The first step to prescribing the right medicine is to recognize the cause of the illness. And, when it comes to what is ailing the global economy, extreme monetary easing has been more cause than cure. The sooner we recognize that, the stronger and more sustainable the global economic recovery will be.
Interpretation
Understanding the root causes of an issue is crucial for effective solutions, especially in economics.
This quote emphasizes the importance of identifying the underlying causes of economic challenges before attempting to implement solutions. Raghuram Rajan suggests that the practice of extreme monetary easing has contributed more to the problems in the global economy than it has solved, and acknowledging this reality is essential for achieving a strong and sustainable recovery.
In practice
In a discussion about economic policies, this quote can highlight the importance of understanding root causes.
The U.S. should worry about the effects of its polices on the rest of the world. We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country.
Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
Too many years away from academia renders you pretty incompetent at research and teaching. So I had to go back.
The gap in India has always been between the promise and the execution.
The last thing you want to do is raise taxes in the middle of the recession because that would just suck up and take more demand out of the economy and put businesses in a further hole.
The basis on which good repute in any highly organized industrial community ultimately rests is pecuniary strength; and the means of showing pecuniary strength, and so of gaining or retaining a good name, are leisure and a conspicuous consumption of goods.
You have to remember: what are incomes to banks are outgoes to families.
Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine - the special pleading of selfish interests.
Capitalism is not an 'ism.' It is closer to being the opposite of an 'ism,' because it is simply the freedom of ordinary people to make whatever economic transactions they can mutually agree to.
No economy can succeed without a high-quality workforce, particularly in an age of globalization and technical change.
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