MUMBAI: Reserve Bank of India (
RBI) governor
Urjit Patel on Friday defended economists saying their core mission is not to forecast crises but to explain how mankind behaves.
It can be noted that economists badly criticised for the 2008 global financial crisis saying they had failed to predict the catastrophe on time. The problem began in the US following the subprime mortgage crisis that led to the collapse of the global economy, which it's yet to fully recover even after a decade.
"The fundamental mission of economists is not to forecast crises but to explain how the mankind behaves in the ordinary business of life and in doing so they do warn of crisis formations, suggest pre-emptive strategies and formulate mitigating policies that address those crises that slip through macroeconomic surveillance," Patel said while addressing the students of a business school here.
He said economists play a vital role in shaping public perceptions and discourses and in designing strategic policies in the corporate sector, central banks, governments and multilateral institutions, but ironically all these go very often unsung.
"Their greatest contribution to policymaking may take place through less direct routes like research which nudge policymakers to think about economic problems/challenges in newer/different ways," Patel said.
Stating that blaming economists for the ills plaguing the global economy is "patently unfair", he said though doctors understand diseases they cannot predict when one will fall ill.
Noting that very often economists face resistance, he cited the example of the American economist Hyman Philip Minsky who laboured in obscurity from the start of his academic career in the 1950s to his death in 1996.
Minsky's researches about financial crises and their causes attracted little mainstream attention during his life time, Patel said, adding "it was only in 2007 when the subprime mortgage crisis erupted, that everyone started turning to his writings as they tried to make sense of the chaos engulfing global financial markets."
Since then, the beginning of a financial crisis is now often referred to as the 'Minsky moment' he said.
Lauding government for bringing in two landmark financial legislations--amending the RBI Act that mandated it to set an inflation target; and the bankruptcy law--and the rollout of GST, saying these three reforms will shape the economy going forward as these show government's commitment to sound public policy which are vital for securing macroeconomic and financial stability.
