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M A Y 2 0 1 2 / F O R E I G N S E R V I C E J O U R N A L
37
ay readers often suspect those of us in
the “economic priesthood” of deliber-
ately shrouding the great mysteries
of our profession through the use of
code words — otherwise known as
“wonkisms.” But while our use of such
specialist shorthand does increase
markedly during periods of high economic uncertainty like the
present, most economists use such language precisely because
they believe they are communicating more effectively with
their audience.
Since that is usually
not
the case, however, this article at-
tempts to decode some concepts and newly popular terms
readers regularly encounter but seldom see defined.
1. A
black swan
has nothing to do with ballet. Rather, ever
since Nassim Taleb published a book with that title in 200
7
,
economists have called an event that when they cannot explain
exactly how or why it occurred. Such developments are so
rare that they go beyond any previous experience that might
be used to describe them. Thus, a rapid resolution of a finan-
cial or currency crisis has been described as a black swan, al-
though one wag dubbed such a fortuitous outcome a
golden
swan
— even more rare. A
market failure
, by contrast, is
used to explain why an economist’s firm and unyielding un-
derstanding of an event turns out to be wrong.
2. The
Rule of 72
, a quick approximation of simple com-
pound interest, is all the mathematics economists need to
know. One of the best-kept secrets of our profession, the rule
reveals how long it will take for an amount of money to dou-
ble, given an average annual growth rate (divide 72 by the
growth rate to get the number of years). Conversely, if you
want the amount to double in a set number of years, the rule
will tell you at what rate it must grow (divide 72 by number of
years to get the required growth rate). To double an amount
in 10 years, for example, requires an average annual growth
rate of 7.2 percent. But like much in economics, this is only
an approximation, and good only for small numbers.
3.
Financial inclusion
allows poor people in developing
economies to access banking services, sometimes through
non-traditional means, such as with a cell phone. Without
physically visiting a bank building, they can use their phones
to make payments or otherwise keep an account current.
They are now “included,” as it were, in the global financial
marketplace — though that has not been the safest of locales
for several years now, thanks to global financial and debt crises.
4.
Technology infrastructure leapfrogging
(ribbit, rib-
bit) occurs when developing economies that previously could
not afford to finance expensive infrastructure — brick-and-
mortar branch banks or land-based telephone lines—are able
to move beyond such requirements through innovative and
relatively inexpensive new technologies, such as cell-phone
banking.
5. A
Berlin Alexanderplatz event
is a long, drawn-out
and complex occurrence with many different viewpoints,
which for many aptly describes the “Sturm und Drang” of re-
cent financial crises. I confess that I didn’t understand this
reference when I first heard a commentator use it, but an on-
line search informed me that the expression originates from a
1929 book of that title, followed by several movie adaptations
over the years. For reference, the most famous cinematic
U
NDERSTANDING
E
CONOMICS
:
A T
OP
D
OZEN
W
ONKISMS
E
CONOMICS DOESN
T HAVE TO BE A DISMAL SCIENCE
,
AS THIS TONGUE
-
IN
-
CHEEK GUIDE DEMONSTRATES
.
B
Y
S
TEPHAN
S. T
HURMAN
Stephan S. Thurman is an international economist in the State
Department’s Bureau of Economic and Business Affairs. The
views expressed in this article are those of the author alone
and do not necessarily represent the views of the U.S. De-
partment of State or the U.S. government.
L