It’s the stupid, stupid

I get it: economists aren’t cool. It’s fashionable to complain about them without understanding the first thing about the discipline. Ordinarily that sort of thing is easy to ignore. But sometimes, though very rarely, it produces that special sort of stupid that you can’t help but cherish! Today is one of those beautiful days and we can thank Ross Gittins for providing it.

His lengthy rant, which I don’t recommend ploughing through, accuses economists of being idiots for not solving all the world’s problems before they happened. So far, so dull. The good part comes when he tells us his solution to all the stupid economists:

She was Elinor Ostrom, a professor of political science at Indiana University, who devoted much of her career to combing the world looking for examples where people had developed ways of regulating their use of common resources without resort to either private property rights or government intervention.

For her pains, Ostrom, who died last month, was awarded the Nobel prize in economics in 2009, the first woman so honoured.

Whoah, hold up there, the solution to all the dumb economists is… more economics?! Yes, apparently what we need are more Nobel prize-winning economists, drawing on their cross-disciplinary expertise to make the world a better place. Not the solution I was expecting but I can’t say I disagree!

HT: Bernard Hickey.

  • I see you enjoyed that article.

    I do love how he criticises economists for “ignoring institutions” – when if he knew the slightest thing about the discipline he would understand how institutions need to described endogenously within a framework of individual choice.  In other words we need to understand the incentives of the actors within institutions to discuss what is going on – instead of making up airy fairy stories that can’t be falsified so we can get attention.

    Then saying we needed to understand trust and rules … if he ever actually read any literature he would feel very embarrassed.  Well I am assuming he’d understand it.  No doubt this sounds harsh, but as you say it is a poorly research piece of rant journalism.

    • I wonder if physicists are loving ‘The God Particle’, too.

      • “Why’d they have to do all this research when they just could have looked in the bible”

        😀

  • jh

    II read Governing the Commons. It was awhile ago, but it seems to be played out in a world where resources are tight and not much chance of innovation improving things (eg fish stocks)> It doesn’t seem much like the world you chaps hang out in? 

    • A world with scarcity is where all economics lives – the commons problem has been around in economics for a long, long, long time.

      If we weren’t discussing choices under scarcity, economics wouldn’t exist – that is its very definition.  So it’s exactly the world we are hanging out in.

  • Kimble

    Did that guy just say that economists dont live in a world with scarcity?

    I think it is time to stop bemoaning economists ability to educate people about what they do and just accept that people are idiots. 

    • Kimble

      *without

      obviously 

      • Kimble

        *actually with

        Excuse: changed the wording of the sentence between coffees. 

        Off to get another coffee. 

    • Ignorant, maybe, not idiots. Unfortunately, the ignorant are often unaware of their ignorance so they’re happy to pass cheap comment on difficult matters. That’s probably what gets economists into so much trouble when they try to solve all the world’s problems with only opportunity cost 😉

  • jh

    I notice on the Crafar farm you said (something like) “if a person who lives in NZ wants to sell his farm to somebody who happens to be in China, then i don’t see a problem”. Presumably it isn’t a problem that there are a lot of Chinese and that countries like China are (said to be) scrambling to secure food for the future? That is the sort of scarcity I was thinking of?

    Given that NZ’s population follows the normal curve there will likely be a proportion who will for one reason or another be likely to suffer by lower wages at one end and more expensive property at the other end and (if so) isn’t it rational for them not to support your Crafar Farm approach?

    How does the “lump of labour” (fallacy) apply in a situation such as in the commons Elenor Ostrom  talks about where a resource seems to be used to the full?

    Does it follow that population growth is a “great achievement” as Robbin Clements said when the South island population reached one million. 80% of job growth was due to the property boom (up to 2008 I think)? In the past you could identify an activity that created  wealth as in when they broke in the hill country. Today some people are suggesting that all you need is people and ideas and more the more people the better.

    • “I notice on the Crafar farm you said (something like) “if a person who lives in NZ wants to sell his farm to somebody who happens to be in China, then i don’t see a problem”. Presumably it isn’t a problem that there are a lot of Chinese and that countries like China are (said to be) scrambling to secure food for the future? That is the sort of scarcity I was thinking of?”

      The sale of a small subset of land, for a price that I presume is equivalent to its value.

      There can only be prices when we have scarcity – that is the whole issue.

      Just because I disagree with you about allocation under scarcity doesn’t mean I don’t believe scarcity exists – making that presumption about an economist is like saying a physicist doesn’t believe matter exists … and that is not an exageration.

      “Given that NZ’s population follows the normal curve there will likely be a proportion who will for one reason or another be likely to suffer by lower wages at one end and more expensive property at the other end and (if so) isn’t it rational for them not to support your Crafar Farm approach?”

      This doesn’t follow sorry.

      “How does the “lump of labour” (fallacy) apply in a situation such as in the commons Elenor Ostrom  talks about where a resource seems to be used to the full?”

      The lump of labour fallacy is a macroeconomic phenomenon talking about the labour market at a whole – Ostrom is investigating allocaton in the face of a specific type of common good problem, for specific markets.  The existence of common goods in society has nothing to do with the lump of labour policy.

      “Does it follow that population growth is a “great achievement” as Robbin Clements said when the South island population reached one million. 80% of job growth was due to the property boom (up to 2008 I think)? In the past you could identify an activity that created  wealth as in when they broke in the hill country. Today some people are suggesting that all you need is people and ideas and more the more people the better.”

      It is not true in the slightest that 80% of growth was due to a property boom – the ony bits of economic activity that may have been excessive due to the boom were construction and real estate services, and they accounted for a lot less that 80% of the lift in per capita GDP.

      Measured economic activity is just about what people produce, ideas and resources are all important.  Given we have a scarce endowment of resources, we’d like to make the best use of them possible – while as a society still ensuring that the worst off get a fair deal.

  • jh

    It is not true in the slightest that 80% of growth was due to a property boom – the ony bits of economic activity that may have been excessive due to the boom were construction and real estate services, and they accounted for a lot less that 80% of the lift in per capita GDP.
    …………………………..

    Another 38,000 people could lose their jobs in the next couple of years as the economy slows, and people working in real estate, housing construction, retailing, manufacturing and business services are most at risk.
    ANZ National Bank chief economist Cameron Bagrie said these sectors had grown off the property-market boom and accounted for 60% of new jobs over the past five years.
     http://www.stuff.co.nz/sunday-star-times/latest-edition/376946/Downturn-puts-38-000-jobs-at-risk

    • Two things here:

      1)  Job growth isn’t the same as production – job numbers fell in agrculture even though output rose sizeably.

      2)  Going to the HLFS numbers the contribution to job growth from construction + ALL rental services and real estate (so including non housing related rental services) was 20.1% of employment.  The 60% figure involved taking a lot of industries that were assumed to be part of the boom – which is very very very debatable.  I would note that taking all of the increase in construction and real estate employment in itself is an exageration of the impact of a “bubble”.

      Even with this exaggerated figure taken from an old news release and old data, this 60% figure is a lot less than the 80% you had placed down.  The data is free on the Stats site – and it does not tell a story of an economy that has only grown off the back of an “unsustainable bubble”.

  • jh

    Globalization brings reorganization at the international, national and sub-national levels. Specifically, it brings the reorganization of production, international trade and the integration of financial markets. This affects capitalist economic and social relations, via multilateralism andmicroeconomic phenomena, such as business competitiveness, at the global level. The transformation of production systems affects the class structure, the labor process, the application of technology and the structure and organization of capital. Globalization is now seen as marginalizing the less educated and low-skilled workers. Business expansion will no longer automatically imply increased employment. Additionally, it can cause high remuneration of capital, due to its higher mobility compared to labor.
    …..
    Isn’t that a reason less educated, low skilled, (low paid/ people who made bad choices/ were unlucky?) should be against foreign land ownership (assuming it drives up prices)?

    • Globalization brings reorganization at the international, national and sub-national levels. Specifically, it brings the reorganization of production, international trade and the integration of financial markets.”

      Agreed for sure – having freer trade in some things, such as some goods and capital, intrinsically changes the economy.

      And I do not disagree with you that, in a world in transition, or with imperfect mobillity, there is scope for a government to do something to help.

      However, in terms of the sale of farms, the distributional impact on the poor is completely irrelevant – a rich domestic farmer and a rich foriegn capital owner are both liable to pay tax here to support the poor, and to look after the land under the letter of the law.

      If we think that land owners should be paying a rental or dividend to the rest of society, then that is an argument for a land tax, not again foriegn ownership