GOVERNOR of the Central Bank of Barbados Dr DeLisle Worrell says the idea that prices are determined by the balance between demand and supply in the market is false.“In real life retail prices are always predetermined by the seller, and wholesale, producer and other prices are determined by contract,” he said in his presentation What’s Wrong With Economics, at the annual general meeting of the Barbados Economics Society on Wednesday at The Savannah Hotel, Christ Church.He pointed out that prices had not been set by markets since the end of the agrarian economy when farmers traded their farmed produce and livestock with artisans, fishermen and other farmers for products that they needed and which they did not produce.“Trading – that is, economic exchange – took place only on a single day, in a discreet space, for a specified time. It made sense to think of economics as the business of trading in markets.“Unfortunately, the timing was all wrong. Economics was born at the sunset of the agrarian age and at the birth of an industrial age, in which the nature of economic transactions was completely transformed,” Worrell said.He said that the world now required a new paradigm in economics that was appropriate to the current culture of economic exchange in an industrial age.“I have come to believe that economists have built a discipline for a world which has largely vanished, and that is why we have nothing sensible to say about the challenges that face the world economy today.“Economics does not give you a straight answer about the price of oil or any other commodity, about the exchange rate of the euro to the dollar, the impact of deficit reduction in [European Union] countries, the effects of interest rate changes by the Federal Reserve, the motivation for stock market fluctuations, or about any other economic question. It is true that there is a dominant position in the economics profession on each of these issues, but that dominant view has proved badly wrong, and persistently so,” Worrell concluded. (SR)
