Economics is a science which quite different to others, such as Physics and Chemistry, do need people to make its case. Economics deals with the improvement of welfare level of a community ,counting on every one´s talent and abilities , more so whether we consider that such improvement, has to be achieved with scarce resources . Thus, people abilities and talents ,compensate for others resources scarcity .
The new approaches of economic development and growth, stress the role of endogenous factors such innovation, creativity and all of those forces linked to motivation, compromise, character and attitude.
This means that economics do not rule out, and cannot rule out, the contribution of anybody. It widen the boundaries of the production frontiers The only resources which is supposedly available with no restriction whatsoever, are the individual talents. Julian Simon(1932-1998), believed that population growth was a source of those talents .
The innovations flows, come from individual minds, the quality of education, the family values and the external factors , which set up the conditions for creativity and inspiration . Without this flows, it would not be possible to solve the scarcity constraint.
Malthus propositions , (over population growth and food supply restriction), were overcome because of these factors , just like the current global warming threat , is going to be solved because of individuals abilities to overcome challenges , when they are pushed at its most.
Talented people make the difference in economics, to make it more humane, and closer to everyone needs and expectations. Economics need the individual talents .as its main source to boost the engines of wealth creation.
Going deeper into the argument, dreams also count. Dreamers made capitalism the driven force of the past two centuries , to create wealth as it has never seen before in the history of mankind .Furthermore, the collapse of the state, was more the triumph of individuals and their character, than just the expected failure of a wrong policy .-
So, It is in each person the seed for something better, even beyond what can be imagined, for the society as a whole. The outcome of this interaction between economics and individual talents, is to have a path for a better society without depending of Government policies , but on individual willingness to be in charge of their destiny.
The financial crisis which started five years ago (2008), has challenged the main stream of macroeconomic policy and new paradigm are on the rise. In such a cases, it was used to think that each policy,(monetary or fiscal policies) properly focused on its target , would get the economy back on track. However recent experience has shown that it is not enough to implement economic policies. When it comes to implement such a policies, It has become more relevant to take into account the timing, coordination with other policies, spillover effects, expectations changes, complementary reforms, all at once!.-
In its august 1st report , the IMF urges concerted policy action to reduce risk to global growth (www.imf.org). In fact ,concerted policy action to avert the risk facing global economy are estimated to have saved 2-5 % of global output, and if world ´s largest economies(“systemic 5”),could improve policy coordination, they would lift global GDP over the long run by as much as 3%.,
The larger volume of trade and financial linkages in the global economy, makes spillover effects more evident for implementing policies. Besides ,the current situation which has been characterized as “unstable disequilibrium” (www.economonitor.com) , requires more than just policies: It requires to go beyond the mechanics text book cases, it requires more inclusive approaches . Let takes the case of the quantitative easing (QE) applied so far. The evidence (IMF report mentioned above), finds clear evidence of positive growth spillover, but it also make clear the risk attached to the exit of such a policy : Too soon would impact growth negatively , but too late would induce asset bubbles and imbalances .In Europe, concerning the design of structural policies ,the chances are for more integration or fragmentation. Thus, there are also dilemmas attached to policy options, which demands for complementary reforms whether these policies are really to become effective .-
What are the implication for global economy?.
a.- In the short run, policies coordination matter.
b.- In the long run, structural reforms improve the effectiveness of policy coordination(Besides, It boost stronger positive spillover effects).-
c.- Macroeconomic policies isolated are not enough for effectiveness purposes.
d.- The spillover effects, are important constraint for the design of economic policies.
e.- Game theory has something to say about policy design(www.lawandeconhoss.blogspot.com)
In his first visit to Latin America, The Pope Francis, who lead the 26th World Youth festival held in Brazil, gave an homework to economists : To pursue a Human economy.
It was coincidentally in Brazil a decade ago, at the First World Social Forum , the effort to build up a Human Economy began. What about it? : It deals with questioning the supremacy of free markets and command models which do not consider citizens concerns ,but only statistical parameters to draw its conclusions and policy prescriptions . The risks of this “statistical approach” ,is to give a superior stand to the outcome of these models, even above citizens needs and values, to solve critical dilemmas concerning for example socials demands or cultural preferences .Reaching such a stage means somehow that the economy lose its sight .It make people´s needs to fit economic models and policies , instead the other way around : economy policies and models to fit people demands and expectations.
Markets as an impersonal tools to solve the allocation of resources problem, substitute the value of human judgment to set economy priorities. Markets solve the allocation problem based only on economic considerations. Thus, key variables of human well being ,such culture , arts, literature, sports becomes commodities with prices which make them available only to those who can afford to pay for it, therefore excluding the meaning of for example a cultural policy .
It becomes self evident that what The Pope Francis request set a pressing demand for such transformation to be applied for current social and economic problems, whose scope I may suspect ,goes beyond Latin America economic policies .
On the other side of the issue ,Economics is a Social science which does not have the chance to work alternatives economic policies out ,based on laboratories conditions to prove what it does works or does not . Both Mathematics and statistic ,becomes useful tools to help economics modeling to represent reality in more simplified way , but in the process it get closer to miss about the essential ,if not in some cases to forget at all: Economics is a Science like other ones, to serve the well being of mankind. It follows that the outcome of such a models ,cannot substitute human judgment.-
Therefore, to rely heavily on models which do not represent but a fraction of relevant variables, with the remaining ones left outside as error terms, is a risky situation as the 2008 global financial crisis has made clear. Those who were able to predict properly such a crisis, did not based their analysis but in their own judgment.-
Is Human economy necessarily self excluding with both the main stream of microeconomic framework or normative macroeconomics?. Are free markets policies, contradictory with Human Economy?.I guess that it all comes down to better institutions and policies .This means to go beyond the simplistic representation of models , to stand up above it with ethic leadership .
When Adam Smith (Moral Philosopher)supposed the presence of an “Invisible hand”, to solve allocation of resources , probably did not exclude faith, trust , the value of promises and hard work, honesty and honor to do business .Human values which in modern societies , laws transformed some of them in institutions. Thus ,Pope Francis is not asking for something unusual for economics , but just to go back to its roots and not missing its focus .-