This issue of the International Review of Applied Economics includes a ‘Call for Papers’ for a Special Issue of the journal, to be dedicated to the areas of ‘risk, uncertainty, and democracy’. Risk and uncertainty are central to how economies function, and how therefore economics as a discipline should approach its analysis of the economic system.
Almost everything to do with the functioning of the economy is uncertain. How much profit a firm will make, either with or without additional investment, is uncertain. It depends crucially on how well the firm can produce their product or deliver their service, at what price. This will depend on many factors, including the skill, capabilities, effort and imagination of their workforce. Some of that can be influenced by the company through their policies and practices, and more generally by their corporate culture, while some will depend on the publicly provided or supported productive infrastructure, including education – and whether this is lifelong – health, transport, and so on.
How much profit a firm will make also depends on what demand there will be for their product or service. This in turn depends on decisions by the consumers – whether these are individuals, or other firms, or government, or others. And those decisions will be influenced by waves of consumer confidence or the lack or it, and by what Keynes referred to as ‘animal spirits’.
At every stage there is uncertainty. And hence risk to invested funds, as well as to the future of the companies concerned, and the jobs within those companies, and within their supply chains.
One of the critiques of mainstream, neoclassical economics is that too often it abstracts from these fundamental points, and instead relies on, for example, production functions showing that with certain inputs, a pre-ordained output will follow, whereas in fact the level of output will depend on many of the factors referred to above – as well as to many other uncertainties. Another example of this weakness in mainstream economics includes the forecasting models, none of which forecast the 2007-2009 international financial crisis and consequent global recession.
The ‘Call for Papers’ outlines various areas in which we would welcome submissions, but that should not be read as restrictive – we would welcome papers on any aspect that addresses these issues.
Several of the papers in the current issue relate in various ways to issues of risk and uncertainty, perhaps most dramatically in the case of the gig economy, where the whole world of work has been made uncertain – on a daily basis as well as longer term. In ‘Is the well-being of gig workers in Malaysia better? The reality of pain and gain’, Khairunnisa Abd Samad, Nur Hayati Abd Rahman, Shafinar Ismail and Najihah Hanisah Marmaya find the workforce having no health benefits, and a lack of retirement security – along with little ability to save (against future risks and uncertainties, including regarding health). Thus, the public policy framework that had been developed precisely to deal with the risks and uncertainties that face the population are increasingly inadequate, and a renewed global effort is needed to design and introduce a new welfare state, fit for purpose for the current phase of global economic development.
Disclosure statement
No potential conflict of interest was reported by the author.