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In pursuit of economic intelligence
Imagine a world where we all perform at our best – reaching our full potential. A world where we are producing at full capacity. A world where people are enjoying life – living in the flow, as envisaged by positive psychologist, Mihaly Csikszentmihalyi. A world where the scarcity problem is adequately solved or ceases to exist.
Was that perhaps a world that Adam Smith (1776) was imagining?
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.”
“To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute the perfection of human nature.”
Adam Smith, the ‘father of economics’, is often misinterpreted as advocating a world of greed and depicting economic agents (human beings) as selfish and only looking out for numero uno. Perhaps he was, instead, seeing a world where everyone was being the best that they could be and, as such, living and producing to the benefit of all. Is it not in working towards reaching our own potential that we have something to offer others – something to trade?
The challenge to each of us, then, would be to discover and unpack our own potential successfully and to help others to do the same. (If I become the best me that I can be, and you become the best you that you can possibly be, we both win.) Is that not the reason we engage in education? We know the potential is there, as hidden as it may sometimes seem. Babies do not contribute anything to society, yet their parents are willing to sacrifice, endure and invest much to raise and train them. Why? The parents know that – although babies cannot recite the ABC, do maths or play the piano – they have locked up inside them the potential to do all these things; they have the inborn potential waiting to be unlocked to contribute to the self and society.
For this very reason we continue to immerse ourselves in learning more, trying to become all that we can be by unpacking our inherent toolset and capabilities and, in so doing, being beneficial to those around us and society at large. Exposure to many topics and skill sets is important in this quest to dig up, dust off and unleash our unrealised or half-realised potential to its fullest.
Management development programmes include economics as one of the programme topics. It is typically described as a module that “focus[es] on bigger-picture thinking and direction”. This is important as it is often necessary to look up from the one aspect that demands almost all our attention and study the environment in which it takes place.
In addition to IQ and EQ as a measure of intelligence and emotional intelligence, respectively, Johan Fourie, associate professor in economics at Stellenbosch University, proposes EQON as a measure of economic intelligence in one of his blog posts. He defines it as “the ability to monitor one’s own and other people’s economic behaviour, to discriminate between different economic actions and label them appropriately, and to use economic information to guide thinking and behaviour”. Understanding why we act the way we do and learning how to think economically might take us a step closer to creating an environment where we can reach our full potential.
Almost any topic can be considered from an ‘economic’ point of view, i.e. by applying our EQON to the issue at hand. Steven Levitt, an economist, and Stephen Dubner, a writer, did exactly that in their book Freakonomics, which has been widely read (5,5 million copies sold) and discussed since it was first published in 2005. A new addition to the list of ‘The economics of …’ topics is the economics of Star Trek. In his book Trekonomics, author Manu Saadia writes, “Trekonomics is a rather perplexing form of economics because, in the Star Trek universe, most if not all of the real-world necessities that condition economic behaviors are, well, no longer necessities. That is why trekonomics is post-economic”. Whereas economics generally entails decision making under the constraint of scarcity, that constraint no longer exists in this sci-fi universe. In such a universe, there are however other difficulties to solve.
So how do we advance beyond our current way of doing/thinking/being in the ‘freakonomic’ world?
Through exposure. We need an eagerness and willingness to be exposed to economic thinking, gain economic insights and apply economic reasoning to our actions and responses. This should enable us, as individuals in our (economic) society, to make better decisions and react better to the actions of others, i.e. by putting into practice a mixture of IQ, EQ and EQON. Although we will still not agree on all things, we will better debate the things that matter, which will result in better decisions.
The bigger-picture thinking and direction that economics brings might just be the key that unlocks that dormant part of our potential. Working towards an improved economic intelligence could bring us closer to the world that Adam Smith might have pondered.
lectures full time at the Economics Department of the University of Stellenbosch. Her interests include teaching economics, the economics of education, and international finance.
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