Crisis because responsible doers are not fortune tellers

In his long years as an economic analyst and editor of an economic evaluation and projections bulletin, the current Secretary of the Treasury, Rogelio Ramírez de la O, had dazzled important foreign companies that received his expectations bulletin for his ability to develop an accurate approach on the short- and medium-term prospects for the economy.

For this reason, those who know him were stunned when the day before Tuesday he appeared in the Chamber of Deputies to review the economic scenario for 2023 and replied to the deputies that the failures in the calculation of GDP had occurred because “we are not fortune tellers”.

And although Keynes made it very clear that it is impossible to foresee the future and that in the long run we will all be dead, it remains to be clarified whether the Treasury Minister’s argument was a confession of short-term uncertainty scenarios as the axis of any economic policy or the warning that things will get worse than they are because it is about disguising the economic collapse as stagnation or recession with the argument that no one can guess the future.

Economists around the world hit the wall because crises, from the Great Depression of 1929 to the Covid recession, broke out amid scenarios of unbridled optimism, including none other than Nobel laureate Paul Krugman who has written two articles to berate his colleagues and himself for failing to foresee the financial crash of 2008 and the wave of inflation of 2021.

In the important part of Ramírez de la O’s participation in the Chamber of Deputies, he insisted on leaving the impression that the economy is a voodoo science and that he is incapable of keeping his own word or at least very reluctant to respond to optimistic approaches. and politicians of the technicians of the economy.

GDP expectations are one of the main instruments of economic policy and are usually useful when they are consulted with socioeconomic rationality, but they always fail when they are manipulated for political interests. The GDP prospective fixing methods are based on the study of the economic behavior by sectors and cross the information with the variables of production, consumption and investment to the present, with the ability to perceive the short term due to the productive dynamics itself.

All the international economic and financial organizations and all the ministries of finance in the Western world have departments dedicated to analyzing the behavior of the figures, because the main economic variable that determines all the others is precisely the short-term scenario of the Gross Domestic Product. as the sum of goods and services in an economy.

In the 80s and 90s of the last century, the economic current of foresight developed and had a great impact on the development of macroeconomic models that began to use the contribution of computers; a company that was promoted by Lawrence Klein and that earned him the Nobel Prize in economics created a model of economic forecasting in small and rudimentary computers that worked in a very simple way: the identification of 16 fundamental variables of economic growth and the interrelation between them to record impacts on economic growth if any of these variables moved in one direction or another. It was the Wharton model and it even created its own University and in which Mexican economists were trained who later swarmed around Carlos Salinas de Gortari in the Programming and Budget Secretariat.

When presenting the Global Development Plan 1980-1982, the then programming secretary Miguel de la Madrid Hurtado avoided referring to the festive approach of the document and affirmed that optimism is a development strategy, a thesis on which the current economic discourse seems to be based. Secretary of the Treasury who has the responsibility of constructing real scenarios and not fortune-telling about economic behavior because public decisions set guidelines on which productive agents move.

From the participation of Ramírez de la O in the Chamber of Deputies, the feeling remained that the economic policy of 2023 is uncertain, with an optimistic profile outlined by the fortune tellers of the Treasury and that it can be summed up in a single sentence to outline the Mexican economic short term : “we do it with the best there is”.

Policy for dummies: When politics replaces economics, it’s time to run.
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Crisis because responsible doers are not fortune tellers