Exasperating Calculators
William Coleman and Alf Hagger
Macleay Press, 2001; 336 pages; $24.20
To call someone an Economic Rationalist is to insult them. To invite an economist to dinner is an act of treason. How did this happen? Exasperating Calculators is the story written by two Tasmanian economists, William Coleman and Alf Hagger, explaining these and other matters. It is the story of a belligerent campaign among so-called intellectuals -- whom Coleman and Hagger label economic irrationalists -- attacking economics, economists and economic prescriptions.
The title of the book comes from the distinguished Australian historian Keith Hancock, who wrote in 1930, "Australians have always disliked scientific economics and (still more) scientific economists, ... the guardians of Australian orthodoxy [protectionists] have thought it necessary to refute these exasperating calculators". Two exasperated calculators, Coleman and Hagger set out to destroy the enemy; they do so admirably.
The principle antagonist is the sociologist Michael Pusey whose attack on economic rationalism was contained in his 1991 book, Economic Rationalism in Canberra: A Nation Building State Changes its Mind. Coleman and Hagger re-analyse Pusey's data, which was based on a survey of the attitudes to society of 215 senior officers of the Commonwealth public service. Pusey concluded that there were too many conservatives in the ranks. By which he meant too many people with an unsympathetic attitude to his preferred role for the public sector. That role was as principal builder of the Australian nation. Moreover, the economists among them were the "worst offenders" in failing to realise the destiny Pusey had marked out for them. The trouble is, Pusey's figures are so full of holes and so appallingly interpreted, he proves nothing of the sort. Pusey not only has a poor grasp of his method, he has no proof, for example, that the economists prescriptions to solve the issues of the day are less or more useful than non-economists. Worse, nowhere in his book does he define economic rationalism. That really exasperated our two calculators!
From this shaky foundation came a flood of other irrationalists. Political scientist Robert Manne rushed in with the book, Shutdown: Economic Rationalism and its Consequences. Our exasperating calculators cut a swathe through the Manne diatribes. They conclude, "in his treatment of Economic Rationalism, Manne combines a studied pose of wisdom with an ingenuous candour about his ignorance". The economist Clive Hamilton of the Australia Institute, weighed in with The Mystic Economist. He argued that man should be reunited with nature and that he should be guided by feelings rather than intellectual powers. To which Coleman and Hagger reply, "we believe Hamilton's cultivation of feelings to be the product of weak mindedness". They also take the big stick to Nugget Coombs, a once distinguished public servant and head of the Reserve Bank, who unfortunately took a turn for the worse once he lost the reins of power. Coombs discusses the influence of John Stuart Mill on economic thought, describing Mill as an academic and clergyman. Our calculators remind the reader that Mill was a life-long atheist who never sat in a lecture theatre in his life and spent his professional life working in the East India Company!
These are the juicier moments in a serious demolition job of those who sought to harm the intellectual foundations of economics using inferior tools. The book is also highly critical of economists for not telling their story, of letting ignorance and fear replace rational analysis. Unfortunately, the much-delayed response to the campaign of economic irrationalism may have caused a loss in the recruitment of future economists. In recent years there has been a 13% fall in students enrolled in economics at university, at the same time as an 18% enrolment increase in all degrees.
The story of economics is outlined in the chapter "Educating Rita". Here we learn that neoclassical economics is not another name for economic rationalism. Neoclassical economics is positive economics; it is about how a modern economy actually works, not about how it should work. Its role is to assist in the evaluation of economic policies, not to determine what policies are desirable. Modern mainstream economics does not say to governments "withdraw", "cut back", "do not interfere", it says the reverse. Know your economic responsibilities and pursue them with vigour. Governments have a market support role, and a market oversight role, and a role to see that overall economic activity is maintained at the right level.
Economic irrationalists do not like the superior ability of economics to explain certain economic phenomena. That jealousy, coupled with the political desire by groups to use governments to obtain an advantage in the marketplace, is a prescription for irrational policy. Economists do not pretend to have all of the answers, but at least they keep count of our follies. Ask one to dinner one night -- they can be fun.
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