I have watched and listened to both raps “The Hayek vs. Keynes” on Youtube.com, links of which are above here. Very interesting and very humorous. Howsoever funny they sound, we all need to go deeper in our habits and the way we live. We should try and understand what is going on now and where we have gone wrong on our way to find better ways of living and higher standards of living. Also this should tell us what wrong have we done to the economy as a whole of countries that have been very rich and now some of them in different kinds of trouble including almost coming to the verge of bankruptcy. This state of affair is in many countries of Europe and US also. Third world countries seem to have sustained the shocks of meltdown of western economies fairy well.
I am convinced that the speculators and vested interests, perhaps including market makers have made it difficult for even academic economists to consider all the aspects of the moving parts, which results in a particular outcome of any action taken. Add to that the unforeseen terrorism, accidents and uncertainty caused by, say 9/11 or by the Seal 6 operation taking out Osama causing crash of commodity markets and you have a recipe for which no one can predict whether the result will be a Christmas pudding or a burnt out barbecue in the stock market or commodity markets. The pundits and speculators both have created a psychological balloon, which gets burst or manipulated by such important and ordinary events alike, more at the mercy of manipulators. But there is a reason for all this. It is obvious that we have been doing many unusual and totally not thought through things to know what will be the outcome. It may work sometime, but the accidents are likely to happen and that too serious, because we are sailing in uncharted territories.
Academician’s worries are real; they worry about unforeseen and nightmarish events, which may make their projections look like joke and make them look foolish. These are more real in recent times when the information flow is far too faster than we can imagine. However, the forecasts, be it because of the economists or despite of them, sometime work as if the forecaster was the prophet of some kind, or fails miserable completely, making a stupid of so many pundits. Fact is that common sense always wins. I have come to conclusion that whatever a lay man does in an uncomplicated situation is perhaps the correct direction, if he uses his street smart wisdom and common sense.
These decisions are so common sense based that they almost do not fall in category of issues and decisions that may require the professional knowledge of an economist. These are what we have learnt as “default” decisions. For example, if I have a fixed income, I must remain within the limits of the income and should not overstep my limits. If despite of following this dictum, I need to borrow some money, I must pay it back ASAP, preferably within a month. This situation has changed because even with limited income people can obtain easy borrowing through his credit card, which has become a norm. Another example would be borrowing heavily and if one is not able to pay, filing a bankruptcy under bankruptcy protection law. Both these examples have a lot of abuses from many concerned people. But what is more important is the fact these new ideas of the past century has changed the whole picture of even trying to understand Hayek or Keynes.
There are many such examples, but these two most common ones suffice because these have not only changed the way the business is done, but has changed the ideology and misuse has been rife in both these cases.
If despite the insistence of vested interests and particularly the commercial and investment banks, things were kept simple, we would not have suffered the kind of shock that we did by the number of derivatives that were allowed. Unfortunately, as described earlier, these went wild and out of control by not having enough supervision on those vested interests. Regulators may have been involved in the financial benefits, which we do not know.
To keep ourselves, our society and our financial health in order, we all need to look for the general betterment than personal ones. Follow simple guidelines and use common sense to live within our means. Keep our debts to minimum. Keep paying back all debts in time. If we did that we surely can use the academician’s and economists’ advices with some benefit. Otherwise there will be theories of different experts and we shall be continuing to wonder which is correct and which one to follow.
Let us rap on such resolves, rather than raping on the things that we do not understand that well. Even those who write theories may not be able to answer and justify their position too well, because if they did then there would not have been another acceptable theory to negate theirs. What we need from the experts is to have some definitive guidelines and unanimity in those directions.