Adam Smith as a Father of Economic Science says that economy is a knowledge how to prosperity the peoples with always to keep the natural and outer space (astronomies) in harmony and synergic for the now and next generations. But economic science have to loose “soul” as foundation have create by Adam Smith, Keynes and David Ricardo as well Schumpeter. Economy science that truely is a knowledge to learn about human behavior which very complex, but now have been by pass with mathematics model that which very complicated and frightening. But the Adam Smith economist follower can’t able to translated this formulas into the good methods, analyzes and economic decisions.
According to me, there are some big questions to economy science that not yet able to answer with complete and accurately like :
1. Economy science have not yet able to make accurately predicting for many economic macro indicators in monthly, quarterly and yearly and always must be revised.
2. Can not able to predicting many factors of internal and external risk, included in method of management risk, how to prevented and avoid from its systemic risk.
3. Why economics is just using mathematical and statistical science in perform a variety of macroeconomic indicators predict that it could not follow the dynamics of business economics, including the speed of technological change. And also build a variety of financial structures that are very vulnerable to the influence of economic turmoil, both in terms of its architecture and foundation building a variety of levels by simply manipulating and derivating on
mathematical calculation to establish a structure on very large, massive and widespread of financial derivatives but very fragile on economic turbulencies effect.
4. Economics has not been able to cover a variety of social inequality, poverty
poverty, make income distribution as well as economic analysis
appropriate environment to prevent environmental damage and social consequences various economic development activities in an integrated, effective and efficient.
5. In calculating the time, science is only wearing a variety of derivatives mathematic
to predict the strains of the human dynamics of business economics with linier calculating (dimension 1) without entering aspects of cultural, social and psychological man who always want to progress and change with the dynamics of dimension 2-4.
In theProspect Magazine editing No. 157, April 2009, Anatole Kaletsky wrotes a paper about “Goodbye, Homo Economicus”. For many economist this paper to remember on book of Paul Ormerod with topic “The Death of Economics”. It is maybe a signal that rapidly or slowly, Faculty of Economy will be disappear. But for myself this is no need for disappear if they want to see the this reality and began to adoption some of knowledge like biology (bio-economic), physical (econo-physic), chemistry, butterfly economic, medical, psychologic, social business management and economic natural based scope (eco-system like eco-nomy) into various of their formulas and technical analyzed method without very much involved in matemathic and statistical science (being dynamical science like aerodynamic, water dynamic and population dynamic) in their analyze predictions and find a good solutions on economic development vision in “Struggle for Life in the Forest” and not anymore in “Survival of the Fittest in the Jungle or Desert”). Also they must not used various assumptions that truly not a reality that will be happen. The econometrics still be good for the micro and private sectors for financial and accounting scope but if to enter the economic macro economy must be translated into various discipline sides.
Now, the economist that tends to not involved mathematic in description of thinking logical, they call as economist from “Jurassic Park” era. This reality more strong when many students of advanced Economy Faculty being confused, because they feels to come to Mathematics Department. According to myself that’s why economic formulas not able and accurate to predicting indicators of macro economic include growth and conditions economic in the future. Because they used many of mathematic and statistic science to calculated the economic trend and growth. Mathematics and statistics is only a linier dimension with modern complicated formulas. Meanwhile, human as businessman, their labour in manufactures and channel distributions and worldly consuments as business produts user is a human biologic that have many aspects in mentality, hearts, psychologic, expectations, bio- rhytmic, dreams and mindset in 2 – 4 dimensions. This human being have dynamic nature and always will be to make change, creative, breakthrough, motivated, innovated and inventor for fulfil their growing and change in taste, needs and wants and human vision in travel space (physics) and time (meta-physics).
The failure of economic science to reduce the occurance global crisis is a protest of economic science approach that more in mechanic nature. Economic science had ignore humanic side, like history approach, psychologic intuitive, sociology and political context understanding. For myself, economic science must be entering the sciences of biology, psychology, medical, socio humaniore, bio-physical and bio-chemistry and being mathematically in 2 – 3 dimensions.
Kaletsky underline 2 points that being fatal mistakes of modern economic science mainstream which have been effluent of global crisis is rational expectation theory and market efficient. With simplified, the second assumptions become a hand or benchmark between businessman and government in decision making. Kaletsky tells that rational investors will be thinking about probability of downturn house price is nol. This signal will be transmitted to the bankers in giving the loans on assets collateral certainly to continue being move up. And the regulators also believe that market can give the best informations for insentive to manage business risk.
Meanwhile, Adam Smith has give a holly messages that in treatment human relations with economic planning and decision making, we must be harmonized with social, nature environment and outer space in vision, concept, activities in non-linier calculating, humanity and environment friendly and not to maximized profit and more exploitation various the resources of natural and human being on its social aspects. That’s why, economy and business science only produces many problems in social gap, environment damage, poverty, economic turbulencies, overheating and bubble economic, diseases, mental disorder (egoism, greedy, consumerism, snobbish and over enrichment without heart), low level socio-politic conditions in underdeveloping countries and war to grap and dominated various natural resources and markets.
1. Assumptions dan Mathematic Linier Simulations
Economy science have used various assumptions as parameter in calculated velocity of economic growth, macro indicators and factors that influences economic which often not representative and describe the real conditions that exist in local and global economy. Economist only simulated formulas derivative in mathematics which will examined by statistical method, like examined of honestly, deviation standard on data validations, calculated opportunities and pessimistic - optimistic scenarios, etc. in coordinate pattern structure which form a straight line as 1 dimension on many data points. So that the yield of economic methods only make a closed, simple, short and static in calculating, predicting, decision making, planning and acting in economic policies. This is not describe of the human dynamic aspects in conditions of biologic and psychologic aspects of human being as businessman, hope and basic needs of counsuments and producens for raw and aid materials, free market competitions and speculations, inventing and innovations technologies in generally was very complex nature and have 2 – 3 dimensions that being able to measure accurately by economic liner method which have low dimension and linieristic.
Basically, first dimension (linier or straight line) will be dominated by second dimension (kwadratic line or area with X Y coordinate) and second dimension will be dominated by third dimension (space or volume with X Y Z coordinate), where human complexity as biologic, psychologic and social creature will be describe by third dimension. The first, second and third dimensions is arrangement and regulated by nature environments with Natural Laws and of course Human Laws. And finally third dimension will be dominated by fourth dimension (supernatural) that arrangement and regulated by Supernatural Laws from the Outer Space (Galaxy) and for in human religion is by The GOD from the Heaven. The third dimension many involved by pure biology, applied biology (medical, agriculture, fisheries, live stocks, forestry and biotechnology), phylosophy, psychology, sociology, arts and music, feng sui and hong sui, included market financial (financial astronomy), information and communication technology and computerized systems like computer artificial intelligent, bio-hibrid and others.
Human live in earth will be influences by first until fourth dimension in form of physical and chemistry (first and second dimension), biological influences for growth since birth, kid, youth, mature, old and die which influence growth of physic, biologic and psychologic (mentality) according to their culyure development, education, spirit, prestation, social status as “Maslow Pyramide” to find and attain their needs and wants toward mental psychology and self actualization of personal and social group (3 dimensions) and living with harmony, obedient and peace in their religion (4 dimensions). Closely, simple and linier of economic model theory of course is not able to anticipated and accurate predicting for midterm (monthly-yearly) and longterm (decades and century). Economy science can able to good predicted if in closely economy, monopolistic and simple without many external factor influences.
According to M. Dawam Raharjo (Cakrawala, Bisnis Indonesian News Paper) that economist have never consider culture factor to their economy formulas. Whereas culture is a dynamic picture for growth, creative, grouping and organizing which appropriate with norms and customs in human life every day, depends on closely, static and conservative or openly, dyamic and modern that can be defined development rate of their nation, include economic sector. Also, Alan Greenspan, economist popular and ex-officio Federal Reserve Board about Russian case after leaving their socialism system to being market capitalism that not able to develop their free market economy. But he is forget about China which being more develop so fast to be strong like USA in 2020, so he tells that “not nature at all, but culture”. During this, he saw that the market is like nature, have certain laws, as economists generally view. This happens controversy in the formula and economic practices that would be purely linear. We think actually if economists incorporate the laws of nature, particularly biological it will clear the existence of a "certainty of natural law" because it the natures which makes the occurrence of a cycle of civilization (culture) human, including the economic cycle (recovery, prosperity and recession) in travel space and time. As the paragraph above that Adam Smith made basic economic theories based on natural law, but in applying the formula, the theory and practice has not implemented this idea Mr Economics. They currently just dwell on the mathematical formulas and statistics that are linear mere without including the various formulas and the reality of natural law, such as physics, chemistry and biology. Economists only lower (derivate which is now rampant in various forms of financial derivatives business) empirical mathematical formulas and assumptions - assumption of a linear expectation regardless of the natural law (dimensions 2-3) and supernatural law (dimension 4) that will always affect the cycle and cultural upheavals and human civilization, (including economics), which it clearly appears that economic development and technological development is often not friendly to the natural and social environments. So economists and technologists should rely more on Einstein's theory of relativity, E = mc2 to produce energy, profits, results and progress abundant (modernity) technology without having to sacrifice a lot of capital costs, losses (due to risk of economic cycles and shocks), waste of natural resources, social inequality and environmental destruction with the efficiency of m (mass) in less quantity, but increase the speed square (c2), and how to make the raw materials for semi-finished goods that not so much used the natural resources for our next seventh generations. And finally not to make a damage the natural environments, because the environments can revenge us like earth quake, tsunami, volcano erupts, water flooding, land catastroph, extreme climate, blizzards, wind storm, global warming, pandemic diseases, economic criss and recession and much more again. So don’t kill the earth for just your greedy and selfish pleasure only.
2 Monetary - Fiscal Policy and its Implication in anticipation of turbulencies and economic crisis
Many passengers on the ship in this panic turned out to look for opportunities in the narrowness. So for us to survive against all external shocks in this globalization era is the vision, thought, concept and behavior of complex biological to solve various complex problems of internal and external conditions. This shock may be the emergence of global investor distrust of the management and conduct of business and government that no longer in accordance with the principles of economics and management, business administration (Good Corporate Governance and Clean Government) which raises the number of moral hazard, fraud and mismanagement of other well technological surprises many kinds of products of goods, services and culture. So when the crisis emerged in the form of monetary and economic crisis of confidence in business management, economics and government, the foreign investors in the money market, stock and real sector rollicking leave the country in a position to remove its currency with hard currency, panic selling in the market capital, attract all current accounts and deposits in the banking and securities, and closed the factory that ends "Capital Flight" massive. This is what we know as the "Impact of Systemic Crises", in which nearly all the real financial and business institutions will be affected by a large and heavy, so that the economic system, business and financial will experience a severe contraction that causes severe turbulence and crisis, causing economic growth to be negative. It also looks at Japan in crisis and long-term deflation and also in 2007/2008 in the USA (the sub-prime mortgages) and European (Greek case almost by default). Only developed countries do not use the services of the IMF in debt, but issued a number of government securities in various forms to make bailout package, stimulus, quantitative easing and aggressive Also cut rates again to stimulate economic growth, thereby becoming a heavy burden and must state borne by the next generation, like the case of the banking bailout Rp. 650 Trillion. So let us manage the state finances in a more healthy and appropriate corporate capital structure with strong economic management, sound business, creative, innovative, efficient and effective in promoting the country as well as companies to avoid moral hazard, fraud, ignorance, carelessness, negligence and greed in managing the economy and state finances and business. Do not want big fast, but full fat is fat, sluggish and unhealthy that produce low competitiveness, the fragility of the financial structure and poor economic performance and vulnerability to internal and external economic shocks. This is what should be a benchmark for economic fundamentals and not merely on macroeconomic indicators of economic planners often make more confident and ultimately much owed by only based on DSR to GDP ratio and the amount of deficit to GDP is actually not correct. Debt should be based on the economic prospective of real economic performance rather than the bubble in the market finansil, especially by protecting this fragile thing on the hedging insurance Credit Default Swap (CDS) which was speculative and high risk, like the case of subprime mortgages and later Greek to derivatived again in several levels to form a giant building, but have the fundamentals that very fragile (fragile underlying sectoral economy).
Hence if the sector and the country can not afford to pay (default), there will be turmoil beliefs that cause capital outflow by selling all the securities the CDS and its derivatives and there was catastrophic. Automatic, companies and countries should yield (yield) is higher for the market to buy and finally getting choked with the mounting debt. It is also likely to be experienced by Americans with a huge debt in the future, let alone the still fragile economic conditions and the defeat of his rivalry with China in the global economic level. Planners and economists often fail to see the insights and visionary of the possibility of external shocks to a country where economic actors and governments are unable to manage the company and his country well and correctly in order to produce something outcome (trickle down effect), value added and multiplier effect of continually increasing welfare. But it only benefits a few people in the world of business and government, in the form of the rampant levels of corruption to the whole economic system and governance, economic rent, mark-up businesses and projects, manipulation and white collar crime banking, private companies and state-owned monopoly. But the most important and crucial is the lack of visionary power, lack of professionalism and incompetence in managing private debt and the state with the capital structure is highly skewed with a range of capital is only 50-20% with a portion 80-95 % of debts and credit risk management and business and crisis management are less reliable for more severity of dampen turbulence and economic crisis.
3. Structure Formation and Character Nations that are less solid and participatory.
The various nations of the world, is actually composed of various ethnic diversity, religion and class that shaped the sand as a form of organization that is not solid, participatory and high powered fighting and a lack of consistency and strong commitment. Fragments of this sand does not have high "power of cohesity", easy to separate and support each other less (actually dropped and tripped each other.) Groups this sand if included in the ball (globalization) and dropped down (gravity fluctuations) will not bounce, but it is sticky on the ground, which means it does not have a sand ball resilience (recovery) the strong to rise again (1997 until now), though never achieving the economic growth of 6.5% in 2003 but supported only by the consumption sector 3-4% from 1999 to 2002 and began to climb again in 2007 to 6.2% by the acquisition of natural resources exports (to China, India , USA, Europe and Japan as well as skyrocketing commodity prices oil speculation, other mines and plantations. This is proven by the economic growth in 2009 only 4.5% only with a declining level of exports of natural resources and commodity prices plummeted by 40 - 50% of the price highest in 2007. Thus, when viewed in the economic fundamentals and structural economic growth is supported by factors of consumption (60%), exports of natural resources (30%) and manufacturing exports (10%) with economic growth rates that are less qualified in the sense of not able to give a lot of welfare for all citizens. This shows that the performance of the cabinet with a variety of economic policy is not too significant and brilliant, because without a strong government and hebatpun, fair economy will definitely grow to 3 - 4.5% without disruption of internal economic crisis and external (U.S. and world economic crisis in 2007/2008).
For that we need a new paradigm and mindset change with open-minded way of togetherness, unity, spirit of nationalism and heroism to scrape out all the feudal mentality, corruption, selfish, greedy, instant and want to own delicious and struggling with employment but working smart to recognize excellence and discipline and work ethics, professional in producing creative and innovative products with "highly value added" which is accompanied by higher productivity. We start with a wealth of natural resources, both non-renewable resources and renewable resources with an advanced processing technology for our nation to get a high value added and no longer as a natural resource exporting countries that are still raw for the sake of progress and prosperity of the Indonesian people towards a just and prosperous society. So the advantage we are forming a nation is Nature-Based Industrial State. Development should be touching all levels of society and between regions, so that the imbalance of economic development can be based on justice for all levels of society in the form of economic democracy and social democracy in a fair, non discriminatory, consistent and continuous.
(visit my blog, http://bioeco-ronment.blogspot.com)
Foot Note :
This is shorterm and longterm fluctuation which will be happen in naturally that drive by mood and psychological global mass to take trading positions in crowded market. But if there are a very urgent fundamental data or news, the fluctuation in graphic maybe happen in turbulence fluctuation move up or move down more than shorter forecasting. And a part of big fluctuation dynamic on biorhythmic and biocycle in midterm and longterm cycle. So you may not being only Globalize with Internet but now you must be have vision as GALAXIZATION with GALAXINET
Where we can know the strains and the condition of the Universe Kingdom in the short term (10 years), medium term of 50 years and long term 100-200 years), which will also be evident in a "Certainty of Life (certainty) rather than uncertainty (uncertainty) "who always complained of many parties, including the leaders of the state policy makers, leaders of business policy (industrialists and traders) as well as experts in various fields of life. The power and influence of Universe Law (Universe Kingdom) this will always affect every aspect of our lives on this planet, either consciously or unconsciously to anticipate properly.
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