|
We are not concerned about economics as much as we are aware of politics, both domestic and international. Couple of weeks ago most of the daily newspapers reported that the incidence of national poverty had aggravated. But unfortunately this news, lost in the spree of hot debates of army deployment, could not draw much attention of the general public. Hardly any repercussion or concern has been expressed by our policymakers, economists, which is not only alarming but pathetic too. The newspapers will be the last one to blame, for they run business; they will underscore news with more public demand than those general people are less concerned with. This is the outcome of simple economics: lower demand induces lower supply. Among others, the demand side, more precisely, economic illiteracy of the general people is largely responsible for news like poverty worsening gone unnoticed, unexplained.
Broadly, economic literacy is the knowledge about basic economics and finance. An economically literate person has some basic understanding of the principles of economics, such as opportunity cost, scarcity and choice, law of demand, role of relative price, present vs. future value, and some degree of knowledge about a few macro economic variables, such as GDP, growth rate, inflation, budget deficit, exchange rate, money supply, bond, stock and so on. There are two types of economic literacy: factual literacy and conceptual literacy. Factual literacy is concerned only about numerical figures of some macro or micro variables; say for example, the factually literate person knows dollar-taka exchange rates without having any clue of how this rate is determined and how it is affected by the movement of some other macro variables, such as inflation. But the conceptually literate person knows both the numerical figures and underlying concepts. In general, when we talk about economic literacy, we mean the conceptual literacy.
Classical economics says that a free market economy works well only when the participants�producers, consumers, savers, investors�have the information they need to make smart decisions. People, regardless how developed their economies, need to understand how a market works, how market allocate resources among competitive ends, what if there is no government, what banks do and how to deal with them; why saving is important and what instruments are available for saving; what investing means, how to do it and what the risks are. More importantly, participants in the economy need to know how to think about the economic choices they face and how to get the information they need to make judicious decisions. Economic literacy gives people the tools for understanding their economic world and how to interpret events that will either directly or indirectly affect them. Nations benefit from having an economically literate population because it improves the public's ability to comprehend and evaluate critical issues. This understanding is especially important in democracies that rely on the active support and involvement of its citizens.
Why should we care about economic literacy? Are we troubled by illiteracy in physics? Or chemistry? Should we worry that most of us can't remember the scientific name of toad or much of the periodic chart of the elements? Why should we worry more about economics? In reply, I would like to quote from Todd G. Buchholz, a pioneer in popularizing the concept of economic literacy, �I can ride on a roller coaster without understanding centrifugal force. In fact, even if I refuse to believe in centrifugal force and actually create a new religion on that basis, I will probably stay in the roller coaster as I careen around the corner. Physics can protect me, whether I believe it or not. But if I ignore basic economics, I could go broke. And if a country ignores basic economics, it could go bankrupt�. One relevant example is the stock market crash of 1996 in our country. I personally do blame the ignorant investors more than the profit seeking investment companies or some firms who capitalized on people's economic illiteracy. If we had some level of economic literacy we could have avoided this disaster. Where the rate of return of capital is less than ten percent, there is no way that the value of stock can go up by more than hundred percents over night. This is simple economics. One does not have to be Milton Friedman to understand this. But unfortunately, our academicians, policy makers and all other concerned groups failed to utter these simple words to warn ignorant investors. People learn from their mistakes, but that was too costly to learn from.
In our country, most of the debates on economic issues evolve around two major economic variables: foreign reserve and devaluation and the general understanding among the people is that lower reserve and devaluation of exchange rate are bad things. This portrays the dismal state of economic illiteracy among the literate people in two major ways: first of all, there is no such economic theory that tells us that they are bad, and secondly, there are other variables, such as, employment, investment, human capital, technology etc. which are as important as those two publicized variables to shed light in explaining the state of economy. We hardly see any mass movement led by political parties on economic issues. Political parties' election manifestos on economic issues are also vague and elusive. Again, as before, I will blame the citizens, because the political parties have the information that most of the people are economically illiterate. So why would they spend time and money to chalk out a comprehensive economic policy package? It's the economic illiteracy that makes opposition parties go out in the street in protest of the national budget as soon as it is tabled, without having a thorough look into it.
So far, I have blamed the general investors and the citizens for their ignorance in basic economics. Now we can turn to another basic question: why are they ignorant? Does a typical student learn anything about the basic principles of economics in primary or secondary level? Does he learn anything from other sources, such as newspaper, magazines, TV or any awareness building program? And the answer is a BIG NO. One should know how GDP, inflation are calculated or why not Treasury print zillions of Taka to make our country rich, before he learns what Koala, a bizarre Australian animal, lives on, or what the capital of Burkina Faso is. A typical science student can go past Higher Secondary barrier without having any orientation with economics.
What can we do to improve the economic literacy of the general people? Couple of suggestions are given below:
i. Course material of the text book deserves a thorough revision to include basic principles of economics. Different level of concepts of economics can be introduced from class V through XII. (I know that English medium schools are doing pretty well in this regard)
ii. Government, NGOs and other institutions like Bangladesh Institute of Development Studies (BIDS), Bangladesh Economic Association (BEA) can play a big role to educate people economics. In USA, National Council on Economic Education was founded way back in 1949 to help youngsters to improve their economic literacy. Most of the developed countries have such economics awareness building program targeting both young and old.
iii. Newspapers, Radio and TV can routinely explain the underlying concepts of economic issues that affect our daily lives, for they can reach out people more effectively than any institution. For instance, Bangladesh may switch to flexible exchange rate regime. Media can help our economy for her smooth landing by explaining the basic concepts of exchange rate, pros and cons of both fixed and flexible regimes in such a way that any layman can understand, certainly with the help of economic professionals.
iv. The Bangladesh Bank can publish booklets on what monetary policy is all about, how a central bank runs, what is the difference between stock and bond, etc in a simple lucid way.
v. Economics Departments of all the Universities can also arrange public forum in building awareness of the importance of economic literacy.
One moot political issue in our country is the size of cabinet of the current BNP government, that is, what should be the optimal size of the cabinet? I am looking forward to that heyday when our politicians will argue: Prime Minister should expand the cabinet up to the point where welfare gain due to last minister appointed must be equal to the additional cost going to be spent on that minister. This is a very simple welfare maximizing condition of economics; and if the people of Bangladesh were aware of this principle, we could have avoided much of our valuable time arguing on this issue. |
