Problems and possibilities of an economic policy in very small economies : an approach

Abstract

The number of studies dealing with economic problems of small countries is growing. They have contributed to our general knowledge on the economics of these societies. Nevertheless, there is no clear evidence that a successful economic policy will be following from this knowledge. This, of course, is not unusual in matters of science. First of all, the exploration of an economic problem is one thing; the solution of problems is another thing altogether. And indeed, the economic problems of small countries, especially of the very small ones, seem so grave that one could seriously question any pretention of being able to solve these. We could emphasize the lack of development possibilities and point at the long list of impediments, at political and social structures which hamper development and which are quite difficult to change, if at all. All of these arguments could be substantiated. They have in fact been substantiated for a number of very small countries, where a virtual absence of resources or diseconomies of small scale seem to deprive their inhabitants of rather basic facilities (5, p.90]. But, for the sake of our argument, let us assume another reason why, so far, development successes in very small economies have not been realized, and let us point to the limited ability of science to propose effective measures to solve real world problems. Our argument is not a philosophical one. We, therefore, neglect the reasoning that solutions to problems almost always create new problems. Our argument is of a more theoretical nature. We simply feel that the ability of science to suggest policies is sometimes rather limited, precisely because of the limitations in our scientific way of dealing with reality. And, since some of these limitations, hampering our insights into the economic life of very small economies, seem to follow from the conception of science itself - since, so to speak, some of these limitations are self-imposed - we propose to look at the economic structures of very small economies in a different way. We have toyed with the idea to illustrate our largely theoretical exercise with a case study on Malta, but, our Institute being a very small economy itself, with limited resources, we had to confine ourselves to mere illustrations. For this and other reasons, our remarks should be seen as no more than a brief exploratory note on a large problem. Clearly, our approach does not pretend to render all other possible (scientific) approaches on formulating an economic policy obsolete or unjustified.