Economics assumes human rationality, but the success of economic policies depends largely on changes in the level of consciousness and public sentiment. Therefore, it is necessary to consider not only scientific analysis but also social mood and emotional factors when implementing policies.
Economics emphasizes human rationality. In general, economic laws work well in societies with a large number of rational people and a high level of consciousness. This is because the rational choices of each individual member of a society increase the economic efficiency of the society as a whole. Therefore, no matter how good an economic policy is, it cannot be expected to produce good results when the quality of its members is poor. In addition, it is important to increase the understanding and participation of the members of society before implementing economic policies. This is because for an economic policy to be successfully implemented, the fundamental intent and purpose of the policy must be fully communicated, and the ability and willingness to implement it is required.
In addition, even if scientific analysis and prescriptions for economic problems have been made, the prescriptions should not be physically applied to the real world without a careful examination of the flow of public sentiment and the economic and social climate that influences economic trends. Since the direction of the economy is highly dependent on the direction of public sentiment, implementing policies that ignore changes in public sentiment can be counterproductive. This is one of the reasons why political stability and social trust are fundamental to economic growth. For economic policies to work effectively, they need to read public sentiment and adjust policies accordingly.
Economics assumes human rationality, but it must also take into account animal instincts. Humans are easily emotional, and the more unstable an economic society is, the more animal instincts are triggered. In this sense, economic stability is a fundamental issue. Without social stability, economic instability increases, which in turn fuels social turmoil, creating a vicious cycle. Especially during a recession, individual self-interest and anxiety are amplified, leading to speculation and irrational consumption. This can further increase economic uncertainty.
And since the economy is based on human economic behavior, it is difficult to predict. For example, in the case of weather forecasting, if you forecast tomorrow’s weather today, the weather will not be affected by the forecast itself. However, economic forecasting is different. For example, if the government predicts a recession, many people act in preparation for it. Conversely, if it predicts a recovery, people also act accordingly, so the economic forecast itself affects the fluctuations in the economy. Therefore, it is common for forecasts to be off to some extent. Predictions such as “it will” or “it won’t” are prone to becoming so-called self-fulfilling prophecies. The problem of self-fulfilling prophecies can add to economic instability, so economic policymakers need to tread carefully.
Economic issues are also closely related to human value judgments. For example, Person A is young, competent, has no dependents, and earns a large salary. In contrast, Person B is old and incapacitated, but earns a small salary while supporting a large family. This income disparity is not just an economic issue, but a discussion of social fairness and moral values. Or the price of a house rises faster than the salary of a person without children, or there is more construction of luxury housing. These are issues that require social consensus and policy intervention rather than simply leaving them to market logic. These issues are often driven by emotions and value judgments. Economic inequality can be a source of social conflict, and policy considerations to mitigate it are essential.
Human behavior is complex and oscillates between rationality and emotion, but it is sensitive to its own economic gains and losses. People who regret a missed opportunity and reflect on it with regret will vow to succeed next time if the situation comes up again. However, they often fail to realize that even if a similar situation comes up again, their surroundings have changed considerably from the past. We tend to be so focused on our own behavior that we overlook the behavior of others. This is why economic forecasting is so difficult. Because the economy is a complex system that involves the interaction of many individuals, companies, and governments, simple theoretical forecasts cannot accurately capture real-world economic trends. As a result, economic policymakers need to constantly observe and analyze the economic environment in order to respond quickly to changing conditions.
