He noted that GDP was likely to fall. Just as he uttered these words, a woman rose from the audience and, with finger pointed, shouted: "That’s your bloody GDP, not ours!” Professor Menon had no right of reply.
Such cases are common in real life, when citizens feel disconnected from the world that Economists proclaim, one does not need to go far to find examples.
In March 2018, after the Monetary Policy and Financial Stability Statement by the National Bank of Rwanda, a friend came to me furious, "what is the problem with you experts” he shouted, "BNR claims that inflation is low in Rwanda, do you guys go to the market, do you buy stuff?” "everything has risen in prices, and we know it”.
These stories are testament that the case for economic and financial literacy is strong. Economics is part of people’s life. It affects our daily lives in both obvious ways and more subtle ways.
From an individual perspective, economics frames many choices we have to make about work, leisure, consumption and how much to save. Our lives are influenced by broader economic trends, such as inflation, interest rates and economic growth.
Since we live in a world where these trends affect us, we often try to make sense of them, in our day to day discussions, economic developments take the central seat.
In markets, chatter will be about food prices, hit the roads, and motorists will be discussing fuel prices, in homes, school fees for children and utility bills among others will be big discussion points. There is nowhere we can escape economics.
There’s a problem however, although many people like to discuss these issues, there is a lack of basic understanding among the public on how the economy functions.
This is why, like my friend or the woman in the audience, many people feel that reality is disconnected from the world economic experts declare. Such problems however, can be tackled through initiatives that boost economic literacy, such as the #BNREngage, by the National Bank of Rwanda to raise awareness among the public on economy related issues.
Why do programmes like #BNREngage matter? Studying biology enables people to observe and marvel at many details of natural environments that otherwise would have escaped notice.
In much the same way, mastering a few basic economic principles can cast the mundane details of ordinary existence in a sharp new light. Ludwig Von Mises once noted, "Economics deals with society’s fundamental problems; it concerns everyone and belongs to all”, this is why economic literacy is important.
Thirty years ago, Nobel Laureate in economics, George Stigler, wrote: "The public has chosen to speak and vote on economic problems, so the only open question is how intelligently it speaks and votes.”
In his view, economic literacy is important because it serves as a "means of communication among people, incorporating a basic vocabulary or logic that is so frequently encountered that the knowledge should be possessed by everyone.” And that it helps because, it is a "type of knowledge frequently needed by the people”.
Economic literacy gives people the tools for understanding their economic world and how to interpret events that will either directly or indirectly affect them.
Countries also benefit from having an economically literate population because it improves the public’s ability to comprehend and evaluate critical issues they face in daily lives. For policy, it is key because it helps to center the policy making process on the active support and involvement of its citizens.
An economically literate population possess the tools for understanding their economic world. It helps to improve the competence of each individual for making personal and social decisions about the multitude of economic issues that they encounter on a daily basis and will do over a lifetime.
For some economic decisions, such as buying a home or investing in the stock market, it is possible to hire professional or technical help when making a choice, but in most cases it is neither economical nor practical for an individual to hire a skilled professional every time an economic decision needs to be made.
Even when such advice is given, the final decision must be made by the individual, not the adviser. Each person must therefore ultimately serve as his or her own economist in making many economic choices, whether those choices involve buying a product, getting a loan, or something else.
In Biology, cells are the basic building blocks of all living things. The human body is composed of trillions of cells, they provide structure for the body, take in nutrients from food, convert those nutrients into energy, and carry out specialized functions.
Without cells therefore there is no body. Likewise, in Economics, agents such as households, firms, buyers and sellers, aka - people, are the basic building blocks of an economy. Without people, therefore, there is no economy.
In the body, cells produce signals to control how much and how often they divide. If any of these signals are faulty or missing, cells may start to grow and uncontrollably multiply, which can cause cancer.
In the economy, people make economic decisions. If many of these decisions are ill informed, they may pose great risks to the economy.
It is therefore important that people understand the economy. #BNREngage is a stitch in time!
The writer is an Economist at the National Bank of Rwanda.