Should I study Economics?

Here are 10 absolutely foolproof reasons for

studying Economics.

1. Economic Forecaster.

As an economist you can make a living from predicting future

economic events. The key to being a good economic forecaster is to
use a mixture of dice and lottery numbers. (some economists make the
mistake of using just lottery numbers, but this can lead to really bad
forecasting) If this method fails just use the statistics from the previous
year; they are always more accurate than the actual predictions of
economists.

• Note: Economists have successfully predicted 10 out of the last 2

recessions.

2. You can always give Advice.

When the economy enters a recession, you will be able to tell

everybody why the economy is in a recession. Also, you will be able to
suggest several conflicting reasons as to how we can get out of a
recession. This will simultaneously, both confuse and impress
everybody; but it doesn't matter because nobody ever listen to
economists.

3. Diminishing Returns.

When you get ill from drinking 10 pints of beer in one night. You will be
able to impress your parents with the knowledge that the law of
diminishing returns is actually perfectly correct. As a side effect, you
may also learn about opportunity cost:

• Spending £40 on drink equals hangover.

4. Rational Behavior.

Economics assumes people are rational. Economics assumes that

people choose the activity which optimises our utility. When people
want to buy a season ticket to watch Leeds United, you can tell them
this is irrational behaviour. The Leeds United supporter will definitely
appreciate the cogency of your economic reasoning and will, more
than likely, start supporting Doncaster Rovers with immediate effect.
5. Economics is a very humorous subject.

Did you know that you can rearrange Economics to get "comic nose".
If, this alone, was not sufficient proof of the hilarity endemic in the
subject of Economics, try these economics jokes:

• How many Free Market economists does it take to change a light

bulb? None, in the long run, it will change of its own accord.
• How many Marxists does it take to change a light bulb? None,
smash the light bulb, a light bulb is a mere representation of the
capitalist ideology that gives a feeble light, rather than the True
source which is the sun.

6. Economics gets you a high paid job.

Actually, this is the only reason people study economics. Unless of

course you have a strange desire to be an economics teacher; in which
case you will enjoy your students repeatedly asking you the question;
"Why didn't you get a proper job in the city, Sir?"

7. It's better than studying Geography.

True, but purists may argue this doesn't prove very much.

8. Economies of Scale

When you forget your wife's / girlfriends birthday you can say that you
were merely seeking to maximise economies of scale and productive
efficiency, because you are waiting to get her a really big present at
Christmas. This always goes down very well.

• (In the incredibly unlikely event it doesn't, don't forget to also

check out: www.nofriendsandsingleconomist.com)

9. However - On the Other Hand

Economics is the only subject where contradicting yourself is seen as a

highly desirable attribute. To double the mark on your economics
essays, just say after each paragraph: however, on the other hand this
is probably not true at all...

10. You will Know Why you are Unemployed

When you are standing in the unemployment queue, you will be able to
tell everyone the type of unemployment they are suffering from. This
will greatly endear you to the ranks of the unemployed; who will
definitely not, sarcastically, ask you;

"If you know everything, how come you haven't got a job then?

The Difference Between Economists and Non

Economists

Economists have a certain world view. Their economic training gives a

different insight into issues that non economists might not appreciate
or consider important. These are few examples of different approaches
to economic issues. There are other examples of differences and
perhaps these differences are not as significant as we might imagine; I
would be interested in hearing the view of both economists and non
economists (assuming of course a 'noneconomist' would read an
economics blog..)

Rational / Irrational

Economic theory assumes people are rational and will make rational
choices. Yet in the real world people often make decisions which can
only be viewed as irrational from an economic perspective. E.g. Why
would people choose to take out pay day loans at an interest of greater
than 2,000% apr? Why would people pay more for a product that is
identical to another cheaper product? This is perhaps a big difference,
but also highlights a limitation of economics. This limitation is
examined in behavioral economics

Opportunity Cost

When watching a political debate or the views of voters, it always

strikes me how little people consider the idea of opportunity cost. You
can frequently here people say 'The government should save this
hospital' 'The Government should provide more public transport' 'The
government should reduce that tax'. However it is very rare that a
pressure group or non economist will offer a way of funding the
spending or tax cut; people often forget the opportunity cost of any
economic decision.

e.g. how often do you here voters of politicians argue 'The government
should increase spending on public transport; and this can be funded
by imposing a political unpopular tax on cars. Furthermore, this tax is
likely to overcome external costs and improve social efficiency.'
For an economist any decision on the governments budget imposes an
unavoidable opportunity cost. Increase spending will lead to either
higher tax or more borrowing. Non economists often forget the
opportunity cost of economic choices.

Statistics vs Personal recollections

Non economists tend to put a greater emphasis on personal

experiences and every day events. For example, many in the US feel
the economy is already in recession because of the bad news on
housing markets, subprime crisis and perhaps a personal experience of
someone losing a job. An economist would be wary of giving
importance to one off factors because they can give an inaccurate
reflection of the overall picture.

Exaggeration

The media often seek to exaggerate the 'housing crisis' and 'rocketing'
price levels. For example, in the UK, newspaper headlines have
recently focused on 'The biggest house price fall for 15 months' This
sounds more impressive than another headline, which is perhaps more
accurate . 'Monthly house price figures show annual rate of House
price inflation falls from 6.5% to 5.3%' Both headlines are correct in
some way; but arguably the first headline emphasises a certain aspect
of the statistics for greater 'shock value'. Of course, this is not to say
economists can't use statistics for exaggerated effect; I'm sure readers
could give numerous examples. But, perhaps non-economists are more
likely to use misleading statistics, especially in the media and political
world.

Certainty vs Uncertainty

The joke goes, put 10 economists in a room and you get 11 different
answers. If you are wondering where the actual punch line is, don't
worry - it's not that funny. But, the point here is that economists are
trained to see both sides of the argument. For every statement a good
economist will feel obligated to add numerous caveats and other
potential outcomes. A recession might occur, but it depends on X,Y,Z.
A non economist is more likely to see issues in black and white. The
economy is messed up - We're heading for a recession.

Externalities

On the issue of imposing taxes on negative externalities, economists

will justify tax and subsidies based on the issue of externalities. For
example, an economist would say a congestion tax is justified because
it internalises the external cost of driving into a city centre. Externality
arguments can often be difficult to explain to non economists. If you
mention a congestion charge to an average voter, there instinctive
reaction would be 'not another tax on the motorist' 'this tax is unfair on
low income groups'. This is not to say non economists cannot think in
terms of externalities, but generally this is a low priority or doesn't
immediately spring to mind

I got the inspiration to write this post after reading:

• Are Externalities a bridge between them and us

• Market Failures and making economics loveable

New Developments in Economics

Economics is an evolving subject. Issues which were once hotly

debated gradually fade from view and become insignificant over time.
In their place we get new issues rising to the surface. These are some
of the important recent development in Economics:

Increased Importance of Globalisation.

Globalisation is a fuzzy term. In a way globalisation has always been

with us. Economies have traded with each other for many centuries.
Not since Japan in the nineteenth century has a country been able to
successfully pursue 'autarky' - self sufficiency. What has changed in
recent years is the scope of global integration. Ripples in markets are
invariably felt throughout the world. Communication and transport
have vastly improved; this has helped give the impression that the
world is much smaller and more closely connected. The multinational
company is more prevalent than ever before. Globalisation affects
many aspects of economics from competition policy to Monetary policy
and agricultural policy.

Shifting Balance of Global Economy

In the post war period, the US economy was dominant. The old phrase
'when America sneezes, the rest of the world catches a cold' was very
much appropriate. But, America's share of global output and global
resources is declining rapidly. In particular, it is the two sleeping giants
- India and China who are coming to play an increasingly important
role in the global economy. This means we can no longer consider
global economics from an Anglo- American perspective. We need to
study and evaluate the implications of China and India's development.
Pressure on Commodities.

The world is used to dealing with a situation of abundant supply of raw

materials. But, diminishing supply and growing demand threatens to
change that. Oil prices are rising, partly due to speculation, but, partly
due to the fact demand is simply rising faster than supply. In the short
term the price of oil may fall, but, also it may continue to rise. In the
long term, the prices of commodities like food, oil and metals could rise
much faster than inflation affecting many issues for both developed
and developing economies.

Environmental Change.

The past decade has seen recognition that economic development is

impacting the environment in a possibly devastating way. In the past,
theories of global warming and ecology were seen as fringe topics.
Now they are seen as the greatest threats facing society - even if at
the moment, we are unable to take effective steps to deal with the
problem. In the future, it will be increasingly necessary to deal with
environmental change. This challenges fundamental ideas such as the
goal of society is to increase GDP. Maybe the goal is not to increase
output, but, only increase GDP if the environment is secured.

Rogue Economics

The recent credit crisis, shows how financial deregulation and

globalisation has contributed to many new problems, which leave
economies vulnerable to financial speculation.
See: Rogue Economics by Loretta Napoleoni

Does Economics Growth Bring Increased Living

Standards?

Increasing the rates of economic growth has long been the holy grail of
conventional economics and politics. To a large extent, most
developed economies have been highly successful in increasing
economic output. But, has such an impressive increase in national
output actually improved people's standard of living?

To decide whether economic growth has increased happiness is highly

subjective, and it is difficult for economists to make concrete
arguments. However, it is worth noting the various side effects of
growth and consider there impact on general living standards.
Benefits of Economic Growth

1. Increased consumption.

Consumers can benefit from consuming more goods and services. An

assumption of economics is that consumption is related to utility, so in
theory, with higher consumption levels, there is greater prosperity.

2. Improved Public Services.

With increased Tax Revenues the government can spend more on

important public services such as health and education. Improved
health care can improve quality of life through treating diseases and
increasing life expectancy. Increased educational standards can give
the population a greater diversity of skills and literacy. This enables
greater opportunity and freedom. Education is seen as an important
determinant of welfare and happiness.

3. Reduced Unemployment and Poverty.

Economic Growth helps to reduce unemployment by creating jobs. This

is significant because unemployment is a major source of social
problems such as crime and alienation. However, despite rapid
increases in economic growth since the Second World War, areas of
high unemployment in the EU remain. For example, in France and
Spain there are currently high levels of structural unemployment. This
kind of unemployment may not be reduced by economic growth.

Why Economic Growth may not bring increased

Happiness.

1. Diminishing Returns.

If a section of the population is living in absolute poverty, economic

growth enables people to have higher incomes and therefore they will
be able to afford the basic necessities of life such as; food, and shelter.
When economic growth can overcome this type of poverty there is a
clear link with improved living standards. However, when incomes
increase from say $35,000 a year to $36,000 the improvement in living
standards is harder to justify. Diminishing returns is a basic economic
concept, which suggests the tenth unit of a good will give much less
satisfaction than the first. If we already have 2 cars, does our living
standards really improve if we now have the capacity to own 3 cars?
Often as economic growth increases incomes, people increasingly save
their money (higher marginal propensity to save) this is basically
because they struggle to find anything meaningful to spend their
money on.

2.Externalities of Growth.

Economic Growth with involves increased output causes external side

effects, such, as increased pollution. Global warming from pollution is
becoming a real problem for society. The economic and social costs
could potentially be greater than all the perceived benefits of recent
economic growth. However, it is worth noting that economic growth
doesn’t necessarily have to cause pollution. The benefits of growth
could be used to develop better technologies that create less pollution.
It is just at the moment this has been a low priority.

2. Economic Growth can cause Increased Inequality.

It is perhaps a paradox that higher economic growth can cause an

increase in relative poverty. This is because those who benefit from
growth are often the highly educated and those who own wealth. In
1980s and 1990s higher growth in the UK and US has resulted in
increased inequality. (1) However, it depends on how growth is
managed; economic growtht can be used to reduce inequality. This
occurred in 50s and 60s.

3. Increase in Crime and Social problems.

It is another paradox that as incomes increase and people are better

off the level of crime has increased as well. (2) This suggests that
crime is not motivated by poverty but perhaps envy. One reason why
crime rates increase is that quite simply there are more things to steal.
Back in the 1930s auto theft, mobile phone theft e.t.c were rare or
non-existent. Economic Growth has created more goods to steal.
However the link isn’t absolute for example in recent years crime rates
in US have reduced from their peak. But there has been a general
association between growth and crimes.

5. Higher Economic Growth has led to more hours worked.

In the beginning of the industrial revolution, higher growth led to

people working lower hours.(3) However, in the past couple of decades
higher incomes have actually led to people working longer hours. It
seems people are unable to enjoy their higher incomes. Feeling the
necessity or preferring to work longer hours. This suggest people are
valuing earning money more than leisure. However, this trend may
also be due to companies wanting people to work longer hours.

6. Diseases of Affluence.

Economic Growth has enabled improved health care treatments, but at

the same time there has been an unexpected rise in the number of
diseases and illnesses related to increased prosperity.(4) One example
is obesity. Modern lifestyles and modern diets have created an
epidemic of obesity, with significant proportions of the population
expressing a desire to lose weight. It could be argued that problems
such as obesity and stress related illnesses are not a direct
consequence of growth. This is true, but, it is symbolic of the fact
increased prosperity has created as many new problems as it has
solved

References

1. Gary Burtless, Senior Fellow, Economic Studies Program

“Has Income inequality really increased in US?” The
Brookings Institution, January 11, 2007
2. The United States Crime Index Rates Per 100,000
Inhabitants went from 1,887.2 in 1960 to 5,897.8 in 1991.
By 1991 the crime rate was 313% the 1960 crime rate.
3. A new study by the Organization for Economic Cooperation
and Development (OECD) confirms that on average, people
in the U.S. are putting in 20 per cent more hours of work
than they did in 1970. See: Spark
4. Obesity related illnesses rise with economic development
Disease of Affluence

Conclusion

There are clearly some benefits of economic growth. These benefits

are most visible when for low income countries. Economic growth
enables the possibility to deal with many serious problems of poverty,
homelessness and lack of basic amenities. However this paper is more
interested in whether economic growth in developed economies is
actually increasing living standards. Does rising incomes equal rising
satisfaction? The answer is not clear-cut. However there are clearly
several issues, which suggest that economic growth, has contributed
to serious social, environmental and economic problems, which have
reduced living standards. This is not to say economic growth is doomed
to bring unhappiness. In fact the challenge is to harness the potential
of economic growth to make sure it really does increase sustainable
living standards.

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Economics of Suffering

Suffering Isn't Good.

No Pain, no gain.' As a competitive cyclist, I often hear this mantra. The

worrying thing is that we hear it increasingly with regard to economic
policy.

There is often a general feeling, that if you implement something

painful, it must be doing something good. Like the necessary injection
to protect you from a worse disease.

The question is does is suffering good in economics?

At the moment, the big issue is spending cuts. The new UK

governments are almost gleefully talking about the necessity of
'painful cuts' and years of austerity. Perhaps this is political sense -
make it sound really painful and then when its not quite as bad,
electors will vote for you.

The problem with large spending cuts is that they have the capacity to
push economy into recession. Unemployment in the UK is already at its
highest level since 1994, more public sector job cuts and a fall in
aggregate demand would further worsen the situation.

If drastic spending cuts (plus much negative talk of how bad the
economy is in - thereby reducing consumer confidence) did lead to
lower growth, it ironically makes it much more difficult to reduce
deficit. A fall in growth would reduce tax revenues and lead to higher
unemployment spending. There is a danger of cutting spending
drastically, but, not reducing debt very much.

The first thing that springs to mind, is the great depression of 1931.
Faced with mass unemployment and a collapse in GDP, conventional
wisdom forced the government of the day (the national coalition led by
Ramsay McDonald) to cut unemployment benefits to balance the
budget (presumably bond markets were on the verge of revolting then
too). Needless to say the cut in unemployment benefits and higher
taxes only made the Great depression worse.
Another example is 1937. As the US was recovering from the Great
Depression, the government prematurely tightened fiscal policy
(reducing spending and raising taxes), combined with a small
tightening of monetary policy, the economy fell back into a recession -
which of course worsened the deficit.

When the Conservatives came to power in 1979, there was a similar

feeling of 'we really need to suffer as much as possible' The
government tightened fiscal, monetary policy and allowed the
exchange rate to appreciate. Even when unemployment hit 3 million
there was no let up, as that lady wasn't for turning.

The good news is that it is possible to cut spending, and cut a deficit
without plunging the economy into recession. It is all a question of
timing. If growth is robust, if jobs are being created in other sectors,
then a certain degree of cuts can be absorbed. A small detail about the
coalition is that the Lib Dems added a caveat to spending cuts - they
said they should be made in consultation with the Bank of England.

In theory, this should mean that the Bank of England will be able to
veto any over zealous fiscal tightening - if there isn't sufficient
monetary stimulus. Though whether that would happen in practise is
open to debate.

There is always room for thoughtful evaluation of government

spending. Just because you've always spent £600bn, doesn't mean
every billion is well spent. Government spending is only a means to
end, not an end in itself. There will always be powerful pressure groups
fighting for their corner, but, this is not a necessary justification.

It's behind the scope of this blog post, to evaluate where government
spending cuts would fall. The main point is to say - Be careful of over-
reacting. Be wary of shrill announcements from politicians, who say we
are on verge of collapse. We often hear the bond market is on the
verge of revolt. But, long term bond yields are as low as ever (10 year
= 3.51%).

Related

• The Economics of Fear

The Economics of Fear

In altruism and behavioural economics, we took a very basic look at

why the assumptions of traditional economics are insufficient for
decision making. Another important factor in behavioural economics is
the issue of fear. There are many examples of how this issue can
influence economic decision making.

Insurance.

People are willing to pay a significant amount to prevent a small

chance of losing a large amount of wealth. In the long run, insurance is
more expensive than the benefits that accrue, but, people prefer the
security of knowing they won't lose everything. However, with
insurance there is also the issue of decreasing marginal utility of
wealth. We don't miss the extra £50 a month insurance payment, but,
we could not cope with losing our house.

Hysteresis.

This is an idea that people are influenced by events in the past. Even if
circumstances have changed, people remember what it was like in the
past and this remains a powerful influence over current economic
decision making. For example, after a period of economic properity,
people may keep spending in the sales, even though their future
income prospects are less promising. Expectations of inflation are very
much based on past data. High inflation begets more high inflation.

Influenced by Outside Influences.

Consumers are very much influenced by outside media pressures and

perceptions of economic reality. For example, an interesing
phenomena is how many Americans think America is already in a
recession. The American economy is not a recession (even if house
prices are falling and there is a credit crunch) Yet, people will talk as if
there already is a recession. This fear of a recession can of course
make a recession a reality. If people think they are in a recession, their
spending will fall (even though their income may be rising) this will
lead to lower aggregate demand and lower economic growth. The
important thing is that people's spending is influenced not by their own
income, but, perceptions of the general economic outlook.

A good example of this is the run on the bank syndrome. When people
heard Northern Rock was in difficulty, people rushed to the bank to
withdraw their savings. Because other people were rushing to the
bank, many people felt they ought to. This was despite the fact that
Northern Rock's problems did not affect savers directly. It was due to
problems of refinancing mortgage loans. But, in this kind of situation
there is often a 'herd' mentality - people follow what others are doing.
Bounded Rationality

Another issue is that people may be bound by limited information.

Therefore, it is not so much fear as inadequate information which leads
to irrational decision making. For example, how many American
consumers would know the inflation rate and economic growth rate of
the American economy.

Booms and Busts

Markets with supposed 'perfect information' are often subject to wild

fluctuations. In periods of booms people jump on the bandwagon -
buying share or houses. But, when market sentiment changes a little,
the mood can swiftly change as people frantically sell, trying to get out
before the market collapses. There are many examples of prices
moving independently of economic fundamentals e.g. dot com bubble
and bust of early 2000s.

Economics - The Dismal Science

It is debatable whether economics should actually be defined as being

a science. A science like Maths or Physics usually gets its satisfaction
from proving something to be irrevocably true. Solve a complex
equation and QED that’s the answer, there’s no argument. Economics
on the other hand will rarely give us a simple answer. Ask five
economists a question and the joke goes you’ll get 6 different answers.

Yet economics could make a claim to be a science - even if only as

John Ruskin disdainfully called it “The Science of getting riches”. Over
the years Economics has also managed to adopt the label of “the
Dismal Science” with plenty of theorists proudly claiming they do have
the solution and answer to all our problems. (Although many may be
surprised at the origins of the term 'dismal science'

Economics began as soon as hunter men began to exchange their

captured prey with other caveman, but generally the science of
Economics did not begin to be formalised until fairly late. Economics
has produced some colourful characters who have all added something
to the science even if there contribution is not universally admired.

The Dismal Prophecies of Malthus

One of the first economists to proffer his theory was T.Malthus. Malthus
is chiefly remembered for his essay on Population. In this essay
Malthus argued the human race was doomed because the population
was increasing at a faster rate than our capacity to grow food. In many
ways Malthus was one of the earliest proponents of “The end is nigh”
syndrome, and unsurprisingly it was Malthus who helped claim for
economics the label “The Dismal Science” Fortunately however
Malthus displayed a trait that many economists would later share - he
was wrong. The population didn’t starve. In fact during the nineteenth
century the forces of capitalism flourished creating unprecedented
wealth for those who owned the means of production.

Origin of Term Dismal Science

It is worth pointing out that the origin of the term 'Dismal Science'
actually originated because of Thomas Carlyle's disgust at the way
economists rejected slavery in favour of equality and the efficiency of
markets. Although it may be hard to believe now Thomas Carlyle,
believed slavery was the highest form of society, morally superior to a
society where people are equal and free to make their own choices.
The term dismal science is first mentioned in Carlye's "Occasional
discourse on the Negro question". See origin of term

Adam Smith - The Invisible Hand

One of Capitalism strongest exponents was the economist Adam

Smith. In his book “The Wealth of Nations” Smith claimed that if people
follow their own self interest, then this these individual acts of
selfishness have the remarkable effect of leading to the greatest
overall benefit for society. This is the basic principle of the book
although Adam Smith did take 1,260 pages to say it. (Unfortunately
very few economists have ever learnt the art of being concise.) Adam
Smith has become synonymous with support for free market
economics, however many people forget he was rather a modest
Scottish intellectual was also made chair of moral philosophy at
Glasgow University. Smith’s other major work was about Charity and
ethics but it was his articulation of free market economics for what he
is chiefly remembered. Anyway his seemingly paradoxical argument
about the free market has remained at the centre of all major debates
in economics. Is an unbridled free market of Capitalism really the best
economics system?

Nevertheless even the most ardent free market economist cannot

ignore the fact capitalism creates inequality and in the nineteenth
century this inequality was painfully evident. Thus many economists
came along to challenge the free market ideologies of Adam Smith.
Karl Marx - The Revolutionary Economist

Whether deserving or not Karl Marx was perhaps unwittingly destined

to play a major role in world history. Basically Karl Marx was of the
opinion that the inequality of capitalism would inevitably lead to a
revolution of the oppressed workers leading to the formation of a
Communist state. In fact Karl Marx went to extraordinary lengths to
explain this principle. One of his principle works, Das Kapital could
make claim to be one of the most boring books ever written. (Perhaps
only beaten by Adam Smith’s Wealth of Nations and Ludwig
Wittgenstein’s Tractatus Logico-Philosophicus,) However in F .Engels,
Marx had a companion who was able to help romanticise the ideals of
communism. Even 10 years after first reading it I can still quote
verbatim several passages from the Communist Manifesto.

“A spectre is haunting Europe -- the spectre of communism”

“ The Communists disdain to conceal their views and aims. They

openly declare that their ends can be attained only by the forcible
overthrow of all existing social conditions. Let the ruling classes
tremble at a communist revolution. The proletarians have nothing to
lose but their chains. They have a world to win.”

Despite the various attractions of Marxism, it never really took hold in

the US and Western Europe. Mainstream economists were fully
entrenched in the free market orthodoxy of classical economics. Just to
reiterate, these economists differed little from the original ideas
postulated by A.Smith. Basically they argued the free market would
create wealth, prosperity and any problems would be solved by the
inexorable workings of the “invisible hand” of the market. However in
the 1930s free market economics was to face a seemingly impossible
challenge – The Great Depression with its mass unemployment,
bankruptcies and falling output. In the face of such economic hardship
the appeal of radical alternatives gave cause for serious political
turmoil - Western democracy itself was threatened. But many
economists stuck to their ideology arguing in the Long Run everything
would be OK.

It was thus in the middle of the great depression that J.M.Keynes rose
to prominence retorting to orthodox economists “In the Long Run we
are all dead” Keynes saw no point in waiting a couple of decades for
the depression to come to an end. Keynes argued for immediate
government intervention and in particular the government should
spend, spend, spend.
Economics has very few, what you may call heroes, but if any
economists deserve such a label it would have to be Keynes.

J.M.Keynes - The Greatest Economist?

John Maynard Keynes was born in 1893 the same year that Karl Marx
died. Both Marx and Keynes were to write influential critiques of the
Capitalist system but here the similarities end completely. Marx was a
rather angry loner, many of his enterprises failed and the majority of
his life was spent in exile. Anonymously working in the British library,
Marx spent many years working on his theories about the inevitable
overthrow of Capitalist society. Marx never lived to see his theories
proved generally wrong, although he may have been surprised at the
importance attached to them.

Keynes in many respects was very different, he cut a dashing figure a

brilliant economist, who could also mix with the elite of British society.
Keynes attacked the inequities and insufficiencies of the free market
but it didn’t stop him from making a small fortune by speculating on
the foreign exchange markets. Keynes was also a visionary, while the
Allies were clamouring for a victor’s peace at Versailles in 1919,
Keynes resigned from the British delegation. He argued the reparations
imposed on Germany would be impossible to repay and that they were
a recipe for the humiliation of Germany and future problems. His book
“The economic consequences of the Peace” became a best seller and
in retrospect proved to be a damning indictment of the narrow
mindedness of the allied victors.

Keynes was brilliant at many things and he knew it. Once he was
placed second in an economics exam. His only reply was that:

“That shows I know more economics than the examiner.”

This may sound arrogant but in all honesty it was probably correct.
Keynes didn’t just restrict himself to economics, he wrote a book on
mathematical philosophy (highly praised by B.Russell) He was a
leading figure in the Bloomsbury group of leading artists, poets and
writers. Keynes later even opened his own theatre, which like most
things he tried his hands at, proved a great success. Keynes may have
had many human weaknesses but he was able to brush these aside
with his evident genius and enormous capacity for innovation and
radical ideas.

Keynes was no socialist but it didn’t stop him poking fun at free market
economists. In direct challenge to the optimistic assertion of Adam
Smith, Keynes took a different view.
“Capitalism is the astounding belief that the most wickedest of men
will do the most wickedest of things for the greatest good of
everyone.”

This shows Keynes at his best - happily attacking orthodox views with a
panache and confidence that was hard to resist.

It was the effect of the great depression that led Keynes to his greatest
work. He scoffed at the orthodox free market economists who said the
government should do nothing in the face of mass unemployment.

Keynes’s strategy was for the government to intervene, borrowing if

necessary. This would create jobs which would give income for others
to spend thus creating more jobs. A deceptively simple idea but too
radical for western governments who were too unwilling to borrow,
(bizarrely some economists like the US Federal Reserve were too
worried about the inflationary impact at a time when there was
deflation.) Unfortunately it wasn’t until the second world war and
governments were forced to spend on military spending that
employment increased to pre 1929 levels. Thus at the end of the
Second World War Keynes was now given high regard and he was put
in charge of the economic planning for post war Europe. Unfortunately
on achieving worldwide fame he died untimely at the early age of 62.

Unlike many radical ideas from economists such as Malthus, Owen,

Marx e.t.c Keynesianism didn’t wither on the vine but became part of
the economic orthodoxy influencing the creation of a whole sub section
of economics (Macro Economics). Alas Keynes died in 1946 just as he
had achieved world wide fame. It had been hoped he would play a key
role in the economic reconstruction of Europe.

The legacy of Keynes was remarkable; post war governments in the

West broadly followed Keynesian policy’s up to the 1970s. Generally
these decades were seen as a time of great stability and prosperity.
Full employment was maintained and many countries experienced
record growth. However proving economics is a fluid science Keynesian
economics has recently fallen out of favour with a recent resurgence of
support for neo classical ideologies with governments once again
praising the ideals of the free market. Alas (or perhaps fortunately,
depending on your view) time and space prohibit a discussion of this
latest development. Although it is worth noting that many
governments who adopt free market ideology rarely implement their
ideas fully. For example Reagan who wanted to roll back the frontiers
of the State actually increased the size of the US government mainly
through huge increases in military spending. The present Bush
administration has also shown remarkable fiscal irresponsibility. The
current budget deficit is approaching $600 billion combined with a
current account deficit of approximately $665 the US economy is
anything but a paradigm of classical economics.

Bibliography

1."Four Essays on the First Principles of Political Economy" By John

Ruskin London Smith, Elder, and Co., 65, Cornhill 1862 (1)

2. An Essay on the Principle of Population, 1st edition, 1798 – Thomas

Malthus

3. The Wealth of Nations 1776 – Adam Smith

4. Manifesto of the Communist Party 1848 by Karl Marx and Friedrich

Engels

5. The General Theory of Employment, Interest and Money(1936) by

John Maynard Keynes

6. The Collected Writings of John Maynard Keynes

The dismal economist’s joyless triumph

By Joseph E. Stiglitz
First Published: December 23, 2008

NEW YORK: I have long been forecasting that it was only a matter of
time before America’s housing bubble — which began in the early days
of this decade, supported by a flood of liquidity and lax regulation —
would pop.

The longer the bubble expanded, the larger the explosion and the
greater (and more global) the resulting downturn would be.

Economists are good at identifying underlying forces, but they are not
so good at timing. The dynamics are, however, much as anticipated.
America is still on a downward trajectory for 2009 — with grave
consequences for the world as a whole.

For example, as their tax revenues plummet, state and local

governments are in the process of cutting back their expenditures.
American exports are about to decline. Consumer spending is
plummeting, as expected. There has been an enormous decrease in
(perceived) wealth, in the trillions, with the decline in house and stock
prices. Besides, most Americans were living beyond their means, using
their houses, with their bloated values, as collateral. That game is up.

America would be facing these problems even if it were not

simultaneously facing a financial crisis. America’s economy had been
supercharged by excessive leveraging; now comes the painful process
of de-leveraging.

Excessive leveraging, combined with bad lending and risky derivatives,

has caused credit markets to freeze. After all, when banks don’t know
their own balance sheets, they aren’t about to trust others’.

The Bush administration didn’t see the problems coming, denied that
they were problems when they came, then minimized their
significance, and, finally, panicked. Guided by one of the architects of
the problem, Hank Paulson, who had advocated for deregulation and
allowing banks to take on even more leveraging, it was no surprise
that the administration veered from one policy to another – each
strategy supported with absolute conviction, until minutes before it
was abandoned for another. Even if confidence really were all that
mattered, the economy would have sunk.

Moreover, what little action has been taken has been aimed at shoring
up the financial system. But the financial crisis is only one of several
crises facing the country: the underlying macroeconomic problem has
been made worse by the sinking fortunes of the bottom half of the
population. Those who would spend don’t have the money, and those
with the money aren’t spending.

America, and the world, is also facing a major structural problem, not
unlike that at the beginning of the last century, when productivity
increases in agriculture meant that a rapidly declining share of the
population could find work there. Nowadays, increases in
manufacturing productivity are even more impressive than they were
for agriculture a century ago; but that means the adjustments that
must be made are all the greater.

Not long ago, there was discussion of the dangers of a disorderly

unwinding of the global economy’s massive imbalances. What we are
seeing today is part of that unwinding. But there are equally
fundamental changes in the global balances of economic power: the
hoards of liquid money to help bail out the world lie in Asia and the
Middle East, not in the West. But global institutions do not reflect these
new realities.
Globalization has meant that we are increasingly interdependent. One
cannot have a deep and long downturn in the world’s largest economy
without global ramifications. I had long argued that the notion of
decoupling was a myth; the evidence now corroborates that view. This
is especially so because America has exported not just its recession,
but its failed deregulatory philosophy and toxic mortgages, so financial
institutions in Europe and elsewhere are also confronting many of the
same problems.

Many in the developing world have benefited greatly from the last
boom, through financial flows, exports, and high commodity prices.
Now, all of that is being reversed. Indeed, it is the ultimate irony that
money is now flowing from poor and well-managed economies to the
US, the source of the global problems.

The point of reciting these challenges facing the world is to suggest

that, even if Obama and other world leaders do everything right, the
US and the global economy are in for a difficult period. The question is
not only how long the recession will last, but what the economy will
look like when it emerges.

Will it return to robust growth, or will we have an anemic recovery, à la

Japan in the 1990’s? Right now, I cast my vote for the latter, especially
since the huge debt legacy is likely to dampen enthusiasm for the big
stimulus that is required. Without a sufficiently large stimulus (in
excess of 2 percent of GDP), we will have a vicious negative spiral: a
weak economy will mean more bankruptcies, which will push stock
prices down and interest rates up, undermine consumer confidence,
and weaken banks. Consumption and investment will be cut back
further.

Many Wall Street financiers, having received their gobs of cash, are
returning to their fiscal religion of low deficits. It is remarkable how,
having proven their incompetence, they are still revered in some
quarters. What matters more than deficits is what we do with money;
borrowing to finance high-productivity investments in education,
technology, or infrastructure strengthens a nation’s balance sheet.

The financiers, however, will argue for caution: let’s see how the
economy does, and if it needs more money, we can give it. But a firm
that is forced into bankruptcy is not un-bankrupted when a course is
reversed. The damage is long-lasting.

If Obama follows his instinct, pays attention to Main Street rather than
Wall Street, and acts boldly, then there is a prospect that the economy
will start to emerge from the downturn by late 2009. If not, the short-
term prospects for America, and the world, are bleak.

Joseph E. Stiglitz is a professor of economics at Columbia University

and recipient of the 2001 Nobel Prize in Economics. This commentary
is published by DAILY NEWS EGYPT in collaboration with Project
Syndicate (www.project-syndicate.org).

In defence of the dismal science

In a guest article, Robert Lucas, the John

Dewey Distinguished Service Professor of
Economics at the University of Chicago,
rebuts criticisms that the financial crisis
represents a failure of economics
Economics focus

Aug 6th 2009 | from PRINT EDITION

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Rex

THERE is widespread disappointment with economists now because we

did not forecast or prevent the financial crisis of 2008. The Economist’s
articles of July 18th on the state of economics were an interesting
attempt to take stock of two fields, macroeconomics and financial
economics, but both pieces were dominated by the views of people
who have seized on the crisis as an opportunity to restate criticisms
they had voiced long before 2008. Macroeconomists in particular were
caricatured as a lost generation educated in the use of valueless, even
harmful, mathematical models, an education that made them
incapable of conducting sensible economic policy. I think this
caricature is nonsense and of no value in thinking about the larger
questions: What can the public reasonably expect of specialists in
these areas, and how well has it been served by them in the current
crisis?

One thing we are not going to have, now or ever, is a set of models
that forecasts sudden falls in the value of financial assets, like the
declines that followed the failure of Lehman Brothers in September.
This is nothing new. It has been known for more than 40 years and is
one of the main implications of Eugene Fama’s “efficient-market
hypothesis” (EMH), which states that the price of a financial asset
reflects all relevant, generally available information. If an economist
had a formula that could reliably forecast crises a week in advance,
say, then that formula would become part of generally available
information and prices would fall a week earlier. (The term “efficient”
as used here means that individuals use information in their own
private interest. It has nothing to do with socially desirable pricing;
people often confuse the two.)

Mr Fama arrived at the EMH through some simple theoretical

examples. This simplicity was criticised in The Economist’s briefing, as
though the EMH applied only to these hypothetical cases. But Mr Fama
tested the predictions of the EMH on the behaviour of actual prices.
These tests could have come out either way, but they came out very
favourably. His empirical work was novel and carefully executed. It has
been thoroughly challenged by a flood of criticism which has served
mainly to confirm the accuracy of the hypothesis. Over the years
exceptions and “anomalies” have been discovered (even tiny
departures are interesting if you are managing enough money) but for
the purposes of macroeconomic analysis and forecasting these
departures are too small to matter. The main lesson we should take
away from the EMH for policymaking purposes is the futility of trying to
deal with crises and recessions by finding central bankers and
regulators who can identify and puncture bubbles. If these people
exist, we will not be able to afford them.

The Economist’s briefing also cited as an example of macroeconomic

failure the “reassuring” simulations that Frederic Mishkin, then a
governor of the Federal Reserve, presented in the summer of 2007.
The charge is that the Fed’s FRB/US forecasting model failed to predict
the events of September 2008. Yet the simulations were not presented
as assurance that no crisis would occur, but as a forecast of what could
be expected conditional on a crisis not occurring. Until the Lehman
failure the recession was pretty typical of the modest downturns of the
post-war period. There was a recession under way, led by the decline
in housing construction. Mr Mishkin’s forecast was a reasonable
estimate of what would have followed if the housing decline had
continued to be the only or the main factor involved in the economic
downturn. After the Lehman bankruptcy, too, models very like the one
Mr Mishkin had used, combined with new information, gave what
turned out to be very accurate estimates of the private-spending
reductions that ensued over the next two quarters. When Ben
Bernanke, the chairman of the Fed, warned Hank Paulson, the then
treasury secretary, of the economic danger facing America
immediately after Lehman’s failure, he knew what he was talking
about.

Mr Mishkin recognised the potential for a financial crisis in 2007, of

course. Mr Bernanke certainly did as well. But recommending pre-
emptive monetary policies on the scale of the policies that were
applied later on would have been like turning abruptly off the road
because of the potential for someone suddenly to swerve head-on into
your lane. The best and only realistic thing you can do in this context is
to keep your eyes open and hope for the best.

After Lehman collapsed and the potential for crisis had become a
reality, the situation was completely altered. The interest on Treasury
bills was close to zero, and those who viewed interest-rate reductions
as the only stimulus available to the Fed thought that monetary policy
was now exhausted. But Mr Bernanke immediately switched gears,
began pumping cash into the banking system, and convinced the
Treasury to do the same. Commercial-bank reserves grew from $50
billion at the time of the Lehman failure to something like $800 billion
by the end of the year. The injection of Troubled Asset Relief
Programme funds added more money to the financial system.

There is understandable controversy about many aspects of these

actions but they had the great advantages of speed and reversibility.
My own view, as expressed elsewhere, is that these policies were
central to relieving a fear-driven rush to liquidity and so alleviating (if
only partially) the perceived need for consumers and businesses to
reduce spending. The recession is now under control and no
responsible forecasters see anything remotely like the 1929-33
contraction in America on the horizon. This outcome did not have to
happen, but it did.

Not bad for a Dark Age

Both Mr Bernanke and Mr Mishkin are in the mainstream of what one

critic cited in The Economist’s briefing calls a “Dark Age of
macroeconomics”. They are exponents and creative builders of
dynamic models and have taught these “spectacularly useless” tools,
directly and through textbooks that have become industry standards,
to generations of students. Over the past two years they (and many
other accomplished macroeconomists) have been centrally involved in
responding to the most difficult American economic crisis since the
1930s. They have forecasted what can be forecast and formulated
contingency plans ready for use when unforeseeable shocks occurred.
They and their colleagues have drawn on recently developed
theoretical models when they judged them to have something to
contribute. They have drawn on the ideas and research of Keynes from
the 1930s, of Friedman and Schwartz in the 1960s, and of many
others. I simply see no connection between the reality of the
macroeconomics that these people represent and the caricature
provided by the critics whose views dominated The Economist’s
briefing.

Economics - Psychology's Neglected Branch

By Sam Vaknin
Article Word Count: 1933 [View Summary] Comments (0)

"It is impossible to describe any human action if one does not refer to
the meaning the actor sees in the stimulus as well as in the end his
response is aiming at." --Ludwig von Mises

Economics - to the great dismay of economists - is merely a branch of

psychology. It deals with individual behaviour and with mass
behaviour. Many of its practitioners sought to disguise its nature as a
social science by applying complex mathematics where common sense
and direct experimentation would have yielded far better results.

The outcome has been an embarrassing divorce between economic

theory and its subjects.

The economic actor is assumed to be constantly engaged in the

rational pursuit of self interest. This is not a realistic model - merely a
useful approximation. According to this latter day - rational - version of
the dismal science, people refrain from repeating their mistakes
systematically. They seek to optimize their preferences. Altruism can
be such a preference, as well.

Still, many people are non-rational or only nearly rational in certain

situations. And the definition of "self-interest" as the pursuit of the
fulfillment of preferences is a tautology.

The theory fails to predict important phenomena such as "strong

reciprocity" - the propensity to "irrationally" sacrifice resources to
reward forthcoming collaborators and punish free-riders. It even fails to
account for simpler forms of apparent selflessness, such as reciprocal
altruism (motivated by hopes of reciprocal benevolent treatment in the
future).
Even the authoritative and mainstream 1995 "Handbook of
Experimental Economics", by John Hagel and Alvin Roth (eds.) admits
that people do not behave in accordance with the predictions of basic
economic theories, such as the standard theory of utility and the
theory of general equilibrium. Irritatingly for economists, people
change their preferences mysteriously and irrationally. This is called
"preference reversals".

Moreover, people's preferences, as evidenced by their choices and

decisions in carefully controlled experiments, are inconsistent. They
tend to lose control of their actions or procrastinate because they place
greater importance (i.e., greater "weight") on the present and the near
future than on the far future. This makes most people both irrational
and unpredictable.

Either one cannot design an experiment to rigorously and validly test

theorems and conjectures in economics - or something is very flawed
with the intellectual pillars and models of this field.

Neo-classical economics has failed on several fronts simultaneously.

This multiple failure led to despair and the re-examination of basic
precepts and tenets.

Consider this sample of outstanding issues:

Unlike other economic actors and agents, governments are accorded a

special status and receive special treatment in economic theory.
Government is alternately cast as a saint, seeking to selflessly
maximize social welfare - or as the villain, seeking to perpetuate and
increase its power ruthlessly, as per public choice theories.

Both views are caricatures of reality. Governments indeed seek to

perpetuate their clout and increase it - but they do so mostly in order
to redistribute income and rarely for self-enrichment.

Economics also failed until recently to account for the role of

innovation in growth and development. The discipline often ignored the
specific nature of knowledge industries (where returns increase rather
than diminish and network effects prevail). Thus, current economic
thinking is woefully inadequate to deal with information monopolies
(such as Microsoft), path dependence, and pervasive externalities.

Classic cost/benefit analyses fail to tackle very long term investment

horizons (i.e., periods). Their underlying assumption - the opportunity
cost of delayed consumption - fails when applied beyond the investor's
useful economic life expectancy. People care less about their
grandchildren's future than about their own. This is because
predictions concerned with the far future are highly uncertain and
investors refuse to base current decisions on fuzzy "what ifs".

This is a problem because many current investments, such as the fight

against global warming, are likely to yield results only decades hence.
There is no effective method of cost/benefit analysis applicable to such
time horizons.

How are consumer choices influenced by advertising and by pricing?

No one seems to have a clear answer. Advertising is concerned with
the dissemination of information. Yet it is also a signal sent to
consumers that a certain product is useful and qualitative and that the
advertiser's stability, longevity, and profitability are secure. Advertising
communicates a long term commitment to a winning product by a firm
with deep pockets. This is why patrons react to the level of visual
exposure to advertising - regardless of its content.

Humans may be too multi-dimensional and hyper-complex to be

usefully captured by econometric models. These either lack predictive
powers or lapse into logical fallacies, such as the "omitted variable
bias" or "reverse causality". The former is concerned with important
variables unaccounted for - the latter with reciprocal causation, when
every cause is also caused by its own effect.

These are symptoms of an all-pervasive malaise. Economists are

simply not sure what precisely constitutes their subject matter. Is
economics about the construction and testing of models in accordance
with certain basic assumptions? Or should it revolve around the mining
of data for emerging patterns, rules, and "laws"?

On the one hand, patterns based on limited - or, worse, non-recurrent -

sets of data form a questionable foundation for any kind of "science".
On the other hand, models based on assumptions are also in doubt
because they are bound to be replaced by new models with new,
hopefully improved, assumptions.

One way around this apparent quagmire is to put human cognition

(i.e., psychology) at the heart of economics. Assuming that being
human is an immutable and knowable constant - it should be
amenable to scientific treatment. "Prospect theory", "bounded
rationality theories", and the study of "hindsight bias" as well as other
cognitive deficiencies are the outcomes of this approach.

To qualify as science, economic theory must satisfy the following

cumulative conditions:
All-inclusiveness (anamnetic) - It must encompass, integrate, and
incorporate all the facts known about economic behaviour.

Coherence - It must be chronological, structured and causal. It must

explain, for instance, why a certain economic policy leads to specific
economic outcomes - and why.

Consistency - It must be self-consistent. Its sub-"units" cannot

contradict one another or go against the grain of the main "theory". It
must also be consistent with the observed phenomena, both those
related to economics and those pertaining to non-economic human
behaviour. It must adequately cope with irrationality and cognitive
deficits.

Logical compatibility - It must not violate the laws of its internal logic
and the rules of logic "out there", in the real world.

Insightfulness - It must cast the familiar in a new light, mine patterns

and rules from big bodies of data ("data mining"). Its insights must be
the inevitable conclusion of the logic, the language, and the evolution
of the theory.

Aesthetic - Economic theory must be both plausible and "right",

beautiful (aesthetic), not cumbersome, not awkward, not
discontinuous, smooth, and so on.

Parsimony - The theory must employ a minimum number of

assumptions and entities to explain the maximum number of observed
economic behaviours.

Explanatory Powers - It must explain the behaviour of economic actors,

their decisions, and why economic events develop the way they do.

Predictive (prognostic) Powers - Economic theory must be able to

predict future economic events and trends as well as the future
behaviour of economic actors.

Prescriptive Powers - The theory must yield policy prescriptions, much

like physics yields technology. Economists must develop "economic
technology" - a set of tools, blueprints, rules of thumb, and
mechanisms with the power to change the " economic world".

Imposing - It must be regarded by society as the preferable and

guiding organizing principle in the economic sphere of human
behaviour.
Elasticity - Economic theory must possess the intrinsic abilities to self
organize, reorganize, give room to emerging order, accommodate new
data comfortably, and avoid rigid reactions to attacks from within and
from without.

Many current economic theories do not meet these cumulative criteria

and are, thus, merely glorified narratives.

But meeting the above conditions is not enough. Scientific theories

must also pass the crucial hurdles of testability, verifiability,
refutability, falsifiability, and repeatability. Yet, many economists go as
far as to argue that no experiments can be designed to test the
statements of economic theories.

It is difficult - perhaps impossible - to test hypotheses in economics for

four reasons.

Ethical - Experiments would have to involve human subjects, ignorant

of the reasons for the experiments and their aims. Sometimes even the
very existence of an experiment will have to remain a secret (as with
double blind experiments). Some experiments may involve unpleasant
experiences. This is ethically unacceptable.

Design Problems - The design of experiments in economics is awkward

and difficult. Mistakes are often inevitable, however careful and
meticulous the designer of the experiment is.

The Psychological Uncertainty Principle - The current mental state of a

human subject can be (theoretically) fully known. But the passage of
time and, sometimes, the experiment itself, influence the subject and
alter his or her mental state - a problem known in economic literature
as "time inconsistencies". The very processes of measurement and
observation influence the subject and change it.

Uniqueness - Experiments in economics, therefore, tend to be unique.

They cannot be repeated even when the SAME subjects are involved,
simply because no human subject remains the same for long.
Repeating the experiments with other subjects casts in doubt the
scientific value of the results.

The undergeneration of testable hypotheses - Economic theories do

not generate a sufficient number of hypotheses, which can be
subjected to scientific testing. This has to do with the fabulous (i.e.,
storytelling) nature of the discipline.
In a way, economics has an affinity with some private languages. It is a
form of art and, as such, it is self-sufficient and self-contained. If
certain structural, internal constraints and requirements are met - a
statement in economics is deemed to be true even if it does not satisfy
external (scientific) requirements. Thus, the standard theory of utility is
considered valid in economics despite overwhelming empirical
evidence to the contrary - simply because it is aesthetic and
mathematically convenient.

So, what are economic "theories" good for?

Economic "theories" and narratives offer an organizing principle, a

sense of order, predictability, and justice. They postulate an inexorable
drive toward greater welfare and utility (i.e., the idea of progress).
They render our chaotic world meaningful and make us feel part of a
larger whole. Economics strives to answer the "why's" and "how's" of
our daily life. It is dialogic and prescriptive (i.e., provides behavioural
prescriptions). In certain ways, it is akin to religion.

In its catechism, the believer (let's say, a politician) asks: "Why... (and
here follows an economic problem or behaviour)".

The economist answers:

"The situation is like this not because the world is whimsically cruel,
irrational, and arbitrary - but because ... (and here follows a causal
explanation based on an economic model). If you were to do this or
that the situation is bound to improve".

The believer feels reassured by this explanation and by the explicit

affirmation that there is hope providing he follows the prescriptions.
His belief in the existence of linear order and justice administered by
some supreme, transcendental principle is restored.

This sense of "law and order" is further enhanced when the theory
yields predictions which come true, either because they are self-
fulfilling or because some real "law", or pattern, has emerged. Alas,
this happens rarely. As "The Economist" notes gloomily, economists
have the most disheartening record of failed predictions - and
prescriptions.

About The Author

Sam Vaknin is the author of Malignant Self Love - Narcissism Revisited

and After the Rain - How the West Lost the East. He is a columnist for
Central Europe Review, PopMatters, and eBookWeb , a United Press
International (UPI) Senior Business Correspondent, and the editor of
mental health and Central East Europe categories in The Open
Directory Bellaonline, and Suite101 .

Until recently, he served as the Economic Advisor to the Government

of Macedonia.
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