Taking sides in the “Auckland economist battle”

Via NBR and Agnitio (note behind paywall) I see that Don Brash has decided to attack Auckland Council Chief Economist Geoff Cooper.  Usually I ignore economist fights – but when one economist has decided to act like an ideolog and attacks other people to hide it, while the other economist is consistently reporting facts, I have to take sides.  Geoff Cooper is right in every sense of the word, and Don Brash is just being a class-A douche (to use the technical term).

To summarise what is going on in the article, Cooper reports that house prices have risen and that this appears to be driving a lift in consumption and house building activity – lifting measured activity in the region.  This is a factual statement.

Don Brash turns around, says this is a bad thing, attacks Cooper, attacks the university Cooper studied at, and then rants about how a house bubble can have serious social and economic consequences.  Obviously Brash hasn’t been reading our discussion here on how we need to think about the consequences and causes of a bubble carefully and with reference to banking regulation – and I would think a former central bank governor would know better than to make such loose statements.

In response Cooper merely points out that he is describing what is going on in the Auckland economy, not trying to argue about what is “right or wrong”.  In other words, he is being an economist, and trying to inform debate as part of his job.  How doing his job well reflects poorly on him, the council, or his university is a mystery to me.

He also managed to avoid calling Don Brash a confused and angry man who appears to have forgotten how to “think like an economist at all times” following his foray into politics.  As I’m not encumbered by the same social constraints, and given my disgust at Brash’s comments, I feel more comfortable making these statements 😉

It is Brash’s own fault that he has confused something increasing measured GDP right now with something that is “good” – not Coopers.  And if Brash has that much trouble reading economic reports without flushing his value judgments all over them and making unsubstantiated attacks on people, he needs to sit back and let his inner economist take over the running of the Brashmobile from now on (In case your confused – I like to add mobile to the end of surnames to represents someones mind and consciousness).  Brash’s comments were not the comments of Brash the economist – they were opportunistic comments of Brash the ideolog.

  • Messy one. All the positive things Cooper reported I’m sure are true (housing does have wealth effects). But it’s real easy to read normative connotations from the words Cooper used, and I’d expect that what Brash here did.

    “Buoying consumer confidence”. “stimulating demand” “boost to building activity” “catalyst for growth”.

    Could just as positively state:

    “First, Auckland house prices continue to rise and housing supply responses remain only on the way. Wealth effects from increased property values will increase consumer confidence and build further demand for new housing, but risk inducing households to increase leverage over their properties. When interest rates again rise, this may put pressure on household budgets. Household disposable income net of housing costs has diminished for those facing increased housing costs, and this will be worsened when interest rates return to their longer-term trend. Increased demand in finance, property and real estate and construction services sectors suggest a supply response will come soon; this building, when it begins, will have consequent downstream beneficial effects on related industries. But consenting will need to double for Auckland to meet the targets specified for next year in the housing accord.”

    There are lots of ways of reporting positive things.

    I do like the warning Cooper gives in point 2 about the challenges of meeting the new building targets. And I really liked Cooper’s interview with Ed Glaeser.

    I also wonder whether Brash saw the full report, or if he were giving off-the-cuff reactions to a few choice quotes about Auckland prices marching upwards, buoying confidence, stimulating demand, boosting expected building activity, and providing a catalyst for downstream growth. Always dangerous to provide reaction quotes without having seen the full piece. What seems more likely here: that Brash caught the full report and got real mad about the tone of #1, or that he only caught part of it on a cell call?

    • “What seems more likely here: that Brash caught the full report and got
      real mad about the tone of #1, or that he only caught part of it on a
      cell call?”

      It is most likely he was quoted a part of it from a cell call.

      However, he is an ex-RBNZ govenour. He, the Bank, and all commentators (I am in this group), use terms like “buoying”, “stimulating”, and “boost” constantly when discussing these things. Among people who write and read these reports they have a less value laden meaning – and I think your point that they can be misconstrued is an EXCELLENT one, one I often discuss with people working in a similar sort of role!

      As someone that used to use the terms in this way himself, he must have understood the context – and decided to be disingenuous and attack. Tbh, attacking Cooper on the basis of a phone call from a journalist is EVEN WORSE – not only was he taking the quote out of context (a context he should understand) but he was relying on second-hand information.

      There is no way I can defend Brash here – there was no need for those sorts of comments about another person. Especially not another economicst 😉

      • I’d like to think that I’m always happier to turn down a chance to comment if I haven’t had time to double check everything properly. I’ve turned down dozens of requests from our uni PR guy to put out statements on stuff where I’m not in a position to say something, or where it would take me more time to figure it out than I have. But it’s also really really easy to catch a call while you’re driving and give something off the cuff to try to be helpful.

        • Indeed – insulting the economist and his university is poor form even if Brash was caught off his guard. I like to think neither of us would play the man in that way 🙂

          You should definitely comment whenever pieces come out stating that the social costs of things are massive – social cost studies are a bubble!