In Search of Economic Savior

EghtesadOnline: Everyone starts looking for that single savior of economy at times of crises and this time around, the search began right after the political and social developments of the second half of last year (Sept. 23, 2017-March 20, 2018) and the exponential rise in the value of foreign currencies and gold coin.

News ID: ۷۸۳۶۵۷

13 August 2018

The above statement was made by Hossein Abdoh Tabrizi, an adviser to the minister of roads and urban development, in a commentary published in the Persian daily Shargh. According to Financial Tribune, a translation of his write-up follows:

Many governmental bodies convened meetings to work out solutions for economic problems. They were willing to draw on the expertise of economists unlike any before, of those who understand the precarious situation and know how to resolve the issues then and there.

Such an interpretation of economics is indicative of a fundamental aberration. Concepts, theories and practical approaches in the science of economics cannot be embodied in one person. Do you know a medical doctor who can both treat patients with gout and diagnose neurotic conditions, besides performing open-heart surgeries? Has the science of medicine undergone a backward evolution?

The same is true of economics. It is not possible to apply reductionism in economics, a science with tens of specialized fields. An economist might be competent enough to comment on macroeconomics, the other on employment and labor force, the third might have the know-how for explaining international economy, the next on finance, and so on.

What is needed in a crisis situation is an experienced, prudent politician, just like a general physician who refers different patients to qualified specialists. He must tap into the wisdom of different economists to alleviate the crisis and not search for a person to wave a magic wand to solve all the problems instantly.

Note that we are talking about the opportunities a science offers—a science as significant as economics.

A misleading statement often makes the round, claiming that Iran does not have a good economist: “They don’t have a clue about anything; they don’t know about the current social and security issues.”

Iranian economists are not experts in security issues, rightly so. But there are economists who are well-versed in political economy. They take into account social, political and security aspects when devising economic policies.

Will the huge and difficult economic problems  go away, if we refer to the top three most cited economists in the world (Andrei Shleifer, James Heckman and Robert Barro) or the three most cited Iranian economists (Mohammad Hashem Pesaran, Djavad Salehi-Isfahani and Mohsen Bahmani-Oskooee) today? What if the decision-makers of the country ignore their proposed policies “for the time being” or “under the current circumstances”? Can any of these noted economists put forth answers that senior policymakers tailor the solutions to their own liking? The answer is no.

The time of crisis is the time to return to the rule of law. Today is the right time to weigh in on the much-needed economic reforms. It is vital for policymakers to get the priorities right based on principles of economics.

Both economics and Iranian economists have warned against multiple foreign-exchange rate system, the source of corruption and inefficiency. Even the best economists in the world cannot devise a corruption-free multiple foreign-exchange rate system. Each and every economist knows that there is a direct correlation between money supply and prices. You cannot plead with the top economists of the world to devise a policy that helps maintain a single-digit inflation rate despite the ever-rising volume of money supply.

Undoubtedly, there are leading Iranian economist in the world who are eager to help their country’s economy. We need to allow them to do so rather than be on the search for temporary solutions.

We should not move out of the jurisdiction of law and the realm of science on the pretext of finding a quick-fix for intractable economic problems.