In my world view about society, speaking of aggregates, of abstractions, can only be useful in formulating theories and in elaborating on ideas and concepts that help us understand the world in relatively simple terms. Aggregates and abstractions cannot become safe guidelines for policy, since they are misleading, as they conceal the individual forces that make them up.
Thus the title of this article “Behind the numbers there are people”, which however is profoundly different from the kind of slogans we often hear from various interest groups, who only care about how to secure their privileges or forward their agendas, always in the name of protecting “the people”.
Individuals matter. The decisions, the tastes and preferences, the incentives and motives of every single one of us, matter. The society, the economy, the nation are nothing more than abstractions that do not exist in isolation from their constituent members.
For policy to be sound, to be effective and productive, these individual, decentralized forces must be taken into serious consideration. Yet policy has often proved to be ignorant of these dynamics, always looking at aggregate indices instead.
And indeed this is where I identify much of the trouble that originates from: (1) regulations that create adverse effects and produce perverse incentives, (2) the persistent inability of policy-makers to address real world issues, in a definite and effective way.
It is upon this fundamental principle that I have always established my opposition to policies, proposals, arguments that speak of aggregates, of abstractions, as if these were coherent entities that operate in a universally understandable and predictable way. It is for that reason that I am highly skeptical of macro-economics or any other field of study that deals with things from a macro perspective.
In the European Union, just like in most centers of power in the world, policy-makers often base their decisions on generalities, not particularities, thus missing the picture. Should I remind you of the Stability and Growth Pact, the set of macroeconomic criteria that guarantee accession of a member-state to the eurozone? A pact that has obviously failed in its cause, since it was established on misguided macroeconomic magnitudes. Or the bailouts to individual states, without any prior study of the micro-economic forces that are characteristic in each industry? Have policy-makers considered the specifics of each case? Or should I speak of the fiscal compact and its absurd provisions, such as the “structural deficit”?
Demand for the sake of demand, or austerity for the sake of austerity represents a dogmatic devotion to numbers that omits the single most important aspect of human society: the forces that shape our choices, our preferences and our actions.
These are the questions that policy-makers need to answer before making any decision. Alas this is not usually the case, hence we get what we deserve…
The world is complex, trying to make it simple in order to intervene in it, in order to shape it, dictate it, change it; is naive, foolish and at times counter-productive or even harmful.
Behind numbers there are people. And people are unpredictable.