Economists’ credit rating is in jeopardy
For years people who suffered most during the economic crises believed in and also advocated the idea that the main problem has been the lack of professional economists at the steering wheel of the economies. Now, at last their wish was realized: in Greece and Italy two professional economists named as prime ministers to save both economies from bankruptcy. The bad news is if they fail there will be no further credit for economists.
In Greece Lucas Papademos, a former vice president of the European Central Bank, was named as the head of a unity (!) government to prevent the country from default. In Italy Mario Monti, a former European commissioner and a well known economist accepted similar responsibility. They both gathered technocrats, mainly economists, to form a government to find solutions for their countries’ deep rooted economic problems.
At first look the main problems are accumulated sovereign debts and huge budget deficits. However, slowing growth and as a result growing unemployment are also very serious problems. Unfortunately, policies to solve the first two problems can not help to solve the other two. On the contrary austerity measures and reforms which are advised to shrink both debts and deficits most likely will slowdown growth and increase unemployment further. The big question is whether those attained technocrats can succeed where elected politicians failed.
It is not realistic to assume as some European leaders think, the greater political consensus in Greece and the professional background of the new prime minister in Italy will help to restore market confidence. Most probably markets will wait for the first acts of both governments. If these acts are rational, feasible and realistic then the results of these acts will be examined. Only ‘’positives greater than negatives’’ alternative can restore the market confidence.
Italy’s prime minister says his team will spur economic growth while trying to impose necessary reforms urgently. This might be necessary to change the pessimistic atmosphere inside the country but at the same time is not again realistic. In Greece Prime Minister Papademos must also put economic reforms on top of his agenda while trying to secure a new bailout deal. His job is quite difficult for this deal must also involve banks. Both prime ministers won support in parliaments somewhat easily. However it is much more difficult to win the people’s support. These people now realized that the real burden will be on their back.
All these problems make it difficult to reach a sound solution for both countries’ economic maladies. Both prime ministers are prominent professional economists and their team members are also able professionals. However, economics is not a natural but a social science. There are no exact rights and wrongs in every science but social sciences are looser as they deal with human behavior not laws of nature. Unfortunately, human behavior could change every minute without giving any indication, but laws of nature do not change or change very slowly and these changes are generally predictable.
In short social sciences including the science of economics can not offer accurate solutions as natural sciences do in almost every occasion. This is the main reason of confidence erosion for economists during the recent crises. For a long time the science of economics could not bring new theories to explain newly emerged economic problems and as a result could not form sound remedies to solve them. Nobel prizes for economics during the recent years have proven this