Economics for the thinking man

Sometimes interacting with economic researchers who work on data and produce conclusions, we tend to forget that they are not there to present us with quick-fix solutions. They are serious analysts who look at the prevailing trends and interpret the data available - what is working and what's not working - and give broad policy prescriptions.

Some in the audience facing such researchers ask them what immediate solutions there are to the ongoing problems. For example: what will alleviate the day to day problems of soaring rent and high food prices in the UAE, within the shortest possible time?

Provocative questions can be good, but only if you can actually succeed in the provocation. But it is hardly ever possible to get them provoked.

An instance last week was a case in point. The typically cool and rational behaviour was much in view during a panel discussion on GCC inflation challenges.

Not stirred

There was a clutch of IMF and Dubai Chamber of Commerce and Industry economists, and not one of them was strirred when asked questions such as: when will inflation come down; what ways are there to bring it down as soon as possible; how is it that government policy cannot work to tackle the issue, and what options does the government really have?

The audience wanted short-term remedies, and were not at all interested in the long term.

When faced with repetitive questions, particularly on whether to revalue or depeg the dirham, Gene Leon, deputy chief of the GCC division of the International Monetary Fund, finally turned a bit philosophical. That's a useful ruse; I should try that more myself.

He said that we need to identify the reality. And that meant the data being put out.

He said there are always two parts of an issue. Number one is: is the economy growing, and simply is the value of the total output this year more than the previous year? In the case of the UAE and the Gulf, the fact is the economy is indeed growing quite well. Number two: is all that growth good? That's something which depends on the model of development adopted, and thereby goes to a different realm altogether.

Difference

As a diligent student of economics, he then cited the difference of positive economics, understood as the economics of what 'is' and normative economics, which is the economics of 'what ought to be'. In other words, the objective versus the subjective.

Economists such as Leon, and mostly certainly from the IMF, do not concern themselves with value-loaded questions. But here's what we all know - that the IMF and World Bank are largely in favour of market economics, and that's a hugely value-laden and ideological position to start with.

He also rightly observed that the two points we tend to miss are uncertainty and change. In steering an economy, what is very important for the government is to make sure that it is able to deal with both these constants. The UAE government is trying to do the best, he said, in a "very special stage of development".