Thursday 9 January 2014

Pseudo-critique

So David Ndii is getting an economics "lecture" from one Robert Tinale, a self-described "social scientist"? Well, nothing wrong with it if the "lecture" was anything more than the pseudo-critique that it is - full of generalisation and cherry-picking of statistics and arguments to fit a preconceived narrative.
If Tinale's stated objective is to debunk arguments by Ndii's  in a recent essay, then he falls into the unintended trap of tripping on his own intellectual shoe laces.  I can easily illustrate this in four points:
One, it is a false start to contend that economists do not use opinion polls; oh, opinion polls are reported in hard statistics. Opinion polling is used in, for instance, gauging inflation expectations so as to guide the conduct of monetary policy. I can infer that Tinale imagines that the Central Bank of Kenya (CBK) conducts monetary policy in response inflation while in reality the monetary policy stance is based on inflation expectations. And how are those expectations gauged? Yes, you are right; through opinion polling - not necessarily those polls conducted by Ipsos, et. al.
Even when inflation is at single-digit level as it is in Kenya now, a significant portion of the population is  of the view that the cost of living is rising - and that is their number one challenge. This tells you that inflation expectations remain, in monetary policy speak, un-anchored. On the back of such stake of affairs, if you tell Kenyans that they are better off than  they were a few years back simply because some World Bank report has said so, they will tell you to try flying a kite for a hobby!
Two, I used to imagine that the concept of economic rate of return (ERR) should be fairly straight forward to whomsoever seeks to critique an economic argument - indeed whoever seeks to make a case around infrastructure investments that are funded by credit. Reading Tinale's write-up, I now know better! It doesnt matter to him that the costs and benefits streams that go into its determination take a long term view. That is why their benefits are expected to take time. But hey, Tinale is already seeing them on the Thika Superhighway project, even when he is condescendingly telling Ndii that "economic development is not achieved overnight". Did I hear somebody shout 'contradiction!'? Well, I thought so too.
Three, it is easy to forget the simple fact that all economic agents respond to incentives and for the private sector to align itself to productivity the policy regime has to do the intermediation.
Four, development dynamics do not follow a linear pattern. So to argue, as Tinale does, that low borrowing necessarily means high taxes, is to epitomise linear thinking - in which case public finance gurus who argue that you can have an appropriate combination of the two so long as they are supported by a framework that ensures that they do not constrain investments and consumption would be speaking Greek - no pun intended to the long suffering Greece economy - to the linear thinker.

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