Ignoring costs and misrepresentation – People’s attitude to economists

One thing that gets to me is the fact that people from both sides of the political spectrum love to avoid costs. As economists pride themselves in discussing the opportunity cost associated with any given policy or action, we end up being attacked by both sides (Update:  Including psychologists it seems.  Dang I thought they were the one social science that understood us 🙁 )

However, the way both sides attack economists is different, equally irritating but different.

On the left people tend to attack us in emotive terms. When my colleague (James) discussed the way people view torture, he was berated for being ‘immoral‘. More recently, supporters of the labour movement at the Standard have attacked economists for “dehumanising econo-speak about ’soft labour markets’ and housing ‘corrections’“. The problem with these types of criticisims is that they are trying to criticise economists objective description of a situation with their value judgments – they fail to understand that the value judgment is something you apply once you have an idea of the facts.

Although these people feel that we are applying specific value judgments when we use language (eg. using the word correction when we are discussing a 10% fall in property values for example), we try to use language that convey’s as little emotion as possible. Our goal is provide people with the facts, which they can then form opinions from. In this case, conservative words such as ‘correction’ seem appropriate, as other words (such as collapse) convey opinions. When wearing my economist hat I try to provide people with facts, when wearing my analyst hat I try to turn those facts into predictions, this involves I make an opinion.

Now people might still be uncomfortable with the idea of discussing tradeoffs that occur in society. This relates to a post by James on the issue of morality. How can we sleep at night when we know that a policy we prescribe may lead to a ‘soft labour market’ that leads to a more difficult existence for those that lose employment? Well we realise that if we didn’t support that policy a different policy would have been introduced, which we believe would have hurt another section of society – such as future generations. Personally I find the idea that people would not be willing to work out the trade-offs involved in a given situation before coming up with a policy immoral – just because you ignore the cost doesn’t mean it doesn’t happen!

On the right of the spectrum, people tend to think that they are more closely aligned to economists. They often use ‘econ-speak’ to discuss issues, and are more willing to have an economist in the same room. My issue with those on the right is the misrepresentation they often provide the public of economists.

The prime example of this comes from the foreign policy website. The attached article looks on as European children are indoctrinated with a anti-market bias. Other commentators seemed to get equally rabid about the issue. However, did they ever stop to think that maybe the examples picked in the article were ‘cherry picked’. If you explore New Zealand text books you are going to find similar rubbish that provides a similar market and anti-market bias.

Furthermore, the European’s have a little bit of a point. Western policy prescriptions often do ignore the social ramifications of their actions – this is something that economists are learning (tentatively) to deal with using game theory.

How does this relate to avoiding costs? Well if you ignore the social ramifications of a given policy, you avoid looking at any of the costs associated with them.

Ultimately, this rant has made me tired, I’m going to go home to sleep – happy in the knowledge that I have Mr Opportunity Cost in the back pocket to help me answer any questions I face in the future.

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