What cannot be doubted is that if a mysterious plague had wiped out all living economists twenty years ago, the world would be a better place than it is now. Economists despite their supposed understanding of the economy have consistently failed to predict any of the major crises that have occurred. Just before the crash of 2008/9 economists were speaking of a new paradigm in which the old rules no longer applied. The huge debt or credit mountains that had developed in the financial sector were no a cause for concern but a welcome development. It was evidence of the efficiency of the banking sector in creating credit to meet the needs of industry and consumers. Banks were at the forefront of the technological advance, an example for the rest of the business to follow. The new paradigm was of course no such thing, old fashioned credit bubbles had built up within the financial sector and would inevitably burst as they did causing a near melt down of the banking sector. There were a few economists that spoke against the new paradigm but the majority were in favour of it. Since the few perceptive economist were ignored by governments it only goes to demonstrate that we would have been much better off without the profession of economists. What is most worrying is that economists have become cheerleaders for the worst economic practices and behaviours instead of being its critics. Very few economists wanted to spoil the party, most choose to go along with the partying.
As one of the few economists (letters published in the national media), who predicted the bust of 2008, I think the role to which I am best suited is to identify those traits in an economist which clearly identify them as a bad economist. While I am not in a position to advise ministers on the choice of economist, what I can hope is that my advice will get wider dissemination and over time and will eventually reach the political classes, so enabling them to make a better choice of economist to advise them.
A bad economist can be identified quite simply, they claim to have the answers, they just know. They never express any doubts ,they are unique in that they always know what will happen in the future. Usually they are one trick ponies, they have learnt and rehearsed the arguments for their particular brand of economics and see no need to ever change their views. What these economists lacked was what I experienced, student’s on my economics course were pointed in the direction of J.S.Mill in the 19th century philosopher, who argued for the impossibility of there being a science of society and in particular a science of economics. His argument was that it was impossible to make sound predictions about what would happen in the future, as there were too many variables (people) who behave unpredictably, unlike the natural sciences where the subjects studied do behave in predictable ways.
The British Treasury as one of the doyens of economic forecasting has spent a century or more proving J.S.Mill correct. The Treasury has never produced one correct forecast about the future of the British economy. They at the best make predictions in line with what has been the trend of the past few years. The only accurate forecasts they make are those that are revised after the event, when adjustments can be made to the forecast on the basis of what really happened. Despite its massive investment in technology the British Treasury has always been caught by surprise whenever a crisis occurs. It failed to predict the financial crash of 2008/9, the bursting of the dot com bubble in 1999 and the property crash of 1990.
Despite their record of failure the British Treasury has no hesitation about advising the government on economic policy. They never feel any sense of doubt and they have been the driving force behind the adoption of free market economics. They were in the 1980s advocating an end to security of tenure (be it home ownership or lifetime tenancies), they argued that there was a problem of accommodation blocking in the areas of economic growth, as people hung on to their accommodation denying them to those workers needed by the growing businesses. The Treasury believed security of tenure was the enemy of economic growth. They were one of the leading advocates in government that led to those policies that effectively led to the end of security of tenure for the majority of people. It was not so long ago that the Treasury were congratulating themselves on the success of their policies, as they claimed that insecure tenancy system of private rentals system had freed up accommodation for the large influx of the migrants from the European Union. The victims of the housing chaos, that is the young professionals and families being priced out of London would disagree.
The next criteria for identifying the bad economist is a wilful forgetting of their past errors, they can never admit that they have been wrong in the past. There are never any failures in their curriculum vitae. Treasury economists despite their mixed record move to senior positions in the finance sector, where the businesses that hire them foolishly believing that they are buying into their unrivalled expertise in economics.
Another of the criteria for judging whether an economist is bad or not, is do they over rely on economic modelling? Do they have an inability to speak in understandable English or do they rely on incomprehensible economic terminology to convince their listeners of their expertise? When trying to sell a policy that the purchaser (the politician) themselves could have thought of themselves these economists use baffling economic terminology to dress up what is a very simplistic policy proposal. I can never forgive the tutor who recommended a book on market economics written by an eminent Chicago professor of economics. A book that for all its use of difficult economic terminology taught me nothing that I did not already know. Not only that it was in hardback and cost far too much; however it was a lesson well learnt. I saw my role as an economics teacher to translate the economic texts I gave my students into comprehensible English. Close reading of the texts showed how authors would use economic terminology to cover up gaps in their knowledge and understanding. Now that I am retired I wonder if this use of unnecessarily complex language was not a deliberate ploy to hide their failings as economists.
One other criteria is does the economist sound like so many others in the profession? All to often rather than analyse a problem and make reasoned suggestions, economists will take short cuts and rely upon repeating what is the common stock of economic knowledge. If they repeat it in their reports they know that they are immune from criticism, as no other economist will criticise them for repeating the mantras from the economist’s creed. While the agreed understandings and beliefs of the profession are not quite the holy writ, no criticisms of it will be tolerated by members of the profession. In conclusion it can be stated that a bad economist is a lazy thinker, someone who relies on the knowledge of the herd, one who follows convention.
Einstein once said that to do the same thing over and over again and yet expect different results each time is the height of folly. This happens regularly at the British Treasury which insists that public services should be put out to tender and run as private enterprises, each year the Treasury finds new sectors of the public service to be farmed out to the private sector. Most recently it was the prison service, individual prisons are now to function as private companies. These new prisons will be judged on there reoffending figures. Incomes for the enterprise will depend on reoffending rates, those with the best record for reducing reoffending will get the biggest bonus payments. Profitability will depend on their success at cutting reoffending. The only problem is that human behaviour does not respond this profit and loss model in the way the politicians assume. If an effective method of reducing reoffending had been discovered it would have been introduced to the system long ago, as it would have been the most effective of reducing crime and costs of criminality. What methods of reducing reoffending that have been discovered are expensive to implement and one of the criteria for the new Prisons Ltd is that they keep costs to a minimum. This cost minimisation criteria goes contrary to the demand to reduce reoffending. This demonstrates another criteria naive over optimism, it is seeing the solution to complex social problems as being the adoption of simplistic business models.
When I attended my first philosophy lectures I remember Professor Oakshot talking about the various philosophical models adopted in the past. One was that adopted in the medieval period was to examine human behaviours from the perspective of a super human being, a God’s eye perspective on mankind. Obviously mankind was found wanting or to use Augustine’s phraseology human behaviour was all too often dominated by the lower appetitive instincts. If today such a super human judged mankind he would recommend the elimination of the tribe of economists. This action would bring immediate benefits to human society and if it did not bring heaven down to earth it would lead to human society becoming much nicer.