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:

  1. Commodities are our comparative advantage, they are what NZ is relatively better at making than other things.
  2. 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).
  3. 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.
  4. As a small open economy, what is going on in the rest of the world is important!
  5. 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).

  • Horace he Grump

    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! 

  • Andrew R

    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.