Economy, Psychology, Politics and Us – By Nisal Rukshan
The Economy of a country has a profound impact on the effective functioning of all other sectors. To measure the economic perspectives, many standardized factors such as Gross Domestic Product (GDP) – the total gross value added by all domestic producers in the economy, Gross National Income – per capita (GNI), Exports and imports of goods and services, have to be considered.
In psychology, thoughts, feelings, and behaviors are considered to provide a better understanding of human activities. These human activities vary according to social, economic, political, and scientific factors.
The behavioural economics reveals how human behaviours are consistent with economic perspectives. It further explains beyond the neo-classical definitions of rational or optimal decision-making. By deriving the foundations of questioning and through researching on these fields, behavioural economists further elaborate that “people as human beings who are subject to emotion and impulsivity and influenced by their environments and circumstances”.
According to the Central Bank data, Sri Lanka’s GDP growth was 1.6% in the 3rd quarter of 2023 and 4.5% in the 4th quarter of 2023. It is apparently a positive achievement, when comparing to the data in year 2022, having a minus growth of GDP for six consecutive negative quarters; i.e. Quarter 1 (Q) = – 0.6, 2022 Q2 = -5.3, 2022 Q3 = -11.2, 2022 Q4= -12.4, 2023 Q1= -10.7 and 2023 Q2 = -3.0.
According to the World Bank data, reconsidering conditions of the GNI per capita, Sri Lanka had -7.7 in 2022 and it was decreased up to -2.3 in 2023.
It is obvious there’s a relative change in certain data comparisons due to the improving economy with the socio-economic situations of the country. But can economic growth be constant only from an economic perspective?
Models of psychology, such as Bio Psychosocial model, Maslow’s Hierarchy of Needs and Vroom’s Expectancy Theory, explain different dimensions human behaviors that underlie economic activity. That’s where we need to integrate psychology into economics (behavioral economics) to better understand these scenarios
Simultaneously, the definition of ‘Political Economy’ by Harvard’s Jeff Frieden “Political economy is the study of how politics affects the economy and how the economy in turn shapes politics. Training in political economy can help students understand how societies work; a useful skill whether they seek to become better policy analysts or more effective social reformers”
Hence, what is finally needed for economic stability in a country are political stability, healthy financial policies, an opposition with constructive criticisms, and surveys and follow-ups on similar successful as well as failed case studies. It must be supported by effective and efficient government services, new economic concepts, traditional agriculture modified with sustainable practices, and the production of necessary infrastructure without corruption.
As citizens in a country like Sri Lanka, understanding the reality (psychologically) and utilizing democracy effectively and efficiently will help create a better political atmosphere, ultimately leading to a country free from bankruptcy. Then, understand your own psychology and that of others, learn about politics and behavior, and be effective and efficient with foresight to become a responsible citizen in the country.
Nisal Rukshan, MHRM, B.A. (Defence), BSc (Hons.) Counselling Psychology, DCPsy
Email: rukshan4slsr@gmail.com
