Principles for talking to macroeconomists
This article on stuff seems to throw down a great set of principles to keep in mind when talking about the New Zealand economy with New Zealand macroeconomists – in a way that intelligent people not versed in economic prose can understand.
They are:
- Commodities are our comparative advantage, they are what NZ is relatively better at making than other things.
- Monetary policy that targets inflation aims to set NZ in a “Goldilocks zone” where the economy isn’t running too hot (high inflation) or too cold (high unemployment).
- Don’t put too much faith on one data point, or even one data set. To tell a story we need to explain why a full set of different figures are moving the way they are.
- As a small open economy, what is going on in the rest of the world is important!
- Economics isn’t about telling the future. Economic forecasts are useful only insofar as they tell us about risks and describe what is going on – economists cannot tell the future.
All good points. I think that number 4 (we are a small fish in a big pond) is the most important one to keep in mind for any of these conversations you may have, while number 2 (the Goldilocks zone) is the best, and easiest to understand, of the stated stories.
Good story, well done Stuff and the economists involved.
I thought there was only one principle for talking to macroeconomists: Don’t!
But then, I’m a microeconomist so maybe biased (but consistent).
Someone should be punching Bernard Hickey/Russell Norman/David Cunliffe in the face until the agree with the contents of this article on Stuff and promise never to act like a bunch of ducks again.
Especially Russell Norman who now seems to think that he can predict the future!
I thought the market was fully able to predict the future — and thus can calculate all future income into a discounted price for any asset?
There are some things it is possible to say are happening now/going to happen with certainty, for example climate change, peak oil — the uncertainty is what to do/what we will do about these. That I suggest is the context for Russell Norman et al comments about the direction we should go.