THE Reserve Bank of Zimbabwe (RBZ) is insisting on introducing bond notes despite reservations from various quarters in the market. Unfortunately, no formal scientific study to date has been carried out to assess the rate of bond notes acceptance. Bond notes success is an entirely different matter — no scientific survey can predict that. It’s a puzzle that despite a swelling chorus of resistance to bond notes introduction the initiative is said to be going ahead. Bond coins did not attract the current levels of market resistance. Why the intransigence?
The Brett Chulu Column
Enter Thomas Kuhn.
Kuhn is the father of the widely-used concept of paradigm introduced in 1962 and further clarified in 1970. Kuhn, in response to criticisms levelled at his 1962 treatise, decided to correct a fundamental misperception of his scientific paradigm concept. Kuhn’s scientific paradigm is an idea derived from a comparative analysis of historical data on the evolution of science.
In his 1970 work, Kuhn elucidated the primary meaning of his scientific paradigm concept: he stressed that it is a convincing scientific success attracting adherents and subsequently serving as an example guiding future research.
In today’s language, Kuhn would say that a paradigm is a template directing research. Put more emphatically, a scientific paradigm needs a community of practitioners that unwaveringly subordinate their thinking to this template — they doggedly hold on to the example of success that first brought the community of practitioners together. Kuhn famously observed that the best researchers are the ones that solve difficult puzzles using the tenets of the paradigm.
Put differently, if a scientist solves a difficult puzzle outside the paradigm that solution is rejected. If a problem cannot be framed around the paradigm, it is regarded as an illegitimate problem, therefore not worth pursuing.
Kuhn also showed that community of researchers united around a paradigm always frame problems through the lenses of their shared paradigm. He made the critical observation that these practitioners always fit nature to their paradigm and not nature to the paradigm. It is clear from this narrative that a scientific paradigm is a social psychological phenomenon. This means it is a product of what a specific group of people (community) think is the only right way to define, interpret and solve problems.
A paradigm is transmitted from one generation of practitioners to the next through a subconscious internalising of examples that constitute the paradigm. This is called tacit knowledge. How do we make the leap from scientific communities to other communities? Other researchers have reached similar conclusions — the most famous being the community of practice idea.
A dispassionate analysis of the origin of the concept of the bond notes seems to mirror closely Kuhn’s scientific paradigm and its conceptual cousin — community of practice. To solve the challenge of shortage of change ushered by an absence of US cents coins, the RBZ introduced bond coins. Bond coins emphatically solved the change problem and seem to have been overwhelmingly accepted by the Zimbabwean citizenry. This seemingly overwhelming success acted as the basis for building an exemplar of success — the very definition of a Kuhnian paradigm.
One can easily see how the RBZ transitioned from bond coins to bond notes. For a past exemplar of success to become a paradigm it needs to woo a community of supporters. It would appear that team RBZ and the Treasury form the core of that community. We will call this social grouping the bond paradigm community. The RBZ and the Treasury seem to be confident that two fundamental pillars of a paradigm are on its side.
First, the bond paradigm community seems to have equated coin change shortage with cash shortage. The thinking seems to have gone like this: we solved the coin-change shortage through innovative bond notes and we can solve the notes shortage with bond notes — if bond coins worked to ease money shortage, bond notes should easily do the same.
It is easy to see why the RBZ has put forward the argument that the bond notes would constitute a negligible proportion of total money supply, envisaged to be no more than 3%.
Bond coins constitute less than 1% of total money supply. It would seem that the negligible-proportion argument could have been calculated to convince the citizenry that bond notes would be as harmless as the successful bond coins. If the change and cash shortage assumption is valid, the RBZ could be genuine that they will restrict the supply of bond notes to a negligible minimum. If the less-than-3% money supply strategy is being taken as a pilot test to gauge the risk of scaling up the supply of bond notes, it needs to be pointed out that this would constitute a bigger risk than the bond coins. It’s an experiment at best.
Second, the bond paradigm community might have overestimated its membership size. It would appear that the tacit acceptance of bond coins by arguably the entirety of the citizenry could have led the architects of the bond paradigm to assume that the whole populace would embrace bond notes. Bond coins did not attract the levels of resistance being currently channelled toward bond notes.
Clearly, the inferred assumption of an automatic acceptance of bond notes was a bit of stretch. It’s a huge challenge — adherents of a paradigm are by definition wooed (not coerced) based on a demonstration of powerful example of success — which was the case with bond coins.
It would appear that the insistence by the bond paradigm community to introduce bond notes could be based on the assumption that the current wave of overt resistance to bond notes represents a vocal minority. There could be a genuine belief that once bond notes are introduced the citizenry will eventually see that they are just as effective and innocuous as bond coins in easing money shortages. This is a big risk. The RBZ’s firmness on bond notes introduction in October points that it might have a foolproof strategy that will prevent bond notes from causing economic tremors, let alone earthquakes.
An approach in keeping with paradigmatic thinking would be for the RBZ to woo clusters of commercial players to trade in bond notes, thereby restricting the circulation of bond notes to business-to-business transactions. This makes sense in view of the less-than-3% total money supply proportion.
Should we give the RBZ the benefit of the doubt? It would be more assuring if the RBZ issues an unqualified undertaking that if bond notes show signs of causing economic dislocations it will not hesitate to withdraw them.
The RBZ is in a bind because it has no data from the future — God designed that we always have data about the past.
We can only use theory to see into the future.
The RBZ seems to have built a theory based on data in the past about bond coins. It would seem that the RBZ is using the “bond coin theory” to predict the success of bond notes. Equating coin and cash notes shortage as similar circumstances is risky. Future data will either vindicate or indict the RBZ.
Chulu is a management consultant and classic grounded theory researcher. He has published research in an international peer reviewed academic journal.