The writer is a former deputy chairman of the Planning Commission. He tweets @nadeemhaque
After much effort, I find out what the basics are in the minds of these philosophers. I learn that what they call basics are mere wishes for an increase in revenues, exports and growth. Makes it easy, does it not? We wish for all sorts of good things and call it economics.
For 60 years, plan after plan was made wishing for these good things: increase production, increase growth, increase exports. It is just so sad that the economy will not listen to these ‘economists’ and deliver all good things like production, growth and exports. And not to forget that all this must happen with low inflation. Of course, we must keep asking for more revenues and every discussion must note well-worn examples of the rich not paying taxes. Okay, so let us have a new tax and collection must improve. There you go. Now see, it is not rocket science! What is it about rocket science that these guys like? Every three minutes, someone mutters, ‘it is not rocket science!’ and all nod in agreement. Discussion killed! Time for the next anecdote! This is how we do our thinking. Is it worth telling these guys that economics is more complicated than rocket science? Rockets are inert and do as they are told. Charting their course is easy. They listen to signals and then follow them. Self-willed humans, on the other hand, do as they like. They resist and react to one another and to government policy. If policy is made without taking into account how self-willed individuals in their millions act, the results will be very different from those that were anticipated. So next time someone tells you economics is easier than rocket science and their pocket list of wishes is all we need, remind them that rocket science is easy, economics is much more difficult.
One important way of looking at the economy is that it is an aggregation of all transactions in the economy. Transactions are basically the exchange of goods and services or contracts to exchange goods and services at points in time. Value is created at the point of exchange. Production happens for the purposes of exchange. Successful economies have configured themselves to maximise the number of transactions in the economy. Most of us who have transacted in Pakistan know how difficult it is to transact in most markets. Buying land outside DHA can be a nightmare; contracts can easily be dishonoured; holding shares in a company is no guarantee of receiving a dividend; consumer goods come without warranty or assurance of quality and so on. Basically, we have an economy where transactions are difficult and often insecure.
Looking at it from a transaction viewpoint, I can come up with another list of ‘getting the basics right’ list, which would begin with improving law and order, securing property rights, strengthening contracting, redesigning and reframing markets for efficiency, removing incentives for rent-seeking and putting in place incentives for entrepreneurship. This is what governments are supposed to do and this is what forms the basics of governance. Hard work and thinking are required to make these things happen. And yes, all this is more complicated than rocket science.
If our friends would be more inquiring, they would find that the development experience of the last 60 years has shown the primacy of these basics over their usual wish lists. Without better governance, all the good things that our ‘rocket scientists turned economists’ want, cannot happen. Perhaps, saying ‘it is not rocket science’ stops these people from thinking. All of us need to come out of our comfort zones and encourage discussion and debate on real reform, i.e., better governments for better markets.
Published in The Express Tribune, January 20th, 2015.
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COMMENTS (15)
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What the writer states is correct, but in part only. An economy needs also a trained and educated workforce, a fair and just society where people feel included and feel they have a stake in the country. This free market mantra is both outdated and has seen its failings in the last decade. I agree with truthbetold. Did ET just need its space filled?
I agree with Dr Nadeem that our civil bureaucrats from DMG can no longer serve as Jack of All Trades, nor can our uniformed officers. What Pakistan needs are qualified specialists and professionals in various fields to hold key posts where planning and policies are decided. We needs economists in Finance but those who have a committment to this country, not those who hold dual nationalities. There is no dearth of Pakistanis with requisite experience and qualifications to head Ministry of Petroleum, Water and Power, Planning Commission, IT, Education, Health, Aviation, Science and Technology etc. In every country where there is an elected government or even those ruled by dictators, political individuals are appointed as Ministers, but never as Special Assistants or Advisors in technical areas like Petroleum, Water and Power etc. It is unfortunate that technocrats who have served us in key positions were all those affiliated with and on payrolls of donor countries or agencies where they hold power.
What is the point and need for this article? Just to went steam on people you don't like? If you are such a good economist who has all the answers, why not publish a very results-oriented treatise that will give the government the right answers on the real problems and an action plan? Why waste time writing a useless article here in ET?
Very interesting article and some great points. That said, your point about fiscal deficits and tax collection requires a bit more elaboration. Aren't you a little too dismissive of those who say that we need better tax collection given how our government is constantly borrowing or printing new money and does not have the resources to spend enough on things like infrastructure, education, healthcare etc? Perhaps you might want to write a separate article to explain your point of view on tax collection and fiscal management?
We need more articles from Dr. Haque.
lol...I was literally laughing through half of this piece. You really seem so frustrated about our rocket scientists. I had imagined that "our" government has a dedicated policy panel.. with some PHDs who have considerable research on developing economies... at least one expert who has sufficient experience at a developed financial market...probably wall street....research panels for country analysis, industry analysis, global economy analysis.... some sort of agriculture expert, representatives from industry, a risk management function forewarning Government of possible fluctuations, statisticians to aid in more quantitative analysis, at least one person with amazing communication skills, who could explain the deliberations to the public and the Government (by speaking and writing) and relay the governments priorities to the team... the picture you presented dented my imaginations...
"Economy is not rocket science" - Agreed. Its much more complex since upteem variables are involved and those variables do not behave in the same way every time. Unlike rocket science, no one can put a number to variables like market sentiments, human likes and dislikes of a product. A simple example is "Caller tune". Who in the world would have thought such an app would click and "video call" won't?
@Muneer In Sub-Continent the root of every evil is caste system and everyone try to get out of this mess but when one get out he or she creates his or her own caste system, where he declares himself the upper caste, and someone middle class and someone else lower middle class and the rest untouchables. Such attitudes create vacuum on psychological levels and when someone preach a different way of life he or she gets enough followers to create another pressure group. It is in the nature of people of sub-continent, that is why one find hundred and thousands of caste and sub-caste, an unconscious effort by different people to gain respect. That is the reason I am a strong advocate of town or village heads, if we compel our political parties to organize their parties on town or village level, more Pakistani people will get a chance of catharsis. Political parties will face survival problem and the only way of survival left will be ‘true service of people’.
I am not sure what is the point of this article. The author is complaining about the shallowness of the "armchair economists", but then proceeds to do the same himself.
The emergence of current gasoline crisis is a good indication of how fragile the economic chain is and how every mind should work together with one goal. I wonder what is the loss in national output in this gasoline mismanagement.
@abreez: That anecdote must be from a foreign country. Pakistanis never give good advice for free. Usually the advice that is handed out here is malicious and designed to manipulate people to serve the adviser's interests.
I will admit though that nepotism is a way of life in this country and people run from pillar to post seeking influence. That doesn't make it a way of life outside Pakistan or for those who have access to foreign markets while in Pakistan.
Here, everybody is an economist! Everyone carries their shopping list of what needs to be done. I often get long lectures from opinionated people who obviously use the same ideas at dinner parties and official meetings (why are they called to official meetings and allowed to hold forth?). In loud voices and with full conviction they argue, “It is not rocket science! All we need is to get the basics right.” As if these are arguments. But no matter the audience (especially arrogant officialdom), everyone buys their line. My question regarding what exactly these basics are is often drowned out. We all know what the basics are without actually talking about them. This is how economics is done in Pakistan. Once I had chance to meet with an old man, who led very successful life, I asked him the secret of his success. What he told me is, “My secret of success is seeking advice from everyone and if I get a good advice I thank that person and make him a friend and if I get bad advice I stop seeking advice from him and watch him so that I can learn from his mistakes. What is important in life are good decisions and whoever will make bad decisions will surely lose respect in the eyes of those around him and when one lose respect he loses control over people. To make good decisions one needs experience and the more people you know more stories you’ll hear and ultimately more experience you’ll get.”
It is not a piece of cake as well.