Thursday, 6 November 2014

Report from the GEN conference

Wednesday was the Government Economics Network's annual conference at Te Papa in Wellington. This year the theme was "The relevance of economics in a changing world".

The keynote presentation was from Stanford's Paul Oyer, "The more things change, the more they stay the same: Four economic ideas everyone should know". His core theme was that, although many people post the GFC have criticised economics for not predicting it, or not understanding it, or even for causing it, economics has core concepts that were valid pre-GFC and are just as valid now. He picked four - cost-benefit analysis, equilibrium, thinking on the margin, and the limits of markets, all operating in the context of people aiming to maximise something in an environment of limited resources - and gave lively examples (funeral parlours in Tennessee, dog care services in Georgia) where these principles played out in real life. However, he also felt (quoting Princeton's Alan Blinder) that too much of economists' attention is taken up with arcana, and that the practical, useful, workaday economics, far from the bleeding edge academic frontier, was relatively neglected. That said, he ended up by saying that economics remains a powerful way of better understanding the world we live in, of helping to operate businesses more efficiently, and of setting policy for the greater good.

Not everyone agreed with his view - there was one pointed statement-cum-question from the floor saying that economics had fairly and squarely walked us into the GFC mess, and that the economics trade is in denial if it thinks it didn't - but I felt Oyer was broadly on the right track. The babies and bathwater criticism of economics has always seemed overdone to me, and I'd probably chuck in some further concepts that have also had enduring value (trade-offs, for example).

The next session was on "Economic analysis for policy", which exposed us to some applied techniques. Leo Dobes from the Australian National University talked about options, and the importance of allowing for the value of options in making decisions, and Caroline Saunders from Lincoln showed us examples of choice modelling, trade modelling, and modelling of sectoral comparative advantage. The choice modelling in particular was fascinating: Caroline showed us a real world example of how it had been used to identify the importance of various consumer criteria (such as safety, sustainability, country of origin) to overseas purchasers of our agricultural exports, which in turn could be used to profitable marketing effect in different overseas markets.

The next session, on "Teaching economics at university", wasn't so great.

The first speaker, Michael Mintrom from Monash, spent a good deal of his time on bringing an investment perspective to public policy development, which I thought was fine in itself, but not fully on-topic. He did get round to what you might want to teach people in university, if they're going to provide that perspective, albeit late in the piece. And it was quite good when we got there: I jotted down cost-benefit analysis models, experimental design with control groups, comparative institutional analysis, ex post opportunity cost studies, how economic insights can support social outcomes, learning from policy mistakes and near-failures, setting students 'capstone' projects which combine theory and application.

I didn't enjoy the presentation by Victoria's Morris Altman at all, principally because the delivery was painful to sit through (screen after screen of text paragraph bullet points, read verbatim). His core point was that it is a good idea to bring a mix of techniques and perspectives to any given problem.

Ashleigh Cox, a master's student at Waikato, gave us an interesting perspective from the other side of the lectern. She was concerned that her undergraduate economics hadn't seemed to give her the insights she'd have liked on issues such as exchange rates, housing, or inequality, and that it was only later and further reading that left her better equipped (mind you, I'd say that's probably true of a lot of things, and most of us have learned more about a subject post school or post college than we ever learned at the time). And she was also concerned about what (I think) she called "economics imperialism", or economics attempting to be a Grand Theory of Everything, and not doing it well at all.

Her comments got the discussion going, both in the hall and around coffee afterwards. Mostly I got the impression that all is not as well as it might be with teaching economics in New Zealand (and there are similar discontents overseas). Comments I picked up: not enough real-world applied economics on the menu; three-year, short-trimester economics degrees don't leave enough room to add the bits that would give a broader perspective to an economics education (such as economic history, or the history of economic thought); not enough effort going into making sure that students have an intuitive understanding of concepts, as opposed to parroting back equations (I was suddenly reminded of a piece George Orwell once wrote about a rote-leaning school student in the UK blindly reciting, "The root cause of the French Revolution was the oppression of the nobles by the people"); and degree courses being overdesigned for the student on the PhD track (heavy on the maths and the theory).

I snuck in a "mostly" qualification earlier, and that's because I also talked to some (younger) people who were very satisfied with what they'd got in New Zealand. As was I with mine in Ireland (Trinity), but then I did get some economic history, and some compulsory politics options, that rounded things off better than some modern economics courses seem to manage.

And we finished with an excellent session on the "Economist as Policy Advisor", from two battle-hardened pros - Graham Scott, formerly Secretary to the Treasury, and the NZIER's John Yeabsley - who've seen it all, and have the war stories to prove it. Graham had led off with an impressively erudite history of the role of advisers to rulers, but we moved on from Athenian democracy to wrestling with Muldoon in short order. I'd guess the many policy analysts in the room will have taken away good ideas on how to handle some of the trickier issues - notably how to present advice that your Minister does not want to hear.

At the end we had an unscheduled appearance by one of those very Ministers, Max Bradford, who made two points that I recall. One was that the greatest difficulty he'd faced was breaking with the inertia of the status quo. The other was that it might have been useful to have had some Ministerial customers of policy advice on the panel for the session, to give their perspective, and I think he was right.


  1. My impression of public policy making is its value would double if they all remembered the first six weeks of microeconomics 101.

    In macroeconomics, reading Milton Friedman's 1968 classic the role of monetary policy will at least once a year should be compulsory. First, do no harm is the most important lesson of all.

    On the exchange rate, stop pretending you know whether it's too high or too low because if you did, you would be out trading on your own account.

  2. Thanks Jim. On your first point, Paul Oyer (from my notes of his talk) said something very similar, that the GFC actually proves that established micro ideas (low price of risk, incentives, regulation) work well


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