“Economic Theory” and “Economic Thought”: Which is more important now?

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Globally, due to the fact that the measures against corona shock are not working well, doubts and dissatisfaction with economics are beginning to appear.

Therefore, according to the recent Nihon Keizai Shimbun, there is a claim that “economic thought” is more important than “economic theory.”

▼ Countermeasures against coronavirus and resumption of economic activities.

The spread of the new coronavirus has not stopped spreading all over the world, and there is a second wave trend in Japan. Nowadays, there is a need for a solution to the contradictory challenges of “new corona measures” and “resumption of economic activity.”

What kind of economic theory is useful for the discussion?

However, in response to this question, one economist has said that “economics so far cannot respond to the situation of the new corona”.

So, the column author focused on the importance of Japan’s “health care system” by citing the contents of the book written by Professor Hirofumi Uzawa.

▼Prof. Uzawa’s thoughts:

Regarding market fundamentalism led by Milton Friedman, Professor Uzawa said, “If a company makes a profit in the market, the law and the system can be changed. In short, a decent person who can do anything to make a profit. It was far beyond the level of understanding of “the theory.

However, this principle has had a considerable influence on Japan’s economic policy.

In response, Professor Uzawa argued as follows. That is, for example, “medical care, which is the core part of social common capital, must cooperate not to use the market mechanism but to protect its activities from a more humane standpoint.”

Also, regarding the Japanese medical system for the elder senior citizens, which is based on the idea of ​​efficiency in modern economics, that the cost of medical care until the death of one patient is kept as low as possible, it is strict from a humane perspective. He was criticizing.

I will briefly describe the story of Professor Uzawa.

▼Prof. Hirofumi Uzawa

This Professor Uzawa passed away in 2014. He was a Japanese economist and emeritus professor at the University of Tokyo. His specialty was mathematical economics, and he was recognized for his achievements in decision-making theory, two-sector growth model, and imbalance dynamics theory.

A paper sent to Professor Kenneth Arrow of Stanford University was recognized, and he moved to the United States as a research assistant in 1956. He conducted research and education activities at Stanford University and the University of California, Berkeley, and became a professor of economics at the University of Chicago at the age of 36 in 1964. Note that Joseph Stiglitz conducted research from 1965 to 1966 under Uzawa at the University of Chicago where Uzawa was enrolled.

▼ Current medical system in Japan

At present, Japan’s medical system barely holds up at “the place where the morale of doctors as an occupational group, which is related to the human heart of aspiration”.

▼ Here are the claims of the author of the article:

• Under these circumstances, what is needed is not “an economic theory” such as how much 100,000 yen per person will affect gross domestic product (GDP), but “run a rich economic life and develop an excellent culture.” “It makes it possible to maintain a stable, humanly attractive society in a stable manner.”
• Based on this way of thinking, management support to medical institutions from the reserve cost incorporated in the supplementary budget must be immediately implemented.
• And it also means a break from the market fundamentalism, which has influenced Japan’s economic policy for many years.

When I knew such an opinion, I felt that I had to face the reality a little more. In other words, the end of the coronavirus is still invisible. Until the development of the vaccine, there is no choice but to select the economic policy menu in the delicate balance of “health care” and “economy”. It seems that the “correct answer” to solve this problem is not found in the current economic theory for the time being.