Why Politicians Don’t Take Economists Seriously 

Why Politicians Don’t Take Economists Seriously 

by Banuchandar Nagarajan - Jul 27, 2019 01:36 PM +05:30 IST
Why Politicians Don’t Take Economists Seriously Prime Minister Narendra Modi with Finance Minister Nirmala Sitharaman (Virendra Singh Gosain/Hindustan Times via Getty Images) 
  • Practicing social scientists, aka politicians, look at the society from a higher level than economists do.

    A good society based on trust will have analysts and politicians meeting somewhere in the middle with an understanding of each other’s strengths, handicaps and motivations.

Society is a partnership in all science, a partnership in all art, a partnership in every virtue and in all perfection. As the ends of such a partnership cannot be obtained in many generations, it becomes a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born.
Edmund Burke

The budget has attracted a fair share of critics. Many of them have gone on to say that the budget has not done its bit to light ‘the firecracker under the animal spirits’. The government should welcome all criticism. As they say, feedback is the breakfast of champions.

But many economic commentators are handicapped in looking at it through the prism of social science. This shortcoming is apparent during elections when economists predict with a swagger and end up with egg on their faces. Past experiences never seem to chasten them.

Practicing social scientists, aka politicians, look at the society from a higher level than economists do. They understand psychology much better than economists and have an instinct for what clicks with the people. Economics is just one aspect of their world-view.

For economists, it is economic welfare alone that will make an individual happy and she will reciprocate through the ballot only if she is materially better off. People’s welfare objective function thus is reduced to a single variable equation or at least the variable with the biggest coefficient. This idea falls flat usually, more so in a country like India where people are emotional and care for much more than money.

Politicians understand the baseline and actions required for marginal increase of “welfare”. By welfare, I refer to Yogakshema, an all-encompassing concept, taking into account psychological, economic and social welfare. During the just-concluded elections, this author has heard people explain how the government has done something for them, for the first time as individuals, through Direct Benefit Transfers (DBT).

When the existing level of welfare is low, even small actions can improve the overall well-being in the economic, and more so, at a psychological level. Exhibit A is the Ujwala Scheme. No economist could have thought about it as a big-bang reform in the conventional sense of the term.

It is well known that Dalits vote for Mayawati in spite of her not making serious efforts to improve their economic welfare. Samman (respect) is priceless. Do economists understand that? Do they have a keen understanding of cognitive biases? Election results have proved that ‘immediacy effects’ of a Balakot can shadow a sub-par showing on the jobs front.

Do economists understand the benefits of effective communication? Will they agree that when the Prime Minister speaks to the poor in their language through Mann ki Baat, it has an empowering effect? More fundamentally, are economic commentators aware of their own intellectual shortcomings and cognitive biases?

Though elections in India are complex with many competing narratives, if you ask an economist why people re-elected the Congress in 2009 and BJP in 2019, you can elicit a cognitively dissonant answer. For 2009, they would say: “It is the economy, stupid.” For 2019, you could retort, “It isn’t just the economy, stupid!”

As is well known, the economic growth statistics, the Sensex etc., mean nothing to vast swathes of the population. The poor mostly understand it as money of the rich people. Even analysts use these numbers as crutches in their post-facto arguments, when the actual break down would have happened in the Yogakshema compact. For example, the Congress drubbing in 2014.

In such a set-up, any tax on the super-rich will only be perceived as a Robinhood move. And write-ups lamenting “tax terrorism” — if it reaches them in some form — will only make the poor feel better. For the short-changed, even retribution, as seen as moral ‘just deserts’, is an increase in welfare. This author is not condoning the tactic, but making a limited point.

Political actions in an unequal democratic society are complicated and nerve-racking. Again, this column is not attempting to paint inequality as the problem when the actual demon is poverty. To tackle poverty, we need the super-rich to invest more and not flee away. There is a fine balance that both — the businessmen and politicians — should be aware of.

It should not be misconstrued that the politician does not care about the economy at all. Prime Minister Modi perceptively spoke about the economy immediately after the victory. He has set a clever and lofty goal of making India a $5 trillion economy. Some economists went crazy about whether it is feasible or why it is distracting, without understanding the idea of goal setting with a number that appears big, is achievable and has elements of pride.

The former Finance Minister, P Chidambaram, wrote in op-eds that the target is achievable by just the power of compounding and does not depend on the Prime Minister or the Finance Minister. That is a clever attack that differentiates a politician from an economist. He is discrediting the goal setter rather than the goal itself.

Ad hominem attacks are the standard tactic in psychological operations and political narrative building. Attack the niyat (intention/motivation) rather than the niti (policy/management). Nevertheless, it should not be forgotten that Chidambaram’s boss got singed in the elections of 2019, by his avowed endeavour to discredit the Prime Minister on Rafale.

For better criticism, analysts will do well to speak the language of social scientists. English language op-ed business has become irrelevant any way. (But we soldier on, don’t we?) They would do well to have more references to “samman” in their op-eds. If they are worried about long-term economic growth, it will be good idea to relate it to the children’s welfare. Invoke the Burkean inter-generational compact.

It is not to discredit the economists completely, but some can help themselves by spending a year teaching in a university in a tier-2 town. May be that will give them an opportunity to become better social scientists.

If one has not grown up in small towns or worked in villages (visiting grandma is not counted), one will find it difficult to “understand from the heart” what economic policies mean and their actual multi-dimensional impact on society.

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.
Adam Smith’s Theory of Moral Sentiments

This quote from Adam Smith’s Theory of Moral Sentiments would make much more sense. Highlighting a “woman Finance Minister” or “bahi-khata (ledger)” won’t just appear as gimmicks.

Politicians, for their part, should value advice from serious analysts. They should stop treating analysts as a nuisance who are not of much value in their scheme of things. The “padhai, likahi ka kaam karne wale (those who read and write for a living/analysts/journalists)may also have thought about problems deeply and may offer useful inputs in shaping their legacies. Statesmen will understand that expert advice will be handy on issues related to long-term welfare, especially at inflection points.

After a big re-election mandate, the government should be broadminded to listen to thoughtful commentators. Not all economists are to be discredited and be dismissed as unaccountable to the public. Eighteen hundred days of “total campaign” has to be matched with serious efforts on job creation. People with nothing on their backs voted for the BJP after Balakot. The government owes it to them to better their economic well-being.

A good society based on trust will have analysts and politicians meeting somewhere in the middle with an understanding of each other’s strengths, handicaps and motivations. Thinking too much of one’s own wisdom and disparaging the others will rob the society of the fruits of cooperation.

Both groups are elites and it is in their combined moral responsibility that Yogakshema of the society rests. So, the twain shall meet.

Banuchandar Nagarajan is a public policy adviser. An alumnus of Harvard University, he has worked in the World Bank, PwC and the UN. Follow him @Banuall.

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