Experts in Macroeconomics

I recently read an interesting opinion piece about how macroeconomics is perceived. Due to the nature of macroeconomics on the surface it feels like a relatable subject, as it includes topics such as taxation, income, government expenditure, inflation, etc. This is why there tends to be a much greater stress of opinion on macroeconomics, compared to microeconomics. However, the technicality of it is far from relatable, with your common academic paper being far from accessible even to those studying economics in the first or second year.

It would be rare to find a laymen with an opinion on microeconomics, mainly due to it immediately being a technical subject from the surface. However I feel it would be safe to assume they would have some kind of opinion on the aforementioned topics. The issue here does not lie with the laymen, the issue that arises is the strong views and opinions that people hold even though they are not experts on the subject.

It is relatively accessible to have an opinion on macroeconomic factors, but this can cause a misunderstanding of policy, and what effects certain policies may have. Then due to the political aspect of macroeconomics this can develop into strong views. The critical element here is that macroeconomics is on par in regards to technicality with microeconomics in many areas due to the use of similar techniques in analysis. This is not accessible to those approaching it from the political perspective or the daily understanding.

The further evolves due to the immediate reaction to The Great Recession, where economists were perceived to have been standing around, scratching their heads, confused as to what was the cause of the crisis, potential outcomes, and the right solutions. Consequently, the public may perceive that macroeconomists themselves have a loose understanding themselves. In this economists are the first to admit that evidence does not make everything cut and clear, but simply an appreciation of the complexity of the many variables in the macroeconomy that interact.

I write this as an article on game theory has become most read on the BBC homepage, but even this is a surface application of what is rigorously mathematical and technical when applied in the academic stage, whereas the concept in itself is a bit more straight forward. In the end of the day it seems like all those involved in public policy believe themselves to be experts in macroeconomics in the decisions they make, however it is clear that it attributes to itself a complexity when approached technically that shows the true value of an expert in the field… even though they may not have all the answers.


The Future of Obamacare

Well to some extent it has, regardless of how small a step, it was a step to greater equality in the United States. I am not necessarily the firmest believer in government intervention in regards to healthcare, but equally the position American citizens are put in due to the corporate greed and lobbying power of pharmaceutical and insurance companies is an equal evil.

The Patient Protection and Affordable Care act did not go as far as Obama had wanted it to go. However, it has allowed millions of American cover that they otherwise would not have. One would hope that in the worlds super power economy, people do not have to make a tough decision between putting food on the table for the family or having health insurance.

Moreover, it did not lead to the fears of its opposition, as the cost of healthcare in real terms has not increased. The fear now however is that any foundation laid by the act will be undone by the future policy of the Obama administration, in that the specific protection for the Pharmaceutical lobby.

Stiglitz has pointed out the case of how India was forced to take up patent law in 2005, due to the competition Indian pharmaceutical companies were bringing to drug production, and in that the western pharmaceutical lobby’s fears that competition from the generic market. In the 1970s India abolished pharmaceutical patents, and this lead to an industry, which would be capable of providing some degree of healthcare in the developing world.

The Obama administration is seeking a bi-lateral trade deal with India that will ultimately secure the position of the pharmaceutical companies. Critically, along with Obamacare, it is clear that there needs to be an overriding framework that ensures that care and medicine is affordable. Stiglitz argues that this is not an unintentional outcome of the trade deal, but rather an explicit element of US trade policy. Thus, we come back sadly to a trade off between the US and its desire to keep domestic jobs, and protect a well-lobbied industry.

The argument that the rigorous American patent system is ensuring profits for innovation and development is becoming worn out. Stiglitz gives the example of Hepatitis-C treatment, which in India goes for $1,000 per treatment with profitability, but in the U.S. for $84,000. This chasm in prices shows the degree of monopoly power that the U.S. government grants in the healthcare industry, and this bi-lateral trade agreement will only reinforce this if India strengthens its patent laws.

So it is increasingly clear that healthcare in the United States can be approached from a more critical angle, rather than still trying to force an act through that lobbyists call communist, but your rational person would call equitable.

Into The Fold – The IMF & Ukraine

Headlines have alerted us that the IMF has returned to its rescue bail out package for Ukraine, initially delayed due to the outbreak of conflict. Already the fund had delivered $4.5 billion worth of the initial program, and so the funds total commitment will reach a healthy $22 billion.

According to Lagarde they are “demonstrating courage to reform”, this being her justification for reviving the financial aid package. It is critical to note here that alongside this package will come separate EU and US loan pledges, as we try to ensure that economic progress is not politicised in a volatile region.

True a ceasefire has been agreed but this fragile agreement is no assurance that tensions in the region will subside. This fragility is going to come through when the government looks to restructure its debt obligation. It is also clear that the holders of Ukraine’s sovereign debt will not be treated equally, as Russia is one of them.

This seems to have become an endless saga, which the IMF has now decided to contribute to. One may also provide a critique of the IMF in that there is a danger with the present levels of corruption this financial aid package may be mishandled to an equal scale to that of Greece. While also considering a double standard created through the IMF being political in the willingness to provide aid to Ukraine, and yet want to hold Greece on a tight leash with its new government which is looking to break free from the shackles of its creditors.

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