Brief notes on communicating economic ideas

Hey all.  I am doing a short presentation on communicating economic ideas – a bit of an abstract conversation where I talk about it in terms of assumptions.  This is similar to last year’s NZAE paper, but focused on only a subset of what was covered.

The presentation can be found here.

It is aimed at people who do economic modelling and have a core framework that they use with other economists.  It is about conceptualising the ways we adjust our arguments/models to communicate them to a broader public, and in turn focuses on the types of assumptions we put in place – and the ways economists need to be careful with how these are communicated, so to avoid accidentally misleading or overselling.

Two-handed economist: The accidental compliment

As someone with the job title “economist”, a large number of my friends only contact me when they want advice on buying currency or whether to fix their mortgage or buy as asset.  After providing my thoughts about why things might happen, and what the risks are, I often get the comment “damned two handed economist, not willing to take a position”.

People think they are insulting me.  However, if that is the actual attitude of my friends in this case I’d gladly point out that they are being utter morons.  Instead, I take this as a compliment.

If I was going to “take a position”, why would I rattle it off to someone, instead of actually taking on the risk of doing so myself – if I genuinely thought that buying and selling currency offered me a good risk adjusted rate of return at this point in my life, then I’d do that, rather than just suggesting it to people.

When giving advice, I simply want people to be aware of the risk involved in the choices they are making – and the fact that there are reasons why asset prices may move one way or the other (and a good number of unforecastable, or unforeseeable, things that may pop up).  To give this advice, I need to to be two-handed.  It is my job, as a good friend, to help inform not to tell my mates what to do.

It would be the height of arrogance to pretend that, with my training as an economist, I could instantly turn around and fill the role of a professional risk manager for a certain asset class, or the CEO of a firm for a certain product.  Instead, I pull together news, ideas, and a good dollop of statistical analysis to provide information for people that will make decisions – filling a role in the production process, not trying to control it.

So economists, stop being so defensive about being called “two-handed” and stop feeling as if you have to take a specific “position” to have worth.  The world is complicated, and your advice (if based on intense questioning and analysis combined with clear communication) is valuable in the way it helps people make choices.  Embrace the fact you’re born with two hands and make sure you use both of them!

My copy of Capital hasn’t arrived yet

So I can’t start reviewing it.  I am very excited, as I’ve told readers before my first economics book (which I didn’t read particularly well) was Das Kapital, so my formative experience with economics was one about factors shares.  To get myself ready I have been reading around the issue – on top of the usual reading I’ve been doing on income distribution work I’ve been trying to catch up a little bit on the factor share stuff.  So I’m excited about my book finally turning up.  One of the issues with living in New Zealand I guess!

However, I’ve seen some people discussing it on twitter, and I was a bit upset about this part of the book:

As I said:

I hope this is not representative of what happens in the book.  It betrays one of two things:

  1. a fundamental misunderstanding of what economic modelling is and why it is used as a tool
  2. a straw man attack (a particularly arrogant one) used to take away attention from any inadequacies in his own argument

Given Piketty is several orders of magnitude smarter than me, it has to be the second – which is a very disappointing rhetorical play to roll out when discussing economic issues 🙁

He is legitimizing a view of the discipline that is frankly false and not helpful for us trying to answer questions to create knowledge – economists have the role of discussing trade-offs to help us consider what is going on in the world around us, waving our disciplinary wang in each others faces to try to win an argument without proper discourse doesn’t help this!

St Patrick’s day

Today is St Patrick’s day – as it is a Monday I’m not sure people will be celebrating, which is a pity.  I know that I will be at least.  I’ll do my typical thing and link to this song:

Frik me that is enormous, sorry I don’t know how to make it smaller!

If you want any commentary about it, I’m sure I’ve written about it in the past, it’ll come up by searching St Patrick’s Day on the blog.  Still I won’t really be around today, I’ll be reading a bunch of essays by old Irish authors starting with a reread of this one.

Economic forecasters aren’t all that bad

Economists get a lot of criticism for failing to polish their crystal balls thoroughly enough before reading the economy. So how good are people forecasting other complex systems? Physicist types. Real Scientists. Let’s ask a weather forecaster how accurate their forecasts are a couple of days out. Days, not months, quarters, or years.

…if our forecasts are about 60 percent accurate or higher, then we consider that to be a good estimate.

Well, that’s slightly better than flipping a coin.

Recent unemployment is entirely cyclical?

The Treasury has just released a crop of Working Papers. Great to see and will read them with interest.

I had a quick read through the first one, which is on “Recent Unemployment Experience in New Zealand

It’s an interesting paper and worth a read. But they reach a surprisingly strong conclusion, where I think a more nuanced interpretation is required: Read more