Many times economists wonder why the age old Economic theories fail to achieve its objectives especially when it is Public policy, Economics of Development and planning, forecasting, etc. It is observed that many theories in economics are complex and affected by different fallacies. The criticism of these theories is made on the basis of their subjectivity or objectivity, qualitative aspect or quantitative aspect, mathematical treatment or applicability, etc. Few years back I and my research associate genuinely wanted to know the mystery behind the complexity of these Economic theories. To find it out, we have studied thousands of Economic theories and discussed with many senior professors and found the reason; that inaccuracy of the economic theories occurs because, these theories are created without considering the behavioral aspect of economic individual. By many years of research we have found that, the proper treatment of human behavioral aspect is the key to the success and accuracy of any humanitarian theory. I want to prove my point by giving the following example of the opinions and believe of Aid-Advocators and Anti-Aid Advocators. Please consider the following example;     

Aid Advocators: Jeffery Sachs, adviser to the  United Nations, Director of the Earth Institute at Colombia University in New York City emphasized, “Poor countries are poor because ,they are hot, infertile, often land locked. It’s make it hard for them to be productive without an initial largeINVESTMENT to help them to deal with these Economic Problems”. But they can’t pay for the initial investment precisely because they are poor. They are in a trap that never let them to pay for this initial investment-They are in what Economist called as “Poverty Trap”. Neither democracy nor free markets will do very much for them. This is why foreign aid is the key. It can kick start a virtuous cycle, by helping poor countries, investment in these critical areas and make them more productive. The resulting higher income will generate further investment and the beneficial spiral will continue. Jeffery Sachs, in his best selling 2005 book, “The End of Poverty”, He agrees that if the rich world has committed $ 195 billion in foreign Aid per year between 2005 and 2025, the poverty could have been entirely eliminated by the end of this period.

Anti-Aid Advocators :On the contrary, William Esterly from New York University has became the most influential Anti-aid advocators, has published two books, “The Elusive Quest for Growth” and “The White man’s burden” which illustrates the importance of anti-aid policies. According to him, there is no such thing is called as “Poverty Trap”. Dambisa Moyo, an Economist previously worked at Goldman & Sachs and at World Bank [IBRD], has joined the voice of William Esterly’s with her book “Dead Aid”. In their books both of them argued that Aid does more bad than good. It prevents people from their own solutions, while corrupting and undermining local institutions and creating self perpetual lobby of aid Agencies. The best bet for the foreign county is to rely on a simple idea: When MARKETS are free and incentives are appropriate then people can find their own ways to solve their own problems. They do not need handouts as foreign aid or Government subsidy.

Cover story: My mother is working in an NGO in the poorest among the poor area of Asia famously called as K-B-K [kalahandi, Balangir, Koraput-of Odisha,India] since 1986.In summer 2010 I had gone there for a vacation. I asked her what is the main reason for the poverty there after such huge INVESTMENT and subsidies by Government by facilitating free housing, free water, Agricultural subsidies, Tribal developmental allowances, free education, etc. She smiled and answered me that, “Because of the easy go attitude and mentality of the people” then she added further, “The government subsidies are the main reason for the pessimism for the work in Kalahandi. It is making people completely dependent and lazy to do any Job or work. Then she described the reason why she said this and recited an example, the widow allowance in Kalahandi [India] is Rs.300/month. She can get 25 K.g. subsidized Rice for just Rs 2/K.g, 1.5 K.g subsidized Sugar for Rs 15/K.g, and 10 K.g subsidized Wheat for 7/K.g [Rs.50+Rs 22.5+Rs. 70=Rs.144.5] and another Rs 157.5 she can easily buy vegetable and spices for one month. Free Housing, Free Electricity, and free water, Free Health facilities are already there provided by the government .She need not to work for her livelihood. But the problem is, the day government stops their subsidies, then that person will find it hard to survive”. I smiled with appreciation as if I understood the solution. Then I asked myself, are stopping government subsidies preventing the pessimistic attitude and poverty of that area? The answer is a big “NO”. So here the question arises what is the solution to this problem. You tell me, whether should we follow the Aid advocators solutions or Anti-aid advocators solutions? If we follow the Aid-Advocators, then we are making people dependent, lazy and destroying their future workability or if we follow the Anti-Aid Advocators, then we are just abandoning needy people to find their own way out. I don’t think 50-50 is an option. It is indeed a big confusion.

When this kind of problem arises, we simply say that ‘Economics’ deals with the problem of Economic Individual for the attainment of material requisites [As described by Marshall].A standard definition of Economics also signifies that the study of Economics enables us to achieve material requisites by bridging the gap between the Means and Ends. But there are many terms and theories like, The theory of Demand, Supply, Utility analysis, Indifference curve analysis, forecasting, etc carries behavioral aspects that has not been properly emphasized while these theories advocated. In my point of view, emphasizing the behavioral aspects of these theories is very much important for its proper applicability and accuracy. Because Economics deals with the problem of economic individual and every individual possess some behavioral or psychological attributes like emotion, motivation, environment sensitivity, cultural believes, etc. To describe it in an illustrative way I took the bellow example of the theory of Demand.    

 What is the standard definition of ‘Demand’? Answer could be, ‘Demand is the desire for a COMMODITY backed by willingness to pay and ability to pay for it’. The highlighted words add the most important attribute and meaning to the above given definition of Demand. What is Desire or Willingness or Ability –These words carries behavioral or psychological value. Without emphasizing these terms in the theories of demand we can’t calculate accurate future demand. That is the main reason why world’s most of the demand forecasting’s fails to achieve its accuracy, always go with approximation [Whether Positive or Negative] .Forecaster explains it and associates it with some supernatural phenomenon like MARKET sensitivity, Economic fluctuation, Downturn or Boom, etc. The same attitude applied for Economic planning, Budgeting, Subsidies, Aid, etc.   

I believe the demand is always accurate for an Economic individual or group if the Human Performance Index [HPI] and Human Behavioral Index [HBI] calculated correctly. To calculate the HPI or HBI we have to understand the behavioral economics what we called as the“Psyconomics”. Psyconomics is nothing but the branch of Economics that advocates the solution to the major problems of economics and helps to achieve the desired material requisites by emphasizing the behavioral aspect of the Economic Individual. Here, I am not advocating any ambiguous or subjective phenomenon in this branch. It is purely scientific and application oriented. It solves the tomorrow‘s biggest economical and developmental problems like poverty, Inequality, etc. We should understand and give proper importance to Behavioral Economics for a better and secure future to avoid economic fluctuations and uncertainty whether like the Subprime crisis of USA or Credit Crisis in Europe. It is really a better option to go for.