Economists, What Are They Good For?

On economists:

Reasons to be happy about the dismal science, by Ross Gittins, Sydney Morning Herald: The older I get as an economic commentator the more I see my job as providing readers with a critique of the performance of economists and their economics. But don't think that makes me anti-economist. Far from it. Economists make an invaluable contribution to society. Which is? To make themselves unpopular by pointing out uncomfortable truths...

We live in an age of rampant populism. As the media have become more commercial and less idealistic they have turned increasingly to reinforcing their audience's prejudices and telling people what they want to hear.

Isn't it shocking about the high price of petrol! Why doesn't the Government do something? What about that terrible Reserve Bank raising interest rates! And why doesn't the greedy Government cut taxes?

The politicians have become more populist, too. With their greater use of focus groups and opinion polls, the art of politics has become more ... efficient at knowing exactly what people want to hear and at aiming policies at the swinging voter, not the party faithful. Because they're better-informed about what the public's thinking, politicians are more inclined to follow rather than lead and to pander to ignorance rather than educate.

Not so the economists... Everything about their training makes them want to blurt out [difficult] truths - and they rarely resist the urge.

Economics ... grapples with the problem of scarcity, which arises because, though our wants are infinite, the resources available to satisfy those wants are finite. From this comes the first way in which economists make themselves unpopular: by banging on about "opportunity cost". This is the notion that anything you decide to do has a cost...  Opportunity cost is a pathetically simple concept, but it's remarkable how often we forget to apply it...

A second way economists make themselves unpopular is by telling us that, often, high and rising prices are good for us. That's particularly true of the price of petrol. The pollies would be crazy to try to get that price down by artificial means. Why? ... Where prices rise because demand exceeds supply - as is certainly the case with oil - the higher price will eventually fix the problem by discouraging demand ... and encouraging supply...

A third unpopular message of economists is that "there's no such thing as a free lunch". ...

A fifth ... message ... is that every upside has its downside. Just about everything that happens in the economy has pluses and minuses, advantages and disadvantages. ...

The final uncomfortable truth from economists, a consequence of opportunity cost, is that "the whole of life's a trade-off". There are a lot of good things in the world and we'd like to max out on all of them.

But they're actually in conflict. The more we have of one, the less we can have of all the others. The trick is to find the particular trade-off between our conflicting objectives - the optimum combination - that maximises our satisfaction. We spend our lives in search of a slightly better trade-off.

We live in a world of marketing hype, ingratiating politicians and a suck-up media, which means we need the antidote of all the grumpy, killjoy economists we can get.

What's the fourth way? I read the article several times, but I couldn't find the fourth way economists make themselves unpopular. Maybe it's pointing stuff like that out.

Comments

[reason]

As far as I can see all the points are the same. For every upside there is a downside.

[Rob Hayward]

As Eddie George said - "There are three types of economist: those that can count and those that cannot".

[Rezwan]

All economists may be very good at forecasting, however, the real decision-making power lies in the hands of the non-economists, in the long run.

[a]

"Everything about their training makes them want to blurt out [difficult] truths."

I guess economists would like to see themselves as bold and fearless defenders of difficult truths - don't we all? However, it seems to me that the fundamental rule for American-trained economists is that consumption must be encouraged. Recession looming? Cut interest rates so that people consume. What's the problem with Europe? It's not consuming enough. They may Tsk, Tsk at the corners and point out that Americans don't save enough, but basically given the choice between Americans not saving and Americans not consuming (recession!), they will always choose the former. Always encouraging more and more consumption, hardly seems a difficult position.

[DC Economist]

"Everything about their training makes them want to blurt out [difficult] truths - and they rarely resist the urge."

I choked on my coffee when I read this - finally someone has come up with a holistic theory of my failure at cocktail party chatter. I can't think of how many times I've found myself biting my tongue in conversations with friends and family, as the urge to insert some economic logic into the discussion arrises. I've even been called 'a downer' by my own mother, who has probably not heard the term 'dismal science' but would wholeheartedly agree with the sentiment (and is still puzzled why her daughter isn't making millions in the stock market, which is what she thinks economists *do* do.)

[NinjaPlease]

"Not so the economists... Everything about their training makes them want to blurt out [difficult] truths - and they rarely resist the urge."

Now that is humor. You want to blurt out the truth but the PEOPLE don't want to hear it?

Holy got it completely backwards Batman! This isn't just elitism, it's now justified elitism, because the people just can't handle the truth, truth being a theory based on laboratory condition, of which there is as of yet no example that produces its expected hypothesis, other than -- workers are going to need new jobs when their current jobs get destroyed.

Is it a wonder why "the people" don't want to listen to you? You're prescribing economic destruction for THEM, but it will benefit all of mankind, maybe, and in the long run. Yes, and if we were to forcibly export 90% of our food, we wouldn't have an obesity problem and world hunger would end -- I mean really, the North Koreans manage on boiled tree bark and wild grasses when foreign aid gets shut off, so why can't we? and by "we" I mean "the people."

Find a better way that is actually employable. Well, I mean, I could build a bridge out of styrafoam, if only gravity didn't exist.

Don't come up with a theory that destroys jobs en masse, and whose benefits are only distributeable if politically unimplementable tax laws are required. No party is going to implement a 50% top marginal rate----but it doesn't even matter anymore, it's not the individuals that are really shirking taxes anymore.

Just re-incorporate offshore, and avoid ALL US taxes. Take a look at the number of "American" companies that do this, because they can.

[Iasius]

"A third unpopular message of economists is that "there's no such thing as a free lunch". ..."
One comment on this:
Economics is full of free lunches. Or rather there are many examples of free lunches left. One that is used quite often is free trade. It's one big free lunch because we don't have perfectly free trade.

[reason]

I have a slightly different question for Mark. Given the role economists have (or are reputed as having), why do we need more than one of them?

[Richard]

"Everything about their training makes them want to blurt out [difficult] truths."

I believe that difficult role has been taken, for many centuries, by philosophers.

I know of no economist willing to drink the hemlock.

[Jim Harrison]

This essay promotes the amazing notion that we're living in a period that suffers from too much democracy, as if our political system were not a set of entrenchments against the desires and often the interests of the people. One hears plenty of populist appeals, of course; but the sponsors of this demogoguery are most often cynical right-wingers who denounce elitism for the benefit of plutocracy.

[Lord]

They are good for telling other people what they want to hear. You know, those other people.

[Wimpy]

Thank you for pointing out that difficult truth Richard.

[tinay8]

In short, there is the dark side and the light side. Both happens unexpectedly, that's why we need to be ready all the time.