Tuesday, July 31, 2018

Symbolic economics

Since the mid eighties, it has been usual to follow both economic news and its trend no just exclusively accordnig to the data available, but also by the opinions and evaluations of economic analists who make their own intepretation of economic data, shaping this way both the markets expectations and the investors mood which at the end get as an unexpected variable into the policy makers decision framework .So , what it comes to be at the core of any economic analysis is not necessarily the data itself, but either what his or her interpretation make of it.This is a source of power for all of those (analists , researchers and the like), who work within the scope of reaching public opinion about economics performance . It includes not only economic analists and their background, but also all those subjective subject related to the public percepcion, such as personal image, prestige, status,knowledge and culture attached to someone. All of these are symbols and its endowment have market value specially valuable when it comes to influence public perception.Thus, investors or for this matter ,public opinion will both listen and later follow what these people says upon the basis of their prestige, good image, knowledege, which are the envelope of the accuracy of their judgement.That is also the case of CEO of Central Banks. They talk, and market listen. The importance of these flow of analisis and expert opinions,is that it reduces transaction cost arising from uncertainty and information assymetry.Of course, this is the case when these analisis are precise and both market and policy makers really cares about the "opinion side" of economic performance.After all ,anyone may have its own ability to make their own decision instead of external advisers. It is well known in the case of economists, that when two of them try to solve a problem, it arise an aditional one. In other word,, two economists given their opinion abut the trend of any economcy,they may come to conclude either that it goes at different pace but the same direction , or even opposite direction whether they chose alternatives perspective (either investment or consumption)for the analisis. This does not means that economist are the less qualified to communicate what they understand better than others, but it is true that after 2008 many of them became under negative evaluation because they were unable to anticipate properly what was the underlying forces of that crisis. On july of 2008,some of them were certain that the economy was on the track of steady economic expansion. On the other side, just a few of them (two or maybe three), who correctly anticipated the crisis and in some cases were treated unfairly,did not get the attetion to their warnings. Some bankers, policy makers and researchers, wanted to believe what they thought it was worth to believe .The fact is that to cope with the effect of that crisis, the FED started what it was called the "Forward guidance policy" (2008-2017),which was the equivalent of the light in the darkness. So any analists opinion, depends both of the quality of her or his assesment, but they also crutially depend of investors and policy makers ready to listen what they are trying to communicate . However, in a world of uncertainty and complexity , with unreliable prediction models, expectations have a key role for decisions making , such that those analists who make thing easier to understand, have the advantage of being able to make the proper interpretation of what is the meaning of any economic variable performance. So, market will follow them.- Thus, the economy has two fields of performing, the effective arising from data, and the symbolic one arising from interpretation, and trend analisis. Both may be complementary to one another when the economy goes up, but either when it comes down or it is close to it, the situation become more difficult to evaluate because of the variety of factors taking place in such a scenario. So, Economists become like politicians , as Winston Churchill once said, they have to explain why things were in the opposite direction to the one they predicted. Both, the effective and the symbolic one, make what a successful economy look like. How come ?. Well it is not only of matter of being well, but also a matter of being percieved well, and even much better.- .-