possible on economic growth is replaced here by consequences of changes in parameters of the orientation to economic development the virtual economy, to forecast results of multidimensional nature. of different economic policies. The com- And now several considerations about parison of results achieved in real and the role of mathematics for pure econom- virtual economies under the same condi- ic science. tions would help to assess the reliability of the theoretical constructs underlying the The very fact that mathematical tools software complex. play and will play a major role in this sphere raises no doubts. But does it mean The role of new pragmatism that with these tools one can solve any It may seem paradoxical, but the pro- economic question? Can we proceed from posed approach to pure economic theory the idea that the language of mathemati- rather supports than rejects the new prag- cal formula is able to crowd out usual matism scientific program. The point of verbal constructs from the description of the program is directed not against the regularities in the functioning of the eco- theory as such, but against numerous nomic system? Will not the economic sci- dogmatic concepts that do not correspond ence become because of this a variety of to reality; the modern theory being, un- applied mathematics disciplines? fortunately, a source of such concepts. As I believe that the answer to all these G.W. Kolodko puts it: You shouldn’t allow questions should be negative because, as yourself to be seduced by stereotypes, con- was shown above, the task of the econom- sensual truths, or the conventional wisdom ic theory goes far beyond the description (Kolodko, 2011, p. 173). of quantitative interrelations between dif- ferent economic variables. For example, In no case can pure economic theory mathematical methods help discover directly produce practical recommenda- quantitative consequences of the capitalist tions on how to address specific issues, firm pursuit to maximize this or that in- which states or their integration unions, dicator (economic profit, rate of profit or global economy as a whole face. After capital yield), but the nature of the firm’s all, one cannot hope that overcoming motivation can be substantiated only on the economic theory crisis, restoration of the basis of qualitative reasoning. its integrity will transform the search of optimal decisions in the routine proce- At the same time the role of math- dure that would happen in an automatic ematical modeling should not be limited regime on the basis of the introduction to the definition of particular quantita- of information in the above-mentioned tive relationships between individual eco- software complex. An attempt to create nomic variables. Ideally, the development a precise copy of the modern economy New pragmatism by G.W. Kolodko: an alternative of or a supplement to pure economic theory? 29 is doomed to failure for purely practi- indicator, deserves full support (Kolodko, cal reasons: efforts needed to collect and 2014). process the needed information exceed However, the success of researches all imaginable limits. Such an approach based on the ideas of the new pragma- is unrealizable because of the existence of tism will be the greater the more they will the above-mentioned zone of uncertainty, build on fundamental findings of general which the pure theory inevitably faces. To economic theory. Thus, the latter should forecast when an how the expectations of set a kind of a logical framework, which the members of the society and, as a re- would simplify the process of decision- sult, their reactions to changing economic making in the socio-economic sphere. variables, will change and which correc- Several examples will illustrate this thesis. tions they will introduce in the mecha- nisms of collective decision-making is G.W. Kolodko is, to my understand- absolutely impossible. ing, perfectly right when he insistently draws our attention to the necessity not to It follows then, that there is no alterna- forget the tasks facing the society, its in- tive to the use of simplified models based terests when formulating economic policy on an aggregated and, to a certain degree, (Kolodko, 2014). He emphasizes the im- heterogeneous information for the deci- portance of preventing excessive income sion-making. It is also true that the tools differentiation for a harmonious develop- used for this purpose will necessarily have ment, puts forward the requirements of an eclectic character. They will include the moral nature to the behavior of busi- classical macroeconomic models, econo- ness and the functioning of the economic metric instruments, and sociological sur- system as a whole. In the international veys. The search for optimal solutions nec- sphere he actively promotes the coordina- essarily requires consideration of cultural tion of interests of numerous participants and socio-psychological characteristics of of the process. But is it not the society, of the political mechanisms obvious that only deep study on an ab- used by it. In this sense, one of the main stract level of the problem of economic in- ideas of the new pragmatism – successful terests and social choice can give solidity applied economic research cannot be con- to these recommendations. ducted without taking into account of the so-called non-economic factors – is abso- Conclusions lutely justified. Taking into account the The general conclusion of the reason- existence of the uncertainty zone, that is ing presented in this paper can be sum- imminent to the social sphere, the thesis, marized as follows. according to which it is necessary to use The potential of the new pragmatism those macroeconomic models that cor- by G.W. Kolodko should, by no means, be respond to the maximum extent possible demanded only today when economic the- to the specific characteristics of the object ory is in crisis. But I have no doubt that it and, therefore, to reject the conclusions has all chances to be demanded tomorrow drawn in another situation, is fully ratio- as well when due to common efforts of the nal. And, at last, an emphasis on the ne- economic community this crisis will be cessity to move the center of gravity from overcome. Simply then the new pragma- the investigation of economic growth to tism will be considered not as an alterna- the analysis of socio-economic develop- tive to pure economic theory, but as a reli- ment, manifested rather in the dynamics able bridge over the uncertainty zone lying of a system of indicators than of a single between abstract and real economies. 30 KWARTALNIK NAUK O PRZEDSIĘBIORSTWIE — 2019 / 1

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Prof. Aleksandr Nekipelov, director of the Moscow School of Economics at the Lomonosov Moscow State University, RAS Full Member