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Of fables and fabulists

January 28, 2020 3:06 pm A+ / A-

LinkedIn – Are we supportive or selfish?

What moves us to act in one way or another?

What is convenient for a person; Can it also be convenient for the human group he integrates? Or everything is a zero-sum game: what he wins, another loses.

Can you design an economic system based on the virtuous and altruistic behavior of its components and expect it to work that way in reality?

What are incentives and how to guide them towards the common good?

Answering these questions would be a good introduction to what was formerly called Political Economy.

Together with the basic concepts related to scarcity, these issues should be part of every curriculum, even in the primary grades of learning. The reflection on them is intuitive if it is well conducted by a trained teacher. After all, the etymology of Economy refers us to personal administration, that is no stranger to almost anyone.

However, despite the fact that systematic research on micro and macroeconomics is already a few centuries old, absurd proposals are still heard, comparable with the bloodletting to reduce fever in the health sciences.

Now, if those absurdities were sketched by an ordinary person, with no formal knowledge, over an informal coffee table discussion, there is no problem. On the other hand, when those who support them are high-ranking communicators or officials, dangerous ignorance will affect us all. The more dangerous when the ignorant holds more power of execution.

In 2002 the Argentines were imposed the “compulsory asymmetric use of pesos”, mocking almost all previous constitutional rights; yes, in holocaust for the “common good”.

Almost two decades later, similar ignorant people are trying to impose a “forced use of pesos” because “saving in US dollars is not a human right.” Beyond the unfortunate comparison between the right to life and the right to choose how to save, this new use of pesos will be as frustrating and will be a failure as the previous one.

The root of the mistake is the existing ignorance of the incentives that make us act in one way or another, and the overvaluation of the police state in modern societies that threatens with imprisonment in the event of non-compliance with unsustainable standards.

We, Argentines, have shown ourselves and over decades that we are the society that worst manages its own monetary system. Analyzing the reasons entails a text of similar length than the current one, so it is convenient to take it as a fact of our “Argentina’s way”.

Therefore, nobody in their right mind will save in pesos. We haven’t been doing it; We will not do it. It may be that an interest rate that promises to beat devaluation in 30 days causes someone to “gamble” That is not genuinely saving. That is speculation, when not arbitration if you buy exchange insurance, just in case.

Recomposing the demand for money requires more comprehensive, deep and sustainable actions, than a mere threatening speech (via AFIP) and / or enthusiastic (because the green shoots are coming). If officials underestimate the population they claim to represent in this way, they should not be surprised later by the sudden and unexpected consequences.

We will continue to save on what best guarantees us to protect the future value of our postponed consumption and our crystallized work. Although it is “illegal” for the Administration.

If we want to save in the currency issued by the BCRA; First, they have to guarantee the solvency of the issuer by clearing the National Treasury bonds of no value from their assets, and then they must show us the solidity of the surplus fiscal program, based on the reduction of public spending, the only way to trust that The long term will be better.

When this happens, we will, like any other company, be willing to deposit our savings in the local currency, because the prices of goods and services will be expressed in that currency (including real estate) and their changes will obey microeconomics factors of relative shortages and not for flooding of pesos.

An old fable in the reading book that was used in elementary school during the 1960s told the dispute between the Wind and the Sun to settle who was more powerful. For this they chose a walker who, alone, was advancing along a path. The challenge was to see which of the two managed to tear the layer faster. As much as the Wind blew with all its strength, it only succeeded in getting the individual to cling more and more tightly to its cover. The Sun, on the other hand, only had to dissipate the clouds and start shining brightly. The man agreed to take off his cape, to walk more comfortably.

We act by incentives. Force is only imposed temporarily.

Saving in dollars may not be a right. But deciding how and how much savings, it is.

Managing the currency well is the official’s obligation. Trying to compensate for their mistakes with false obligations to citizens is, at least, ignorance.

 

By Hector Mario Rodriguez

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