For someone who has forever been sceptical about the capacity of economics, as a subject, to be of any use in the real world, and the ability of economists to formulate a workable plan for alleviating the problems of common Pakistanis or even to manage the economic mess we find ourselves in, the assertion that economists and their ideas have transformed business, was amusing, to say the least. My initial thoughts was, yes they did transform it, for the worse!
Don't get me wrong, albeit forever might perhaps be a strong word, but the crux of the matter is that economics and economists have very little, if at all anything, to brag about. The world finds itself in an economic mess today, primarily because almost all economists failed to predict the great recession, and then later, dreamed up a solution which was designed to save the Masters of the Universe only, and perhaps ended up elevating the hardship of the common man. And the funny part is, the profession has now started arguing that income equality is good for growth and low taxes on the rich is the best policy. Hilarious!
On the domestic front, the economists are hogging the camera eye for quite a while now, albeit beyond critiquing each and every economic decision of the government and all the time ferociously discussing why the economy is in a mess, none of them seem to have a workable solution for the economic challenges the country faces. We all know that exports have to increase and the trade deficit has to come down, but how? Definitely the fiscal deficit and borrowing have to be brought down, and tax collection has to go up, but again how? Taxing the rich is a brilliant idea, but pure genius would be practical suggestions on how to do that. And let us not forget that most economic celebrities that we see on the media have one time or the other been part of the government's economic team; and our economy has been on a declining trend, or in substance not doing very well for as long as some of us can recall, so arguably they are part of the problem. Perhaps the media is being naughty!
But, like the say, curiosity apparently kills the cat; so ended up buying Robert Litan's book, "Trillion Dollar Economists". The underlying objective, or hope, was that if by any chance, however slim, there existed economists who have solutions worth trillions of dollars, than perhaps their ideas can be applied in Pakistan. Cutting to the chase, my hopes stand shattered.
Nonetheless, let us give the devil his due; albeit admittedly, perhaps, that was a bad choice of words.
One definitely agrees with a passing remark in the book, which is credited to a couple of economists other than the author: the best way to narrow income inequality is to widen opportunities for education especially amongst those living in disadvantaged neighbourhoods. However, the problem remains, how? Considering that after paying of our debt servicing obligations and just a bit of defence spending, the Federal Government has nothing left from its pool of revenue receipts; where do we get the money to spend on education. Obviously the solution is to borrow and spend, since that for a nation like us, would be the wisest investment, but unfortunately bridges and roads seemingly get more votes!
The other proposition which was exciting, and actually reinforced my own views, credited to Julian Simon, disproved claims that population growth suppresses economic growth and that the world has an inexhaustible supply of natural resources. Apparently Simon was so convinced that in 1980 he even made a bet that 10 years later, prices of five metals will come down irrespective of population growth and resource scarcity, and won. Very recently there was an article in The Economist, which also associated population growth with economic growth; perhaps population growth is the main reason Pakistan was projected to be in the top 30 or so economies by 2030. Contrarily our solution to education for everyone and economic growth is family planning!
Dear Reader, by now perhaps you are anxiously waiting for the answer to the riddle about how economists make trillions of dollars. Well, Litan asserts that economists were behind second price auctions which helped in setting prices and the auction system for clearing airline seats and selling spectrum to telephone companies. He attributes gains to many businesses, including transportation, communication, telephony, finance, and oil and gas, to economic ideas; and he may well be right. But while the book might just be recommended reading for businesspeople and policymakers in the related sectors, there are no solutions, or trillions of dollars, in there for trade, current account and fiscal deficits.
I believe that while the economists have failed, our elders, our parents and their parents and so on forth, actually had a solution for all kinds of deficits, including these triple deficits; limit spending to what you earn, only borrow for education and work hard.
As a nation we can either choose to adopt these golden rules, or continue hoping against hope that a day will come when economists do the job.
(The writer is a chartered accountant based in Islamabad. Email: syed.bakhtiyarkazmi@gmail.com)