Happy Holidays to all, and thank you for allowing me to write to you this past year. It is not my intention to maintain a political tone in these articles. In fact, I abhor that inclination. Yet, an aspect of economics remains inherently political. My focus has always been less so, zeroing in on three principal areas: financial economics, behavioural economics, and the economics of technological change.

There’s no avoiding it, though—political motives often creep into analyses by undermining typical economic axioms. An axiom is just a fancy word for an assumption that sounds almost pseudoscientific. Trust me when I say the axiom that humans behave rationally is quickly tossed aside when politics enters the picture. That’s not to say political decisions are irrational—just that they often don’t align with the expectations of those of us who lean toward the quantitative side of economics. Like me.

There’s one concept we economists oversimplify. I’ve yet to find an econometric model that truly captures it. It’s either represented in monetary terms, through a dummy variable, or via profit/logit models. Don’t ask me to explain those in detail—they’re as complicated as they sound. Honestly, the best place I’ve seen this concept expressed is in the error term of regressions. That concept is “trust”. It’s a complex, elusive thing that can appear irrational depending on the lens used.

People trust other people and systems for all sorts of reasons. This trust can seem highly personal and unique when observing individuals. It appears irrational when viewed through the more hardline economic models in two of my three specialisations. At the most basic level, rational individuals act on incentives that bring the most benefit for the least cost—not always in monetary terms. So generally, you trust what yields the least harm to you.

But things get murkier at the macro level—easier to observe, harder to interpret. The law of large numbers works in mysterious ways. Sometimes, I feel it’s the best evidence of God’s strange sense of humour. I’ve seen societies act against their own interests while individuals within them do the complete opposite. At the micro level, rational decisions depend on the amount of information available and who one chooses to trust. At the macro level, in my view, information is often ignored in favour of institutional trust.

Look at what’s literally going on outside the Caribbean right now. I don’t care if Barbados sees me as Chicken Little—it would only prove my point. The new head of MI6, Blaise Metreweli, bluntly stated that the threat of war is real and looming. Yet many will wait until missiles are flying before taking precautions. President Trump recently labelled fentanyl a weapon of mass destruction. Iraq happened once before, and still, Caribbean governments may wait for disaster before pivoting to policies of self-preservation. Frankly, I don’t know what more the government of Trinidad and Tobago must endure before CARICOM takes stronger positions—especially concerning our own shores.

I’m getting carried away. This article borrows some ideas from the last one but shouldn’t be seen as a direct continuation. The essence remains: trust is breaking down at the macro level across Western democracies. Politically, the rise of the far right reflects a collapse of liberal policies. That’s despite liberalism typically delivering better long-term economic outcomes. You can choose to separate morality from economics. Our election cycles prove that people often do.

With the exception of two policies pursued post-independence in Barbados, I struggle to find any that were sold as “transformative” but didn’t end up ballooning debt. The same is true across the Caribbean—every public sector moonshot has led to debt growth. The evidence is strong.Yet every election cycle follows the same recipe:

  • A few yards of silky but promising public sector appointments;
  • Straight-stitched announcements of large-scale projects that won’t finish within the term;
  • A few yards of patched road;
  • And some pinking shears for the yard fowls to cut through sensible arguments.

Historically, Bajans fell for this cycle repeatedly. Thankfully, that gullibility is starting to wane.

This past week solidified my beliefs more than ever. The discourse around the Economic Diversification and Growth Fund Bill showed the most degraded public trust in government I’ve seen in a decade. The bill’s intent is actually logical. Its target audience could fill the void left by the fading international business sector. A well-designed Act could generate fiscal surpluses and GDP growth exceeding 5% annually. Financially, it wouldn’t cost the country much. The risks are low—especially if the government takes on a shareholder role in some way.

It’s painful, though, to watch a ruling party act like it’s in election mode (see recipe above) yet behave as if it doesn’t trust the public to act in its own best interest. I’ll admit: that’s a tough spot for any government. Still, protest is valuable in any form. History shows that societies go where the Zeitgeist leads. Ours has become more transactional; it often feels like compliance can be bought. That’s individual self-interest at work. But a society can only tolerate being ignored for so long.

Eventually, a rare moment occurs—one where individual and social interest align. All in an effort to reduce the pain being inflicted. Economies tend to thrive when this happens. We should never underestimate the power of immense motivation.

I’ll close with lyrics from one of my favourite songs, December 4th, by the lyrical mastermind Shawn “Jay-Z” Carter. Fitting, given the timing of this article’s publication, but also aligning with my thoughts on trust.

“And ‘trust’ is a word you seldom hear from us
Hustlers, we don’t sleep, we rest one eye up
And the drought will define a man when the well dries up
You learn the worth of water – without work, you thirst ’til you die – yup”