As if the fact that Lebanon’s current economic crisis that is considered one of the worst three the world has seen in the last 150 years is not enough, the country has additionally tarnished its image by being among the very few countries in the world which have done absolutely nothing to rectify the crisis after more than three years since its inception. We all know the political-economy arguments that induce such an outcome, mainly: the capture of the state by a political elite that won’t cede to economic reforms in the fear that it will lose its privileges and its hold on power; the refusal of traditional interest groups like trade unions and associations who are largely anathema to structural change; and, perhaps more important, the influence of an “armed resistance” which is most happy with maintaining and defending the status-quo. But are these factors enough to explain the complete inaction by the government, especially after the disastrous consequences exemplified by the exchange losing more than 96% of its value, multi-faceted poverty exceeding 70%, and per-capita income dropping by more than 60%? That is not to say these factors are unimportant or even decisive, but perhaps they lack a solid economic argument as to why the Lebanese have not been forceful in undertaking economic reforms and turning their economy around.
What I would like to do in this note is to provide a tentative economic argument towards that end. This argument is borrowed from the new field of Behavioral Economics which stresses that people’s economic behavior is not as rational as standard economic theory presumes.
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The Time discounting and Procrastinating Economy A Note on Crisis Ridden Lebanon