Failing economics

May 6, 2018 00:50 AM Bhim Bhurtel


Economic policy professionals in Nepal have not been able 
to apply economic engineering to produce a desired growth

 

It’s been almost ten years since the second worst economic recession ravaged the advanced economies including those of Asia. Though marginal recovery has been witnessed in some economies, most advanced economies are still bouncing back and forth with sluggish growth. 

Effective demand management, growth spurred by job creation and speedy and sustainable recovery has been a key challenge for most economies. The protracted volatility could possibly lead to a double dip recession in future. Despite efforts by governments and international organizations, signs of sustainable recovery are still negligible. The gravity of resiliency of advanced economies towards this recession has raised a serious question.   

Thousands of universities and colleges recruit the brightest high school graduates in their economics programs with the hope that these students would be equipped with knowledge and skills to become potential economic policy professionals. 
The economics departments of top-notch education institutions produce world-class economists, and their products are the front-runners in economic decision making in several governments and international development agencies. The governments, economics departments of colleges and universities, and economic development agencies depend on the knowledge and skills of these university products for policymaking. 

Economists practice economics and publish millions of erudite articles in the best journals of economics. Thousands of books on economics have been published identifying economic problems. Economics as an academic discipline and policy science has been growing in an unprecedented manner and it has become much more sophisticated than in the 1930s.  

Despite these skills, better data management technology and data analysis and predictive power of economic science, today’s economics fails to foresee and predict recurring economic meltdowns.  Economists have not only failed to foretell the current economic crisis, they have also been unable to fix economic snags effectively and timely.  
The prolonged recession is suggestive of the fact that economists do not have the ability to predict economic upheavals or provide a remedy for economic maladies. It is also a proof that elite educational institutions are not as proficient as they claim to be. 

Beyond theory 

Why do economics and economists fail? Economics is the study of human behaviors. But with the use of highly sophisticated mathematical and statistical techniques, it has turned into a physics-like genre. It deals more with physical phenomena than with behavioral phenomena. 

Common sense dictates that economists understand economic issues and they should be able to comprehend human economic behaviors and enable policymakers and politicians to comprehend future economic crunches and offer remedies that could be employed to deal with them. Global economy has been facing one crisis after another periodically. 

It was thought that after the great depression of the 1930s, economic crises in advanced economies would be fixed for forever. But 1970s’ oil crisis triggered a stagflation. The current trend of recession shows that economists have failed to comprehend economic phenomenon and human behaviors in economic decision making.

Economics is isolated from larger section of society. Common people feel that economics is the exclusive preserve of the economists, and esoteric economic theory is mystifying to ordinary people though these very people are the ones who must know the functioning of the economy. Economic knowledge should be accessible to ordinary people who are affected the most by economic problems so that they can comprehend economic problems and find solutions to these problems. 

There is an atypical divide between the massive scales of the economic problems ahead in the world and the economic policies and devices the economists in the governments and international development organizations use. In the same fashion, there is an odd split between the massive scales of economic knowledge at our disposal. On the other hand, we have few doable solutions to cope with the economic problems.

Making it work

In Nepal, at least 18 established macroeconomic laws have no consistency. For instance, at the time of high inflation there should be an increase in investment. But our investment has diminished significantly over the period of time. Similarly, in case of pegged exchange rate regime, the open macro-economic law triggers the ripple effects in the small economy that pegs with exchange rate of larger economy. Nepali currency has been pegged with Indian currency. India’s economy is growing at faster pace but only negative spillover effects are impacting Nepal. 

One finds such inconsistencies in Nepal’s hydro-electricity sector as well. This indicates that either they have a dearth of knowledge and wisdom to estimate the actual functioning of our Nepali economy or they severely lack professional integrity. That is why economic policy professionals have not been able to apply economic engineering to produce a desired growth.

If economics miscarries what it supposed to carry on, it should be concluded that if something went wrong in economics as a discipline of policy science economists have failed. Either recovery doesn’t exist or our economic knowledge devised to fix the crunch is flawed. The economic academia, governments and international economic institutions should seriously rethink the content of economics courses and the quality of graduates to secure the future of economics as a policy science and its practical problem-solving capability. 

The author is an economist

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