‘Baby Boomers Style Thinking’ and Volume Crazy Economic Data: Are They Getting Irrelevant?

This week, there was an article in Linked-in by Lex Sokolin, explaining the reasoning behind ‘memetic dismissal of the Millennials – ‘Ok, Boomer!’ and linking it to fin-tech developments. He wrote this:

Chlöe Swarbrick, a 25-year old climate MP was presenting her climate change case to the New Zealand parliament, and was heckled by an older audience member. Without missing a beat, she acknowledged and dismissed the challenger with a pithy “Ok, Boomer.”

Urban dictionary explains this reaction further as generic reply to baby boomer style thinking or the equivalent of “Wow, you’re so horribly wrong, but I don’t have the time or energy to repeatedly explain something to you that you’re not going to listen to anyway’.

We all may be inclined to think younger people’s and even new technology’s dismissal of anything old as a natural course of life; but on the same day, I was struck to read about the dangers of IMF getting gradually irrelevant by a prominent economist* . It was not a dismissal; but still a polite warning, stating that ‘there is no worse fate for these organizations than gradual irrelevance’

What is going on here? Are we finally moving from ‘It is the Economy, Stupid!’ to ‘Ok, Boomer!’?

As an economist, I have been struggling to make sense of any economic and financial data from a longer-term perspective. Neo-classical theories do not seem to work, expected causalities do not run, regressions are usually no more than exhausting exercises, and the x’s do not explain the y’s anymore no matter how fancy the models get. Some explain this by the excessive monetary expansion after the 2008 global crisis and as a solution, try to use big data to fill in the both the time and information lag. Others say that nothing is linear and we have been in need for a long time now a ‘systems thinking approach’ in an ever more complicated and globally linked world.

From a ‘Ok, boomer!’ perspective, how should I make sense of my increasing dissatisfaction with the mainstream economic and financial data? If the reaction is ‘trying to make sense out of economic and financial data is so wrong that I cannot even explain’, it is very possible that I am trying to make sense out of something irrelevant. Are economic and financial data even measuring what we, as humankind want to achieve?

Actually, this line of thought is not new. For some time now, it is argued that the economic data that we use do not measure what we want to achieve. We hopefully want to become a better, enlightened human race; not just bigger in physical terms. Every indicator that is booming is not an ultimate end. Let me give some examples:

Gross domestic product, used to measure annual income a nation creates, takes into account monetary transactions, regardless of its social, environmental and well-being benefits and/or costs. A nuclear disaster recovery costs contributes to the GDP, as well as energy created from fossil fuels. If you grow vegetable in your garden and consume, it does not contribute to the GDP; but if you buy if from a supermarket, it counts in. A tree in a forest does not contribute to the GDP; but if it is cut and industrially processed and sent to some part of the world as an export, it has mysteriously a higher value–added than its natural form. A cut tree is more valuable than a living tree in our accounting system!

Financial sector balance sheets measure volume growth of balance sheet items, like assets, liabilities, credits, deposits, EBITDA every three months. Measuring their growth every three months means the main success criteria here is the pace of growth; but not other economic, social and environmental value they create for its stakeholders. This kind of short-term analysis does not tell us whether their credit growth is inclusive, whether it serves income or gender equality or whether the bank contributes to environmental destruction or climate crises. We do not even know what kind of companies our deposits fund. We, as depositors, can be funding fossil fuels, armed goods, hazardous but legal industries. Banking sector financial data only tells us that banks balance sheets are growing in monetary terms and their impact (good or bad) is increasing.

How about the real sector? Monthly production figures, labor and capital productivity, efficiency measures, return on capital. All of these indicators are implying an indefinite increase potential in production with limited inputs and unaccounted inputs. Quality of air, degradation of natural resources, alternative use of labor or capital is not taken into account in company balance sheets or the GDP accounting. Production figures do not show a company’s communication style to its stakeholders, employees’ well-being or work satisfaction, general good they create. Production figures, gross or net income show only the net monetary value a company creates to its shareholders. Then again, even in terms of value created to shareholders, financial indicators are good as the growth in volume.

In terms of the indicators that we use, we are getting bigger; but not necessarily better. Within our economic system, it seems we are using the wrong means for the end we target.

All this eye rolling of the new generations, their impatience and the sense of urgency: Could they all mean that what the economic system is trying to measure and achieve are becoming irrelevant for some? If some of the citizens of today find what the current indicators totally meaningless for the world they want to live in, can the current institutions continue to shy away from taking the hard decisions at the cost of becoming irrelevant? Is the IMF ready to give response to ‘ok, boomer’’ eye rolls?

Reaction behind ‘Ok, boomer!’ is a state of mind demanding an economic system that is more just, fair, meaningful and nurturing both for human kind and ecosystem in our planet. I believe that it is not a generational dismissal of the old people. That state of mind is telling us that our economic system, its institutions, and its measurement system are all getting irrelevant in terms of reflecting future that some of us will want to live in. An ever-booming world in terms of every indicator we use cannot be what everyone wants; if not just because the world does not have the resources to provide for an ever-booming state of mind.

*https://www.project-syndicate.org/commentary/imf-world-bank-less-policy-influence-by-mohamed-a-el-erian-2019-11