Of all fields of expertise and excluding the bogus ones (sociologists, chiropractors etc) none match economists for talking nonsense when it comes to forecasting. If that sounds extreme, bear in mind the fact that economic forecasting is invariably wrong is now a specialist field of study at Harvard.
How much of this is due to sheer stupidity? (that’s a brave question to put in print. I might be arrested for being unkind.)
Australian economist, described in the report as “eminent,” Dr Ross Garnaut, surely takes the winner’s medal on this count. Last week he told an on-line university audience that there is “no chance of Australia avoiding a deep recession.”
Get that; no chance. Having said that he followed up saying, “we can work to ensure its as shallow as possible.”
Given there’s “no chance” of avoiding it, an assertion incidentally a stop-go sign holder could have told us, how is it possible to “work” to make it shallower?
In fairness and notwithstanding the stupidity of those utterly contradicting assertions, he went on to talk sense in speaking up for global free trade.
Currently it’s fashionable to talk of an end to free trade, something which along with education has brought more people out of poverty than any other action in human history.
On the other side of the ledger, the ill-judged imitative over-reaction by politicians to the coronavirus outbreak is about to put more people into the poverty than any other action in human history.
10 Comments
Surely a deep recession comes in degrees and therefore could be shallower.
If we want our economy to take off, it can and quite easily. Amongst other reforms, all we need to do is have Mrs Compassion make a bold declaration:
“We, New Zealand, will never go back to Level 4 or 3 quarantines again. We will securely quarantine the old and infirm at the most, should another pandemic threaten us”.
Then ‘expansionist’ investors will be interested. But only then.
How many economists are billionaires? You would hope lots but the reality is that they are mainly reliant on wages paid by someone else who is taking the risks. Unfortunately you can find an economist to say anything you want, so it is not hard for this government to find “expert economists” to predict that spending borrowed money in totally wasteful ways will boost the economy. The wasteful spending by Jacinda (with “expert” backing) will result in increased poverty for NZ.
Sir Bob, thanks for doing the blog, it’s often been a highlight of my day recently amidst the sea of madness we are all confronted with.
This post reminds me of an old economist joke. An economist, a physicist and a chemist are stranded on a desert island. They find a can of baked beans on the shore. The three of them then discuss how to open the can.
the Chemist: I will place the can in the water and the salt will corrode the steel to the point I can prise the can open.
the Physicist: I will throw the can off that nearby cliff from such a height that the speed of it’s decent will smash the can open but not scatter the contents everywhere.
the Economist: Assuming I had a can opener…………
Yes economists (and large institutions) are invariably wrong.
I vaguely remember once seeing a case made about a reversed arrow of causation from wealth to education, which was sort of interesting, but it might have been the work of an economist or sociologist.
I have been reflecting on how people don’t/didn’t realise how much stuff is running in the background to keep things going.
Our society is explicitly premised on things like power, water, roads, and increasingly the internet etc.
If these public utilities go down, it is a tax on money and time, but one doesn’t expect people to be open for business in the absence of them.
While one can be prepared, on the surface these services are generally cheaper to run in a centralised manner.
We are also implicity premised on the absence of infectious diseases in the public square.
We have taken the health triumphs since the 1970’s for granted.
Since we have forgotten many businesses are now premised on the presence of public health.
A significant part of the economy is no longer feasible – concerts, conferences, anything with crowds in general really.
New Zealand hast got on top of the virus, whether the cost to do so was cheap or expensive in the long run remains to be seen.
Either way we are now a ‘green’ zone.
It behooves us to capitalise on this state of affair as much as possible.
The best way to do so is to jump on digitising businesses.
The debate raging in the red zones needs to grapple with that when opening up the absence of public means that:
-Customers will stay home, so physical demand will fall.
-There are many new costs, implicit and explicit, while now being at the lowest point financially.
-Workers will get sick.
-There is PR liability which can damage reputation.
Having the other shoe drop this way makes one consider what the ultimate real costs of optimisation are if crashes like this are a feature.
An example of the middle ages comes to mind, where settlements had to factor in sieges, quarantines, etc. into their economic activity.
Things are different now you might say, but the virus is largely acting as an accelerant for pre-existing trends.
No doubt eventually people will eventually behave in the fashion they once did because that’s what human beings are like, but one wonders how things will change.
Even for those of us that favour bottom-up systemic approaches, the imprint of top-down authority leaves it mark.
Caleb, you seem to have a good grasp of the obvious.
Could you give us as much prattle on solutions?
I have to various degrees elsewhere. One can only spare so much attention.
It was, as I said, a reflection. Wouldn’t want to overlook the obvious.
I don’t lose any sleep over reading such comments or posts.
I rise every day and live in my own reality.
I control my own thoughts and destiny.
Economists are just like business reporters ,no skin in the game ,and generally despite having no significant assets show no reluctance in opining on how others could and should apply their particular expertise and foresight .They just dont get that opinions are like rectums-everyone has one but some are better at the game of analysis ,risk and implementation and their results speak for themselves.
Surely the the Harvard study will quickly come to the conclusion that economic forecasting is a behavioural science not a logical one and stop wasting their time.
I still see no reason to think that there will be long term adverse consequences from the lock-down – as long as government policy isn’t what I fear it will be under a Labour government of idiot spending and idiot “job creation”.
The underlying economics have not changed, there’s no exporting of wealth as occurs with OPEC oil price hikes, there’s no debt crisis unless government creates one. The tourism industry will face hard times, but NZ is not the only country to have gotten infection rates down to very low levels: Taiwan, South Korea, Austalia (obviously) and several central European countries (Austria, Slovakia) have done so as well, and dare I mention China, which, if she hadn’t been the originator of the pandemic, as one of our biggest sources of tourism dollars, would be high on the list of global bubble partners – and the Chinese tourist isn’t going to have the choice of visiting more popular destinations like Italy, The UK, France and the US for some time.
A international bubble with over 20 countries including our two largest visitor contributing countries is possible.