…the Missing Piece (1)
More often than not, we hold ‘high profile personalities’ occupying important roles as the saviours of Ghana’s economic woes. As most citizens are prone to hold ‘high profile personalities’ accountable based on promises made, it is time for the ordinary citizen to understand that economics is not hard science. Many promises backed by mathematical models created by learned people won’t necessarily reflect the realities. By so doing, a much broader perspective is needed. Borrowing John Maynard Keynes general assessment of economics, “economics is, at best, a multidimensional, evidence-based craft, alert to all the influences on human behavior; at once ambitious in scope and modest in its claims for what we can ever predict in human affairs”.
In most cases, the dominant strain of the ever-knowing academic economics ignoring John Maynard Keynes’s view on economics fail to properly determine the rational expectation hypothesis. The fallacy here is that we sometimes assume that essential market actors not only necessarily behave rationally, but do so according to the same mental models deployed by economists. To believe that a rigorous economic-based idea from a renowned economist could encompass, predict and optimise the dynamic complexity of macroeconomic induced collective human behaviour is a mistake.
The ever-changing and growing complexities in handling market-related and behavioural-induced economics calls for dynamic, well-thinking, and idealistic individuals. To this effect, we have the well-learned and industry veterans manning our economic management teams. However, the citizenry believes that being a genius in your field necessarily mean you must be a saviour to many challenges faced. The dominant strain of both academic and market economics fails to see a forthcoming crisis and contributes to it.
Citing a more popular example, I do remember the statement “if the fundamentals of the economy are weak, the cedi will expose you”. This, on a macroeconomic scale, is very true. Yet, economics is a very dicey subject that can expose the known and the unknown. As I have always maintained, economics and ‘know-all’ are not the best of friends, as one will expose the other. From a more academic perspective, arguing fundamentals based on past economic proponents make the cedi statement a good one to put out. However, the economic output of an action (past fundamentals) should result in either the appreciation or stabilisation of the cedi (if the cedi is chosen to be used as an assessment index in this scenario).
As the cedi is called to question herein, whichever party that has been in power in the last decade played a role in depreciation of the cedi. It is commendable as an analyst to be explicit that most modern macroeconomics do largely ignore the operations of financial systems – hitherto, the role of the banks in tackling economic challenges. Truth be told, per my economic analysis the banking sector reform has done us more good than harm. Yet, there are several missing pieces to economic stability that we may have ignored. To conclude, we cannot just overweight the countable against the unquantifiable. Neither can we yield to false precision, nor ignore real-life microeconomics.
The writer is an Energy economist, research consultant, Climate change activist ([email protected])