SCIENCE IMPOSSIBLE

Economics is the science of assumptions about human behaviour. Politics is the art of influencing human behaviour. And psychology is the practice of understanding human behaviour. The three need to act in tandem. Post-demonetisation, the scenario that has emerged suggests that there is disconnect between economics, politics, and psychology. Philosopher J Krishnamurti once said that the ability to observe without evaluating is the highest form of intelligence. But we seldom work on a fact without clouding it with opinion.

As our system of upbringing is based on what to think rather than how to think, the result is biased thinking. This is typically true of many economists who are fixated to ideas. Naturally, that economics is limited to the reach of those ideas. As the country debates over right and wrong, good and bad, short and long run of demonetisation, a new crop of economists has mushroomed. As they give knee-jerk reactions on the impact of demonetisation, the confusion gets confounded. We find only two sides today — one favouring demonetisation, the other opposing it. But the truth lies somewhere in between.

Let us examine the economics first. The two diametrically opposed views are not based on fact, but emanate from fiction of ideas. Coming to politics, as usual there are as many views as parties. Politics is no longer about ideology. It is about parties and sometimes parties within parties. So people are talking with only rhyme not reason. That is what politics is all about the business of talking. The problems get glossed over and solutions elude us. From days to months. Maybe years. Who stands to gain? Well God only knows.

The whole issue is about understanding. Understanding the impact of actions on the large majority who do not have any security net except the cash in hand. Cards they do not have and e-wallet they do not know about. There is a need to examine the implications from a psychological point of view. Implications which take into account emotions and feelings. This certainly is beyond the pale of economics which pretends to be objective but talks about expectations. Rational expectations to be precise.

The big question is can expectations be rational? The assumption that man is an economic rational being was raised, tested and rejected around a 100 years ago when psychologists settled for the view that man is emotional. Given that and assuming that man’s rationality is limited by his emotions, examining the relationship between cash and corruption will prove that they are independent variables. Cash is a means of exchange, whereas corruption is a mindset. Cashless, thus, has not much to do with corruption. Moreover, complete cashless is an impossibility, particularly in India where an overwhelmingly large section of population uses cash. It needs to be understood that going cashless and decreasing the use of cash in transactions are different things. So less cash is the right term. Maybe, in the long run, gradually encouraging cashless transactions may lead to a largely cashless economy. Cash gives a sense of empowerment to the poor whereas cashless empowers technology providers.

Coming back to economics then, it is an impossible science if separated from politics and psychology. Had it been a science, economies would have been in much better shape. There is a need to realise that even hard economics today talks about soft psychology.