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It demonstrates the social costs of economic illiteracy, specifically ignorance of the concept of sunk costs. Once a cost has been incurred, economics tells us to move on; nothing more can be done about what has occurred. The dismal science is ruthlessly forward looking. I saw on Facebook an analogy made to a village wedding, where debts are incurred to put on a grand show. We could, of course, have debated the decision to hold the wedding when the decision was taken. But now that the guests are arriving, we should follow custom and put on a happy face and welcome them. As with village weddings, there is a possibility that the costs will be covered or that, at least, the losses will be reduced as a result of the “envelopes” that we hope the guests would hand over. A radio station asked me whether the Commonwealth was relevant and whether there were any chances of economic returns (an “envelopes” question). The answer was an unequivocal yes, from the perspective of Sri Lankan firms exporting goods and services. I had just written my last column where I had given examples for Sri Lankan firms succeeding in five countries: Bangladesh, Fiji, India, Mauritius and Samoa (http://www.lankabusinessonline.com/the-health-of-the-private-sector-in-sri-lanka/). It so happens that they are all members of the Commonwealth, though Fiji is under suspension until the election is held. This is illustrative of the ease of doing business in countries where English is the language of government and commerce and the British Common Law provides the foundation for the legal infrastructure. I have worked in countries outside the Commonwealth such as Morocco and Bhutan. It’s much more difficult. So, what is common sense on the Commonwealth?
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Guests are visiting. Let’s put on our best faces. Be nice, or at least be quiet. Let’s do our best to help bring in the envelopes. If they do not come in, it is quite clear who will have to pay the bills. Rohan Samarajiva heads LirneAsia, a regional think tank.
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He was also a former telecoms regulator in Sri Lanka. To read previous columns go to LBOs main navigation panel and click on the 'Choices' category.