Creative economics

No problem can withstand the assault of sustained thinking.-Voltaire The concept implied by the title may appear nefarious, perhaps even prejudiced, coming from someone whose origins lie in a profession, infamous for creativity in modern times, but even if that is the case, what can go wrong with economics, that already hasn’t?

In any case there is a fundamental difference, core accounting, notwithstanding its claim to fame as the forebearer of capitalism, is about maintaining and reporting history, accordingly any creativity can only distort or present a biased perspective of facts. History can be disguised, distorted, withheld or hidden, but try as one may, history cannot be changed, obliterated or erased altogether, at least until someone invents the time machine. Precisely the reason why, inspite of all innovative methods and standards, accounting could never ascend to the status of a science!

On the other hands, economics, a social science concerned with the material welfare of humanity, studies the production and consumption of goods and services with the theoretic objective of devising policies which manage the way forward. Unfortunately, as of today, the subject has apparently failed miserably on everything it has postulated. Economists today generally try to disassociate themselves from any and all predictions or forecasts, in fact defiantly contest this particular role of their profession, and are even loath to explain the economic happenings of the real world.

If Enron was accountancy’s nightmare, sub-prime and euro debt crises have been economics’ Waterloo. Curiously while accountants have been deemed to be creative, economists are generally considered more mundane. While the accounting profession works overtime issuing standards which no one understands but defers too, economics has relied upon a handful of theories which everyone claims to understand but criticise endlessly. After over a century, economics, in essence, is divided between two schools of thought, Keynesian and Austrian, and neither works in entirety!

Audacious observations perhaps, but where is the harm in thinking creatively or even differently? Perchance Edward de Bono’s six hats can provide a solution to the extremely perturbing boom and bust cycles. Or maybe Von Oech’s whack on the side of the head is the needed elixir for economic thought. For the moment, let’s run with this idea.

Removing mental blocks is Von Oech’s first step towards creative thinking. What would that mean in economics? Frankly, the mere fact that all else cannot be held constant in the real world and that there is a need for a dynamic theory which acknowledges that human beings will not behave as postulated in economic models, is the initial breakthrough required. The world does not cherish unworkable solutions. Inevitably, morality does have an impact on the material world, everyone is not selfish.

The next step is to focus on the second right answer. Maybe fiddling with interest rates, especially when it is not an exact science, is not the only right answer to beat inflation or kick starting economic growth. Whatever happened to controlling money supply or increasing output or just letting the market decide? But then again, there might even be a second right answer to free markets, which in practice are not really free anyways!

Paying attention to metaphors is the next step. Privatisation corresponds to handing over own car to a stranger and then paying for being driven around in the same car. International trade is equivalent to a pact with the devil, eventually he will come for your soul. Seriously, metaphors are interesting, and in the current recession there is no end to imaginative comparisons.

Stop following the ruler, especially when he is on the verge of driving over a cliff. Consumer spending fuelled by easy money was definitely not a wise policy, there is a definitive need to check consumer choice and largesse. Allowing savings to be employed in speculative investment was worse, apparently however, governments and central banks around the globe continue to put their eggs in that basket.

Cultivating imagination, for which the proposed methodology is generating “what if” scenarios, both for the past and the future. What if the central bank had continued to regulate foreign currency in Pakistan? What if the trade balance had been managed through curtailing unnecessary imports? What if the big dams had been constructed at the right time? What if national assets had been protected? What if going forward necessary commodities are rationed and subsidies are restricted to targeted deserving populace?

Let’s look at the big picture, rather than out of context indicators. Frankly the obsession with data which is neither accurate nor complete, even in the case of developed nations, is mysterious. Especially in the case of Pakistan, where the size of the population itself is a guesstimate, the strategy of ignoring the bigger picture is suicidal. And the bigger picture is that there is no apparent light at the end of the tunnel and unless the leadership comes up with creative solutions, things will get worse, if that is at all possible. Looking at what’s happening in Cyprus right now, apparently it is!

Never state a problem in the same terms as presented by outside authorities. As it is the one fit policy doesn’t seem to be working anywhere. Perhaps losses of State Owned Enterprises are not the problem, quite the opposite, inadequate protectionism might be the real problem. Maybe the problem is ditching the policy focus on export oriented or import substitution manufacturing, not freer markets.

The policy of consulting a fool, initially does sound foolish, however on further pursuit the observation that the King is always surrounded by Yes-Men appears intuitive. Definitely governance requires someone foolish enough to challenge misconstrued initiatives religiously. Reverse the view point. This indeed has interesting application, even beyond economics. What if rather than electoral candidates being graduates, tax payers and non dual nationality holders, voters are restricted to tax paying graduate Pakistanis?

This was a rather enjoyable journey and all credit to Roger Von Oech for the Whack! The objective today was not to criticise but to positively identify that “Out of the Box” thinking requires a change of perspective and disconnect from existing paradigm. Remaining within the framework, the only options that will come to mind are taxing the rich, privatising SOEs, controlling government spending and opening markets. Notwithstanding, that these ab initio don’t generate confidence, there is hardly an example where a developing nation employing these very policies ever joined the League of Developed nations! Maybe it can be something other than a whack or wearing the six hats, but whatever it is, there is no denying that creative economics is exigent. Don’t expect anything original from an echo.

-Author Unknown