It’s official: 88% of economists have no idea how an economy works

From Ross Gittens: This is why we don’t need to panic about record budget deficits.

When the Economic Society of Australia polled 50 leading economists recently, 88 per cent of them agreed that governments should provide ongoing budgetary support to boost demand during the economic crisis and recovery, “even if it means a substantial increase in public debt”.

In a speech last week, Lowe said the budget blowout might seem quite a change to people used to low budget deficits and low levels of public debt. “But this is a change that is entirely manageable and affordable and it’s the right thing to do in the national interest,” he said.

Our living standard have crashed, we cannot go out to dinner, travel interstate, travel overseas, look for jobs, open a business, meet our families, have birthdays, or funerals. We can sit home and watch Netflix or read a book. And the supermarkets are open and most things are still there (except Coon cheese). Meanwhile governments are printing up lots of currency for us to spend.

Mr Cheerful also adds in this:

The pandemic will be working to keep the economy down until an effective vaccine is widely available worldwide, which may be several years way.

As for political freedom, what would he or any other of our motley crew of economists know about that?

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17 Responses to It’s official: 88% of economists have no idea how an economy works

  1. Jim Rose

    I am sure they are qualified by saying it must be infrastructure spending so there will be no spending for a couple of years before the land is assembled et cetera

  2. Bronson

    FFS what exactly is the value of an economics degree and do you need to lower your IQ before being awarded one?

  3. Come on Steve. 44 out of 50 “leading economists” (ie pre-selected) out of an organisation of 1,400 members whose President is budget policy program director at the Grattan Institute.

    This is the suburban accountant writing after all. Has there ever been a tax increased or new government program he has opposed?

  4. Professor Fred Lenin

    Hiw did the World survive before Economists and zEcommunists were invented?

  5. Anyone who is a Keynesian or MMTer should be catapulted into the North Atlantic…from Ayers Rock.

    They should also hand back their degree as a matter of honour and academic integrity.

  6. Snoopy

    If MMT works why have the IMF and World Bank been encouraging third world countries with sovereign currencies to borrow in foreign currency when they need to raise capital? Isn’t this perpetuating third world poverty?

    Has the whole international finance system been a racket since WWII?

  7. Robber Baron

    Universities do not teach how economies work.

  8. Lee

    The pandemic will be working to keep the economy down until an effective vaccine is widely available worldwide, which may be several years way.

    That’s your answer? Waiting for something that may be years away, or quite possibly never?
    Is this guy a complete imbecile?

  9. This is so good it has to be fattening.

    An Open Letter1
    By Kenneth Rogoff,
    Economic Counsellor and Director of Research,
    International Monetary Fund

    To Joseph Stiglitz,
    Author of Globalization and Its Discontents
    (New York: W.W. Norton & Company, June 2002)

    Washington D.C., July 2, 2002

    At the outset, I would like to stress that it has been a pleasure working closely with my World Bank colleagues—particularly my counterpart, Chief Economist Nick Stern—during my first year at the IMF. We regularly cross 19th Street to exchange ideas on research, policy, and life. The relations between our two institutions are excellent—this is not at issue. Of course, to that effect, I think it is also important, before I begin, for me to quash rumors about the demolition of the former PEPCO building that stood right next to the IMF until a few days ago. No, it’s absolutely not true that this was caused by a loose cannon planted within the World Bank.

    Dear Joe:

    Like you, I came to my position in Washington from the cloisters of a tenured position at a top-ranking American University. Like you, I came because I care. Unlike you, I am humbled by the World Bank and IMF staff I meet each day. I meet people who are deeply committed to bringing growth to the developing world and to alleviating poverty. I meet superb professionals who regularly work 80-hour weeks, who endure long separations from their families. Fund staff have been shot at in Bosnia, slaved for weeks without heat in the brutal Tajikistan winter, and have contracted deadly tropical diseases in Africa. These people are bright, energetic, and imaginative. Their dedication humbles me, but in your speeches, in your book, you feel free to carelessly slander them…..

    Now the good bit:

    Let’s look at Stiglitzian prescriptions for helping a distressed emerging market debtor, the ideas you put forth as superior to existing practice. Governments typically come to the IMF for financial assistance when they are having trouble finding buyers for their debt and when the value of their money is falling. The Stiglitzian prescription is to raise the profile of fiscal deficits, that is, to issue more debt and to print more money. You seem to believe that if a distressed government issues more currency, its citizens will suddenly think it more valuable. You seem to believe that when investors are no longer willing to hold a government’s debt, all that needs to be done is to increase the supply and it will sell like hot cakes. We at the IMF—no, make that we on the Planet Earth—have considerable experience suggesting otherwise. We earthlings have found that when a country in fiscal distress tries to escape by printing more money, inflation rises, often uncontrollably. Uncontrolled inflation strangles growth, hurting the entire populace but, especially the indigent. The laws of economics may be different in your part of the gamma quadrant, but around here we find that when an almost bankrupt government fails to credibly constrain the time profile of its fiscal deficits, things generally get worse instead of better.

  10. Squirrel

    The same 88% (or more) would then go on to explain, without blush, that the system should be further massaged to ensure that they and people like them bear less of the burden of servicing and/or repaying that debt – which is why they love the idea of raising and broadening the GST and imposing land tax on family homes.

  11. wal1957

    Get those money printing presses rolling…what could possibly go wrong?

  12. David Brewer

    What gets me is

    The pandemic will be working to keep the economy down until an effective vaccine is widely available worldwide, which may be several years [a]way.

    No. The pandemic itself is having virtually no effect on the economy. And on its own it would have had no measurable effect no matter what was done or not done, since virtually no one of working age would have had to do more than take a few days off work.

    As only old, sick people were/are at serious risk from the pandemic, its economic effect is infinitesimal; it is only the countermeasures against it that are “working to keep the economy down”.

    The countermeasures are of two kinds. The effective health countermeasures, such as protecting and closely monitoring staff and inmates of hospitals and nursing homes, have virtually no economic effect.

    But it’s the ineffective countermeasures, closing down businesses, that cause the economic damage.

    And some countermeasures were even counterproductive in terms of spreading the disease, such as Dopey Dan’s “quarantine hotel” incubators.

    The root cause of the staggering economic damage wrought by Covid countermeasures has been panic. The media drumbeat about a killer virus, combined with politicians’ irresistible urge to “do something”, no matter what, created the policy clusterfvck of the century. Just think of all the stupid things that were done, e.g:

    – closing schools, forcing parents to stay home to look after kids
    – closing parks, golf courses, beaches, State borders, building sites, and every “non-essential” business, and diverting police to harassment duty
    – slowing down or gumming up every government function, from the post office to parliament
    – the $70 million tracking app – how could anyone be stupid enough to think this would work?

    Never was Ronald Reagan’s sage advice to his Cabinet members more pertinent: “Don’t just do something, stand there!” A few days of calm reflection would have revealed the futility and dangers of many of the high-handed directives to which we have all been subjected these last 4 months. But calm reflection is what they never got. We will be living with the economic consequences not just after the virus has gone, but for the rest of our lives.

  13. Entropy

    As for political freedom, what would he or any other of our motley crew of economists know about that?

    They know that they are mostly employed in publicly funded positions, or in large corporations that will benefit from more public funding.
    So of course they know we need more public funds.

  14. Luke

    Yes but if you actually question these people, they don’t think lock downs affect them.
    They experience no difference in pay, in fact many now have a new sense purpose and status.
    The lockdown rules don’t upend their routines. And at the end of the day they expect to be exempt from any rule that actually does affect them (which in all jurisdictions can be granted by chief health officers for any of the health directives).

    The biggest impact to them would be a loss of their annual overseas holiday.

    It’s like the universities that support a lock down but still want their foreign students to be let in.

  15. Rich

    You should have seen the luvvies at the ABC put on a fawning display for Alison Penington the “senior economist” for the left think tank, the Center for Future Work and some economics professor from the University of Newcastle. Unadulterated MMT propaganda. Money printer go burrrrr!

  16. Spurgeon Monkfish III

    building sites

    Were not closed in NSW. I live across the road from one which has been going full bore for the duration, in fact the stupid bloody local council extended their allowable hours of work to include Saturday afternoons and all of Sunday. Building sites weren’t closed in Victoriastan either, for reasons that are blindingly obvious.

    the $70 million tracking app – how could anyone be stupid enough to think this would work?

    The wonderful thing is no one will be sacked, disciplined or forced to resign over this typical and entirely predictable instance of idiocy and incompetence. I knew it was unworkable from the beginning and I’m no IT guru. Hunt at the very least should have resigned over it, but as we now, politicians are now beyond both accountability and shame.

    Consequently the whole stupid criminal destructive hysterical farce blunders on, laying waste to millions of peoples’ lives.

    As for the “economists” mentioned above, they are clearly among the subset that is wrong about everything, all the time. I am ashamed to be a member of the profession, especially while its most high profile “practitioners” are indescribably embarrassing and unrepentantly bombastic wrongologists.

  17. David Brewer

    Thanks Spurgeon for the correction/clarification on building sites.

    One more example of irresponsible irrationality that we should not forget. School closures were crazy, it would have been far better to leave them open. This was known to many medical officers around the world. In Scandinavia, the officers in Denmark, Norway and Sweden all recommended leaving schools open, but only Sweden stuck with this advice, the other countries’ politicians folded. But here we even had the spectacle of the Queensland “chief health officer” first admitting that closures were unjustified, but then recommending it precisely in order to terrorise the population:

    She says while evidence showed schools were not a high-risk environment for the spread of the virus, closing them down would help people understand the gravity of the situation.

    “If you go out to the community and say, ‘this is so bad, we can’t even have schools, all schools have got to be closed’, you are really getting to people,” Dr Young says.

    “So sometimes it’s more than just the science and the health, it’s about the messaging.”

    “So my advice to the Premier was, ‘we’ve got to do it. It’ll be awful, but we’ve got to do it’.”

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