The Eco Chamber

Over at Club Troppo, Fred Argy has penned a 3-part series on ideology and economic reform (Part I, Part II, Part III). He makes a number of important points, finishing off with the admonition:

Economists are of course as entitled as anyone else to make firm policy recommendations – and in general it will be a more informed judgment. But economists who evaluate a policy reform by simply comparing two equilibrium points – e.g. “GDP will be x% higher once the full effects of the reform have occurred” – and pronounce it to be a good reform without taking account of how the benefits are distributed and the transitional adjustment costs are at best producing a very incomplete analysis and at worst are being dishonest and giving our profession a bad name. Fortunately, other economists see through them. As the famous British economist Joan Robinson said, ‘the purpose of studying economics is to learn how to avoid being deceived by other economists’.

It seems to me that one of the downsides of so much of Australian economic commentary being conducted by business economists is that questions of distribution are typically ignored. Growth matters, but it’s also important to think about who’s benefiting from it.

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1 Response to The Eco Chamber

  1. “Growth matters, but it’s also important to think about who’s benefiting from it.”

    Thank-you Andrew. You may single-handedly change my opinion of economists yet. Well, you and Nick Gruen…

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