Economy, Domestic Economy

Blight of Engineering Approach in Economy

Mousa GhaninejadMousa Ghaninejad

Perpetuation of the fiction that engineering approaches are workable in social interactions, including economic interaction, must be consigned to history. Eminent economist Mousa Ghaninejad, a strong advocate of the free market, has made the call in an opinion piece “The Blight of Engineering Approach in the Economy” published on the website of Tehran Chamber of Commerce, Industries, Mines and Agriculture. Excerpts:  

Engineering natural systems is revered all over the world for improving the wellbeing of people, particularly over the past two centuries and after the Industrial Revolution. Meanwhile, the amazing feats of engineering have led to a common misconception that we can work out solutions to all problems by employing engineering approaches.

In essence, engineering is directly applicable in the physical world and cannot be easily generalized to social sciences—where individuals and their interactions are involved. Human behavior is driven by their unique thoughts and preferences. The thoughts might undergo dramatic change over time. What effects change are factors not easily detectable through natural sciences or engineering, simply because individuals have a free will and enjoy freedom of action. They react quite differently to different circumstances.

This is while political power wielders are more than willing to finely engineer social or economic relations. They like to choreograph foreign trade and keep in check imports in order to protect domestic production and boost economic growth. They are eager to price goods and commodities and engineer social justice.  Protecting or increasing the value of the national currency has always been one of the strong temptations in policymaking circles.

In our country, engineering the interest rates and adjusting it with the inflation rate is pursued dutifully. However, history shows something else. It has often shown all these strains of engineering are doomed, though hardly ever abandoned thanks to their popularity among people and policymakers alike.    

The illusion, leaning on delusion, of engineering the economy has proved to be so ingrained that even economists harbor it by highlighting the concept of market failure. They falsely suggest that economics is the science of dealing with market failure through engineering techniques rather than the science of understanding the behavior of markets.

The brainchild of such mentality in our country has been disastrous. Economy controlling institutions (from the Consumer and Producer Protection Organization to the Competition Council to Anti-Smuggling Organization) are all products of such a mindset.

Creation of interest-free banking originated from an engineering approach, as if you can build a functioning banking system by ignoring economic rules.

Doing the impossible may be possible, but it won’t necessarily produce the desired results. The economy in which we operate is not a natural system and economic mechanisms cannot be engineered like natural systems.